Think Different: Why Progressives Should Stop Bashing ‘Big Tech’
By: Daniel Castro
Many in Silicon Valley likely breathed a sigh of relief last week when the Democratic presidential candidates at the third debate in Houston directed no fresh barbs at the tech industry. But this cease-fire may not last long. The primary season has found many Democratic presidential aspirants willing to make sharp-elbowed proposals to address concerns about “big tech” — Google, Amazon, Facebook, and the other market leaders that help drive the digital economy — in order to get media attention, raise funds, and draw voter interest.
Senator Elizabeth Warren argues they threaten competition and pledges she would break them up, while former Congressman Beto O’Rourke has said government should treat them “a bit more like a utility.” Senator Amy Klobuchar, in a nod to many people’s unease about how their personal information gets used for commercial purposes, says she’d tax companies for using consumer data. And outsider candidate Andrew Young worries that “technology is quickly displacing a large number of workers, and the pace will only increase,” so, in a hedge against labor obsolescence, he proposes establishing a universal basic income of $1,000 per month for every adult.
These ideas — that big tech companies deserve antitrust scrutiny, that we should pump the breaks on data-driven innovation, and that technological advances are bad for workers — are quickly becoming accepted wisdom across the political spectrum, as much among some of the conservative pundits on Fox News as among some of the Democratic hopefuls out on the campaign hustings. But progressives should rethink this strategy, because while bashing big tech may seem like a savvy appeal to popular sentiment, it will lead to bad outcomes for workers, consumers, and other progressive interests.
First, consider the implications of breaking up big tech companies just because they’re big. From a worker perspective, it’s a terrible idea. That’s because big companies, tech or otherwise, outperform small and mid-sized companies on a wide range of metrics that are near and dear to progressives: They pay higher wages; they provide better benefits, including overtime, health insurance, and retirement plans; they are less likely to lay off workers and more likely to invest in skills training. They also create more jobs on a net basis, because small companies are more likely to go under. A progressive economic agenda should want more of this, not less.
Second, consider how and why tech companies get big in the first place. It’s not because they are doing anything untoward (if they are, then it’s the Federal Trade Commission’s job to hold them accountable); it’s because they invest heavily in research and development to bring new products and services to the world — very often the kinds of products and services that boost productivity in other sectors, which drives growth more broadly — and because their businesses typically involve network effects and economies of scale. For example, a social networking platform is most valuable to its users when everyone they want to communicate with is on it, too. Likewise, a retailing platform becomes more valuable to all concerned the bigger and more efficient it gets in connecting buyers and sellers. Either way, benefits accrue to consumers and the economy — better products and services, lower prices, more innovation, growth and net job creation. All progressive values.
Yet skeptical progressives say pshaw. They fear that focusing on consumer welfare overlooks other priorities, like promoting competition, protecting privacy, reducing income inequality, and fostering small businesses. But in bashing big tech, they are reaching for the wrong policy tools to achieve their goals. For example, the antitrust cudgel isn’t necessary to promote competition in tech. Today’s market leaders are more vulnerable to upstarts than their critics imagine — and if they try to squelch rivals, then the Justice Department, the FTC, and courts await them with fines and injunctions. Likewise, if digital privacy is the goal, then the solution is for Congress to pass a national law that protects consumers while enabling innovation. Taxing companies’ use of data would be a serious setback for potential breakthrough innovations in everything from vehicle safety to energy efficiency and medical diagnostics, among countless others.
Bashing big tech also will do nothing to improve the plight of working-class Americans or reduce inequality. Progressives should focus instead on policies like raising the minimum wage, since that benefits both workers and innovation. They should call for increasing the top marginal income tax rates and taxing carried interest and capital gains as normal income — and even consider taxing speculative stock transactions to keep Wall Street financiers from siphoning too much capital out of the economy — and then use the proceeds to invest in pro-growth initiatives like rural broadband deployment, worker training, and a national advanced manufacturing strategy. Meanwhile, they should campaign to end preferential treatment for small businesses — many of which are owned by comfortable 1-percenters — and adopt a size-neutral approach to economic development that encourages firms to innovate, increase productivity, and grow.
Because the tech industry raises all boats in the local economies where it operates, including for low-wage workers, progressive candidates could be calling for a major national initiative to establish at least 10 advanced technology hubs in places like Albuquerque, Detroit, Indianapolis, Pittsburgh, and St. Louis. And finally, if they still feel compelled to attack tech companies, then progressives should direct their fire at the Chinese tech companies that are backed by a mercantilist state seeking to dominate advanced industries at America’s expense.
There is much to do to restore the promise of the American dream for U.S. workers. Attacking tech companies might feel good, and even excite some in the progressive base, but it won’t get the job done.
Daniel Castro (@castrotech) is vice president at ITIF and director of ITIF’s Center for Data Innovation. This article first appeared as an Innovation Files post on itif.org.