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CHAPTER 6

Feudalism in California, Harbinger of the Future

Perhaps the best way to picture the future contours of hightech feudalism is to examine the present conditions in its fountainhead, California. Many progressives see Golden the State, and especially Silicon Valley, as the harbinger of a better, greener, more egalitarian future.¹ Yet the reality could not be more diff erent. Rather than a model of upward mobility, California is a place now dominated by a small class of exceedingly wealthy and well-connected people, resembling the nobility of the Middle Ages or the elites of the Gilded Age.

California has changed dramatically from the opportunity-rich environment that lured so many millions to the state. From the beginning, California promised much, wrote Kevin Starr, the premier chronicler of the state’s history: “While yet barely a name on the map, it entered American awareness as a symbol of renewal. It was a final frontier: of geography and of expectation.”² Since its entrance to the Union in the mid-nineteenth century, the Golden State was known as a place where ambitious outsiders from diverse backgrounds could prosper and realize their dreams. But today more Californians feel the state is headed in the wrong direction than the right, according to a recent poll by the Public Policy Institute of California, and the proportion reaches above 55 percent in the inland areas.³ Voters dislike the state legislature even more than they dislike President Trump.⁴ Consumer confidence hit a three-year low in 2019, even as some other states, such as Texas and Michigan, saw small upswings.⁵ There is also anger over the growing problem of homelessness.⁶

Number One in Wealth, and in Poverty

Social stratification rather than upward mobility now characterizes the social order of California. The state has one of the nation’s highest Gini ratios—which measures the inequality of wealth distribution between the richest and poorest residents—and the disparity is growing faster than in almost any other state outside the Northeast, according to James Galbraith, a liberal economist.⁷ The gap between middle and upper wages has become the widest in the nation, and while midrange wages are around the same as those in the rest of the nation, they buy less because of much higher taxes as well as energy and housing costs.⁸ California’s level of inequality is greater than that of Mexico, and closer to that of Central American countries like Guatemala and Honduras than to what is common in developed counties like Canada and Norway.⁹

With adjustment for cost of living, California now has the highest overall poverty rate in the United States, according to the Census Bureau.¹⁰ Fully one-third of welfare recipients in the nation live in California, which is home to barely 12 percent of the total population.¹¹ A United Way study in 2017 showed that close to one-third of the state’s families are barely able to pay their bills.¹² Today, eight million Californians live in poverty, including two million children.¹³ Research by the Public Policy Institute found that 45.8 percent of California’s children live close to the poverty level, often in substandard housing.¹⁴

Conditions are especially tough for Hispanics and African Americans, who constitute 45 percent of the state’s population. Almost one-third of the state’s Hispanics and one-fith of African Americans hang on the edge of poverty, notes the United Way. Based on cost-of-living estimation tools from the Census Bureau, 28 percent of African Americans in the state live in poverty, compared with 22 percent nationally.¹⁵ Fully one-third of Hispanics, the state’s largest ethnic group, are below the poverty line, compared with 21 percent outside the state.¹⁶ Over two-thirds of noncitizen Latinos, including the undocumented, live at or below the poverty line.¹⁷

The state’s vast interior, home to roughly one in three of its residents, suffers the highest poverty rates in the nation.¹⁸ Los Angeles, by far the state’s largest metropolitan area, has among the highest poverty rates for major U.S. metros.¹⁹ In parts of Los Angeles, the growing homeless encampments have spawned medieval diseases such as typhus. There are even indications of a comeback for bubonic plague, the signature scourge of the Middle Ages.²⁰

As the tech sector and the Bay Area have come to dominate the state’s economy over the past fiteen years, conditions have worsened for many if not most Californians. In the past, the state’s economic diversity—from agriculture and home building to aerospace and entertainment—provided the means to succeed for a diverse population. The Great Recession hit California more profoundly than the rest of the country, and subsequently the state’s income growth has been remarkably concentrated in the tech-heavy Bay Area. Across the state, almost two-thirds of job growth in 2015–16 was in minimum-wage or near-minimum-wage jobs, according to the state’s Business Roundtable.²¹ Since 2010, according to calculations by Marshall Toplansky of Chapman University, 80 percent of all jobs created in the state have paid under the median income, and half of these under $40,000, a poverty wage in a high-cost state. This is a higher proportion of lower-wage jobs than most other states have shown.²²

The Hidden Reality of Silicon Valley

The Bay Area of California, heartland of the tech boom and site of one of the most rapid accumulations of wealth in human history, has created not mass affluence but an emergent dystopia. The website CityLab has described the Bay Area as “a region of segregated innovation,” where the upper class waxes, the middle class wanes, and the lower class lives in poverty that is becoming unshakeable.²³

Among the nation’s large cities, inequality grew most rapidly over the last decade in San Francisco, reports the Brookings Institution.²⁴ The California Budget Center named the city first in the state for economic inequality.²⁵ It is a city of enormous wealth that is plagued by mass homelessness and rife with petty crime, while the middle-class family heads toward extinction. San Francisco lost 31,000 homeowning families over the past decade.²⁶

Silicon Valley to the south, once an exemplar of suburban egalitarianism, has also become much more stratified. As recently as the 1980s, the San Jose area boasted one of the country’s most egalitarian economies. Jobs in manufacturing, assembly, transportation, and customer support allowed people with a wide range of skills to attain the California dream: many factory workers as well as middle managers could achieve homeownership and a comfortable retirement. The 1980s, write Manuel Pastor and Chris Brenner, were “good times for growth and equity in Silicon Valley.”²⁷ But as the Valley has ascended to global preeminence in technology, class divisions have grown ever starker. By 2015, some 76,000 millionaires and billionaires lived in Santa Clara and San Mateo counties, but hundreds of thousands of people were struggling to feed their families and pay their monthly bills. Nearly 30 percent of Silicon Valley’s residents rely on public or private financial assistance.²⁸

During the boom of the last decade, cost-adjusted wages dropped for middle-class workers, Latinos, and African Americans in Silicon Valley.²⁹ One reason is the shift of employment away from manufacturing and into software: over the past two decades, the Bay Area has lost around 160,000 manufacturing jobs. The IT industry has greatly expanded, but the newer software companies need fewer workers than other kinds of businesses, including the more traditional tech firms. Their revenues per employee are two to three times those of Intel, for example.³⁰ They also often employ large numbers of noncitizens on temporary visas, who now constitute upwards of 40 percent of the tech workforce in Silicon Valley.³¹ Meanwhile, the numbers of black and Latino employees in the tech industry have been declining.³²

Employment in the software industry is by no means always lucrative. Left behind are workers in the vast service sector, many of whom work for contractors. Security guards earn around $25,000 annually.³³ Many lower and even midlevel workers at firms such as Google live in mobile home parks, while others sleep in their cars. The Valley has some of the nation’s largest homeless encampments.³⁴

Once a beacon of middle-class aspiration, Silicon Valley has become “fragmented and divided,” note Pastor and Brenner, “with the high-tech community largely isolated from the broader region and particularly those parts of the region that are less fortunate.”³⁵

Feudalism with Better Marketing

In Wired magazine, Antonio García Martínez describes the contemporary Silicon Valley as “feudalism with better marketing.” He sees a clear elite of venture capitalists and company founders. Below them are the skilled professionals, well paid but living ordinary middle-class lives, given the high prices and heavy taxes. Below them lies the vast population of gig workers, whom García Martínez compares to sharecroppers in the South. At the bottom, there is an untouchable class of homeless, drug addicts, and criminals.³⁶

García Martínez depicts a society that is “highly stratified, with little social mobility.” High prices make it all but impossible for most to own homes. Workers in the gig economy have little chance to improve their lot, as they struggle to pay their rent, or are forced to sleep in their cars or on friends’ couches, or commute great distances in to work.³⁷ Roughly half of California’s gig workers struggle with poverty.³⁸ For the “untouchables” below them, the prospects are even grimmer.

This regressive social evolution troubles many on both left and right. There are growing calls for regulation of the tech empire, for more antitrust action, or even for nationalization of the tech giants, not only in the United States but also in Canada and Europe.³⁹ In recent years, some once favorable progressives have labeled the tech oligarchs as just the latest purveyors of “predatory capitalism” and a mounting threat to democracy.⁴⁰

Ultimately, few stand to benefit from the rise of the tech oligarchy. Almost half a century ago, Daniel Bell predicted in his landmark work, The Coming of Post-Industrial Society, that technology would enable those who control it to fulfill “a social alchemist’s dream: the dream of ordering mass society.”⁴¹ Allowing a small number of technologists and financiers to dominate a huge portion of the economy and the information pipelines, and to monetize every aspect of human behavior, seems incompatible with democratic self-determination.⁴²

Stanley Bing’s novel Immortal Life portrays a society in the near future that is ruled by tech oligarchs. A chaotic government has essentially been replaced by a cabal of superannuated tech moguls who control 97 percent of sales in all market sectors—retail, entertainment, agriculture, and so on—through “one huge, interconnected skein of interests.”⁴³ Democratic government hasn’t just been constrained; it has been made superfluous. The overlords implant devices into human brains, and plan to dominate the world by controlling the central cloud that all humanity is plugged into. The novel’s subtitle calls the story “soon to be true,” and it may not be awfully far from the mark.

What we must ask ourselves is whether we want the hierarchical, socially stagnant, centrally programmed future that the oligarchs have in mind for us. Given what their vision appears to be, and what we already see in California, resisting them represents the great imperative of our time.