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September 18, 2014


Long before Social Security, long before workers compensation, unemployment compensation, a forty hour workweek, a minimum wage, food stamps and other such social safety net programs, there was corporate welfare, perhaps as generous as that of today. Only the form of our giveaway has changed; now it is found largely in the tax code; then we gave away huge parcels of land, favorable tariff treatment, etc. This essay is not about the royal charter granted to East India Tea for a monopoly on Oriental trade by English sovereigns who reigned by divine right; it is about a giveaway of federal resources in this country by politicians supposedly elected to serve their American constituents in democratic fashion free of the arrogance of divinely appointed leadership. We have made many people  rich with our largesse, and then, like now, such recipients have turned against their benefactors – us.

This essay is about railroad barons, tech-rich elitists and Stanford University, gateway to Silicon Valley, where thankless millionaires and billionaires made rich by taxpayer welfare from the nineteenth century through today are proposing that a new state of Silicon Valley be carved out of California, apparently for purposes ranging from lower taxes to not having to associate with the unwashed masses in this American experiment in democracy. This and other reactionary movements by the tech-rich class in Silicon Valley (and a few other such venues) were initially made possible, of course, by taxpayer-funded giveaways, giveaways endorsed by such as the venerated Lincoln, the old “rail splitter” of frontier fame.

The myth spun by Republicans in 1860 about Lincoln’s “rail-splitting” days was tardy. Lincoln had grown rich himself as a (you guessed it) lawyer for railroads, having graduated from his circuit-riding days of yore in representing clients in relatively small cases to representing well-heeled clients such as the welfare-loving railroads (who were intent on a coast-to-coast hookup to facilitate trade and pad their own pockets with monopoly profits and federal land giveaways). Abraham Lincoln, great as he was, was a “railroad man” through and through, and hadn’t split a rail in many a moon before his election in 1860.

An understated historical fact today is that he continued the building of a coast-to-coast railroad even during the Civil War, and that some of the incentives he and other presidents offered for its building were breathtakingly immense. We were fleshing out our “manifest destiny” in building a coast to coast railroad, and Whig, Republican and Democratic presidents were of a single mind in supporting such an enterprise, which ended in 1869 at Promontory Point, Utah, where the western and eastern efforts were united, four years after Lincoln’s untimely demise. With that and discovery of oil ten years earlier near Titusville, Pennsylvania, the Gilded Age was given full rein to overcharge, monopolize, collude in pricing with their interlocking directorates etc., which led ultimately to the Sherman Anti-Trust Act and other trust-busting statutes which, unfortunately, are currently being ignored in this era of merger.

Progressive Republicans (especially Teddy Roosevelt) and helpful Supreme Court decisions assisted in slowing the excesses of the Gilded Age, but it appears that corporate America these days (especially the tech industry) is back to its old tricks of swallowing up competition via under-pricing and collusion a la the old Rockefeller game of running competitors out of business, buying them on the cheap, and then enjoying monopoly profits resulting from lack of competition.

As I have blogged before, it appears the Gilded Age is back, but this time with a supportive Supreme Court, spineless Democrats of too big to fail fame, and Republicans who are anything but progressive. Campaign contributions help grease the skids of our new Gilded Age for the upward spiral in wealth for the already rich and the leavings and the bills to pay for such corporate largesse for the rest of us caught up in the current economic malaise in a so-called “global economy.”

Rich people like billionaires Bill Gates (Microsoft) and Larry Ellison (Oracle) could have been members of the working class but for government funding of much of the research that built the industry in which they have so handsomely profited. As noted by Rebecca Solnit in the current issue of Harpers Magazine, the Internet itself was developed by the Department of Defense. Further, Silicon Valley with its huge contracts from DOD and Stanford University (where 85% of its research funding is via federal funding) continue to haul in huge chunks of taxpayer money for whatever such funding is supposed to yield to our “defense.”  So now some of the Silicon Valley denizens are tired of such an oppressive tax atmosphere and propose to come up with their own state? Why, when (as noted by Solnit) Google, Facebook, and Apple use offshore shell games to largely avoid paying taxes – and they have company from corporate defense contractors such as GE, Northrup Grumman and others – who routinely overcharge and defraud DOD and then connive to beat the tax rap, leaving such liability to you and me?

San Francisco-based Twitter went public last year, creating 1,600 employee-millionaires overnight. Twitter also benefited from a payroll-tax break worth $56 million, which San Francisco mayor Ed Lee approved under threat that the company would leave the city if it had to pay what ordinary businesses do. The mayor is in thrall to the tech industry and billionaire Ron Conway, a major contributor to his campaign and an early investor in Twitter and such tech companies as Google and Facebook, among others. Taxpayers in San Francisco are left to patch that $56 million hole in their municipal budget.

The foregoing are some of the people who want to carve out a new state of Silicon Valley. It can’t be tax relief alone that motivates such people, whose flacks sneeringly refer to non-tech people (you and me) as belonging to a “Paper Belt,” which presumably refers to everything that came before 1994 and isn’t run by the tech industry. As for tax relief, they already have it: their accountants have fashioned out such relief from an internal revenue code which they helped write; they also have arranged to have a weakened IRS, withered because of underfunding (and consequent reduction in corporate audits) by their campaign-hungry friends in the Congress. Gilded Age #2? Can there be any doubt?

It is a very profitable arrangement between those who spend our money for us and the objects of such largesse, who now complain of the usual suspects – taxes, overregulation etc., this from an industry that would not exist but for corporate welfare meted out long before the industry came to be and continuing from such a time to and through today on terms they have their congressional lackeys adopt as “policy,” aka “law.” Their billions engender more billions for them while the rest of us pay their bills. That’s “policy?” Am I missing something here in describing this outrageously undemocratic formula of helping the rich get richer and the poor get poorer? Need we legalize Piketty’s dour formula of r > g? I hope not!

I will write more on Stanford University and its promotion by railroad baron Leland Stanford from his millions generated by corporate welfare and political chicanery in Part II. Stay tuned.   GERALD   E


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