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The New Technopolis

Silicon Valley is no longer the model for high-tech development. Instead look to greater Washington, D.C., or Southern California.

June 25, 2000|Joel Kotkin | Joel Kotkin, a contributing editor to Opinion, is a senior fellow at the Pepperdine Institute for Public Policy. He is the author of "The New Geography: How the Digital Revolution Is Reshaping the American Landscape," to be published this year

The Southern California technopolis is distinguished by its cultural-industrial complex, which evolved out of the entertainment industry and now includes new media, digital imaging and the Internet. The epicenter of this technopole is Santa Monica/West Los Angeles, with satellites in the San Fernando Valley, notably Burbank and Glendale.

Finally, the region's technopolis boasts the vast transportation and warehousing resources of the Inland Empire. These unglamorous and unappreciated assets, according to John D. Kasarda of the Kenan Institute at the University of North Carolina, are enabling the region to emerge as the leading Internet trade region in the country.

Many academics and economic and political policymakers disparage multipolar development as wasteful of space and resources. Yet, the evidence suggests that the Silicon Valley model has run its course and may be counterproductive. For one thing, although the valley's extreme concentration of technology-related businesses, about three times that of its nearest rival, has produced a hothouse of economic growth and wealth creation, it has also produced an enormous bumper crop of political, economic and social problems.

Consider the region's cost of living. The premium awarded a San Francisco or Silicon Valley address has driven housing and commercial real-estate prices to among the highest in the nation. A one-bedroom cottage in Palo Alto goes for as much as $750,000, a price tag that excludes all but a small elite from the local housing market. One-third of the valley's more than 30,000 homeless have a full-time job.

Silicon Valley's overconcentration has also afflicted its transportation system. For decades, Bay Area residents skewered Southern California, in particular, for its freeway horrors. But today, commutes in and out of Santa Clara Valley easily match those in the Southland; the percentage of regional freeways suffering from the highest levels of congestion rose from 11% in 1995 to 31% three years later.

In a sense, the valley has become a victim of its own success and mythology. The new technopolises can always recycle older industrial locations, as is occurring in the San Fernando Valley, the Baltimore harbor and central Dallas. But Silicon Valley is increasingly hemmed in by geography--the San Francisco Bay--and a powerful, well-entrenched anti-growth movement. The combination of these factors has created an extremely difficult and expensive development environment.

These social problems are slowing the valley's growth and tainting its attractiveness in the eyes of younger people and companies. A recent poll of graduating Iowa college students--the Midwest has long been a critical talent pool for the valley--found only 5% of them rating San Jose as a desirable place to live, well behind Minneapolis, Denver, Portland, Seattle and even Los Angeles.

But perhaps the greatest challenges facing Silicon Valley are internal. The concentration of professionals in the valley and San Francisco has fostered conditions hostile to less-well-heeled parts of the middle class, not to mention working class. Besides sky-high real-estate prices, the region's overdependence on information industries has created a bifurcated economy of highly successful information elites and "worker bees" who provide services, often at very low wages. As manufacturing has shifted to subcontractors, "silicon sweat shops" have become a critical component of the valley economy.

Since the late 1980s, wages of middle- and lower-income valley residents have stagnated; only the top 20% have registered significant gains. This has produced a widening gap between the original valley elite--the venture capitalists, investment bankers, professional managers and sales people--and the general work force. The ratio of top corporate salaries to worker wages skyrocketed from 42:1 in 1991 to 220:1 in 1996. Top executives' salaries rose 391%; those of rank-and-file workers dropped by 6%. Largely because of the valley's increasingly homogeneous economy, there is a dearth of upwardly mobile jobs in manufacturing or services. In greater Washington, government often plays this role for working-class people, while warehousing and manufacturing still flourish in greater Dallas and throughout Southern California.

In the long run, Silicon Valley's blend of industrial homogeneity may prove economically counterproductive. As technology spreads to such activities as retail, warehousing, industrial machinery and apparel and textiles, new kinds of companies that apply innovative methods to traditional production are likely to spring up where older firms can afford to locate. This is true of entertainment firms, which find Southern California not only cheaper, but a far better place to marry content with technology.

In the emerging digital era, regions will need to learn the advantages of what Robert Fishman calls "regional pluralism": urban neighborhoods, elite high-tech nerdistans, affordable working-class suburbs and an accessible outback of rural communities. This kind of diversification, not the intense monoculture of Silicon Valley, is likely to become the model for future high-tech development as the digital revolution reshapes the U.S. landscape. *

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