Candidate of Big Tech

In the free-form, roller derby race for the Democratic presidential nomination, few candidates are better positioned than California’s Senator Kamala Harris. She is a fresh and attractive mid-fifties face, compared with septuagenarian frontrunners Joe Biden and Bernie Sanders, or the aging progressive Elizabeth Warren. Part Asian-Indian, part Afro-Caribbean, and female, Harris seems the frontrunner in the intersectionality sweepstakes that currently largely defines Democratic politics. Yet the national obsession with ethnicity and novelty obscures the more important reality: Harris is also the favored candidate of the tech and media oligarchy now almost uniformly aligned with the Democratic Party. Read more

The Opium of California

The current frenzy of new IPOs — Uber, Lyft, Slack, Postmates, Pinterest and Airbnb — seems destined to reinforce progressive notions that California represents the future not just for the state, but the nation. It will certainly reinforce California’s fiscal dependency on tech-dominated elites — half of the state’s income taxes come from people making over $500,000 a year — and provide a huge potential multi-billion dollar windfall for the state treasury.

To be sure, the insiders — founders, with nearly half the voting shares in companies such as Lyft, a small “tech mafia” of venture firms, foreign investors such as Japan’s Softbank and Wall Street investors — will have reason to celebrate. But the lavish paydays will do little to relieve, and may even serve to worsen, the state’s gaping inequality and nation-leading poverty rates.

Most damaging of all, the IPO high will encourage supporters of the state’s policy agenda. If new companies crop up, and the handful of politically savvy investors thrive, California’s illuminati can fend off criticism of policies that undermine the middle and working class in everything from energy to housing.

The changing nature of California’s tech economy

“Science,” observed Daniel Coit Gilman, the second president of the University of California, ”is the mother of California.” With few navigable rivers, a persistent shortage of water, far from the then-dominant Eastern seaboard, California’s growth depended on engineering prowess. Not tied to the traditional industries, the state seized on emerging fields such as aviation, space and eventually semiconductors, laying the basis for an expanding middle class

In contrast, little of today’s tech growth produces tangible products, and those that remain, such as Space X, the semiconductor industry and Apple, are placing their production either abroad or in less expensive and less highly regulated states. This allows them to escape California’s high electrical rates, poor roads, collapsing bridges and lagging public education system. The digital future may remain in California but the action in chip-manufacturing, biomedical products or space exploration seems headed elsewhere.

The firms in the new “information peddling economy,” notes the University of Washington at Tacoma’s Ali Modarres, have a very different relationship with their employees than “first wave” companies such as Hewlett Packard and Intel. In the first wave a broad range of employees enjoyed rewards from corporate success and stock gains; drivers for Uber, as one analyst suggests, will get nothing but the privilege of seeing vast flows of cash used to replace them with automated vehicles.

The neo-feudal city

The new wave of IPOs will expand the ranks of what The New York Times aptly describes as “the elite caste who can afford to live comfortably in the Bay Area.” Tech senior managers will enjoy huge capital gains, greatly reducing their federal tax liability. In contrast, less well-placed working schmucks will pay upward of half their income in taxes while those who clean their offices will face potential new fees on everything from tires and soda to water.

Even in the Bay Area, home to four of California’s wealthiest ZIP codes, middle-wage jobs are disappearing and most new growth is tilted toward low-wage service work. Nearly half of all millennials are planning to leave and analysts suggest the area may face a severe shortage of skilled workers. Overall, notes a new Joint Venture Silicon Valley report, homelessness and inequality has expanded in the region, while the quality of life is perceived by most to be deteriorating.

One can appreciate the economic benefits that Uber, Lyft, Salesforce and others have brought to San Francisco, but there’s also a neo-Dickensian reality: sky-high housing prices, widespread homelessness, displaced minorities, few children and a rapidly shrinking middle class. There are now more drug addicts in the city of San Francisco than high school students and so much feces on the street that one website has created a “poop map.” More than half of the Bay Area’s lower-income communities, notes a recent UC Berkeley study, are in danger of mass displacement.

As for the rest of California

In previous tech-led economic booms — as recently as the last decade — growth extended to the rest of the state, particularly the more affordable interior. Tech firms expanded eastward, to Sacramento, south toward Salinas and throughout Southern California. The new tech economy, in contrast, has no real need for a periphery. It expands almost anywhere, whether to media-centric New York, less expensive places including suburban Austin, Nashville or Dallas or to China, India or the Philippines.

This has left much of Southern and interior California an economic dependency, hosting largely on low-wage jobs and increasingly dependent on an expansive welfare state. Worse yet, the tech boom serves as a narcotic, anesthetizing our political leaders from confronting the economic realities outside the venture capital-funded Bay Area bubble.

What is needed now is a focus on the middle- and working-class Californians, the vast majority of whom live far from the Bay Area.

California’s policy makers need to start by rolling back many of the regulations on energy and housing that are reducing opportunity by driving up costs and driving middle-class jobs out of the state. We also need to focus more on developing employment centers outside the ultra-expensive coastal areas, something that would allow people to live closer to where they work. This suggests a policy that focus on such things as good roads, decent schools and a variety of upwardly mobile jobs — things that may not matter much to oligarchs or the youthful staffs, but make all the difference to middle- and working-class families.

To be truly a sustainable society, California needs opportunities for carpenters, machinists, middle managers, not just for the current structure that relies on superstar coders and produces large numbers of low-paid service workers. We need a California boom that lifts most of our citizens and does not drive them toward a permanent semi-feudal state, servants and supplicants of a small, fantastically wealthy and preening technological elite.

This piece originally appeared in The Orange County Register.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. He authored The Human City: Urbanism for the rest of us, published in 2016 by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of and lives in Orange County, CA.

Photo Credit: Daniel L. Lu (user:dllu) [CC BY-SA 4.0], via Wikimedia Commons

A New Good Neighbor Policy

Whatever one thinks of Donald Trump’s proposal to build a “beautiful wall,” it is unlikely to resolve the crisis sending ever more people—largely from Central America—to America’s borders. The problems that drive large numbers to leave their homes and trust their families to criminal gangs will not be solved by bigger fences but better thinking. Fundamentally, the United States should regard Mexico and Central America not as adversaries but as economic partners in a world increasingly defined by competition between the U.S. and an ever-more aggressive China determined to establish global hegemony—even in our hemisphere. In this context, a strong policy of investment and aid to our southern neighbors makes both economic and political sense.

The American relationship with Mexico and Central America is implicitly complementary. The U.S. and Mexico not only exchange products and services; they also produce them jointly. American manufacturing or value-added inputs represent 40 percent of every dollar Mexico exports to the United States. Chinese exports to the U.S. represent only one-tenth as much.

Mexico complements the U.S. in ways that promote regional competitiveness. Capital abundance and high-skilled labor in the U.S. are complemented by low-skilled labor abundance and capital scarcity in Mexico, factors that are, if anything, even more evident in Central America. The region’s weak human-capital accumulation has hobbled its integration with advanced trading partners like the United States. In Central America, more than half of youths between 15 and 24 are out of the educational system, and most work at poorly paid jobs. Only 38 percent of Central American youths aged 27 to 29 hold a high school degree, compared with 61 percent in the rest of Latin America.

The 1994 passage of NAFTA led to a period of unprecedented growth and optimism. Mexico enjoyed macroeconomic stability, during which inflation, exchange-rate volatility, and short-term interest rates converged with those of the U.S. Economic cycles in industrial production also converged in both countries. This emergence was derailed, first by China’s 2001 entry into the World Trade Organization and then by the Great Recession.

The recession is now a bad memory, but China’s influence has only grown. By 2003, China had surpassed Mexico as the second-leading importer to the United States, behind Canada. By granting WTO membership and most-favored nation status to China, the U.S. opened the door for an expansion of Chinese-manufactured exports, to the detriment of traditional sources such as Mexico, which lost around 650,000 manufacturing jobs from 1995 to 2016. A big overlap exists in the kinds of products—clothing, automotive, and consumer electronics—in which both Mexico and China excelled; the two countries’ export mixes to the U.S. became similar just when China increased its manufacturing export capacity. Mexico specialized in industries and activities in which, in some cases, China would eventually develop a comparative advantage. In 2006, Mexico’s maquiladoras—mostly lower-tech factories requiring semi-skilled labor to do assembly and finishing work—generated more than $25 billion in foreign exchange and accounted for 44 percent of total Mexican manufacturing exports; 94 percent of maquiladora exports went to the U.S. As China’s access to U.S. markets grew, the maquiladora industry lost jobs, largely to China’s benefit.

The increase in Chinese exports to the U.S. hurt Mexican labor markets, which faced a negative demand shock after 2001. These shocks may have been disproportionately large in the case of manufacturing establishments that use unskilled labor, especially for maquiladoras in the border region. These factories’ production structures resembled those of Chinese firms, and they were thus more vulnerable to China’s enhanced presence in the U.S. import market.

The displacement of Mexican manufacturing products in the U.S. market led to a decrease in Mexican wages, and the negative effects spilled over to wages paid in non-manufacturing industries. The decline of manufacturing in Mexico has had a devastating impact on the country. As China’s dominance as a U.S. trading partner has grown, Mexico has seen a rapid rise of crime and corruption. The once-bright hope seen for the country, largely as a result of close cooperation with the United States, has faded, and led, most recently, to the election of its most aggressively left-wing president in 50 years—Andrés Manuel López Obrador.

The results south of Mexico were even worse. In the pre-China era, Mexican manufacturers would move some their more labor-intensive operations to Central America, where costs were lower. But as the Mexican economy has failed to expand, such movement has decreased. Instead of new production, many of these countries simply import manufactured goods from China, rather than building industries for “liftoff” while they export commodities to Beijing. Chinese merchandise imports by Central American countries (Costa Rica, Dominican Republic, El Salvador, Guatemala, and Honduras) rose from $4.7 billion in 2011 to $8.5 billion in 2017, according to United Nations statistics.

What we now see at the border—the desperate movement of families—reflects this sad reality. As in Mexico, the nations of Central America are afflicted by high unemployment, slowing growth, and rising criminality. If prosperity never fully arrived in Mexico, it was only scarcely glimpsed farther south.

This situation, and mass migration, can be addressed only through a strategic repositioning by the region’s dominant economic power. This would include more incentives for American businesses that have already decided to move operations out of the country and shift them to Mexico—where they would at least benefit both countries—instead of to China. For President Trump, whose comments about Latin America are often both ill-conceived and poorly received, this initiative would deprive China of markets and allow our closest neighbors to share in a new North American prosperity. It’s an idea that has gained some support within the administration, and from both Republicans, such as Marco Rubio, and Democrats, like prospective presidential candidates Julian Castro and Joe Biden.

A bold program that steers American investment, and that of allies, to Mexico and Central America could be critical to bolstering our trade position and creating newly receptive customers. And it could reshape the immigration debate by slowing migration—a win both for America and those countries desperately in need of creating opportunity for their citizens.

It also would serve to address the historic gap between our neighbors and ourselves. There’s an old saying in Mexico, ascribed to the nineteenth-century dictator Porfirio Díaz : Pobre Me’xico, tan lejos de Dios y tan cerca de los Estados Unidos, which means, “Poor Mexico, so far from God and so close to the U.S.” A reimagined American-Mexican alliance would make both sides happy to be neighbors again.

This piece originally appeared on City Journal.

Photo Credit: Martin D, via Flickr, using CC License.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. He authored The Human City: Urbanism for the rest of us, published in 2016 by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of and lives in Orange County, CA.

Understanding the Appeal of Democratic Socialism Key to Defeating It

In their race to save an unpopular president and their lack of a positive agenda, many Republicans and conservatives increasingly identify the rise of “democratic socialism” as their ultimate, if you will, Trump card. Given the fact that most Americans, particularly older ones, still favor capitalism and are less than enthusiastic about expanding federal power, this approach might work.

But conservatives, in or out of the White House, underestimate the intrinsic appeal of the resurgence of neo-Marxism at their own peril. Already more Democrats have a favorable view of socialism than capitalism. Some millennials — soon to be the nation’s largest voting bloc — even see neo-Marxism as “hip” and even “sexy.”

These same urban hipsters, as opposed to working class ethnics, elected the left’s political stars like Alexandria Ocosio Cortez. Bizarrely, socialism even appeals among the educated young workers so coveted by tech firms. This rise of woke progressivism represents a threat both to the right as well as the super-affluent gentry left.

Ignore socialism’s appeal, at your own peril

I grew up in an atmosphere where socialist ideas were taken seriously. My paternal grandmother was a member of the Young People’s Socialist League, and a strong supporter of Norman Thomas (my paternal grandfather was a successful dress manufacturer and Republican). My maternal grandfather, a union window washer, spoke openly of the class struggle as if he was still in Russia.

Socialism’s appeal stemmed, as it does today, from the failures of capitalism. Until the 1950s, working class people in most industrial countries suffered harsh conditions, crowded into bleak city apartments or isolated in hardscrabble smaller communities. For them, what many conservatives deemed as “socialism” — social security, the GI bill, the New Deal infrastructure program — was seen as helping expand the middle class.

The experiences of the working class were very real. My mother was raised in the slums of Brownsville, Brooklyn, and my maternal mother, a seamstress, lived her last years in union housing in that fair borough. Even though most of us were from middle class families, we naturally embraced expanded social democracy, if not of the Norman Thomas variety, certainly that espoused by President Harry Truman, California’s Pat Brown and even President Lyndon Johnson.

A historical perspective

Conservatives often link today’s socialism with the massive failure of the Soviet Union and the Maoist regime in China. And to be sure, some of today’s firebrands have long demonstrated sympathy to dictatorships in Venezuela and Cuba, and for Rep. Ilhan Omar, even a soft spot for anti-Semitic radical Islamists like Hamas. But even the most addled firebrands know they can’t sell third world despotism, much less sharia law, to the average American.

Generally our new socialists pitch European welfare states as their model, with much higher taxes and greater regulation of private businesses. The shapers of modern democratic socialism, such as Michael Harrington, whose The Other America, exposed the vast extent of poverty in early 1960s America, favored a similar system but favored decentralization over of the oppressive Soviet regime. Remember this was a time when most northern European economies were stronger than ours. In recent decades, some of these countries, notably Sweden and Germany, have adopted a more free-market approach as a means of reviving their economies.

What’s the matter with the new socialists?

With rampant inequality and shrinking middle class, the case for socialism should be stronger than any time since the Depression; many, if not most Americans, certainly would not object to taxing the uber-wealthy much more. But socialism’s leading messengers, reared in the ideological hot-houses of elite universities, also constitute the wealthiest and whitest of America’s political tribes.

Not surprisingly the neo-socialists carry attitudes ill-suited for capitalizing, as did Donald Trump, on the mass middle and working class disaffection. All too often they adopt the intersectional, and sometimes openly anti-American, agenda incubated throughout our culture and educational system. Their obsessions with racial redress, including reparations and open borders, seemed ill-suited to winning over most working class voters, something that more seasoned socialists, like Bernie Sanders, recognize.

Worst of all, the much hyped Green New Deal would spell disaster for millions of blue collar workers, as the AFL-CIO recently pointed out, particularly those who work in the construction, energy, transportation, farming and manufacturing industries. The original New Deal, recently excoriated by Ocasio Cortez, was about improving the lives of ordinary Americans, not forcing them to downgrade their ambitions, give up meat, live in small apartments and perhaps not even have children.

Having never studied the history of the Soviet Union, the new democratic socialists seem oblivious, unlike Harrington, George Orwell and other 20th century social democrats, about the dangers implicit in the centralization of economic and political power.

But it’s not just the ditzy left-wingers who need a history lesson. Those on the right, with all their fulsome defense of capitalism, need to be reminded that free markets need to create increased opportunity as well as the better living conditions. Our increasingly hierarchal, and feudal, capitalism all too often fails this test. My fellow capitalists, please remember that only a broadly inclusive version of capitalism can exorcise the ghost of socialism.

This article first appeared at The Orange County Register.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. He authored The Human City: Urbanism for the rest of us, published in 2016 by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of and lives in Orange County, CA.

Homepage photo credit: Office of Sen. Bernie Sanders [Public domain], via Wikimedia Commons

Chinese Sci-Fi Writers Give Us A Glimpse Into China’s Dystopian Present And Future

A thoroughly scientific dictatorship will never be overthrown — Aldous Huxley

In contemporary China, it’s hard to know what people outside the party dictatorship think about the future. As in the former Soviet Union, often the best guide may be not in the controlled media or cowed academia, but in the speculative wanderings of writers.

Chinese science fiction began back in the last days of the Qing dynasty, and, as author Liu Cixin suggests, became identified with a science-based optimism that fit well with the Communist vision. This has now “almost completely vanished,” he notes, replaced by a far grimmer vision.

These writers implicitly reject the notion of inevitable social progress now celebrated by President Xi Jinping and Communist-controlled media. They reflect not party orthodoxy but the most likely future, much as novels such as Yevgeny Zamaytin’s “We,” or the works of the Polish Stanislaw Lem, which identified the underlying realities of the old Soviet Empire.

The Surveillance State

These writers largely express the angst of a millennial generation, which faces a troubling future. In Chen Quifan’s “Year of the Rat,” a surplus college graduate ends up stuck hunting genetically altered rats. “We are just like rats,” the protagonist suggests, “all of us only pawns, stones, worthless counters in the Great Game.”

These writers suggest that the Chinese surveillance state, with untrammeled access to personal data, will continue to expand. Plans are being made to implant workers’ brains with monitors and to bolster a system of “social ranking,” which includes everything from credit worthiness to political reliability.

In his short story “City of Silence,” about the internet in the near future, author Ma Boyong speaks of attempts of “appropriate authorities” to restrict speech to “healthy words”; at the end of the book so few words are left that the “capital of the state” itself becomes mute.

Ma’s story suggests an autocracy amplified by technology far more subtle than the Stalinist horror depicted by George Orwell. As one dissident in “City of Silence” suggests: “The author of ‘1984’ predicted the progress of totalitarianism, but could not predict the progress of technology.”

Hierarchy in a ‘classless’ society

Hao Jingfang’s “Folding Beijing” describes a future Beijing divided into closely delineated communities for the elite, the middle ranks and a vast poor population, living largely by recycling the waste generated by the city. Hao depicts a city that literally changes shape into three forms — a luxurious first space with 5 million people, a still comfortable second space accommodating 25 million and a third space, where the protagonist, Lao Dao, lives among 50 million people clustered in dreary conditions.

Han Song’s clever “The Passengers and the Creation” speaks of a world contained within an airplane, with strict designations between first, second and coach class. The velvet curtain that separates First Class, Han writes, is “soft” but “as impenetrable as iron.” In this world, the wealthy aged live in comfort and can call on the services of young flight attendants recruited from coach.

Writers also have confronted the dire situation in the country’s countryside, where many of the some 600 million rural Chinese still live in poverty. Liu Cixin’s “The Village Schoolteacher” describes a place “so poor that a bird wouldn’t poop on it.” Mao’s revolution may have been driven by the peasants, but President Xi ‘s “moderately prosperous society” may never reach them.

The demographic crisis

China’s historic problems with overpopulation are morphing into a dearth of babies and the prospect of a rapidly shrinking workforce. This is made worse by a huge unbalance, about 33 million, of marriage-age boys over girls. By one estimate, 37 million Chinese girls were lost by abortion or infanticide since the “one child” policy came into force in 1980. China’s current male generation is so socially disconnected that the Communist Party, and some private firms, now teach them how to date.

Maggie Shen’s remarkable novel “An Excess Male” describes a society where women are allowed to take more than one husband, all to encourage greater breeding and relieve social pressures. Shen’s heroine May-ling is married to two men, neither of whom is much interested in carnal relations with her, and is looking to marry a third, an “excess male,” in order to have more children.

Life is made more problematic by the fact that May-ling’s favorite husband, Hann, is gay. In the China of the future, people designated “willfully sterile” are persecuted for not procreating. The state, whose policies fostered a looming demographic disaster, persecutes innocent citizens who don’t care to solve the country’s demographic shortfall.

Ultimately, the science fiction writers tell us much you won’t hear from the official sources or that country’s admirers here or in Europe. China could well be evolving into an authoritarian dystopia. True heirs to Orwell, Huxley and Zamaytin, these brave artists portray not only a view of China’s future but offer a window to its already existing contemporary reality.

This article first appeared at The Orange County Register.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. He authored The Human City: Urbanism for the rest of us, published in 2016 by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of and lives in Orange County, CA.

Homepage photo credit: The Erica Chang via Wikimedia Commons under CC 3.0 license,

The Imperial Presidency

President Trump’s attempted end-run to fund his “beautiful” wall has been widely, and properly, denounced as a naked power grab by both the left and even some on the right. Yet if Trump’s action is ham-handed and likely dangerous, it also sadly reinforces a long-standing trend that seems to be leading us, inexorably, toward an ever-more imperial presidency.

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America’s Oligarchs Face Left-Wing, Right-Wing Backlash

When the late Steve Jobs died in 2011, even protesters from the left-wing Occupy Wall Street movement mourned his passing. Today, it is unlikely that the passing of tech giant would elicit much in the way of sympathy from progressives or, for that matter, almost anyone else.

As Amazon’s expulsion from New York suggests, the tech oligarchs are gradually morphing from great saviors to widely perceived threats to the republic. Rather than gutsy entrepreneurs, they are seen increasingly as greedy oligopolists whose goal is to place society firmly under their digital control. A majority, notes the Pew Research Center, already feel they need to be more tightly regulated.

The oligarchs have managed to unite both the progressive left and the conservative right against them. The left objects that the tech industry remains almost totally un-unionized and seems to seek to eliminate gainful work for all but a handful. The right sees a threat to their political expression as they strengthen their hold on the means of communications, generally wiping non-progressive views from the screens of their customers.

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Twilight of the Oligarchs?

Amazon’s decision to abandon New York City—leaving a $3 billion goodie bag of incentives on the table—represents a break in the progressive alliance between an increasingly radicalized Left and the new technocratic elite. Read more

America’s Role Model Should Be America

President Trump may take blind patriotism too far, but his often nativist stance seems likely to prevail against Democrats whose policy prescriptions increasingly draw from “models” as China, Scandinavia or Germany. Such infatuations have been commonplace for a century among intellectuals inspired variously by Imperial Germany, fascist Italy, the Soviet Union or mercantilist Japan.

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This Train Won’t Leave the Station

Governor Gavin Newsom has canceled the bulk of the state’s long-proposed high-speed line between Los Angeles and San Francisco, leaving only a tail of the once-grand project—a connection between the Central Valley’s Merced and Bakersfield, not exactly major metropolitan areas. “Let’s be real,” Newsom said in his first State of the State address. “The project, as currently planned, would cost too much and take too long. There’s been too little oversight and not enough transparency.” The project’s cost, originally pegged at $33 billion, ballooned over the last decade to an estimated $77 billion (or maybe as high as $98 billion), with little reason to assume that the cost inflation would end there. Read more