Silicon Valley Wage Theft Proves Free Market Rhetoric Is False

Steve Jobs: Not an entrepreneur; A bully and thiefAs you may have heard, employees of high tech companies in Silicon Valley have filed a class action lawsuit claiming that big firms colluded to keep wages low by not competing with each other. These companies are Apple, Google, Intel, Adobe, Intuit, and Pixar. How very “free market” of them! You will find all the nasty details in Mark Ames’ excellent Pando Daily article, The Techtopus: How Silicon Valley’s Most Celebrated CEOs Conspired to Drive Down 100,000 Tech Engineers’ Wages.

What’s especially wonderful about this case is that the primary villain is everyone’s favorite example of the kind of “entrepreneur” we must encourage with low taxes and no aid to the poor: Steve Jobs. Of course, as I note all the time: Apple has got to where it is not by innovating but by packaging. In addition, they use the legal system to attack competition. And now we know that Steve Jobs himself was directly intimidating other companies into making this deal that cost 100,000 employees an estimated $9 billion over five years at the end of the 2000s. Adobe CEO Bruce Chizen wrote at the time, “[I]f I tell Steve [Jobs] it’s open season (other than senior managers), he will deliberately poach Adobe just to prove a point. Knowing Steve, he will go after some of our top Mac talent…”

Because I have worked a lot in the high tech world, I know what a crock most of this “innovator” fawning is. The real innovators tend to get swallowed or crushed by the big companies. The big companies are not innovators—ever. Again: look at Apple. All they’ve ever done is package other people’s technology well. They are above all good at branding. But people on the outside really think they are great. Yesterday, Thomas Friedman wrote a hilarious column that shows just how thoroughly he has metabolized the globalized, libertarian Silicon Valley Kool-Aid, Start-Up America: Our Best Hope. He starts by talking about some banal ideas that he calls “creative” coming from large companies that he calls “start-ups.” And what links all these companies together?

What they all have in common is they wake up every day and ask: “What are the biggest trends in the world, and how do I best invent/reinvent my business to thrive from them?” They’re fixated on creating abundance, not redividing scarcity, and they respect no limits on imagination. No idea here is “off the table.”

This is not creativity or innovation; this is trend chasing; this is what people who don’t have any new ideas do. But of course, Friedman doesn’t understand this. Rich men in nice suits told him it’s the future. And Friedman so wants to believe—he’s written books saying it is the way things are. We learned the lesson of The Lexus and the Olive Tree where he told us that to unleash the free market, each country must put itself in a “golden straitjacket.” And The World Is Flat taught us that globalization is super-keen but even if it ain’t we have to live with it because he and the rest of his class are gonna cram it down our throats.

All of this is about the great libertarian idea of free markets and free minds. The problem is that the markets are anything but free. And even more important, the minds are closed. Friedman is the poster-child for this. He believes in the new global world order and no amount of fact will change his mind. Of course, he’s just the front for the New Gilded Age tycoons who spew out this free-market claptrap while working behind the scenes to do everything they can to distort the market to their advantage.

Dean Baker as always has a extremely insightful take on this whole wage-theft situation. In one sense, it is no big deal: companies are doing illegal and immoral things to increase profits is not surprising. What is interesting, however, is what it says about all of the libertarian rhetoric that comes out of Silicon Valley. They always claim that no government intervention is necessary because in a free market everything takes care of itself. But their actions indicate that they do not think this is true in our current “free” market:

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 compete for workers, they could keep their wages down.

So the issue is that businesses will continue to abuse workers and the system generally. We should do everything we can to stop it. But what we should not do is believe the free market claptrap that comes from these people. Because when it comes down to it, it is clear that even they don’t believe it.

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