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Elected Officials, Please Stop Drinking Silicon Valley’s Kool-Aid

Tech giants aren’t on our side

Paris Marx
Jul 12, 2018 · 10 min read
Photo by Martin Shreder on Unsplash

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Tech companies love to depict themselves as garage-tinkering underdogs taking on big business. They conveniently ignore the fact that many of them are some of the largest corporations in the world, let alone the United States.

There’s good reason for it. The level of scrutiny directed at large companies, especially those approaching monopoly or oligopoly, is vastly different than the attention paid to startups and small businesses. The biggest tech companies benefit immensely from the image they’ve crafted of themselves. They receive public goodwill from appearing just as humble as freelancers and small businesses everywhere — which everyone tends to support — while their size allows them to capture markets in a way smaller companies aren’t able to.

Political leaders have, at least until recently, fallen for the ruse. They let tech leaders’ actions go largely unscrutinized, buying into their promise of promoting the social good — Google’s “Don’t be evil” slogan, for example — that has been pushed through well-crafted marketing campaigns. This goodwill and relative lack of scrutiny, combined with their astronomical size and dominance in their respective domains, has given them significant advantages to push an agenda that increases their corporate power and bottom lines.

Neoliberalism and the decline of the United States

Neoliberal capitalism, which began in the 1970s and persists to this day, has proven incredibly beneficial to dominant tech companies. Many of these companies were founded on a quasi-libertarian political philosophy that government power should be limited to allow individuals to thrive — with the help of technology, of course.

Neoliberal politicians pursued an agenda of market deregulation, mass privatization, significant reductions in the tax rates of corporations and wealthy individuals, and the decimation of social programs aimed at equalizing opportunity and improving the lives of people not born into privilege and wealth. A new story was created that when the rich got richer, everyone (somehow) saw the gains, and that success was the result of an individual’s hard work, determination, and self-sacrifice. This narrative set the foundation for tech companies to make a libertarian promise that their products would support individuals’ pursuit of success.

Of course, that wasn’t what happened. After the 1970s, wages began to stagnate, breaking with productivity growth for the first time since the end of World War II — a trend which continues to this day. The decline in productivity forced average people to rely far more on credit to maintain a middle-class standard of living. Meanwhile, starved of funds from successive tax cuts, social supports were slashed to the bone and “reformed” to make them harder to access — thus reducing support for a growing number of people falling on hard times.

These trends have only accelerated in the aftermath of the 2008-2009 recession, as all of the recovery’s gains went to the richest individuals from 2009 to 2013, rents soared so high that someone earning minimum wage can’t afford a two-bedroom apartment anywhere in the United States, and people who were laid off from stable employment found themselves struggling to survive on low-paid, precarious work. Pundits constant talk of a recovery based on high-level figures, while ignoring the true devastation that was enacted on millions who lost jobs, homes, health insurance, and hope.

Major tech companies have found an opportunity in the crisis. They can present themselves as job creators, community saviors, and forces empowering people who are trying to get ahead, all while profiting from their desperation and lobbying politicians to double down on the policies that got our country in such a terrible state.

Big Tech is attacking government revenue sources

Apple, Amazon, Alphabet, Microsoft, and Facebook — in that order — are the five largest publicly traded companies in the world. They make huge profits by expanding their digital empires, fighting for lower taxes, seeking large taxpayer subsidies to open new facilities, and employing questionable labor practices.

For the past several years, Tim Cook — and Apple’s legions of lobbyists — has been pushing the US government to lower the corporate tax rate and reduce the rate for companies repatriating profits from abroad. He appeared before Senate committees to make this case numerous times, and to make sure Donald Trump knew his position. His persistence finally paid off when Congress passed Trump’s tax cut package in November 2017, slashing hundreds of billions from the federal government’s annual budget.

The loss of revenue from tax cuts will inevitably lead to more cuts to social programs, which have already been slashed so deeply that they don’t provide the support Americans need to get back on their feet. The United States has the least comprehensive set of public supports of any developed country. This country lacks universal healthcare, parental leave, and a strong public education system, just to name a few.

As federal and state governments have pulled back from providing services because tax cuts have starved them of cash, city governments have tried to address residents’ needs. But even they can encounter the cold, heartless power of Big Tech.

Amazon, for example, has played a role in transforming Seattle. The city’s population has increased by 19 percent since 2010, rents soared 13.5 percent in 2017 alone, and its homeless population is among the highest in the country. The city put together a plan to fund affordable housing and supports for the homeless. They tried to fund it by taxing big businesses reaping the benefits of the boom, but Jeff Bezos wasn’t having it.

The city council’s initial proposal of a $540 head tax on the employees of companies making more than $20 million (to generate $75 million) was slashed to $275 per employee for a total of $47 million after Bezos’ initial opposition — but even that wasn’t good enough. A month after the tax was passed, city council voted to repeal it because of the pressure they were getting from big business (see: Amazon and Starbucks). They did not identify alternative funding to address the homeless population’s dire need, and deaths have doubled in the past six years.

To make things worse, Amazon released a statement in the aftermath, saying the company was “deeply committed to being part of the solution to end homelessness in Seattle.” Apparently, they’re not. Amazon would have paid about $12 million toward the tax — a mere 0.4 percent of its 2017 profit, or what Bezos earns in just 52 minutes (he’s made more than $40 billion just in 2018). It’s not the first time Bezos has advocated self-serving tax measures in his adopted state: he donated $100,000 to fight an initiative to tax incomes of Washington state’s wealthiest residents — one of the few states without an income tax.

Of the Big Five tech monopolies, Amazon takes the most advantage of those who work for low wages because they have few other options. The company actively recruits people who live in campers (with a preference for seniors) to work the busy holiday season, and wages in regions where it sets up its fulfillment centers drop — sometimes precipitously. The company also opposes unionization. Reports of terrible working conditions are well-documented at the warehouses, including workers fainting because Amazon refused to install air conditioning in the summer. Hours spent walking on concrete floors have been known to cause foot and hip injuries.

Instead of being investigated for this behavior, Amazon is rewarded with massive financial incentives from state and local governments for providing jobs — and it’s not the only one. These companies back campaigns to continue conditions that have caused so many economic and social problems throughout the U.S., they benefit from tax cuts, and they receive public subsidies any time they expand with deals which rarely make economic sense for governments sacrificing their already inadequate budgets.

Politicians buy into Big Tech’s promises

Cities and states across the United States are struggling. When a massive company with a positive reputation (many large tech firms lead rankings of the most loved and admired brands) pitches governments on new developments, politicians want to do everything they can to attract their business.

Because these companies are so large, politicians hope that if the initial project works out, even more jobs may be created either by the large tech company or by smaller companies that follow it to the new locale. Attracting big companies helps politicians show voters they’ve been effective and should be reelected — they created jobs! — but they can also serve the ideological position of the politician. Republicans can view handing corporations huge sums of public money as forwarding their goal to slash government to the bone.

Good Jobs First, a national policy resource center, estimates that major tech companies have received $9.3 billion in subsidies and incentives to build data centers and warehouses across the United States over the past five years. These companies are already massively profitable and some of the incentives amount to hundreds of thousands to millions of dollars per job created — an amount that obviously will not pay off in the long run, especially when another state can just hand them a check to move when the benefit wears off.

Though Apple has an estimated $285 billion in cash reserves, it still looks for subsidies when opening new facilities. The company was awarded $213 million to open a data center in Waukee, Iowa in 2017, even though it would only create 50 jobs at a price tag of $4.3 million per job created, making it almost impossible to see how those incentives would ever be recovered.

Similarly, when officials in Nevada awarded Tesla a tax incentive of $1.25 billion to win its Gigafactory, watchdogs warned that it would starve the state of funding for public services. Now, years later, with the incentive expected to be closer to $1.4 billion, that’s exactly what happened. Since the factory isn’t contributing to the budget, there isn’t money to increase funding to police and fire services, which are feeling the strain of population growth. Schools are also overcrowded and bus routes for students are being cut, while those suffering from increased prices talk of being “Tesla’d.”

However, the most outrageous subsidy went to Foxconn — the Taiwanese manufacturing giant that builds iPhones, Kindles, Xboxes, and other devices for a wide range of tech companies — enabling them to establish their first factory in the United States. Wisconsin governor Scott Walker has approved a $4.8 billion incentive package to have the facility built in his state, even though most people think it won’t pay off for 25 years (if at all). The company has only promised 3,000 jobs with “the potential to grow to 13,000.” It’s hard to argue this isn’t simply an example of a politician misusing and abusing the public purse on a massive gamble.

These companies are all very profitable — they don’t need public money. But because so many places are struggling, elected officials will do whatever they can to attract jobs to their area — even when those jobs pay a pittance and expand the ranks of the working poor. In the past, governments could provide support to people who were struggling, but decades of tax cuts have starved social supports and made some of them nearly useless — and these new incentive packages only make the situation worse.

Challenging Big Tech’s greed

Under Big Tech’s current strategy of decimating government’s ability to fund social programs while expecting massive payouts every time they hire a few more low-paid workers, we’re all on a path to destitution. Even those making tech-industry salaries won’t be able to isolate themselves when the communities around them are mired in poverty.

The neoliberal strategy, enthusiastically embraced by the CEOs and board members of major tech companies, is an absolute failure. It works for corporations and a small class of rich individuals, but it’s responsible for a consistent decline in the opportunities and outcomes of poor and middle-class people. A radical change is needed.

Democratic talks of renewing the antitrust regime that was used to break up a range of twentieth-century monopolies and applying it to the tech sector is heartening. The current regime has been an absolute failure, resulting in increased economic consolidation that has led to price increases, lower wages, economic activity shifting to urban centers, fewer new businesses, and many other negative outcomes.

Instead of slashing taxes and social programs to make government inept, we need our government to make investments in people, social programs, and infrastructure so everyone — not just corporations and the rich — can prosper.

Bernie Sanders and his fellow progressive Democrats have made positive proposals in this direction. Sanders wants Medicare for all, tuition-free college, housing investments, a massive infrastructure program to create good jobs and future economic prosperity. Democratic socialist Alexandria Ocasio-Cortez, who recently won the Democratic primary in New York’s 14th congressional district, also proposes a federal jobs guarantee to ensure everyone who wants a job can work, and sets a wage and benefits floor that no private employer will be able to undercut.

These are transformative proposals, but they may not go far enough. The UK Labour Party, led by socialist Jeremy Corbyn, goes even further in proposing support aimed at specific sectors with a new industrial strategy; the renationalization of privatized services that are not serving the public, such as rail and water; and, most importantly, a strategy to promote cooperatives and give workers more power in running the economy.

The decline of the United States is not written in stone. It can be reversed, but only with very deliberate policies that promote collective wealth and well-being. Big Tech falsely promotes itself as having interests aligned with hard-working Americans, while it lobbies for policies that benefit its bottom line at the expense of the country. The power of massive corporations must be reined in. They must be forced to contribute to public budgets that can fund the programs that are necessary for our economic and social renewal. Otherwise, our decline will continue, and people’s anger at being stuck in a downward spiral will eventually explode into something much more dangerous.

Paris Marx

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