The tech sector has created great wealth — and worse inequality. Is that San Francisco's future?
May Day, also known as International Workers Day, began in the United States, but it's been all-but ignored by most Americans for decades. And on this May Day, 2013, in the city of San Francisco, it's a good time to note that the growing wealth and income gaps between the rich and the rest of us are reaching historic highs — a dangerous situation, many economists warn — and hardly anyone at City Hall is talking about it.
The job boom in San Francisco, much touted and promoted by Mayor Ed Lee, has been largely in the tech sector, which has created great wealth. But some economists are starting to argue that the Internet, rather than creating economic and political democracy, has done just the opposite.
We're talking about more than just high rents and gentrification — the industrial sector that San Francisco is pinning its future on, critics say, is one of the most brutally monopolistic and exploitive in modern history. It should come as no surprise that the Bay Area has among the highest income and wealth inequality in the nation.
There's no shortage of data pointing to growing inequality and the danger that it poses, but the bottom line is that hoarding of wealth by the rich is causing the middle class to shrink and to make it harder for those on the bottom to just get by.
"About 6 in 10 of us believe that the tax system is unfair — and they're right," Nobel-laureate economist Joseph Stiglitz noted in a recent New York Times column. "Put simply, the very rich don't pay their fair share,".
But Americans generally don't understand how bad things really are. Polling done by Harvard and Duke University researchers in 2010 found most Americans vastly underestimate this country's wealth gap (most thought the top 20 percent controlled 59 percent of the country's wealth, rather than the true figure of 84 percent), and overwhelmingly preferred far more economic equity (most respondents thought it would be fair for the top fifth to control 32 percent of the wealth, which is the case in Sweden).
Part of the misunderstanding comes because "the economy" of the wealthy is doing great, even if that doesn't help most Americans. "The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then. Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains high," UC Berkeley Professor Robert Reich, another leading voice on the issue, wrote on his blog last month.
"Most of the Western world has experienced an increase in inequality in recent decades, though not as much as the United States has," Stiglitz wrote. "But among most economists there is a general understanding that a country with excessive inequality can't function well."
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The wealth divide is not only growing, but it is impacting young people and minority groups particularly hard, and with that concentration comes the potential for social instability and unrest.
The growing divide between the rich and the rest of us is being felt most acutely by Hispanics and African Americans, according to a new report by the Urban Institute, "Less Than Equal: Racial Disparities in Wealth Generation."