This valley is their valley

March 12, 2014 — Russell Hancock pointed out the window of his downtown office at a complex of three corporate towers, shining white and hive-like in the dry sun of the valley. “That’s Adobe’s world headquarters, right there,” he said. “And yet it’s a cocoon. You don’t see people coming in and out of that building.”

Hancock, the president and CEO of Joint Venture Silicon Valley, continued. “We used to have this theory that if companies located here, there would be a spillover effect: people shopping, [eating] in restaurants and patronizing establishments and all of that. The new model is companies build these cocoons, and they put in the dry cleaning and the dentistry and the car washes and food and all of that inside the cocoons, and nobody ever leaves.”

Not long after it prophesied the arrival of the American Technopolis, Joint Venture began publishing a yearly Index of Silicon Valley, a detailed demographic cross section of the region that has come to depict a number of unsettling tendencies. “This valley, everybody thinks of it as highly prosperous, dynamic, firing on all its cylinders,” Hancock said. “That’s, of course, true. But it’s only true for one set of people” — the so-called “digerati,” the highly skilled, highly educated techno-elite, laden with disposable income. “This valley is full of them, but they’re the only ones who are thriving. The middle class is shrinking, the lower end is growing, and technology isn’t a tide that’s lifting all of the boats in the way that it used to.”

This kind of polarization is, of course, widespread beyond Silicon Valley and the San Francisco Bay Area. But it has particular salience in connection with this region, not least because that is where many of the technologies emerged that facilitated, among other seismic changes, the globalizing of labor and financial markets. And, because of the degree of wealth concentrated in the region, the South Bay is a particularly stark example of inequality. It is also a window into the spatial and political nature of that inequality — the ways disparities are arranged across the land in patterns of poverty and wealth, and how much this has to do with the ways cities and regions organize themselves along lines that deepen, rather than mitigate, those patterns.

Entrepreneurialism by default

In certain ways, Silicon Valley has followed a common pattern, one not unlike the failure of intra-regional cooperation that (as Remapping Debate has reported in the past) contributed heavily to the downfall of Detroit. “The functional economic unit is the regional economy,” said Chris Benner, the professor of regional development at UC Davis. “But there are these separate cities. And the resources of that economic unit are not available equally to those who are living within it.”

This means the various individual cities of Silicon Valley and the Bay Area are locked in a de facto competition with one another for those resources. There is a tendency in the Valley to underplay or deny this reality, and to focus instead on the region’s coordinated effort to compete with other regions around the world bent on siphoning up a portion of the spoils of the tech boom. But as long as the municipalities of the Valley operate as individual entities, they will continue to do anything necessary to bolster their separate balance sheets, regardless of the consequences for their neighbors. Competition is the default state.

In the resulting matchup of entrepreneurial cities, San Jose is the battered underdog — the jurisdiction always trying to keep its head above water, but getting weighed down more with each deal it makes. “The city has pretty much always been willing to give those big industry folks whatever they want,” said Terry Christensen, the retired political scientist from San Jose State University. “That’s always been our chronic problem: having to take whatever will come our way rather than setting the standards and choosing between companies.” 

The examples are numerous. There was a time around 2008 when San Jose thought it had scored a huge victory: Tesla, the hyper-luxury electric car manufacturer, agreed to move from San Carlos, a city 25 miles away in San Mateo County, to a plot of city-owned land in north San Jose. The move would bring the multibillion-dollar company’s headquarters and a large assembly plant. The city’s offer in the deal was substantial: a free 10-year lease on the land, with very low rates thereafter, and about $1 million in rebated development fees. Evidently that wasn’t enough. In 2009 Tesla moved its headquarters, along with a smaller production facility, to the Stanford Research Park in Palo Alto, a perennial victor in the game of capital courtship.

Over time, a feedback loop arose in the way resources flow to the different municipalities and populations in the region. Smaller, more successful cities with stronger tax bases are able to invest more heavily in the services and infrastructure that, in turn, make such cities even more attractive. Less, then, flows to San Jose, which continues to lose fiscal resources to economic development subsidies that never seem enough to right the imbalance.

“There’s a momentum,” said Myron Orfield, director of the Institute on Metropolitan Opportunity at the University of Minnesota and a prominent figure in the field of regional governance. “Strength builds greater strength. Families and businesses that have choices go to places where they can have low taxes and great services, and where they don’t have to take care of poor people. And the more a place becomes like that, the more attractive it is — if you can afford to live there. Because usually the price of admission is huge.”