What’s good for Silicon Valley might not be good for America

By Francisco Dao , written on February 26, 2013

From The News Desk

During his 1953 confirmation hearing for Secretary of Defense, Charles Wilson, then president of General Motors, was asked if he could ever make a decision that would adversely affect GM. His reply that he could not conceive of such a situation "because for years I thought what was good for our country was good for General Motors, and vice versa," evolved into the popular misquote, “What’s good for GM is good for America.”

While the words were never actually spoken, the sentiment of, “what is good for (insert) corporation/industry is good for America” has nonetheless taken hold of our popular imagination and, despite Silicon Valley’s rebellious self image, few industries believe more strongly than the tech sector that what is good for them is also good for the country.

But is it true?

The tech industry stakes its claim on being good for America primarily based on job creation, but as Clayton Christensen pointed out in a recent CNN special post, we are largely engaged in efficiency innovations which “almost always reduce the net number of jobs in an industry.” The so-called disruption that the tech industry loves to tout mostly serves to take away a large number of jobs in other places and concentrate that work into a smaller number of jobs in the tech sector.

Let’s look at the retail industry which employs 10 percent of the American people. Since at least 1950, employment in the retail sector has almost perfectly mirrored the the larger economy as a whole. But as this recent article from The Atlantic shows, starting in the late 1990s retail employment began to fall even during economic growth. I suspect it’s more than just a coincidence that national retail employment fell during the exact time period that ecommerce began to grow. Is Silicon Valley’s success in ecommerce good for the tens of thousands of people across America no longer employed, or soon to be laid off, in the retail sector?

As the leverage of technology and the Internet concentrate more jobs and sales within a smaller number of players, so too has the tax base shifted. First there was tax free internet shopping, which clearly took dollars away from local communities. But even with the advent of new state taxes on online purchases, the local job losses have resulted in shrinking local tax bases. If you’re Anytown, USA and 10 percent of the city budget dries up because the hometown Circuit City closed, and people are buying more things online, what does that do to the available funding for your schools, parks, fire department, and local infrastructure?

While Silicon Valley hasn’t directly taken away jobs from the media industry in the same way it has from the retail sector, the disruption created by Internet distribution has still resulted in declining financial performance and massive job losses in journalism, television, motion pictures, and the music industry. The tech sector will of course argue that the developments have been beneficial to consumers, but even if we accept that position without debate, it still doesn’t change the fact that a lot of people in the press, media, and entertainment industry have been hurt by Silicon Valley’s success.

My point isn’t to make the tech industry out to be an evil empire. It is the nature of progress and capitalism that innovation will produce changes in industry and the economy as a whole, and I understand that such changes often result in new winners and losers. What I’m addressing is the blind acceptance that what is good for Silicon Valley is good for America. This belief not only reeks of self importance, but I would argue that a strong case can be made that what is good for Silicon Valley might not be good for America at all, certainly not while we’re stuck in the job-destroying efficiency cycle of innovation as opposed to the empowering cycle which produces net positive job growth.

Perhaps the easiest way to look at it is to consider what Marc Andreessen said about software eating the world. If you're in the place making the software that's doing the eating, the world looks like a giant buffet. But if you're part of the rest of the world that's getting eaten, Silicon Valley looks an awful lot like a predator.

[Illustration by Hallie Bateman with concept by Nathan Pensky]