The Resistance We Need: Trump Administration Gears Up to Trust-Bust the Tech Giants

If ever any group had it coming, it’s the giants of the tech industry. The recent decision by the Trump administration to look into monopolistic practices by the tech oligarchs—talk about collusion!—represents a welcome change from over two decades, under both parties, of sucking up to these firms as they bought up competitors and consolidated market positions that would put the likes of John D. Rockefeller to shame.

As in the gilded age a century ago, the tech industry epitomizes capitalism run amok, with huge concentrations of wealth, power, and control over key markets, like search (Google), cellphone operating systems (Apple and Google), and social media (Facebook/Instagram).

We have been accustomed to think of technology entrepreneurs as bold, risk-taking individuals who thrive on competition but now we know that it is more accurate to see them as oligarchs ruling over an industry ever more concentrated, centrally controlled and hierarchical. Rather than idealistic newcomers, they increasingly reflect the worst of American capitalism—squashing competitors, using indentured servants from abroad, colluding to fix wages, and dodging taxes while creating ever more social anomie and alienation.

The Valley, as one observer puts it, has taken a “reprieve from the bogeymen in the garage.” That is, while the tech giants peddle the tired meritocratic myth that there’s some genius in a garage this close to replacing them—if that genius could still afford a garage in the Bay Area, at least—in fact, they simply buy out or price out new competitors.

The industry’s influence flourished most under President Obama, where Google’s presence, for example, was all but ubiquitous, with nearly 250 people shuttling one way or the other between government service and Google employment, and dozens of others going between the search giant and his campaign operations. Needless to say, the search giant had little to fear from corporate lawyer Eric Holder’s Justice Department, which was more interested in delivering politically correct homilies than protecting consumers or small businesses through anti-trust actions.

Lack of oversight from Washington allowed these firms to grow to gargantuan size and consolidate their monopolistic control. Now they are taking over much of what’s left, from food delivery to finance, movies to space exploration. The message to everyone else? Move aside—we’re taking over.

Financed by a small charmed circle of venture capitalists and private equity firms, these behemoths have employed their close political ties in Washington to avoid antitrust scrutiny that firms in less “sexy” industries would be hard-put to avoid. This has allowed, for instance, Facebook to buy up competitors like Instagram, WhatsApp and Oculus, and for Google to devour hundreds of firms, at times purchasing a new venture every week.

As big donors to the Democratic Party and supporters of numerous politically correct causes, tech giants, led by Google, seemed at one point about to acquire the progressive left as well. But with the demise of corporate facilitator Hillary Clinton, the ascendant Bernie Sanders-Elizabeth Warren style populism now openly targets the oligarchs and favors their breakup. Progressives, at least those not dependent on oligarchal funding, increasingly also question their labor practices, which are resolutely anti-union and extraordinarily inegalitarian, and their ability to hoard cash while paying minimal or no taxes.

Compounding their political jeopardy, the oligarchs also have managed to alienate the right, traditional defenders of property rights and capital. Some conservatives doggedly still defend them, but more have been alienated by the firms’ systematic bias against conservatives—often suspending their online presences, and even access to online credit.

As a result, there is growing support on the right for anti-trust action against the oligarchy, as evidenced in Glenn Reynolds’ new book, The Social Media Upheaval. Others, such as centrist Michael Lind, suggest that if these are in fact natural monopolies, it would be best that they be regulated as such, much as we have seen in markets such as electricity and water. Whatever the kind of poison being prescribed, the oligarchs have generated a remarkable range of enemies.

The new pressure on big tech from the Trump administration, and from the left, is critical if we wish to remain an open and democratic society with broad-based opportunity. It’s important to understand that these companies—unlike earlier generations of tech firms that manufactured physical products in the U.S—are not, as economist Robert Gordon notes, making our economy much more productive or improving people’s lives as they focus on ad revenue and surveillance.

“We wanted flying cars,” lamented tech entrepreneur Peter Thiel, “and we got 140 characters.”

In the end, the oligarchs’ steady accumulation of wealth, power and information—like that of the Gilded Age moguls—is incompatible to a fair and responsive republic. Their promise is to create a nation of subsidized rental serfs, who can spend their time doing gig work or enjoying what Google calls “immersive computing.”

With little commitment to upward mobility, the oligarch’s ascension would mean that the rest of us—billions of people of “surplus humanity”—will be turned into something like medieval serfs, powerless and landless, whose last remaining power may be the threat of setting up the guillotine in the town square.

You want that future for yourself or your children? Of course you don’t. Therefore we need to applaud the Trump anti-trust moves, as well as the fierce new critiques coming from the left. But critics like Warren, Sanders, and Trump will still need to overcome the inevitable gauntlet of media influencers, big money donations, and well-financed propaganda that the oligarchs can muster. After all, they can always find new tools, like Kamala Harris, who is busily raising cash along San Francisco’s “millionaire row.”

At the end of the Middle Ages, the middle classes displaced their aristocratic lords to establish the first modern democracies. A century ago both parties participated in efforts to curb the power of the Gilded Age moguls. Resistance to overweening power means more than just fighting Trump or fending off the left.

In our day, if people left or right want to take our future back, they first must seize it from the tech oligarchy.

This article first appeared in The Daily Beast.

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 NewGeography.com and lives in Orange County, CA.

Making Life Worse: The Flaws of Green Mandates

“Saving the planet” should be an unbeatable political slogan. Yet consistently the imagined “green wave” mindlessly embraced by most of the media continues to fall short, as evidenced by recent elections in Canada and Australia, as well as across much of Europe.

These results reflect climate scientist Roger Pielke’s 2010 notion of “the iron law of climate policy.” Pielke noted that support for reducing greenhouse emissions is limited by the amount of sacrifice demanded. “People will pay some amount for climate goals,” he noted, “but only so much.” Read more

The New Shame of Our Cities

A metropolitan economy, if it is working well, is constantly transforming many poor people into middle-class people, many illiterates into skilled people, many greenhorns into competent citizens. . . . Cities don’t lure the middle class. They create it.
  —Jane Jacobs

Perhaps no song has been belted out more often than the one that claims that America is moving “back to the city.” Newspapers, notably the New York Times, devote enormous space to this notion. It gained even more currency when the Obama administration sec­retary of Housing and Urban Development, Shaun Do­novan, pro­claimed that the suburbs were “over” as people were “voting with their feet” and moving to dense, transit-oriented urban centers.

This celebration perhaps reached its crescendo when Amazon initially announced its move to Crystal City, Virginia, and Queens, New York. “Big cities won Amazon and everything else,” Neil Ir­win of the Times predictably enthused. “We’re living in a world where a small number of superstar companies choose to locate in a handful of superstar cities where they have the best chance of re­cruiting superstar employees.”

In fact, however, these views are more aspirational, or even delusional, than reflective of reality. Overall, data suggests that we are not seeing a great “return to the city” but, with few exceptions, a continued movement out to the suburbs and less dense cities, nota­bly in the sunbelt. The spurt of urban core growth that occurred immediately after the housing bust turned out to be remarkably short lived, with the preponderance of metropolitan growth—roughly 80 percent—returning, as has been the case since at least the late 1940s, to the suburbs and exurbs. Indeed, at no point did Census Bureau estimates show net domestic migration from suburbs to core cities, only a reduced rate of migration in the opposite direction.

Even the country’s most influential urbanist, scholar Richard Florida, now suggests that the great urban revival is “over.” Rather than the usual belief that density leads to productivity and innovation, a new Harvard study demonstrates that, between 1970 and 2010, suburban areas have overall steadily increased their economic advantages: the share of suburbs making up the top ranks of all urban and suburban neighborhoods (measured as the top quartile) went from roughly two-thirds in 1970 to almost three-quarters by 2010.

Shifting Demographics: Exaggerating the Urban Renaissance

Even at the peak of the urban “renaissance,” most of the population and job growth continued to occur in the suburban periphery. Cities achieved some parity in growth rates in the period between 2009 and 2011, as presidents Bush and Obama provided “a covert bailout”  to banks, universities, and government bureaucracies concentrated heavily in and around urban cores.

Yet as the rest of the economy improved, and urban land prices rose, population movement again shifted away from the dense inner city to less compact, more affordable locales. Analysis of census data by demographer Wendell Cox found that the core counties of the metropolitan areas with populations of more than one mil­lion, after losing only ten thousand net domestic migrants in 2012, experienced an outflow of nearly 440,000 by 2017.

Read the entire article on American Affairs.

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 NewGeography.com and lives in Orange County, CA.

America Can’t Ignore the Economic Threat of a Rising China

In the aftermath of the Communist victory in the late 1940s, the question often asked in Washington was: “Who lost China?” That fueled the McCarthyite inquisition that followed. The question our children might ask is: “Who lost America?”

The long-running side-show around Russian “collusion” focused on the nasty but largely inconsequential ties between some of Donald Trump’s more sleazy aides and their equally disreputable Russian or Ukrainian counterparts. Yet, compared to China, Russia represents at most a pesky but fundamentally second-rate power; Russia’s GDP is smaller than that of South Korea and barely a tenth of China’s.

In the 21st century, how we cope with China will determine the future of American economic and political pre-eminence. Read more

After Amazon: What Happened in New York Isn’t Just About New York

The fiasco surrounding Amazon’s recent escape from New York reflects a broader, potentially devastating trend. By driving the Seattle-based behemoth out of the Big Apple, New York’s increasingly militant progressives have created a political paradigm that could resonate in cities across the country.

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The Once-Lucky Country

Planners and other elites threaten the long-established pleasures of life in Australia.

Few places on earth are better suited for middle-class prosperity than Australia. From early in its history, when it was a refuge for British convicts, the vast, resource-rich country has provided an ideal environment for upward mobility, from the pioneering ranches of the nineteenth century to the middle-class suburbs of the late twentieth. Journalist Donald Horne described Australia in 1964 as “a lucky country run mainly by second-rate people who share its luck.”

Over the last decade, though, Australia’s luck has changed, as the country develops many of the pathologies of crowded, socially divided societies like the United Kingdom or the United States. Read more

Our Suicidal Elites

The French nobility, observed Tocqueville in The Ancien Regime and The Revolution, supported many of the writers whose essays and observations ended up threatening “their own rights and even their existence.” Today we see much the same farce repeated, as the world’s richest people line up behind causes that, in the end, could relieve them of their fortunes, if not their heads. In this sense, they could end up serving, in Lenin’s words, as “useful idiots” in their own destruction.

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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.

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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 NewGeography.com and lives in Orange County, CA.

California’s Message: You Built That, Now Get Out!

The people who build our homes increasingly can no longer afford them. As the state elite and their academic cheering crew celebrate our progressive boom, even the most skilled, unionized construction workers, notes an upcoming study, cannot afford to live anywhere close to the state’s major job centers.

In fact, notes the study, soon to be published by Chapman University, not a single unionized construction worker can afford a median-priced house in any of the major coastal counties, including Orange, Los Angeles, San Mateo, San Francisco, Santa Clara, San Diego, Alameda, Sonoma and Napa. Even with incomes averaging over $73,000 annually, notes author and economist Dr. John Husing, most can afford median-priced homes only in the further reaches of the Central Valley or the Inland Empire, requiring huge commutes.

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