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Something’s Rotten in Silicon Valley

in Business/Politics/US by

Silicon Valley has long been trumpeted as both the ideal and center of America’s entrepreneurial energies and business acumen. It has been an envious example for foreign governments, particularly in Asia, seeking to spur creativity and international success stories in their economy. Most recently, Japanese Prime Minister Shinzo Abe pledged to help small Japanese firms enter Silicon Valley in an attempt to help jumpstart the Japanese economy and promote its firms long term competitiveness. Beyond the economic capital Silicon Valley has generated among Americans, increasingly these firms are starting to command considerable domestic social and political capital. In the debate over net neutrality it was these tech firms that came out on the side of the “common man” that led to considerable positive coverage from bloggers on these companies. While Silicon Valley may be the shining exemplar of America’s best on the surface, lurking just below the warm shimmer is a growing rot that is going largely unnoticed.

As Mark Ames of Pando Daily first uncovered, from 2005, Apple’s Steve Jobs and Google’s Eric Schmidt illegally agreed not to recruit each other’s employees, share compensation details, and to publish workers who violated these terms. As discovered by Ames, the agreement grew in scope to cover the who’s who of Silicon Valley companies including Apple, Google, Intel, Adobe, Intuit, Dreamworks, Oracle, and Pixar. Through these actions, the companies involved were able to push down wages of their employees to the tune of USD $9 billion according to the class action lawsuit. In emails leaked to the public, prominent peoples champions such as Apple’s Steve Jobs, Google’s Sergey Brin and Eric Schmidt are revealed to have sent direct emails to each other of violations in the other’s company and demanding the firing of workers who dared to breach their agreement. Jobs in particular comes off as a true robber baron and is shown to threaten companies with “war,” reminding them to consider Apple’s size and power if they did not consent to joining the wage fixing cartel. The fallout from this discovery is only growing, and another class action lawsuit by visual effects workers is being brought on following these revelations. In addition, the number of companies and their level of involvement continues to grow as more personal emails are revealed. These revelations reveal the true nature of these companies as being far from the champions of meritocracy and encouraging individual talents that so many revere them for. Rather, the image that is revealed is more similar to the abuses of major financial companies in the run up to the 2008 Economic Crisis and even further back to the robber barons of the 19th century. As these documents reveal, those at the highest levels of these companies were not only aware of their illegal actions, as repeated emails encouraging planning for plausible deniability has shown, they were also aware of how their actions flew completely against the public image their massive PR funding built. As one Intel employee remarked “While we pay lip service to meritocracy, we really believe more in treating everyone the same within broad bands”.

Given that so many of Silicon Valley’s companies are concerned with the cost of their employees enough to illegally suppress their wages, it is unsurprising that exploitation of foreign workers has become linked to many of these tech companies. Silicon Valley marquee Apple, in addition to Google, Verizon, Cisco, and many more have participated in the H1-B visa sponsorship program that according to the US Congress has been abused on an “industry wide” scale. Highlighted in the non-profit Center for Investigative Reporting’s report is a thorough expose on the issue. Abuses of H1-B visa workers include being tied to their place of employment, legal liability for breaking their contracts, and creating an “ecosystem of fear” to ensure employees do not speak out on these violations. According to US Department of Labor investigations, and cited by the report, from 2000-2013 over USD $29.7 million was withheld from employees hired from overseas and through the labor brokers that supply them to companies that include Silicon Valley’s most publicly lauded companies. Not content with their current access to low wage workers and their success in colluding to depress wages, Google, Facebook, Apple, and other Silicon Valley tech giants are strongly lobbying the Obama Administration and members of Congress to increase the cap on H1-B visa grants and consequently to support labor brokers that engage in the well document exploitative practices. And why shouldn’t they? As has been covered before, these overseas hires are paid far less than the market rate for their services and are frequently returned to their home country after completing their contract instead of being hired on full time. Despite the hoopla and puff pieces such as this article from Slate coming out in support of expanding the program as a “means to bring the best and brightest to the US”, the numbers show that the majority of H1-B hires are not provided a path to citizenship and long-term employment. In short, these companies benefit from cheap, temporary and often exploitative labor and are using their political clout vis a vis their economic power to expand their power to do so.

If the illegal conspiring to depress domestic wages and to take advantage of foreign workers is not worrying enough, the political clout that these companies are starting to wield, and apparently effectively, is an even greater cause for concern. As I have covered previously, recent empirical research has shown that the economic elite, including those that are at the top of companies such as Apple, Google, and Facebook, have an overwhelming ability to dictate what political actions are followed in the US. Emphasizing this ability to influence the actions of politicians is Google, famous for their “Don’t be evil” motto. As reported by the Wall Street Journal, while being investigated for antitrust violations of which they would subsequently be cleared of, Google co-founder Larry Page and other top employees met with Obama Administration officials and the FTC. According to the report, Google lobbyists have met with officials at the White House on the average of once a week since Obama took office. This should come as little surprise however, as from the very onset of his presidency the number of former Google top brass or Google-affiliated individuals in the Obama administration has raised eyebrows. In addition, Google is already seeking to get close to Hillary Clinton’s campaign, with many suspecting that her chief technical office will come from Google. While other firms may not be as high-profile, Google has set the precedent for Silicon Valley’s influence in the highest levels of politics.

Far from being the hotbed of entrepreneurial spirit born of free market capitalism and paving the way for America’s technological and economic leadership throughout the next century, the top firms that now rule Silicon Valley are more accurately seen as exploitative actors profiting through monopoly capitalism. With levels of income inequality at record highs, firms that collude to depress wages are dangerous. When they begin to wield their economic power to secure political objectives in line with maximizing their profits, the very foundations of capitalism and the integrity of democracy are undermined. The alignment between these firms and net neutrality or any other political issue should not be misconstrued as their sympathy for the common man. Rather, as the rare instance when a monopolistic power’s aims happen to match those of the average citizen. Silicon Valley may be responsible for amazing technological feats and innovative products central to our lives, but the aims of its firms are no different than any others in a country such as the US where politics and money are so intertwined: maximize profit no matter the cost.

Eric Watson holds a Master Degree in Finance from Yonsei University and currently works at MotionPoint where he helps Fortune 500 companies expand their business globally. He previously served as the editor in chief of the The Yonsei Journal of International Studies. His current research interest is the development of new manufacturing technologies and the new national policies necessary to encourage their efficient and egalitarian adoption. He completed his bachelors degree at Arizona State University (ASU) in 2010 with a degree in Political Science (Honors).

3 Comments

    • I think this is the first signs that indicate a shift in that direction. Plenty of time to get off this track, but it always worries me when the public points to companies as champions of their rights.

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