Daily Ticker

Tech stocks soar as middle class sinks: Backlash ensues

Aaron Task
Daily Ticker

2013 was great year for tech stocks, be they mega-caps like Google, new favorites like 3D Systems and Pandora Media, once-forgotten chipmakers like Micron Technology, social networking plays like Facebook and, of course, our corporate parent. Outpacing the Dow and S&P 500, the tech-heavy Nasdaq is up 38% this year after climbing (well) above 4000 for the first time since 2000.

Related: “It’s a Boom,” Not a Bubble: Howard Lindzon

2013 was so great a there is renewed talk of a "bubble" in tech. And while a money-losing company like Twitter sporting a bigger market-cap than Target or Time Warner Cable (prior to Friday's swoon, at leat) is reminiscent of the tech mania of the late 1990s, there are many differences between then and now: For example, back in 1999 most Americans were pretty convinced technology was changing our lives for the better. Today, there's a brewing backlash against the sector and, in particular, its cultural center in Silicon Valley.

This has become most evident in the "Occupy Google" movement, which reflects growing frustration with rising income inequality in the Bay Area, where many of technology's biggest companies are based (including Yahoo.)

Related: Occupy Google: Income Inequality Backlash Hits Silicon Valley

"San Francisco is becoming a city without a middle class," George Packer wrote in The New Yorker last spring. "Pockets of intense poverty, in districts like the Fillmore and the Tenderloin, are increasingly isolated within the general rise of exorbitantly priced housing."

Packer's piece, Change the World, didn't exactly predict the backlash against the industry but certainly examined some of the potential causes, including the sector's isolation from problems in the 'real' economy. "It suddenly occurred to me that the hottest tech start-ups are solving all the problems of being twenty years old, with cash on hand, because that’s who thinks them up," he wrote in the piece, latter adding: "Silicon Valley continues to create hugely popular products that generate fantastic wealth at the top."

Less seriously, but in a sign this is become a mainstream issue, GQ Magazine looked back at the year in tech with a piece entitled Geeks Gone Wild.

With everyone from the Pope to President Obama identifying income inequality as the "defining issue" of our age, it's not surprising some of the same animosity previously reserved for Wall Street "fat cats" is reaching Silicon Valley, where incredible fortunes are being amassed.

Related: "Silicon Valley is the new Wall Street": Alex Payne

"There is a link between technology and income inequality," Yahoo Finance technology reporter Aaron Pressman says in the accompanying video. "Technology has been broadening the global economy and expanding the workforce globally...and that's putting a squeeze on people in the U.S."

That said, Pressman doesn't think it's fair to blame Google or the iPhone or technology per se, noting America's middle class has been under pressure for decades. "I think it's a larger phenomenon," he says, suggesting 'Occupy Google' is "part "another outbreak of the same phenomenon" that brought about not just Occupy Wall Street but the Tea Party as well.  A lot of middle class people are "disaffected where society is going," he says.

As to the idea that technology is no longer helping improves the lives of ordinary people or that 2013 was a "lost year" for the industry as Quartz declared, Pressman notes there have been "huge, important critical developments this year that are being overlooked," including:

  • Swiss company ABB invented a new large-scale circuit breaker that will enable much farther and more efficient power transmission lines. In theory, this could enable electricity generated by solar fields in Africa powering cities in Europe.
  • An Israeli scientist created a power-assisted walking device called Rewalk that paraplegics could use to walk again.
  • 2013 was a very good year "if you measure progress by the number of children who die of preventable causes, or by the number of people who escape extreme poverty," according to Bill Gates, who's working on getting more of the world's richest people to donate at least 50% of their wealth via The Giving Pledge. 

"There is life-changing technology but it's not being advertised during the Super Bowl," Pressman says.

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo! Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

 

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