I Love Tech, and So Should Your Government

A classmate of mine at Hertie recently started an online web platform to discuss issues of public interest. It's called Civocracy, and is located at www.civocracy.org. It's currently in beta testing and the founder told me he's still looking for beta testers if anyone out there is interested.  Not only is Civocracy a really cool and well-executed idea, it's already provoked a blog post!

Someone recently posted that they didn't think that governments in developed countries should support technology industries. The author argued that there are better options for government support and that tech funding doesn't lead directly to job creation. This struck me as a pretty bad idea.

A quick Google (hey, tech company!) tells me that there are currently 41 technology companies listed on the Fortune 500, including Apple, HP, Amazon, Dell, Microsoft, Google, and Facebook. Yet another Google search reveals that those seven companies alone employ approximately 780,000 employees worldwide. Clearly, tech companies employ lots of people.

Not only do they employ lots of people, but they generate a lot of economic activity. According to a recent study by two Stanford professors, companies formed by Stanford alumni generate $2.7 trillion in revenues each year, and have created more than 5 million jobs since the 1930s. From what I could tell, not all of those jobs have been in tech, but Stanford is deeply integrated with Silicon Valley so I'm assuming that a substantial portion of those numbers are in tech-related industries. If I'm off the mark here, please let me know.

Marian Mazzucato recently wrote a book called "The Entrepreneurial State" (full disclosure: I haven't yet finished it) in which she argues that governments play an active role in stimulating innovation, and that without state support, companies like Apple could not have succeeded in the way that they have. Going back to Stanford, the university receives public support through its tax-exempt status and through research grants to its faculty. Public support thus supports Silicon Valley entrepreneurs via its support of Stanford.

Policymakers throughout the world have taken the lesson of Silicon Valley to heart. To name just two examples: in London, state support has led to the development of a formerly dilapidated section of East London, which analysts are calling London's answer to Silicon Valley. In Berlin, there is a Senate department dedicated to economic and technology issues. The point of these initiatives is not solely to generate wealth: it's to spur development and eventually create new jobs.

You'll be hearing more about the Berlin case because I'm writing my thesis about it. I haven't settled on a research question yet, but I think it will have something to do with how public policy influences the development of tech industries here in Berlin.

Now, it's true that there is a dark side to this story. Time recently published an article that noted the coincidence of Kodak (employing 140,000 people at its peak) going bankrupt, and Facebook's simultaneous acquisition of Instagram (13 employees). The article argues that technology companies are "hollowing out" the economy because increasing automation leads to fewer jobs for flesh and blood people. Whether we're heading towards a future where there are no jobs left for people because robots can't complain and don't demand health insurance remains to be seen. But I wouldn't bet on it