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[RRE]Net Loss
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Date: Tue, 27 Jul 1999 12:43:40 -0400
From: "Nathan Newman"
[...]
NEW BOOK ON THE SOCIAL AND ECONOMIC IMPLICATIONS OF THE INTERNET, PUBLISHED ON THE NET AT:
http://socrates.berkeley.edu/~newman/
+============================================================== NET LOSS: GOVERNMENT, TECHNOLOGY AND THE POLITICAL ECONOMY OF COMMUNITY IN THE AGE OF THE INTERNET =============================================================== By Nathan Newman, Ph.D. Contact at: nathan.newman@yale.edu
Where does technology like the Internet come from? Why is it so identified with specific regions like Silicon Valley? Why does new technology seem so associated in the public mind with both personal empowerment for some people and economic insecurity and growing powerlessness for others? And what is the best government policy for promoting technology and equal access in the new economy?
What confuses all these questions is the dynamic interaction between government, technology and the regions that are shaped and in turn reshape both technology and economic policy alliances. And nowhere has this dynamic been more confusing than in the case of the Internet, a technology directly planned and funded for decades by national government in Washington, DC, yet associated most in the public mind with garage startups in Silicon Valley. Even as technology companies have digested billions of dollars in technology subsidies from the government, we hear new words like "cyberlibertarianism" coined by Internet enthusiasts.
This book, NET LOSS: GOVERNMENT, TECHNOLOGY AND THE POLITICAL ECONOMY OF COMMUNITY IN THE AGE OF INTERNET helps make sense of this historical and ideological jumble. It highlights the process by which government guided the creation of the Internet and the regions most associated with the technology, even as the forces unleashed by the Internet have in turn reshaped and constricted government technology policy to the detriment of the broader public.
OVERVIEW
The Internet has emerged as the focus for much of the strongest hype and substance in debates on the new economy. It has become the defining economic event of the end of the 20th century - a fact reflected by the obsessive media attention and to the raw economic explosion of companies associated with it.
The Internet is seen as the metaphor, even the embodiment, of the new information age, of a post-industrial economy, and of a new paradigm in workplace and company organization. Information in this view, rather than raw materials, have become the substance of commerce and the Internet is the highway of the new era.
Most strikingly, the Internet is seen as the herald of the globalization of the economy and the triumph of a deregulated marketplace. In this vision, the economics of place have given way to telecommuting, global production and just-in-time delivery of goods and information from all points on the globe. In such a world, economic regions become an oxymoron as the economy becomes a matter of bits and e-mail in cyberspace, not transit and meetings in local space. The "Third Wave" in this scenario leaves economic regions as the archaic leftovers of the industrial age. Governments, those stalwart institutions tied to such geography, become impotent and unimportant in this new global information society. Yet on the face of it, it's nonsensical to argue that new information technologies like the Internet show the irrelevancy of national governments and economies.
The Internet is one of the crowning achievements of central government in the last few decades--planned over decades, funded by a series of federal agencies, and overseen by a national network of experts. And its success is not merely an exemplar of technical achievement but is also an exemplar of the efficiency of government planning over purely private economic development. In the absence of the open standards of the Internet developed and promoted by the federal government, almost all analysts admit that the private vision of toll road information services promoted by industry would not have created the surge of explosive economic innovation we are currently seeing around the Internet. It is only with the success of the Internet (and the profits to be made) that industry is now decrying the interference of government in information access.
The most striking counter to the vision of global placelessness is the very existence of Silicon Valley, the region most associated with the rise of the Internet. If any region were to collapse on the wave of cyber-communication, it would be Northern California's "hotwired" Silicon Valley. Contrary to what some might expect, Silicon Valley not only survives but is thriving, expanding and even consolidating its role as the geographic focus of a supposedly geography-free revolution. From network router companies like 3Com to Web tool makers like Netscape to the multimedia upstarts of San Francisco's "multimedia gulch", new companies in Northern California seem to be refusing to let geography die its proper death.
The simplest connection between government policy and regional strength in places like Silicon Valley is that the government itself designed its technology policy to favor small regional companies, which in turn favored the emergence of regions like Silicon Valley where small firms without bottomless corporate resources could complement each other with services and products.
The subtlety is in the range of policy tools used by the government in promoting such small-firm innovation, including funding university research that could easily spin-off new firms, requiring second sources for defense contracts, promoting public technology standards with which small firms could cheaply integrate new products, and supporting aggressive public purchasing regimes to favor desired technology. Silicon Valley firms that would be at the heart of its commercialization, such as Sun, Cisco and Oracle had all gotten their start based largely on selling to government agencies. Or, as in the case of Netscape, such firms would raid the talent of the government centers that built the Internet to commercialize government-created software like the Mosaic web browser and servers.
In evaluating the role of regional economies, then, it is critical to see them not as initiators but respondents to national and global economic policies. All of these policies both encouraged innovation and a technology regime favoring smaller firms in specific geographic spaces. But at a deeper level, the vibrancy of the Silicon Valley regional economy is not in defiance of globalizing trends due to the Internet but that regional strength was in many ways the precondition for the triumph of the Internet.
Fundamental technological change like the Internet requires more than the introduction of new products; it requires fundamental transformations in a whole array of mutually supporting institutions, goods, services and standards that must all advance together. While this can happen between people and companies in different places, the organic trust and interaction of those living in the same region has always been a key factor in such broad-based technological advancement, whether in the car industry in Detroit or in the financial districts of Wall Street.
But the end product of this kind of technology policy is not just new technology but a reshaping of politics governing the economy, first in shaping the local economic spaces directly targeted by government policy, then, as technologies like the Internet take on national significance, in reshaping national policies themselves. Even as outside federal investment was the basis for regional expansion, there have subsequently appeared internal economic dynamics that are critical to how the economy functions in the context of the new information-based technology, especially in its relationship to regional politics and the more general global politics of control of an industry.
The very "lock-in" of regional dominance raises the issue of what regions do to either hold onto that dominance or what they fail to do that may let such an advantage fade away. As critically, the new dynamics of regional economics highlight who has power within such regions and who loses out as regional economies change under the impact of technology. As Internet commerce took off, its business leaders increasingly fought any government policy seeking expanded access for the broader public for fear that would undercut business opportunities.
Even when sharing physical geography, companies have found increasing need for new political and social relationships in the form of business-to-business consortia in order to regularize technology exchange and get political agreement on standards. This in turn has reshaped local politics in places like Northern California in ways that link elite professionals together in a new kind of suburban "gated community" of innovation. Especially as the federal government withdrew from coordination of Internet standards, innovation in places like Silicon Valley was increasingly tied to global technological needs. However, this elite version of cooperation leaves little need for serious concessions to the needs of non-elite workers in a region.
Despite the ode to "small business" as the engine of jobs, such globally-oriented startup companies are tied to global corporate policies that end up promoting overall policies that increase inequality within regions. As wages rose in the Silicon Valley areas, housing and other costs rose even faster for the average workers, just as poverty rose rather than fell with the overall prosperity of the region. For most workers, the Silicon Valley boom has given little sense of security but rather, with the rise of temporary agencies and the rise of contingent employment for as much as 40% of workers, a sense of the ephemerality of growth. Even as elite engineers invest the dividends of IPOs for their long-term security, other workers watch continual outsourcing of lower-end jobs erode any sense of stability.
The Internet itself is much like the utility networks of the past where great fortunes were made and political battles were fought to assure the widest possible access. Integrated public utility networks and cross-class growth coalitions had defined the social space in which Progressive reformers in the early part of this century had built modern local government in line with regional economic management goals. However, as the Internet industry has built its "gated community" and elite economic networks selectively connect rich suburbs and professional urban enclaves across the globe with the most advanced technology, poorer communities and urban sections have been left with little more than virtual dirt roads.
We are seeing new ideologies of privatization and corporate servicing by local governments that end up doing little or nothing for the general population. Instead, cities and towns are pitted against each other in an endless competition to spend what little resources they have serving those with the most capital, while eroding democracy to make government services one more set of amenities that corporations choose from in conducting branch site selections.
At the most basic level, the invisible regional geography of communication serves to polarize already existing economic and racial divides as cities rush to support business with public networking goods. Technology investments in schools end up overwhelmingly in the hands of more privileged communities as business finds concentrated support for schools in their suburban enclaves a more cost-efficient approach than general revenues for all schools.
And just as networking has eroding firm barriers separating firm from firm, the Internet is helping to blur the lines between government and business. Global firms scoop government contract bids off the Net as local services become merely part of the business plan of multinational corporations. Conversely, government services respond ever more precisely to the demands of those businesses operating in the region, whether in expediting construction permits electronically or the wholesale marketing of government data for the benefit of firms doing business in the area. At best we see local governments seeking to extract small economic concessions for the wholesale benefits they deliver in their desperate recruitment of business.
In outlining the emergence of the Internet, my book illustrates the way government shapes new technologies and regions while in turn being itself reshaped by the new economic forces unleashed. This has meant the rise of cyberbusinesses pushing for government to cede control its management in favor of private profits, often at the expense of both the needs of the technology and of equity in local and national economies. If there is a saving grace to this grim trajectory, it is the hint of new organizing by community groups in creating their own global alliances to begin to even up the global power balance. It is this new system of local community organizing combined with global networking that is defining the ongoing politics of the new global economy.
BACKGROUND OF THE AUTHOR
My goal in writing this book was to address many broader social and economic issues often ignored in the hype around discussions of the Internet. It is informed by many of the best economic analyses of technology, combined with my own expertise as a policy advocate around the new technology. The goal is to present a sober, contrarian analysis of the overlooked economic and sociological roots of the Internet revolution and its grimmer implications for the economic have-nots left out of its revolution.
This ebook manuscript is based on a Ph.D. dissertation approved by the Sociology department at the University of California at Berkeley in 1998. I was a Jacob Javits Fellow at Berkeley from 1990 to 1991 and a National Science Fellow from 1991 to 1994. From 1992 to 1996, I was co-director of UC-Berkeley's Center for Community Economic Research (CCER) where a major project was analysis and policy work tied to the emerging Internet. Part of our work was training community non-profits and union members in use of the new technology which contributed immensely to the books insights on the disparity in technology resources emerging in the new economy. This built on my own personal history before graduate school as a union organizer and policy advocate.
I published a number of articles and working papers on these technology issues at CCER, partially incorporated in the manuscript. The working paper I produced back in 1995 on the rising threat of Internet commerce to local sales taxes was the first major report highlighting this danger and received national media coverage, including republication in State Tax Notes and a revised version published in the April 1996 Technology Review at MIT. I was also an invited speaker at the annual convention of the California State Association of Counties and at the Association of Bay Area Governments.
From 1997 to 1999, I was Project Director at NetAction, a non-profit technology policy organization where I wrote extensively on the issue of technology and the threat Microsoft has posed for open standards on the Internet. In January 1998, I was asked to testify at a special California state legislative hearing on the future of technology networking in the state university system. In my roles at both CCER and NetAction, I have been interviewed by publications including The New York Times, the Washington Post, USA Today, The Nation, CNET's News.Com, WiredNews and have appeared on C-SPAN and on CNet's The Web television show.
CHAPTER OUTLINE
CHAPTER 1: This chapter lays out the basic argument of the book while placing it in the scholarly and public debate over the evolution of technology. This chapter outlines the many different facets of the discussion around government, technology and regional development: the role of public initiative in its formation, the rise of Internet-related regional districts in places like Silicon Valley, the Internet's use as a globalizing communication and production tool, the need for physical infrastructure around its deployment and the coinciding regulatory changes, its emergence as a new marketplace for exchange that has the potential to undermine traditional geography-based consumer (and taxing) markets, and the rise of the counter-organizing by grassroots organizations using the Internet to link up with other activists worldwide.
CHAPTER 2: This chapter outlines how the Internet evolved as one of the foremost examples in decades of how public initiative creates the basis for the creation and expansion of industry. Through funding from national agencies ranging from the Defense Advanced Research Projects Agency (DARPA) to the National Science Foundation (NSF), the federal government in association with state universities and research centers across the country created the original backbone of the Internet and pioneered the networking technology to make it work. As importantly, it created the standards and protocols that created the trust extending far outside the original research community that allowed for the exponential growth in the Internet. It would leverage public space and volunteer energy, a classic use of civic networks, to create a stream of free, quickly shared innovation. The success of the government-created Internet over the proprietary standards of corporate behemoths like Microsoft or IBM is in many ways a classic illustration that open standards are the key to innovation and growth in an industrial sector.
But beyond the creation of the Internet as a public good, the government's "embedded" relationship with the emerging networking industry was a key factor in leveraging government innovation into explosive economic activity. Many of the founders of this new industry, as in preceding generations of computing innovation, would get their initial training on the government payroll or through government contracts, expanding the pool of talent while inculcating them in the values of open computing standards. As well, a substantial number of the initial networking companies started life as government spin-offs or contractors.
The Internet's existence would counteract proprietary networking strategies, notably by Microsoft, and thereby open the possibility for a wide range of companies to compete based on innovation around these public standards. The last part of the chapter examines the privatization of much of the management of the Internet in the early 1990s and the dangers raised by allowing particular industry players, again notably Microsoft, to attempt to subvert open networking in favor of proprietary standards backed by market power.
CHAPTER 3: If the Internet is a classic example of public initiative and its embeddedness in economic development, its relationship to the concentration of Silicon Valley economic firms is paradigmatic of how public initiative works through regional collaboration. From its earliest days when railroad money from the federal government flowed into the region, the area now known as Silicon Valley has been shaped and reshaped by federal investments. Research labs at both Stanford University and the University of California at Berkeley, both increasingly supported with federal funds throughout the 20th century, would play a key role in directing funds, talent and coordination of innovation in the region. World War II and its aftermath would create a proliferation of defense contracts that would build a computer industry literally in the fields and orchards of the area. As importantly, close relationships between universities, federal research labs and industry leaders would increasingly shape the collaborative and entrepreneurial network of firms in the region.
Out of this environment emerged many of the Internet visionaries, notably Doug Engelbart whose Augmentation Research Center would be one of the key labs in the 1960s from which would emerge many of the key computing and Internet innovations. Key to both the personal computing and Internet revolutions of the 1970s was the bubbling civic energy of the region derived from a unique combination of government investments, entrepreneurial zeal and anti-war, counter-culture civic networking. In rather direct ways, that civic energy would be channeled into economic networking that would build a commitment to shared knowledge and open computing standards.
In turn, the federal government would intervene in computing markets to reinforce open standards around which Silicon Valley firms would build their businesses. One notable example would be Sun Microsystems, founded by Stanford and UC-Berkeley graduates trained within the community of early Internet pioneers, which would promote the government-backed open operating systems and Internet standards in every computer they would sell throughout the 1980s. Other Bay Area companies, from the Internet router company Cisco Systems to Netscape to database-maker Oracle would build their businesses tied to government contracts and standards. With that base of innovators tied to these open standards supported by the government, a vibrant collaborative network of Internet companies would explode and lock in leadership for the region as the Internet itself expand exponentially.
However, as the federal government has withdrawn from strong intervention to assure open Internet standards, it has become a more open question whether that collaborative model will survive as companies merge to face off against the strength of vertically integrated companies like Microsoft seeking to dominate through proprietary approaches. The withdrawal of strong government-backed Internet standards may be hastening the erosion of the Silicon Valley model.
CHAPTER 4: With the configuration of new industries in Northern California, from software engineers to networking companies to multimedia content providers, the question then becomes whether the character of these Internet-related firms will resemble a regional industrial district model or more closely follow a corporate "strategic alliance" model with weak regional roots. The Internet itself adds in a whole new factor to that question since it itself enhances the globalizing trends that information technologies have been accelerating.
Contrary to what some might expect, Silicon Valley not only survives but is thriving, expanding and even consolidating its role as the geographic focus of a supposedly geography-free revolution. What makes the region worth examining in this context is the consciousness of many firms of the fragility of their region's success. Under pressure of the California recession of the early 1990s, leading local technology companies formed a consortium called Joint Venture: Silicon Valley to address a wide-range of fears around technological collaboration. With federal funding for a number of its initiatives, the consortium would launch a whole range of civic initiatives spanning the public-private divide. A number of these initiatives involved Internet company collaborations through consortiums with such names as Smart Valley, CommerceNet and the Bay Area Multimedia Technology Alliance (BAMTA). The results of this endeavor are in many ways a natural experiment for studying the relationship between civic energy and the formation of industrial districts in the context of the Internet.
The success of these initiatives has been overwhelming in the view of the participants, so much so that companies from around the world, including Cable & Wireless, Olivetti, the European Union bank and Toshiba have joined as members. And this latter fact is the rub. What started out as regional consortia rapidly shed their specifically local orientation in favor of global networks. Where CommerceNet was formed initially as a way to electronically link suppliers and contractors locally over the Internet, the primary interest of participants rapidly became the use of the Internet for marketing goods to global customers. CommerceNet and BAMTA quickly evolved into forums for creating strategic alliances and expanding the worldwide market on the Internet, rather than a network for strengthening regional ties around production. Northern California was increasingly seen as a useful enough concentration of skilled workers and innovative firms for corporations from around the world to seek to establish relationships there.
Yet these regional alliances in Silicon Valley are tied to a form of civic networking and business-to-business consortia that go far beyond traditional market relationships. Looked at in the context of other regional consortia, such as SEMATECH and MCC in Texas and the hundreds of other multi-firm research-oriented consortia around the country, the explosion of Internet companies in Silicon Valley is recognizably the creation of the social capital highlighted by a range of theorists. Local regional collaboration becomes a key mechanism for developing cooperation around industry-backed technology standards that need the day-to-day interaction to sustain themselves versus the proprietary strategies of global competitors outside the consortia.
The Internet itself is an active force in shaping whether firms deal more closely with local firms in Northern California or whether it ties them more easily into global production systems. While many in Silicon Valley see the Internet as strengthening the informal communication and exchange that has made the region such a powerhouse in innovation, others see it making non-local intellectual and commercial exchange easier between Reich's symbolic analysts. Projects developed by CommerceNet are seeking to create standards for computerized Internet databases that can substitute for the informal specifications of local contractors in favor of seeking the best global partner for supplies, which has obvious implications for eroding the traditional advantages of regional collaboration. The growth of the Internet also promises more development of software in "virtual industrial districts" in cyberspace as tools are developed to strengthen the illusion of proximity for collaborators at long distances. Already, simple coding of software is entering world commerce with India leading in this function. With the Indian government building teleports in key cities, all that is needed are systems for easily specifying design specifications for coding and other support to become much more common using the Internet. In the end, the collaboration achieved by the consortia is focused on marketing strategies and knowledge exchange that may benefit the elite engineers of the region (for whom electronic communication enhances local collaboration) but has little to do with the overall health of the region.
Information technology opens the possibility of telecommuting from home and expanding the effective physical radius for those who need come to work only a few times a week, but in the end this emerges more as a coping strategy for elite engineers who need not face the inadequate physical infrastructure of gridlocked roads that the "unwired" face due to an underfunded public sector. The Internet thereby becomes a further tool for the secession of the elite from that decaying public sector. Additionally, it makes affordable housing less of an issue since engineers can comfortably live in cheaper suburbs farther from the firm when they need only come into work a few times per week.
And this leads to the dark side of concentrated economic power and its regional effects that Harrison documents from Italy to studies of Silicon Valley: of dual labor markets, of peripheral inhabitants bypassed by "flexible" conditions, and a general squalor of public infrastructure. This is reflected in the fact that while Joint Venture: Silicon Valley started with broad goals around strengthening the local infrastructure of the valley to the benefit of both industry and local communities, by the end of the 1990s its focus revolved around technical alliances, business incubation and making local government more pliable to the needs of business. Instead of broad cross-class civic collaborations, you have a new politics of business-government relations focused on collaboration between elite engineers and corporate leaders as the new basis for regional development with little regard for or involvement by less skilled workers in the region.
CHAPTER 5: Along with federal funding, a large source of funds for Joint Venture and its associated consortia have been the traditional regional anchors of economic development in Northern California: California banks like Bank of America, the regional power company Pacific Gas & Electric and the local telephone company Pacific Bell. Yet their participation has not had the effect of tying the consortia efforts into broader economic development, a fact reflecting that these "anchors" are increasingly global market players in hot competition with competitors both within the region and outside it.
Notably, all three companies are in network-based industries whose functions are rapidly converging with the Internet itself and, as noted earlier, have seen the regulatory regime under which they operate radically changed. Earlier banking, telecommunications and power utility regulatory regimes were dedicated to the idea of spatially-bounded markets where companies would be encouraged to expand access to their networks with pricing models allowing them to recover the fixed costs of those investments With the geographic scope of their markets limited, it was in their self-interest to participate in economic develop that maximized growth in every sector, rich and poor, within that region.
The new "reregulation" regime has created a constant tinkering with market rules that undermine regionally defined markets in favor of national and global competition where companies concentrate on richer, high-profit customers while short-changing investment in the broader public infrastructure on which lower-income families depend. Bank of America and Wells Fargo, the largest California banks, have become increasingly global in their aspirations and have seen Joint Venture and its associated consortia as a way to help set standards for dominating cyberbanking in the future. Power utilities are now buying and selling energy wholesale in national spot markets over the Internet and, more recently, within the state on Internet-based power exchanges. All of this is cutting power costs for business customers while shifting costs onto residential customers and taxpayers.
Most critically for the Internet itself, the breakup of AT&T and market competition in telecommunications has ended the mandate for equal access to telecommunication services as the variety of business services available has exploded and the price for basic residential access has climbed precipitously. Despite the rhetoric of "deregulation", a range of telecommunications rules mandate competitive behavior in the field, most dramatically in the requirements that mandate that local phone companies allow interconnection to any other telecommunications business without requirements that those businesses necessarily pay to support the network as a whole. The most dramatic example of this are Internet Service Providers themselves who, due to early regulation in the 1980s, have had subsidized access to the telephone infrastructure while paying almost nothing for its maintenance. The result, as in the banking and power industries, has been economic subsidies for business and upper-income residents (the main users of such Internet providers) as lower-income residents trapped in local geography have had higher bills and a neglect of the basic infrastructure they depend upon.
Politically, the outcome has been a whole series of national and local regulatory battles as to what constitutes an "ideal" market in each networked industry. Instead of regional anchors whose private interest is geographically bound to the public interest of regional development, we have a whole set of arrangements that are jury-rigged to police against predatory pricing, compensate for defunct infrastructure, mandate interconnection between different services, and provide sporadic measures for assuring that rural and the poorest customers are not completely dumped out of the system. Many market evangelists have called for doing away with subsidies for the poor altogether (while maintaining the regulatory regime that subsidizes business) and dumping the responsibility for assuring universal access on local governments' welfare budgets. Even as subsidies for business interconnection to networks would remain implicit in public policy, the subsidies for the poor would be laid out as a line item in budgets ripe for political attack.
CHAPTER 6: As economic allies of local government retreat into global competition, the costs of assuring access for the "information have-nots" are increasingly shifted from the networks directly onto public budgets. This is hard enough given almost two decades of cuts in national government subsidies to local government and tax restrictions such as Proposition 13, which themselves responded to earlier waves of global speculation in housing markets. All this has weakened the fiscal strength of city governments. However, Internet commerce itself is threatening to itself further undermine local tax revenues.
Local government and economic development has always depended on a virtuous cycle where income generated in a region tended to trickle down through local retail purchases that in turn generated sales tax revenue to continue public initiatives to support production. Now, as commerce increasingly moves onto the Internet, there is a large and growing portion of that income spent on untaxed out-of-state purchases which further incapacitates local government's power and stability. Mail order sales have been a growing drain on local revenues for decades but the Internet through computerized outreach, online showrooms and growing online transactions have made it easier for companies to dispense with the local stores or personnel that would, under interstate commerce laws, trigger local sales tax payments.
The result, especially in states like California where local governments depend on sales tax, has been a desperate competition for the remaining retail outlets. This has introduced a terrible distortion of economic development patterns as cities bid for successive waves of retail, from suburban malls to "big box" discount retailers to "call center" retailers marketing through mail order and the Internet to the rest of the country. Rather than targeting local spending on infrastructure, education or research networks, most local governments are desperately handing out tax subsidies in the desperate competition to influence the location decisions of these outlets. Instead of regional cooperation around development, regions end up with a nasty zero-sum competition that fragments development, especially as rich communities "opt-out" by retreating to separate gated communities with their own services and no burden of paying for services for the poor. In an increasingly global consumer market and systems of production tied to global decision-making, it is increasingly clear that fractured local governments have neither the revenue nor the political strength to negotiate real economic development deals for their citizenry.
CHAPTER 7: Despite the fiscal and political pressures on local governments, many are heralding the Internet as the opportunity to decentralize political decision-making and strengthen civic networks. With the highest concentration of Internet access in the country, the Bay Area has been talked about as a "beta site" for a new electronic democracy. The unfortunate reality has been that despite broad access to the Internet, its public "Information Superhighway" can best be described in John Kenneth Galbraith's phrase of "public squalor amidst private affluence."
Networked technology is driving a restructuring of the physical infrastructure of regions that is not only heightening inequality but is driving dramatic restructuring of the functions of local government. The modern professional government was a child of Progressive Era reform that itself was largely a product of the need to coordinate and extend the new public water systems and utility networks of their day. As those networks fracture, so too is coordination between local jurisdictions as they seek to use competing telecommunications systems, from hardware to Web sites, as a competitive advantage in attracting businesses from other locations.
In an age of information, it is ironic that the budgets of local, state and even federal agencies are so strapped that many are discontinuing the collection of key areas of public information, even as they could be distributed to the public most effectively. This leaves information control in the hands of private companies. In the cases where information can't be collected effectively by private companies, public leaders like Pete Wilson's Chief Information Officer John Flynn have pushed to have agencies sell it rather than give it to the public free. In this way, private companies are able to rent the coercive power of government to collect the information for its own needs that it could not collect on its own. In many cases where governments are putting government economic information online, such as government purchasing or contract information, this is threatening to undermine the informal local economic development control cities had through targeting local business who were the only one's who found it worthwhile to track local bid information. Many local governments on the Internet see it mostly as a global advertisement to attract business investment. With Smart Valley's main focus on assisting government's on-line presence in order to speed government permitting of industry projects, this has meant that support for local government from industry has focused on making communities in the region more pliable to the needs of industry. And this has usually meant concentrating support on the richer communities where the companies are based.
Many local and state government agencies are intensely interested in using the Internet to assist job placement by the unemployed or underemployed. California actually has an extensive electronic system connecting its many local and regional employment offices with use of e-mail prevalent across the state. However, this does not translate easily into simpler job placement of the unemployed, mostly due to the fact that, while the unemployed register their availability for work, employers are under no requirement (and show little inclination) to list job openings for marginal workers electronically. Whether because of racism or convenience, employers resist efforts to make their hiring practices more open to marginal communities seeking employment for through such systems. Lacking either the union strength or the legal ability or will, local governments end up not pursuing the measures that could use the new technology more aggressively for the unemployed.
All this in turn highlights that local regional actors have much less role in the development of their regions that the global corporate giants and the nation-state governments that create the underlying rules, implicit subsidies and public investments that create opportunities for regions to prosper. And given the dark side of flexible production on peripheral employees and the unemployed in the new economy, a stronger role for that nation-state level of government is even more needed. For many local governments and their lobbying associations, the strongest power of the Internet is to more effectively unite local municipalities to lobby for state and federal legislation they see needed to maintain services in their communities.
CHAPTER 8: This final concluding chapter examines the above arguments in the context of the national debate over political and economic decentralization in our society. What is clear is that the contradictions between elite regional business networking and global production create a broad confusion over what level of economic and political organization is most critical in the new economy. As nation-state mass production systems give way to networked enterprises, a political opening was made for ideologies of decentralization that, while espousing grassroots political empowerment, end up strengthening the power of global corporations versus local governments without the resources or power to negotiate as equals.
However, even as this rather bleak story unfolds, there is a counter-trend of grassroots organizations using the new networked technology, particularly the Internet, to strengthen their power at national and international levels. Even as the Bay Area has been a center for promoting networked technology for global corporations, its parallel history as a source of radical civic energy has manifested itself in the regions support for global electronic networking. The union of janitors in Silicon Valley firms like Apple and Oracle have used electronic networking not only to tarnish the images of those "model" employers but have used the technology of the Internet to directly inform and influence the attitudes of the engineers whose offices they cleaned each night. Hotel unions have used the Internet to distribute boycott information globally and even target the stockholders of computer companies like Powersoft to pressure those companies to keep corporate business out of anti-union hotels. Unions nationally are increasingly using the resources of the Internet to build solidarity and strengthen their organizing drives. With local power undercut by global corporations, more and more organizations are using the new technology to build the global alliances that, perversely, are seen as the only way to preserve local sovereignty.
What this all promises is a growing struggle in the workplace and in urban politics over both the positive and negative trends of the information age. As global companies create strategic alliances using the human resources of a region, labor and community organizations are beginning to marshal the tools of information technology to organize contingent workers pushed to the fringes of economic and political power. The growth of the Internet embodies a broad change in the urban space where control of time and communication, especially to resources and people outside one's region, is becoming the ongoing and critical issue in local power, making semi-permanent local growth coalitions a thing of the past. Instead, while internal regional alliances will remain crucial, local power is inevitably flowing to those who can use the new information technology to deploy global power for local control of resources.
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