Tech elites paid for the rope that may hang them.
The term “useful idiot,” often credited to Vladimir Lenin, applies to people supporting a cause or movement injurious to their own self-interest. Nowhere is this more relevant these days than in Silicon Valley, a place dominated by brilliant technologists and marketers who often seem to have the social and political acuity of middle schoolers, as evidenced by their strong support for progressive Democrats poised to destroy the underpinnings of their businesses.
California governor Gavin Newsom is expected to sign the recently passed Assembly Bill 5, which will effectively turn many contractors into employees. AB5 codifies the California Supreme Court’s unanimous May 2018 ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles that many contractors should be treated as employees. The legislation’s prime backers are the state’s unions, which see it as an ideal way to organize now out-of-reach workers.
The new measure is potentially devastating, though, for companies like Uber, Lyft, and Postmates, all built around part-time employees, and none yet profitable. Many other tech firms—including profitable ones—use contractors for everything from app development to catering to cleaning. As many as 2 million Californians are employed in so-called gig work. If AB5 passes, job losses won’t just be felt by the ride-hailing firms but also by many other businesses, including newspapers, small trucking firms, some medical providers, and even franchise owners.
In the 1980s and 1990s, Silicon Valley, like many industries, placed its bets on both political parties. Moderate Republicans like Pete McCloskey, Ed Zschau, and Tom Campbell routinely won congressional elections, as did similarly minded members of the state legislature. But over the past few decades, the Valley has become politically monochromatic, with virtually no elected Republicans. Almost all contributions from Silicon Valley tech owners and employees in the 2016 and 2018 elections went to Democrats. Tech money helped Newsom outspend his GOP rival by three to one—with major contributions from former Yahoo CEO Marissa Mayer, and Lauren Jobs (widow of the Apple founder) at the top of the donor list. Former Google chairman Eric Schmidt heads data efforts for several Democratic presidential candidates, including Joe Biden, Kamala Harris, Cory Booker, and arch-populist Elizabeth Warren. Tech employees are, if anything, more progressive-leaning in their political contributions than their corporate masters.
Just a few years ago, these investments seemed to be paying off. The Obama administration was deferential to tech firms, steering away from any hint of antitrust action. Google representatives met in the White House weekly, and more than 250 people shuttled between working for Obama and Google during his presidency. Now, this power is being challenged. Google is being sued for monopolistic practices by 48 states. Though progressive California has stayed out of the fray, AB5 demonstrates that the tech moguls are losing ground there, too, to better-organized and more politically savvy public-employee and service unions.
The new legislature’s makeup reveals how much power has shifted to the unions. Beyond protecting gig workers, organized labor has broken with tech on education reform, long a Silicon Valley hot-button issue. Under the current legislative super-majority, the Democrats have worked overtime to make sure that California’s schools—ranked 40th on Education Week’s composite score of national school performance—remain mediocre by undermining charter schools, eliminating exit exams, banning suspensions for unruly students, and, as a recent proposal suggests, introducing a new ethnic-studies curriculum for public school students.
The Californian ruling caste’s progressive sentiments have not translated into broad-based economic benefits. According to an analysis by Chapman University’s Marshall Toplansky, California has created surprisingly few high-wage jobs over the past decade, with 86 percent below the median pay and some 40 percent paying under $40,000—in one of the nation’s most expensive states. In a tech-dominated economy, virtually every other sector has grown slowly, well below results in such key competitors as Texas and Arizona. And even the bounty of Silicon Valley has not helped the state’s middle class, since some 40 percent of all tech jobs have gone to foreign workers.
California, in fact, is creating a huge class of workers struggling to achieve anything close to middle-class standards. Gig-economy workers epitomize this trend. One survey of workers in 75 countries found that most gig contractors earn less than minimum wage, including in the United States. Roughly half of California’s giggers struggle with poverty. The reasons are not hard to identify: they lack many basic protections that full-time employees enjoy—for example, enforcement of civil rights laws.
Some identifiable progressives, like Chris Lehane and David Plouffe (who managed Obama’s 2008 campaign), maintain that the gig economy is “democratizing capitalism” by returning control of the working day to the individual. They point to opportunities that gig work provides for people to make extra money using their cars or homes. Uber and Lyft represent their employees as creatives or professionals, moonlighting as drivers to save up for a vacation or expensive date. That may be true for some, but for many others gig work can look more like modern serfdom.
The battle between the Valley and the socialist-oriented progressives is just beginning, both in California and around the country. The traditional Democratic elite has been recruited to argue the tech leaders’ case. Former senator Barbara Boxer works for Lyft, and Tony West, brother-in-law of presidential contender Kamala Harris, is counsel for Uber. They’re helping direct a wave of tech dollars into Sacramento and Washington to reverse the tide, including a proposed $90 million ballot measure to undermine AB5.
How long will Silicon Valley’s leaders accept these conditions? Both Lyft and Uber have shifted some of their operations out of state, Lyft to Nashville and Uber to north Dallas. Apple has opened a huge new operation in the suburbs outside Austin. But there may be no escape if the ascendant Elizabeth Warren or Bernie Sanders ends up in the White House, particularly with a Democratic majority in both houses of Congress. In these circumstances, Big Tech is likely to be treated in Washington with the kind of scorn that Amazon faced in New York City from local congresswoman Alexandria Ocasio-Cortez, now increasingly the national voice of the party grassroots. If Warren wins, tech companies and their high-wage upper-tier workers will have to deal with demands to put workers on their boards and pay huge taxes to fund expanded Social Security and Medicare programs. Privacy legislation could impede their highly profitable tracking and data-collection businesses, and antitrust enforcement could see the breakup of companies like Google and Facebook. At least one progressive, Oregon senator Ron Wyden, has even suggested that Facebook’s Mark Zuckerberg face “the possibility of a prison term.”
The tech elite has financed a Democratic Party that now appears to favor socialism over capitalism. A socialist movement is even percolating among Silicon Valley tech employees, many of whom see little opportunity to amass enough wealth to buy a house in the exorbitant Bay Area. Like those French aristocrats who backed revolutionary ideas in the late-eighteenth century only to find themselves riding tumbrels through angry crowds, tech elites have spent a fortune promoting a “woke” politics that is turning against them. They may not lose their heads, but they could find their riches fleeced by former allies. It couldn’t happen to a more deserving, self-involved, and cognitively gifted group of . . . well, idiots.
This piece first appeared on City Journal.
Joel Kotkin is the presidential fellow in urban futures at Chapman University and executive director of the Center for Opportunity Urbanism. His latest book is The Human City: Urbanism for the Rest of Us. His book on the return to feudalism will be released next year.
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