Why Silicon Valley Needs To Do More To Help The Economic Recovery

Extreme income inequality seems unsolvable. But, says former labor secretary Robert Reich, business can--and should--play a role in helping grow the middle class, even if it's for selfish reasons.

Since Silicon Valley is so good at solving problems, here's a doozy: Currently, the United States has the greatest wealth disparity in 100 years. So says former secretary of labor Robert Reich in the new documentary, Inequality for All. The crisis is decades in the making, and obviously infinitely more complicated to fix than, say, bugs in the latest whiz-bang shopping app. But still, what can our brightest tech entrepreneurs do to help the long-suffering middle class?

Silicon Valley is "largely a force for good, but it can be a force for much, much more good," says Reich in the latest installment of Fast Company's Creative Conversation series. Recently, he and Jacob Kornbluth, who directed Inequality for All, stopped by our offices. Reich was adamant that business can and should change the economic status quo.

"Silicon Valley cannot be in a bubble," he says. "There is too much of a tendency for people in that community to wall themselves off and say, 'As long as we're inventing, as long as we're making money, everybody else is fine.'

"The technology community ought to know better than anybody that the rules of the game are fashioned not by God, not by nature, but by decisions made by government. Look at tariffs, look at trade barriers, look at trademarks, look at patents, look at intellectual property, and look at anti-trust laws. These things determine the trajectory of a lot of our technology community. They determine the winners and the losers."

New laws, Reich says, change the rules and, just as important, change the priorities. "The economy can be organized in a way that innovation and efficiency and growth are important," he says, "but so is making sure that more and more people are recipients of the economic gains."

What can a specific executive or entrepreneur do? Be like Ford. Henry Ford, that is. In 1914, the automotive pioneer paid his workers three times the typical factory wage, says Reich. Why? "Because he understood that his workers were going to be his customers," Reich says.

That symbiotic relationship remains true today. Some 70% of the economic activity in the U.S. is based on consumer spending. Meanwhile, over the last 30 years, wages have dropped, leaving the majority of consumers with less to spend.

"Friendly, hard-charging capitalists," says Reich,"have got to understand they would do better with a smaller share of a rapidly growing economy that is growing because the prosperity is more widely shared than they will with a very large share of an economy that is barely growing because most Americans don't have the money to keep it going.

"People need to understand that they have a self-interest in reversing the trend. It's not just [that] it would be the moral or right thing to do. The economy cannot be sustained--our democracy cannot be sustained--if we continue on this trajectory."

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Read Reich and Kornbluth’s extended conversation in the November issue of Fast Company and check out more from them on FastCompany.com.

For more information about Inequality for All, distributed by Radius TWC, go to inequalityforall.com.

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4 Comments

  • Joe Rassam

    This really is laughable. Reich knows exactly why this situation exists, yet talks around it or not at all, instead selling the spin to his constituency. Reich has been an active participant in working for and supporting politicians who work not for the middle class, but for the 1% who give them the large contributions and open doors to other 1%ers. Yet another phony acting like he cares and wants to solve the problems of the middle class. Spare us!

  • Jocelyn Aucoin

    So it's not enough to do the moral thing... we have to "sell" this idea to Silicon Valley with self interest? UGH. You know maybe if these tech people were from the SV, this wouldn't even be a conversation. They'd know the pain of the diminished middle class.

  • mcgdesign

    ""Friendly, hard-charging capitalists," says Reich,"have got to understand they would do better with a smaller share of a rapidly growing economy that is growing because the prosperity is more widely shared than they will with a very large share of an economy that is barely growing because most Americans don't have the money to keep it going."

    Ditto for the hard-charging increase in size of government. Taking a smaller share of the economy increases prosperity that results in increased revenue to the government.