Last week Mark Ames published an article that should forever destroy any
connection between the Silicon Valley tech billionaires and libertarian
worldviews. The article reports on a court case that alleges that Apple,
Google, and other Silicon Valley powerhouses actively conspired to keep
their workers’ wages down. According to documents filed in the case, these
companies agreed not to compete for each others’ workers dating at least
as far back as 2005. Workers in the industry have filed a class action
suit that could lead to the payment of billions of dollars in lost wages.
This case is striking at many levels, the most obvious being the
effective theft of large amounts of money by some of the richest people on
the planet from their employees. This is pernicious, but not altogether
surprising. After all, the boss stealing from the workers is as dog bites
man as it gets. Few would be surprised that rich people were willing to
break the law to get even richer.
The real news here is how the Silicon Valley barons
allegedly broke the law. The charge is that they actively colluded to
stifle market forces. They collectively acted to prevent their workers
from receiving the market-clearing wage. This means not only that they
broke the law, and that they acted to undermine the market, but that they
really don’t think about the market the way libertarians claim to think
about the market.
The classic libertarian view of the market is that we have a huge number
of people in the market actively competing to buy and sell goods and
services. They acknowledge the obvious — some actors are much bigger than
others — but there is so much competition that no individual or company
can really hope to have much impact on market outcomes.
This point is central to their argument that the government should not
interfere with corporate practices. For example, if we think our local
cable company is charging too much for cable access, our libertarian
friends will insist that the phone company, satellite television or other
competitors will step in to keep prices in line. They would tell the same
story if the issue were regulating the airlines, banks, health insurance,
or any other sector where there is reason to believe that competition
might be limited.
They would tell the same story on the labor side. If we are concerned
that workers are getting low wages then the answer is to improve their
skills through education and training rather than raise the minimum wage.
If workers were worth more than the minimum wage, then the market would
already be paying them more than the minimum wage.
They have the same story when it comes to requiring family leave, sick
days, or other benefits. Libertarians would say that if workers value
these benefits they would negotiate for them and be willing to trade off
wages. There is no reason for the government to get involved.
This story about the wonders of the free market is simple in its appeal
and it has the great implication that nothing should be done to keep the
rich from getting ever richer. However the Silicon Valley non-compete
agreements show that this is not how the tech billionaires believe the
market really works. This is just a story they peddle to children and
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 to compete for workers, they
could keep their wages down.
It shouldn’t be surprising that the Silicon Valley billionaires really
are not libertarians. After all, much of their fortunes rest on patents
and copyrights, both of which are government granted monopolies: the
opposite of a free market.
But for some reason, seeing the tech whiz-kids forming a cartel to keep
down their workers’ wages seems an even more direct violation of any
belief in libertarian principles. This is the same sort of cartel behavior
that we associate with the cigar-chomping robber barons of the late 19th century. It turns out
that the biggest difference between the tech billionaires of the Internet
Age and the high rollers of the railroad age is the cigars.
Dean Baker is the co-director of the Center for
Economic and Policy Research (CEPR). He is the author of Plunder
and Blunder: The Rise and Fall of the Bubble Economy and False
Profits: Recoverying From the Bubble Economy.
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