Rageful Nostalgia and the Silicon Chasm

by Reihan Salam

Charlotte Allen surveys Silicon Valley’s cultural and economic landscape for the Weekly Standard, and she doesn’t like what she sees:

Menlo Park is actually only about 20 percent Hispanic and is unabashedly affluent in its own right, but its Hispanic population concentrated next door to the hedgy scrim of Atherton makes for a startling study in contrasts. No one pretends that the gravel-roofed, shack-size houses in this particular neighborhood are “charming” midcentury modern gems. That would be hard to do, what with the weeds, the peeling paint, the chain-link fences, the chained-up guard dogs, and the front lawns paved over to accommodate multiple vehicles for multiple dwellers. The phrase “the other side of the tracks” has vivid meaning. “Look at the newspaper police blotters, and you’ll see that in Atherton the main reported crime is identity theft,” said Berkey. “Here, it’s break-ins.”

You can laud this underbelly barrio as vibrant immigrant culture or you can decry it as an instant-slum product of untrammeled illegal border-crossing, but it represents an important fact on the ground: These are the people who earn their livings tending to the needs of the high-tech “creative class” that has made Silicon Valley famous. I could see them on Atherton Avenue, the amanuensis class heading up from Menlo Park in their wee panel trucks and Dodge minivans and their Ford flatbeds fitted out with racks for garden tools among the Bentleys, BMWs, Audis, and Lexuses that are the standard Atherton vehicles. They tend the meticulously clipped lawns, flower beds, hedges, and trees of Atherton (Berkey said that it’s not uncommon for an Atherton sentence to begin, “My arborist .  .  . ”). They clean the houses and the swimming pools, they deliver the catering, they watch the children, and they repair the roofs, the plumbing, the balconies, and the wine cellars of the very affluent and the very busy. You might say that across-the-tracks Menlo Park, along with down-market Latino neighborhoods just like it up and down the peninsula—East Palo Alto, parts of Redwood City, the southern end of San Jose—functions as a kind of oversize servants’ wing. It’s safe to say that almost every hotel maid, restaurant busboy, cashier, janitor, retail stocker, and fast-food worker in the valley is Latino.

Master and servant. Cornucopian wealth for a few tech oligarchs plus relatively steady but relatively low-paying work for their lucky retainers. No middle class, unless the top 5 percent U.S. income bracket counts as middle class. Silicon Valley is a tableau vivant of what many economists and professional futurologists say is the coming fate of America itself, a fate to which Americans, if they can’t embrace it as some futurologists hope, should at least resign themselves.

She goes on to lament the evaporation of the middle-income jobs that once flourished in the South Bay, and to decry “the oligarchs of Silicon Valley”  for their “elite-class social and political views,” including their support for comprehensive immigration reform. Though I’ve also been critical of comprehensive immigration reform, I was stuck by Allen’s uncritical acceptance of the labor-aligned Economic Policy Institute’s case against increasing skilled immigration. It is certainly possible that skilled immigration depresses wages for skilled U.S. workers. Yet the essential difference between skilled immigrants and less-skilled immigrants is that as a general rule, skilled immigrants make a larger net contribution to public finances than their less-skilled counterparts. Limiting skilled immigration might improve wages for skilled natives, the premise of the EPI analysis Allen cites, but it might also encourage the offshoring of skilled employment. This is part of why I think that the case for skilled immigration is much stronger than the case for less-skilled immigration.

Allen decries land-use restrictions for driving up the cost of housing — yet she seems to be blaming the wrong culprit:

On top of those perhaps deliberately depressed salaries and the high cost of existing housing are a raft of California “green” laws—enthusiastically supported, as one might expect, by the valley’s tech elite in a post-manufacturing economy—that make life there even more expensive, and family-friendly housing even less attainable. Renewable-energy mandates drive up utility costs, and environmentally driven land-use restrictions and “smart growth” plans have made the construction of new single-family homes in the valley all but impossible for everyone except those affluent enough to own a large-lot teardown.

Not surprisingly, the lower-echelon tech employees and midskill workers cram themselves into the enormous apartment complexes that line El Camino and some of its side-arteries, many of which are attractive enough for singles although not especially hospitable to raising children. Then they give up and move to Utah or Texas or some other state with lower taxes and cheaper housing, or they resign themselves to hours-long, traffic-clogged commutes to Fremont and other less expensive, less pretty suburbs across the bay in Alameda County, where housing prices are also rising but not quite so rapidly.

One could argue that the real problem is that there aren’t enough “enormous apartment complexes” in the region. Land-use restrictions in the region are typically used to limit density, not to increase it. Though Allen might find “smart growth” plans politically distasteful, they actually ease the affordability crisis to the extent they allow for greater density. Building affordable single-family homes is essentially impossible given the value of the land, which is why multi-family dwellings are the only way to put employment opportunities within easy reach of middle-income families.

Though Allen’s article is well-observed and interestingly angry, there is not too much that differentiates it from left-of-center jeremiads against the oligarchs of Silicon Valley, like those written by George Packer of The New Yorker. One distinction is that Allen celebrates low-density, low-rise suburbia, and it’s not clear that she appreciates the ways in which favoring single-family homes over multi-family homes does at least as much as environmentally-driven land-use restrictions to drive up the cost of housing. The other is that she finds the social liberalism of the oligarchs distasteful. Otherwise, she embraces the notion that the future is bleak thanks to the rapaciousness of the capitalist class:

The current long-running recession, together with the fact that most of the jobs that have been created recently are at the low-wage bottom, has led the futurists to adjust their rhetoric radically. They have switched from the manic-phase optimism of the 1990s and early 2000s to a combination of putting a happy face on middle-class disappearance and telling Americans to get used to it. Florida, for example, candidly admitted in one of his recent Atlantic posts that what he called the “talent clustering process,” the agglomeration of “highly skilled knowledge, professional, and creative workers” in “knowledge-based metros” such as Silicon Valley “provides little in the way of trickle-down benefits” to those lower on the scale of brains and education.

The bright-side-of-life school argues, au contraire, that the benefits will continue to trickle, if not exactly as palatably as the 1990s optimists envisioned them. That school includes Enrico Moretti, a labor economist at the University of California, Berkeley, writing for the Wall Street Journal last September: “For each new software designer hired at Twitter in San Francisco, there are five new job openings for baristas, personal trainers, therapists and taxi drivers.” Michael Mandel and Judith Scherer of South Mountain Economics, in a 2012 paper titled “The Geography of the App Economy,” arrived at a similar ratio, as long as you count pizza-deliveryman as a tech-economy spinoff job. Ray Fisman, a Columbia Business School professor writing in Slate, advised victims of deindustrialization to move to tech centers, where they could collect “more than a few crumbs” working as manicurists and lawn cutters for their more creative overlords.

You’d almost think that Allen considers the work of manicurists and lawn cutters undignified — that has to be it, as there is little doubt that manicurists and lawn cutters working in affluent “knowledge-based metros” earn more than their counterparts elsewhere. The upshot of Allen’s analysis isn’t clear. We can’t build enormous apartment complexes to reduce the price of housing, because they’re not as family-friendly as single-family homes; and so housing will continue to be extremely expensive in high-productivity regions. The Democratic Party liberalism of the oligarchs is distasteful, but so is the capitalist dynamism that is reducing the value of less-skilled, and mid-skilled and in some cases high-skilled, labor. There is something vaguely dishonorable in Allen’s worldview about providing services to busy professionals, so we can’t have service jobs take the place of manufacturing jobs. We’re left with rageful nostalgia.

It is apposite that Allen has chosen Tyler Cowen’s new book Average is Over as her chief intellectual target. Cowen has been condemned, by the left-of-center political philosopher William Galston among others, for his “moral indifference” to economic hyperpolarization. But Cowen’s book is about laying out a plausible future, and thinking through its implications. Allen’s article does much the same thing. Yet Allen objects to the fact that Cowen doesn’t think that the lives of the non-rich will be miserable in a hyperpolarized future, the implication being that Allen thinks otherwise. If that really is the case, you have to wonder if Allen is preparing to man the barricades.