Google's Eric Schmidt Has Ideas About How to Solve Income Inequality

A blog about business and economics.
March 7 2014 5:11 PM

Google's Eric Schmidt Has Ideas About How to Solve Income Inequality

Eric Schmidt
"$19 billion for 50 people, plus this much for you."

Photo by Philippe Lopez/AFP/Getty Images

Eric Schmidt, the inexplicably well-compensated chairman of Google, stopped over at South by Southwest today, where he decided to share some ideas about how the country should grapple with income inequality. His comments—which he made in conversation with Google Ideas director Jared Cohen and Wired’s Steven Levy—didn’t quite have the plutocratic verve of a Tom Perkins interview. But they did nicely encapsulate a more subtly corrosive outlook common among wealthy, vaguely liberal-minded Americans.

Jordan Weissmann Jordan Weissmann

Jordan Weissmann is Slate's senior business and economics correspondent.

Things started off well enough. As The Verge reports, Schmidt explained that he was “very, very worried” about the conflicts over techie-fueled gentrification that have been rocking the Bay Area. San Francisco’s problems, he said, were a manifestation of a problem across the developed world by which technology is replacing traditional jobs, enriching the few while leaving behind the many. "Ninety-nine percent of people have seen no economic improvement over the last decade," he said.

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Ten points for empathy. But then…

The solution to this displacement, according to Schmidt, is to foster conditions that encourage the creation of fast-growing startups that generate lots of jobs, or "gazelles." Those conditions include better education, looser immigration laws, and deregulation in strictly-controlled areas like energy and telecommunications.
When Levy noted that fast-growing "gazelles" seem to lead to more inequality, at least in the case of the 50-employee WhatsApp which was acquired by Facebook for a reported $19 billion, Schmidt brushed aside the apparent contradiction. "Let us celebrate capitalism," he said, opening his arms. "$19 billion for 50 people? Good for them."

Oy. There’s a lot to wade through here. “Let us celebrate capitalism” is a gold-medal-worthy feat of dismissive hand-waving. And the bit about gazelles isn’t ridiculous so much as facile: Gazelle is a term of art some economists and think tanks use to describe the fast-growing young companies that provide a disproportionate fraction of all new jobs each year. Some are the kinds of startups that we associate with Silicon Valley. Some are good old-fashioned industrial companies, or retail chains. He just wants to make it easier to start a new business. Great. Join the club.

The problem is that in the end, Schmidt’s solution to the hardships inherent in globalized capitalism is … more capitalism. He senses a problem and conveniently lands on a solution that doesn’t involve any personal sacrifice on his part, or the part of other well-educated, well-paid folks he might run into on the thought-leader circuit. Which is pretty much why nobody learns much at those events, anyway.

Jordan Weissmann is Slate's senior business and economics correspondent.

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