The delusions of an American Technopolis

Original Reporting | By David Noriega |


In its other two scenarios — one a “High-Tech Manhattan” housing corporate headquarters, the other a “Virtual Valley” that remained more or less static — the report concluded that the region would lose out from the simple absence of growth. But what Joint Venture’s predictions failed to specify was how, exactly, the benefits of corporate expansion would come to be broadly enjoyed by all residents of the American Technopolis. It simply assumed that growth would translate into broader opportunities. 

“Everybody talks about how securitization — packaging mortgages into bonds and selling them globally — created this crazy casino economy. But it also meant that a lot of money would no longer be circulating locally.” — Nathan Newman

The undercurrent guiding this entire conversation was the increasingly frictionless mobility of capital. As Newman writes in “Net Loss,” “the implication was clear that companies in a thoroughly global economy would seek out other regions that would fulfill their needs if the Bay Area failed to do so…The reality was that while the economic action of technology innovation might be local, the power of corporations to pick and choose their venues was global and outside the control of the local actors who desperately tried to negotiate with these global partners.”

This shift was accelerated by policy at the federal level, where the government not only failed to consider the downsides of globalization but worked actively to stoke it. “Financial deregulation in many ways disempowered localities,” Newman told Remapping Debate. For a long time, capital circulated largely within regions, until arcane derivatives that became possible in newly deregulated financial markets dissolved geographic boundaries. “Everybody talks about how securitization — packaging mortgages into bonds and selling them globally — created this crazy casino economy. But it also meant that a lot of money would no longer be circulating locally.”

There were many people in the Bay Area political scene, Newman said, who warned about the damage globalization would bring to localities and scrambled for ways to respond. They pointed out, for instance, that the ability to easily outsource labor would not only draw jobs away from the region but would also exert downward pressure on work standards, environmental regulations, and the like. But in and around Silicon Valley, elected officials — much like the corporations whose calls they were happy to heed — tended to embrace capital mobility as a cause for adaptation rather than a force to resist or curtail. This became especially true only a year or two after Joint Venture’s report, as the dot-com bubble began to inflate over the Valley and record growth brought new, if fleeting, revenues to city coffers. “As the high-tech boom was taking off,” Newman said, “everyone was just enjoying the ride.”


Running in place

Around that time, San Jose became grew better at playing the economic development game. During the 1990s the city won its biggest trophies in the hunt for corporate headquarters: Cisco Systems moved to the northern industrial zone from Menlo Park in 1993, and the following years saw the birth of eBay and PayPal. Crowning the downtown vision of McEnery and his successors, Adobe moved to a brand new office tower in the city core in 1998, but only after it secured a $35 million subsidy.

Meanwhile, inflated by the dot-com boom, almost all of Joint Venture’s predictions about regional prosperity came true: job growth, rising per capita incomes (accruing primarily in the tech sector), regional investments in light rail and other public infrastructure benefitting tech companies and their employees. This was the American Technopolis seeming to deliver on its promises.

So why didn’t the growth model that San Jose pursued for decades, a model whose principal focus was attracting business and raising the value of land and property, do better? “Over the long cycles of how cities evolve and devolve, that model feeds on itself, it undermines itself,” said Chris Hoene.

But one aspect of Joint Venture’s vision remained elusive: the notion that “the community” would win alongside the companies. Working Partnerships released a report in 1998 that pointed out a few important but underappreciated trends that accompanied the region’s new levels of economic growth. Among them were rising income inequality, declining wages for much of the population, and rising housing costs. For most people not directly involved with tech, the report pointed out, these changes made life worse, not better.

The picture that emerged in the late ’90s is much like the one today. “Silicon Valley is a very unequal region when measured by household income,” said Chris Benner, who wrote the 1998 report and is now a professor at the University of California, Davis. “You have very few high-level, high-tech jobs, where people are making tremendous amounts competing in a global market around global industries. And then you have a growing number of low-wage service sector jobs.” As the years progress, these two segments grow increasingly polarized and disconnected.

This drifting apart of the tech sector from the rest of the population was mirrored in the diverging fortunes of the smaller cities in the Valley and San Jose. Through the latter half of the 20th century, while San Jose ballooned into an oversized suburb, Palo Alto, Mountain View, and the rest kept small populations. At the same time, they hosted the birth and growth of what would become today’s tech giants. Wealth flowed to these towns, where it accumulated and was invested into the kinds of services and amenities that San Jose would have mounting trouble keeping up: parks, libraries, police. (This divergence is examined closely in Part 3 of this series.)

By contrast, San Jose’s aggressive pursuit of economic development throughout the ’80s and ’90s did not, in the end, do much to solve its longstanding fiscal problems. The new downtown became a carousel of short-lived retail establishments, never managing to retain any of the kinds of luxury shopping that makes a city thrive on a central commercial district. To this day, street-level stores open and close frequently, and vacancies are not unusual. Outside of days when events bring transient crowds to the arena or the convention center, downtown San Jose has the feel of an abandoned movie set: a series of structures built for a purpose that never quite materialized.

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