The Troubling and Challenging Economic Divide
by Jan Baughman

April 10, 2000

February 6, 2000 - Note from the Editor: Yes, of course, the world will become a paradise, should we ever understand and accept the myths. Jan Baughman debunks one of those myths in this week's lead story. Our second piece, Sadness in Novi Sad, Serbia, by Alma Hromic, will make you wonder whether within the sphere of Serbian "subhumanity" people indeed are, like you, very human. Hromic was born in Novi Sad. However, she has lived outside her native country for most of her life. She now lives in New Zealand. She has written a sensitive book with R. A. Deckert, Letters from the Fire. It is a story of two ordinary people swept up in the extraordinary events of NATO's war against Serbia. It's an E-mail story that will be particularly attractive to an audience that's used to cyberspace. It's a story of transformed enmity into friendship and love.

"...We cannot forget the simple message that, no matter how much new technology there is, the two things we must remain committed to are empowerment and community. Everyone counts. Everyone should have a chance. Everyone has a role to play. And we all do better when we help each other."

-- William Jefferson Clinton
March 24, 2000, Hyderabad, India

President Clinton spent the last day of his recent trip to India last month visiting Hyderabad, the high-tech center with the presence of the likes of Microsoft, Oracle and Toshiba. In his speech, he lauded India's high-tech industries: "Ten years ago [they] generated software and computer-related services worth $150 million. Last year, that number was $4 billion. Today, this industry employs more than 280,000 Indians, in jobs that pay almost double the national average."

Hyderabad, the Silicon Valley of India, is a center of contradiction to the extreme. A technological gold mine neighbored by villages with no cars, no telephones, minimal electricity and, obviously, no computers.

Clinton continued, "In India today, as in America, there is much to do. Millions of Indians are connected to the Internet, but millions more aren't yet connected to fresh water. India accounts for 30 percent of the world's software engineers [a very small number], but 25 percent of the world's malnourished [an enormous number]. And there are other statistics which, given the wealth of the United States, I could cite you about our country which are just as troubling and challenging."

This was not the time and place for the president to review the U.S. statistics. But let's do it now.

Take Palo Alto, for example. An affluent town in the matrix of Silicon Valley next to Stanford University, where an affordable cottage is $600,000 and a casual opulence fills the air. Its neighbor, separated by the non-digital divide of Highway 101, the link between San Francisco and San Jose, is East Palo Alto, a town of about 25,000 whose legacy in the early 1990's was having the highest per-capita murder rate in the country. East Palo Alto is predominately non-white, with no real infrastructure, no banks or grocery stores. The 1990 census listed the per-capita income in East Palo Alto as $9,968 compared to $32,489 in Palo Alto. And that was before the recent high-tech boom. Palo Alto residents upgrade to state-of-the-art computers and donate their obsolete machines to the East Palo Alto schools and feel good about helping to close the ever-increasing divide (also enjoying the tax credit, by the same token). In fact, giving outdated computers to poor schools only adds to the width of the divide. And then they go on widening it by pushing its residents further east, further away from their jobs, tearing down their shops and apartment buildings to build Home Depots and gated condominium complexes. Silicon Valley has created 275,000 new jobs since 1992, but only 50,000 new houses. Land is worth more than gold, and the highest bidders set the price. Something, somebody, has to give. The easy target is obvious.

But what will become of Palo Alto and all of Silicon Valley if its infrastructure dissolves? Even with its wealth, San Jose and San Francisco rank fifth and sixth among U.S. cities with the worst roads. What will become of the companies when the roads can no longer support all those commuters? What will happen when the teachers and librarians and shopkeepers and fire fighters that serve the communities are forced to leave the area because they can no longer afford the housing, despite the plethora of jobs? How will they define "empowerment" other than the power to leave? And who will tend to the needs of all those millionaires? When people cannot afford to live where the jobs are, the entire society suffers.

In a recent interview with Michael Saylor on PBS's NewsHour (Saylor is the 34 year-old CEO of MicroStrategy, a 6.8 billion dollar e-business software company), Saylor stated that, "If an individual can come along and create a company which will cure the traffic problem in Washington D.C. and save 280 million hours per year, I think they (sic) deserve to make a few million dollars. If we hold this out as the greatest possible reward and we've got 22 year-old youths running around trying to make you live longer, cure cancer, cure traffic, save people money, cut everybody's credit-card rates from 22% to 6% using technology, then I can't think of a more constructive motivation than that. And that's in essence what our economy is doing and all of these dot-com millionaires, they got that way because they reformed or restructured an industry and they did it ten times faster than the existing political system or the existing corporate infrastructure ever would have."

In other words, the best and brightest deserve all of those millions, and all of those millions should motivate and reward the best and brightest to make the world a better place. This is not unlike the president's message.

Furthermore, according to Saylor, we all benefit from the riches of the millionaires because "they're either going to a) pay it in tax or b) give it away to charity. Or c) they're going to consume. When they consume, they create a whole raft of jobs for the people that feed the luxury industry." Trickle-down theory at its simplest, an experiment we've been through before.

Here is a statistic: In the last decade, the wealthiest Americans saw their income rise by 15% compared to only a 1% increase for the poorest. Remember the people in East Palo Alto who can no longer afford to live there, despite the need to feed the luxury industry.

Clinton stated in Hyderabad that by embracing technology, India, "the world's most populous nation would have the world's largest number of educated people, and, therefore, in no time would have the world's largest economy. Doing the right thing is good economics in the Information Age, and we have to do this together." (This would ring truer if the U.S. slowed the import of India's engineers.) Clinton was right in terms of absolute numbers, but what near-term impact will technology have on education in India? Currently, half of the women and a quarter of the men are illiterate (in a population of 1 billion plus), and 30 million children aged 6 to 10 are not in school, according to The New York Times (March 19, 2000). Here we're talking about the need for major strides to achieve the "world's largest number of educated people". Is that what Mr. Clinton is advocating? If so, this is not realistic. Technology has yet to improve education in the United States, and there are no statistics to show it would improve it in India.

More statistics: From 1979 to 1995, real wages in the U.S. dropped 23% for people with less than a high school education, but rose 4% for college graduates and 12% for people with advanced degrees. So yes, income, education and the economy are linked, but the bar on the value of education continues to rise. While the U.S. economy is booming, our educational achievements remain appalling. We have a minority of highly educated people, but overall, we are not teaching our children the basics of reading, writing and arithmetic. And in this era, the basics also include basic computer skills. In fact, in order to fill all of the highly skilled jobs, we must import scientists and engineers from around the world, including India, in order to sustain growth.

We cited statistics about the United States that are just as troubling and challenging as President Clinton said. We did so because everyone does count, everyone should have a chance, everyone does have a role to play and we all do better when we help each other, as President Clinton also said. It is difficult to capture the essence of humanity with statistics. However, the numbers demonstrate that we Americans are not as healthy as we believe, or as healthy as the economic indicators would lead us to believe, and the import of our ways by other countries should be considered with caution.

This, President Clinton did not say.


Note:  On April 4, the president issued a "National Call to Action to Close the Digital Divide. "Our mission", said Clinton, "is to open the digital frontier to all Americans, regardless of income, education, geography, disability or race...If we work together to close the digital divide, technology can be the greatest equalizing force our society or any other has ever known." He did not mention the importance of expanding the digital frontier to India. On April 17/18, President Clinton will visit East Palo Alto, accompanied by CEOs, members of Congress, cabinet secretaries and community leaders as part of his New Markets Tour.


"India's Unwired Villages Mired in the Distant Past". Celia W. Dugger, The New York Times, March 19, 2000.

"Clinton Lauds Technology As Key to India's Economy". Jane Perlez, The New York Times, March 25, 2000.

Ray Suarez Explores the New Money Culture. Transcript from The NewsHour with Jim Lehrer, February 1, 2000. http://www.pbs.org/newshour/bb/economy/jan-june00/money_2-1.html

White House Press Release: Remarks by the President to the Hyderabad Business Community http://www.pub.whitehouse.gov/uri-res/I2R?urn:pdi://oma.eop.gov.us/2000/3/24/6.text.2


This Week's Other Article

Sadness in Novi Sad, Serbia - by Alma Hromic


Resources on the War in Yugoslavia and its Aftermath


Articles Published on Swans Regarding the War in Yugoslavia and its Aftermath

Published April 10, 2000
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