FacebookTwitterGoogle+RedditEmail

The Cartels of Silicon Valley

by DEAN BAKER

Last week Mark Ames published an article that should forever destroy any connection between the Silicon Valley tech billionaires and libertarian worldviews. The article reports on a court case that alleges that Apple, Google, and other Silicon Valley powerhouses actively conspired to keep their workers’ wages down. According to documents filed in the case, these companies agreed not to compete for each others’ workers dating at least as far back as 2005. Workers in the industry have filed a class action suit that could lead to the payment of billions of dollars in lost wages.

This case is striking at many levels, the most obvious being the effective theft of large amounts of money by some of the richest people on the planet from their employees. This is pernicious, but not altogether surprising. After all, the boss stealing from the workers is as dog bites man as it gets. Few would be surprised that rich people were willing to break the law to get even richer.

The real news here is how the Silicon Valley barons allegedly broke the law. The charge is that they actively colluded to stifle market forces. They collectively acted to prevent their workers from receiving the market-clearing wage. This means not only that they broke the law, and that they acted to undermine the market, but that they really don’t think about the market the way libertarians claim to think about the market.

The classic libertarian view of the market is that we have a huge number of people in the market actively competing to buy and sell goods and services. They acknowledge the obvious — some actors are much bigger than others — but there is so much competition that no individual or company can really hope to have much impact on market outcomes.

This point is central to their argument that the government should not interfere with corporate practices. For example, if we think our local cable company is charging too much for cable access, our libertarian friends will insist that the phone company, satellite television or other competitors will step in to keep prices in line. They would tell the same story if the issue were regulating the airlines, banks, health insurance, or any other sector where there is reason to believe that competition might be limited.

They would tell the same story on the labor side. If we are concerned that workers are getting low wages then the answer is to improve their skills through education and training rather than raise the minimum wage. If workers were worth more than the minimum wage, then the market would already be paying them more than the minimum wage.

They have the same story when it comes to requiring family leave, sick days, or other benefits. Libertarians would say that if workers value these benefits they would negotiate for them and be willing to trade off wages. There is no reason for the government to get involved.

This story about the wonders of the free market is simple in its appeal and it has the great implication that nothing should be done to keep the rich from getting ever richer. However the Silicon Valley non-compete agreements show that this is not how the tech billionaires believe the market really works. This is just a story they peddle to children and gullible reporters.

If they really believed the market had a deep sea of competitors in which no individual actor could count for much, then their non-compete agreements would serve no purpose. If Google, Apple, Intel and the other biggies agreed not to hire each others’ workers, it really wouldn’t affect their pay since there would always be new upstarts ready to jump in and hire away underpaid engineers.

The fact the Silicon Valley honchos took the time to negotiate and presumably enforce these non-compete agreements was because they did not think that there were enough competitors to hire away their workers. They believed that they had enough weight on the buy-side of the market for software engineers that if they agreed to not to compete for workers, they could keep their wages down.

It shouldn’t be surprising that the Silicon Valley billionaires really are not libertarians. After all, much of their fortunes rest on patents and copyrights, both of which are government granted monopolies: the opposite of a free market.

But for some reason, seeing the tech whiz-kids forming a cartel to keep down their workers’ wages seems an even more direct violation of any belief in libertarian principles. This is the same sort of cartel behavior that we associate with the cigar-chomping robber barons of the late 19th century. It turns out that the biggest difference between the tech billionaires of the Internet Age and the high rollers of the railroad age is the cigars.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This article originally appeared in The Guardian

 

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

Weekend Edition
February 5-7, 2016
Jeffrey St. Clair
When Chivalry Fails: St. Bernard and the Machine
Leonard Peltier
My 40 Years in Prison
John Pilger
Freeing Julian Assange: the Final Chapter
Garry Leech
Terrifying Ted and His Ultra-Conservative Vision for America
Andrew Levine
Smash Clintonism: Why Democrats, Not Republicans, are the Problem
William Blum
Is Bernie Sanders a “Socialist”?
Daniel Raventós - Julie Wark
We Can’t Afford These Billionaires
Enrique C. Ochoa
Super Bowl 50: American Inequality on Display
Jonathan Cook
The Liberal Hounding of Julian Assange: From Alex Gibney to The Guardian
George Wuerthner
How the Bundy Gang Won
Mike Whitney
Peace Talks “Paused” After Putin’s Triumph in Aleppo 
Ted Rall
Hillary Clinton: the Good, the Bad and the Ugly
Gary Leupp
Is a “Socialist” Really Unelectable? The Potential Significance of the Sanders Campaign
Vijay Prashad
The Fault Line of Race in America
Eoin Higgins
Please Clap: the Jeb Bush Campaign Pre-Mortem
Joseph Mangano – Janette D. Sherman
The Invisible Epidemic: Radiation and Rising Rates of Thyroid Cancer
Andre Vltchek
Europe is Built on Corpses and Plunder
Jack Smith
Obama Readies to Fight in Libya, Again
Robert Fantina
As Goes Iowa, So Goes the Nation?
Dean Baker
Market Turmoil, the Fed and the Presidential Election
John Grant
Israel Moves to Check Its Artists
John Wight
Who Was Cecil Rhodes?
David Macaray
Will There Ever Be Anyone Better Than Bernie Sanders?
Christopher Brauchli
Suffer Little Children: From Brazil to Flint
JP Sottile
Did Fox News Help the GOP Establishment Get Its Groove Back?
Binoy Kampmark
Legalizing Cruelties: the Australian High Court and Indefinite Offshore Detention
John Feffer
Wrestling With Iran
Rob Prince – Ibrahim Kazerooni
Syria Again
Louisa Willcox
Park Service Finally Stands Up for Grizzlies and Us
Farzana Versey
Of Beyoncé, Trudeau and Culture Predators
Pete Dolack
Fanaticism and Fantasy Drive Purported TPP ‘Benefits’
Murray Dobbin
Canada and the TPP
Steve Horn
Army of Lobbyists Push LNG Exports, Methane Hydrates, Coal in Senate Energy Bill
Colin Todhunter
“Lies, Lies and More Lies” – GMOs, Poisoned Agriculture and Toxic Rants
Franklin Lamb
ISIS Erasing Our Cultural Heritage in Syria
David Mihalyfy
#realacademicbios Deserve Real Reform
Graham Peebles
Unjust and Dysfunctional: Asylum in the UK
Yves Engler
On Unions and Class Struggle
Alfredo Lopez
The ‘Bern’ and the Internet
Missy Comley Beattie
Super Propaganda
Ed Rampell
Great Caesar’s Ghost!: A Specter Haunts Hollywood in the Coen’s Anti-Anti-Commie Goofball Comedy
Cesar Chelala
The Public Health Impact of Domestic Violence
Ron Jacobs
Cold Weather Comforts of a Certain Sort
Charles Komanoff
On the Passing of the Jefferson Airplane
Charles R. Larson
Can One Survive the Holocaust?
FacebookTwitterGoogle+RedditEmail