The American economy is not functioning as well as it could, and Americans know it. In the recent midterm elections, anxiety over the U.S. economy was the top voting issue. Every newspaper and political journal in the country spills a considerable amount of ink covering those same anxieties. There, however, the consensus ends. Americans have large disagreements with each other over the nature, causes of, and solutions to our broken economy—as well as over just how intense the crisis is. With his latest book, The New Class Conflict, demographer Joel Kotkin enters the fray by searching for an explanation for our weak economy in Silicon Valley.
Joel Kotkin is a fellow in urban studies at Chapman University, and the founder of the website New Geography, where one of his long-standing preoccupations has been to examine American labor migration patterns. He is a self-styled old-school Democrat who has made a sport of pouring scorn on those younger progressive urbanites who think big blue cities like New York are the country’s demographic future. According to Kotkin, statistics show that educated young people are moving to “red” suburbs or low-density cities in increasing numbers. Furthermore, Kotkin believes that the various orthodoxies of the Vox set threaten the middle class by militating against the kinds of arrangements—suburban living, “brown” jobs in the energy sector—that have long underpinned its prosperity. These old antagonisms animate The New Class Conflict, and though the book does not offer the reader a unified argument—each chapter is a standalone essay—two central themes emerge in its pages.
The first theme is a critique of the technology companies located in Silicon Valley. Kotkin believes that the CEOs of those companies constitute a new and dangerous force in American life because they represent an unprecedented concentration of economic and political power. The book asserts that Silicon Valley’s corporations do little for the United States as a whole, in large part because they bring only a paltry number of jobs to the table. Furthermore, Kotkin alleges they have achieved at least some of their clout by illegal and unethical means like tax-dodging and cronyism. But the ultimate infamy driving Kotkin to distraction is that he believes these companies are using their power in ways that hurt the middle class—for example, by supporting job-killing environmental legislation.
If the first theme zooms in on a particular industry, the second theme zooms out to the American economy as a whole. Kotkin accepts that inequality is rising drastically, and he believes it is a serious threat to the American Republic. In this, he generally follows the American Left, frequently quoting thinkers like Thomas Piketty and Karl Marx. He adopts Piketty’s thesis that the return on capital is now exceeding economic growth, resulting in existing or future inequalities. He also worries not just about relative inequality, but the income stagnation of the average American in real terms. For example, he cites one study purporting to show that overall median incomes for Americans fell 7 percent from 2000 to 2010. This drop occurred, of course, while the costs of goods and services like health care and education increased.
The greatest weakness of Kotkin’s book is that these two themes don’t go together; the critique of Silicon Valley is disconnected from his more general economic diagnosis. Kotkin’s oligeeks didn’t create the crisis currently bedeviling the American economy. For example, the subprime mortgage crisis wiped out the wealth of tons of middle- or working-class Americans, especially African Americans. That can be laid at either Wall Street’s or the federal government’s door, or both, but not at Silicon Valley’s.
Kotkin occasionally yearns for old industries that he admits were also oligarchies, controlling large amounts of economic and political power. But steel industrialists are a more acceptable type of oligarch for Kotkin, largely because their companies created more jobs and economic growth than Silicon Valley seems able to do even while they enriched themselves. Yet Silicon Valley is not responsible for the decline of U.S. manufacturing and the broad-based prosperity it engendered, and nostalgia for the steel industry won’t bring it back.
Indeed, American history itself provides plenty of reasons to reject any attempt to pin stagnation and inequality on tech titans alone. The trends Kotkin sees in the U.S. economy existed far before the smartphone was invented. In 1871 the American printer Henry George, who would later become famous for his 1879 book Progress and Poverty, penned the following words:
Already the custom of renting land is unmistakably gaining ground, and the concentration of land-ownership seems be going on in our older states almost as fast as the monopolization of new land goes on in younger ones. And at last the steam plow and the steam wagon have appeared—to develope [sic], perhaps, in agriculture the same tendencies to concentration which the power loom and the trip hammer have developed in manufacturing.
We are not only putting large bodies of our new lands in the hands of the few; but we are doing our best to keep them there, and to cause the absorption of small farms into large estates…concentration is the law of the time. The great city is swallowing up the little towns; the great merchant is driving his poorer rivals our of business; a thousand little dealers become the clerks and the shopmen of the proprietor of the marble-fronted palace; a thousand master workmen, the employees of one rich manufacturer, and the gigantic corporations the alarming product of the new social forces which Watt and Stephenson introduced to the world, are themselves being welded into still more titanic corporations…of the political tendency of our land policy, it is hardly necessary to speak. To say that the land of a country shall be owned by a small class, is to say that the class shall rule it; to say—which is the same thing—that the people of a country shall consist of the very rich and the very poor, is to say that republicanism is impossible. Its forms may be preserved; but the real government which clothes itself with these forms, as if in mockery, will be many degrees worse than an avowed and intelligent despotism.
Much of The New Class Conflict is devoted to essentially this same complaint, updated for today’s economic environment. Kotkin is at his best when he realizes that his anxieties have deep roots in American history. Despite the book’s flaws, this historical awareness makes it more useful than much of the literature produced on the American economy. When Kotkin writes that “the most fundamental challenge facing the United States is the growing disenfranchisement of the middle and working classes from the benefits of economic activity,” he is on to something. In his fourth chapter, “The Proleterianization of the Middle Class,” he specifies what this means in light of American history:
From early in its history, the United States rested on the notion of a society based upon a larger class of small proprietors and owners. “The small landholders, Jefferson wrote to his fellow Virginian James Madison, “are the most precious part of the state.” To Jefferson and Madison, both the widespread dispersion of property and the limits on its concentration—“the possession of different degrees and kinds of property”—were necessary to a functioning republic.
Jefferson, admitting that the “equal division of property” was “impractical” also believed “the consequences of this enormous inequality producing so much misery to the bulk of mankind” that “legislators cannot invent too many devices for subdividing property.” The notion of a dispersed base of ownership became the central principle around which the Republic was, at least ostensibly, built. As one delegate to the 1821 New York constitutional convention put it, property was “infinitely divided” and even laborers “expect soon to be freeholders,” which was a bulwark for the democratic order.
Kotkin’s citation of Madison is a bit strange, since he links Madison’s views on dispersal to the section in The Federalist in which Madison is quite clearly arguing that some degree of economic inequality is natural (“the possession of different degrees and kinds of property” is from Federalist 10). Madison argues that the factions arising from class conflict can only be checked by making the republic very large—not by removing inequality. Yet Kotkin is absolutely right that the idea of dispersed ownership is a preoccupation of American thought, even if his choice of evidence is sometimes slapdash.
You can see this preoccupation in the rhetoric employed by our leaders today—President George W. Bush’s “ownership society” and Barack Obama’s focus on inequality are related concerns channeled into different political registers. The best place to find it, however, is in our legislative history, as Kotkin himself notes. When politicians believed the main principle of economic power in society was land, the federal government acquired as much of it as it could and dispensed it freely to institutions (the Morrill Acts of 1862 and 1890) and individuals (The Homestead Act of 1862, and subsequent acts). These acts were not always successful. In fact, the Homestead Act was so poorly administered and supervised that it resulted in greater centralization of land in the hand of speculators. But they were motivated, among other things, by a desire to disperse property and keep wages high.
As America became increasingly industrialized, that same desire took different forms. The Sherman Act of 1890 and the Clayton Act of 1914 were passed to confront centralization in a different way: by making anti-competitive monopolization a felony. For good or for ill, the Home Owners’ Loan Act of 1933 and the National Housing Act of 1934 basically made possible the suburbs and the wealth associated with suburban homeownership in the 20th century. The GI Bill of 1944 underwrote the prosperity of World War II veterans through the provision of low-interest mortgages and small business loans, as well as through subsidies for high school, vocational, or university education. In short, subsidies, investments, and federal legislation helped create the post-war prosperity of the American middle class.
But what, then, is to be done now? The New Class Conflict closes with a chapter on “the way forward” that emphasizes need for pro-growth economic policies. Here Kotkin shows himself to be as conservative in his prescriptions as he is liberal in his descriptions. He calls for a decentralization of political power away from the inexorable cronyism of the federal government to the state or local level. This proposal might appeal to federalists, but it is not actually a direct answer to the economic problems he’s concerned with throughout the book. He cheers the rise of telecommuting, and celebrates the way new technologies have made it possible for more people to be their own bosses. He calls this the “1099 economy.” But that economy might not be as rosy and economically secure as he would paint it.
We might cut Kotkin some slack on this weak conclusion. Finding a solution to the problems he identifies that is both politically possible and economically effective is hard, hard work, and nobody seems yet to have figured out how to pull it off. Meanwhile, The New Class Conflict does help us frame our situation, and that’s no mean achievement. The same anxieties about economic and political centralization that haunt American discourse now have always done so. This means that Americans have intellectual and historical resources to draw on in facing them. Neither the Homestead Act, nor the GI Bill, nor the Home Owners’ Loan Act of 1933 will necessary provide direct and explicit clues about what we should do now. But studying them, and being clear about the role they played in our history, is a start.