How tech culture and tech philanthropy may exacerbate inequality and undermine democracy

By David Sirota , written on June 10, 2014

From The News Desk

Inequality and democracy are the kind of topics you may expect to hear about at a political convention, but not necessarily at a tech conference. And so looked at one way, some of Vice President Al Gore's discussion at Southland today could be heard in context as a bit of a jeremiad - one spotlighting a tech culture that sometimes contributes to the forces that exacerbate inequality and undermine democracy.

Discussing the economy, Gore lamented that "we have rising levels of inequality and chronic underinvestment" in public programs aimed at addressing environmental protection, health care and education. He reminded the audience that when "95 percent of all the additional national income in the U.S., since the recovery began in ’09, goes to the top one percent, that’s not an Occupy Wall Street slogan, that’s a fact!”

What Gore did not explicitly mention, but what is becoming increasingly obvious, is that there are plenty of signs that the tech economy may be a significant driver of the inequality he lamented.

As Princeton economist Alan Blinder noted in a Wall Street Journal op-ed earlier this year, technology has been "clearly the major villain" in rising economic inequality, as "e-commerce eliminated many 'ordinary' jobs (while) enhanc(ing) the opportunities and rewards for some 'extraordinary' jobs." One way to see this is in the app economy - whereas major mergers and acquisitions in the past often involved companies employing thousands of workers, today we see those same deals rewarding billions to companies with a comparatively few employees, meaning more wealth is concentrated in ever-fewer hands. Another way to see this is to look at how economic inequality just so happens to be particularly rampant in tech hubs like San Francisco.

These trends, of course, are only exacerbated by the fact that so much of the tech sector is hostile to unions, which are one of the rare forces with a track record of combatting economic inequality. They are also exacerbated by the fact that major tech firms have used their power to collude to suppress wages. And research suggests all of this is buttressed by the growth of the private equity and venture capital sectors (Gore, a partner at Kleiner Perkins, didn't explicitly mention that, either).

Thus, the question Pando raised a while back - and that Hillary Clinton recently echoed - about inequality still remains: What’s the tech world gonna do about it?

On the question of democracy, Gore first offered up a defense of the public sector and said that "democracy has been hacked" by moneyed interests who buy elections. He then said this in response to Sarah Lacy's question about whether or not it is a good thing that tech billionaires are spending big on allegedly philanthropic enterprises in the public policy space (emphasis added):

That's a good thing, as long as the rest of us don't ever fall prey to the illusion that charity is going to do the job of what democracy needs to do. We the people have the right to work together to allocate resources including tax money for good purposes but when the systems that allocate that money and design the policies are dominated by those with wealth and power, then naturally the average citizen begins to get very upset and suspicious as we should be.

Gore's comments about charity, of course, come only a few weeks after Facebook's Mark Zuckerberg generated a new wave of headlines about a $120 million donation to help schools in low-income neighborhoods in the Bay Area. What's so revealing about that donation is that it comes only a few years after California considered a ballot measure to increase funding for its schools. While the Facebook founder has said he supports higher federal income taxes, Zuckerberg was notably absent from the (ultimately successful) campaign to pass that ballot measure.

That context is germane to Gore's fundamental point about charity and democracy. There seems to be a trend of billionaires and tech firms making private donations to public institutions ostensibly with the goal of improving public services. Yet, many of these billionaires are either absent from - or hostile toward - the efforts to raise public resources for those same public institutions. Zuckerberg is only one example.

There are, for instance, all the hedge funders who make direct donations to charter schools and the charter school movement, while their industry lobbies against proposals to compel hedge funders to pay the same tax rates as everyone else - tax rates that would generate money for education. Likewise, there are the Koch Brothers, who simultaneously finance the nationwide anti-tax movement, while making huge donations to public institutions. Meanwhile, Microsoft boasts about making direct donations to schools, while the company (though not Bill Gatesopposes proposals to increase taxes to fund those schools.

The underlying assumption in these and so many other similar examples is, to paraphrase Gore, that charity can do the job of what democracy should be doing. And, to further paraphrase Gore, that it's a fundamental challenge to the idea that "we the people have the right to work together to allocate resources" for inherently public priorities. It is a challenge because philanthropic money is not like general public revenue, which is raised through taxes and then allocated by a democratic process.

Philanthropic money, by contrast, is rarely donated in any kind of general-purpose way for the public institution to subsequently allocate. On the contrary, it is often donated with specific ideological strings attached so as to short-circuit or circumvent that democratic process. The donor, in other words, makes the cash contingent on the democratic institution (school board, etc.) doing exactly what he wants, regardless of whether the community wants that.

Go back to Zuckerberg's donation to see that in practice. In the same way his donations to Newark were effectively contingent on his preferred public policies and objectives, his donation to San Francisco is reportedly being targeted, in part, to privately run charter schools.

Now, it is true that school districts have the right to not accept the money, and that the school districts which do accept the money do make that decision through a democratic process. You could try to argue that means there is no conflict between philanthropy and democracy - except that ignores the fact that the public institutions in question are often desperate for resources because they do not get enough from public revenues.

It is a vicious cycle: Big money interests use anti-democratic campaign finance laws to fund anti-tax policies that drain public institutions of public resources. Those policies subsequently make those public institutions desperate for private resources - aka resources that are contingent on officials relinquishing democratic control over public institutions.

The standard defense of this cycle is the ethos of disruption - the idea being that the only way to force public institutions to do what they supposedly need to do is to have some billionaire unilaterally leverage his cash to buy the public policy he wants. That may work sometimes, and it may spectacularly fail other times. But whether or not you subscribe to that particular disruption ideology, don't pretend it is democratic - it is quite the opposite.

[photo by Geoffrey Ellis]