The Fortunes and Abuses of Silicon Valley No Longer Inspire American Youth.
Robert Reich's theses now have millions of fans.
Is Silicon Valley too rich? Too disconnected? Robert Reich, an economics professor at Berkeley and former Secretary of Labor under Bill Clinton, has rallied millions of fans around this thesis. For him, the great American fortunes that have accumulated hundreds of billions of dollars are part of the social disintegration of America.
In his books, videos on social networks, and his website Inequality Media, Reich denounces the growing inequality, stigmatizing the super-rich who do not pay their dues to society.
In the past, the remark was confined to the American left, such as Bernie Sanders, the eternal grandfather of radicals, or the young and very popular elected official from the Bronx Alexandria Ocasio-Cortez. Today, the cohort of critics is expanding to include journalists and tech intellectuals, such as Scott Galloway, a professor of marketing at New York University, who this month in The Atlantic, takes down the “false idols” of tech, with their whims and fancies.
The behavior is annoying, but it is almost anecdotal in the face of criticism of widespread tax optimization, whether by individuals or companies.
In its investigation, “The Secret IRS Files,” the news website ProPublica detailed the tax engineering deployed by the big tech fortunes to evade taxes:
Their preferred technique is to borrow massively by pledging the billions of dollars in stocks they have accumulated. The advantage is that these loans are not taxable, even if they are used to buy yachts, jets, and residences so Elon Musk or Jeff Bezos, and others pay practically no taxes.
More broadly, there is the question of the consequences on the economy of the immense wealth creation born of tech. If we take the ten or so companies that have contributed to the technological supremacy of the United States - from Microsoft to Netflix, via Intel's microprocessors or Nvidia's - an update of the amounts raised at the beginning of their existence (over one year) is revealing.
During a period ranging from 1968 - the birth of Intel - to the turn of the 2000s - the creation of Google -, these start-ups collectively raised the equivalent of 1.5 billion dollars discounted. They may have gone on to raise multiple rounds of financing, go public or take on debt, but it was this initial investment that allowed them to take off.
This capital is at the origin of one of the greatest industrial leaps in history, with the invention of the personal computer, spectacular advances in countless scientific fields, not to mention the networking of the world's knowledge through the Internet.
But this billion and a half dollars of historical Big Tech is almost insignificant compared to current financing: for the year 2021 alone, American venture capital firms have invested 330 billion dollars, i.e. 220 times more than for the transistor pioneers!
This excess considerably increases regional imbalances, which reinforces inequalities, following a spiral where companies find themselves in fierce competition to capture the talent that their wealth can buy at any price. This results in extravagant salaries like those of Facebook (median level: $240,000 per year), often combined with stock-option allowances that quickly turn a slightly talented engineer into a millionaire. The corollary is a soaring cost of living in cities where landlords and restaurants have benefited from this mad profligacy, excluding the middle classes.
The result is an ever-widening gap between the categories. In 1989, 1% of Americans owned 27% of the national wealth. In 2019, they owned 34%:
For the bottom half, we went from 4% in 1989 to 2% of the US wealth in 2019.
In 1968, the year Intel was founded, a CEO earned on average 21 times more than an employee. At the beginning of the digital boom in 1993, the ratio rose to 61 times. Today, it is 351 times, recalls Robert Reich.
The Berkeley economist is ultra-popular among 25-30-year-olds subject to heightened eco-anxiety and the societal shockwave of the Covid crisis. For them, these excesses are no longer acceptable.
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