Inequality à la San Francisco: A Warning for America’s Future

Almost two centuries ago, Karl Marx declared that the wealth of nations is controlled by those who own the means of production.

His analysis remains true to this day. However, today’s means of production are increasingly linked to digital technologies.

The takeover of the tech titans

The fact is that during the technological revolution of the last half century, the means of production were concentrated in very few hands. The economy was practically taken over by technology titans who were also able to conquer the political system to a large extent.

The city of San Francisco, to this day the capital of the global tech industry, shows what happens in such a system.

It also literally illustrates Marx’s thesis about the concentration of wealth and the impoverishment of the masses.

The technical revolution

The digital revolution has changed the world. That change was mostly for the better. For example, during last year’s Covid-19 pandemic, new technologies literally helped us survive.

Without advances in digital technology, it would have been impossible to work and study from home. This also applies to the life-saving development and testing of vaccines in record time.

The dark side

But the technical revolution also has a dark side, as the example of San Francisco shows all too clearly.

The city may not be the most expensive in the world, or even the most expensive in the United States, in terms of the cost of living or real estate. However, it has emerged as a showcase for the growing inequality between those in the tech industry and everyone else.

The San Francisco “model”

San Francisco is compact compared to New York or Los Angeles. The population is under 900,000.

When large numbers of newly wealthy entrepreneurs from Silicon Valley moved into the city, they immediately drove out the middle class. The remaining residents increasingly became an underclass thanks to rising rents and the high cost of living.

Residents of newly built homes often pay between $ 20,000 and $ 30,000 monthly rent for a three-bedroom apartment. The average price for a single family home is around $ 1.6 million.

The pandemic effect

Even before the pandemic, the city was full of homeless men and women who were openly pooping on the sidewalk outside the front doors of the rich. The pandemic has further alleviated this inequality.

The remaining working poor and citizens of the city lost incomes over the past year. Many, especially those in the badly affected service and tourism sectors, have failed to meet their rent payments.

The exodus intensifies

The trend towards an exodus of workers in non-tech industries from the city has increased dramatically since the beginning of the pandemic. It now includes many mid-of-the-road and back-office technology employees.

Meanwhile, tech entrepreneurs, the real owners of the means of production, have only gotten richer. The pandemic has made them even more indispensable to the economy.

Impact on public services

Services to the less fortunate in the city are deteriorating as more and more of the ultra-rich live in the city.

City College of San Francisco, a community college that provides training to adults in various useful professions, has lost 40% of its students since 2010.

It is faced with layoffs and faculty cuts in the classroom. In the meantime, school enrollment has fallen by 5% in the past year alone.

A black swan event with precedent

The pandemic can be a black swan event. However, it fits into the economic boom-and-bust pattern that has prevailed in the US economy over the past two decades.

And what a surprise, every new recession makes the owners of the means of production richer. As do a relatively small group of people who serve them, such as lawyers and financiers.

The rest of the country is getting poorer. This happened after the 2008/09 financial crisis. And all the more so during the current pandemic.

Balloon stimulus

In 2008, the Obama administration gave a $ 831 billion incentive to restore jobs, revitalize the economy, and help state and local governments. During the pandemic, the incentive needed to remedy the situation was dramatically higher.

Under Donald Trump, the CARES package was $ 2 trillion. It was followed by Joe Biden’s $ 1.9 trillion incentive. Additional infrastructure investments of $ 2 trillion are currently in the works.

A plaster for a broken arm

This is a huge stain for the broken US economic system. But it’s still nothing more than a band-aid.

If the root cause – massive, gold-plated economic inequality at the age level – is not removed, the “model” of prosperity and poverty in San Francisco will only deepen and spread.

Populism, frustration and resentment

With increasing inequality, frustration and resentment go hand in hand. In recent years these feelings have led to populism and rebellion against the elites.

The anger is already taking to the streets. Inequality was the ultimate cause of the January 6 storming of the US Congress.

As these events showed, the digital tech industry willingly provides what is necessary for the angry sections of society to unite and organize.

Conclusion

Marx predicted that capitalism would lead to a concentration of wealth in the hands of those who own the means of production and the impoverishment and disenfranchisement of all others.

The New Deal in the US and social democracy in Europe have softened unbridled capitalism and enabled many to participate in the prosperity of the economy.

Now the United States in particular needs to rebuild an economy that works for society as a whole, not just the super-rich few.