Government Built Silicon Valley

With U.S. President Donald Trump, many high-tech titans have decided that now—after their coffers overflowing—Americans don’t need much government. Leading the charge to dismantle it is Elon Musk. His role is especially jarring because Silicon Valley was built on the government’s largesse. A booming high-tech sector—one of the signature achievements of the modern economy—wouldn’t have happened without the administrative state that Trump is seeking to root out.

The history of Silicon Valley exposes the grave dangers posed by the war on government. The hazard is that as a result of this push, Trump succeeds in breaking apart the marriage between Washington and the technology industry that has helped make America great.

The road to high tech really started to be built during World War II. In 1945, Vannevar Bush, who had directed the U.S. Office of Scientific Research and Development during the war, captured the zeitgeist of the era when he published “Science: The Endless Frontier,” which offered a declaration of principle for the government supporting scientific education. The report, submitted to President Harry Truman, explained why government support for research was so important to national security and the economic well-being of the nation. “The pioneer spirit is still vigorous within this nation,” Bush wrote in the letter that accompanied the report. “Science offers a largely unexplored hinterland for the pioneer who has the tools for his task. The rewards of such exploration both for the Nation and the individual are great. Scientific progress is one essential key to our security as a nation, to our better health, to more jobs, to a higher standard of living, and to our cultural progress.”

Much of the development of large mainframe computing systems was born of defense needs. While mainframe systems were being built in the early 1930s, during the war, the U.S. Army and several other defense units developed the Electronic Numerical Integrator and Computer (ENIAC) under the direction of Maj. Gen. Gladeon Barnes. Congress devoted massive resources (today’s equivalent of millions in current) dollars to the construction of what would become the first general-use computer. The most important initial function of ENIAC, which was completed in 1946 by University of Pennsylvania scholars John Mauchly and J. Presper Eckert, was its ability to provide cutting-edge calculations about the trajectories of weapons. Before the project ended, the government discovered ways to use ENIAC for a wide range of jobs, including advanced weather prediction and wind tunnel design. With funding from the Census Bureau, Mauchly and Eckert next worked on the Universal Automatic Computer (UNIVAC), resulting in a digital computer allowing for data processing and storage methods that were new and extremely beneficial to industry. With CBS anchor Walter Cronkite standing by, UNIVAC, which weighed a whopping 16,000 pounds, famously predicted early on election evening in 1952 that Dwight Eisenhower would defeat Adlai Stevenson by a landslide. A computer star was born. The machine would even appear on the cover of a Superman comic book.

Throughout the early Cold War in the 1940s and 1950s, the federal government poured resources into the production of knowledge. The GI Bill of Rights (1944) vastly expanded the student body by covering the cost of enrollment and more for veterans, many of whom were first-generation students. In 1950, Truman signed legislation creating the National Science Foundation, an institution that complemented the National Institutes of Health by aiding nonmedical science and engineering. Their shared mission was to “promote the progress of science; to advance the national health, prosperity and welfare; and to secure the national defense.” Eisenhower, a Republican, worked with congressional Democrats such as Sen. Lyndon B. Johnson to respond to the Soviet Union’s successful launch of the Sputnik satellite in 1957 by building on this precedent. The National Defense Education Act (1958) financed student loans, graduate fellowships, and research funds. By the early 1960s, with substantial help from the government, U.S. universities were booming and considered to be among the finest institutions of learning anywhere in the world. As the Cold War kept heating up, one area where Americans were clearly ahead was on the campus.

Without the government-industry connection that emerged from this era, there would be no internet. While there may still be people debating whether former Vice President Al Gore invented the internet, there is no dispute that the federal government did. The Defense Advanced Research Projects Agency (DARPA), established in 1958, undertook high-risk, large-scale research, cooperating with private firms, that had the potential to produce enormous payoffs. DARPA was central to the Advanced Research Projects Agency Network (ARPANET) in the late 1960s, which constituted the first advanced computer network. Much of the drive for the military had been the desire for a functional network that could survive a nuclear attack. ARPANET was the basis for the modern internet. The National Science Foundation announced a distinct section, called NSFNET, in 1986. The foundation connected five supercomputer centers and granted academic network’s access. The project was considered to have been the “backbone” for the creation of the commercial internet. Other notable computer innovations also grew out of this operation. DARPA dollars facilitated the Stanford Research Institute’s making of the mouse, a technology that made it easier for an individual without great technical expertise to interface with computers. In 1991, Congress passed the High-Performance Computing Act—legislation that Gore helped move—which funded a team of programmers at the University of Illinois’s National Center for Supercomputing Applications that helped vastly expand the internet. Marc Andreessen, one of the engineers who co-created Mosaic and Netscape, acknowledged in 2000, “If it had been left to private industry, it wouldn’t have happened, at least, not until years later.”

Indeed, Silicon Valley would not have become what it is today without the government. The DARPA-Stanford research partnership, as the historian Margaret O’Mara has brilliantly recounted in Cities of Knowledge and The Code, is a big reason why the university emerged as such a powerhouse in high-tech education and research. Government money fueled the transformation of a formerly sleepy region, which O’Mara reminds us would have once been improbable to imagine as a hub of big inventions and money. A series of Stanford leaders, including provost Frederick Terman, opened their arms to the federal coffers and shepherded the Stanford Research Park into its current incarnation.

Not only was Stanford built up with government monies, but many of the companies that have littered the landscape in northern California had Washington to thank. Fairchild Semiconductor, established in San Jose in 1957, took form with Air Force and NASA contracts. NASA’s ongoing investment in the integrated circuits that it and other companies produced allowed costs to become accessible and for the semiconductor industry to emerge. Federal dollars during the 1980s and 1990s that were tied to programs such as President Ronald Reagan’s Strategic Defense Initiative—a massive laser missile shield that would protect the United States from nuclear attack, which critics derided as “Star Wars”—resulted in all sorts of computer innovations not envisioned by the administration’s plan. Though stories about Steve Jobs and Steve Wozniak working out of a garage capture our entrepreneurial imaginations, the role of the administrative state continues to loom large over the entire region. “From the marble halls of Washington and the concrete canyons of Wall Street,” O’Mara writes in The Code, Silicon Valley was made by many hands. Other “cities of knowledge,” including Cambridge, Massachusetts; Philadelphia; and Atlanta, were similar beneficiaries of government.

The federal government has helped high tech in many other ways besides policies directly related to computers and the internet. Immigration reforms, for instance, that opened the doors to high-skilled foreign-born immigrants resulted in the arrival of people who helped build the computing products that the entire world depends on today. The Hebrew Immigrant Aid Society helped a young Sergey Brin and his family obtain a visa to emigrate from the Soviet Union in 1979. With that, Google was born. Musk was able to finish his education at the University of Pennsylvania with a student visa and stay in the United States because of an H1-B visa. Yahoo co-founder Jerry Yang immigrated with his family from Taiwan in 1978. The Small Business Investment Incentive Act (1980) provided valuable dollars to Silicon Valley firms as they struggled to make a name for themselves.

Indeed, Musk’s company Tesla benefited from government assistance. In 2009, a critical moment for the company, Tesla received $465 million in low-interest loans from the U.S. Energy Department that it used to construct the Model S. Electric vehicle tax credits have grown consumer demand for his and other vehicles. Federal research grants played a role in the different components that make up these cars.

The federal government and the high-tech industry have stood side by side for decades. And the high-tech story has happened many times over, often in some of what have become the country’s most conservative areas. In From Cotton Belt to Sunbelt, historian Bruce J. Schulman traces how the revitalization of the South and Southwest, ground zero for the modern conservative movement of the post-1960s era, was built on defense contracts and military bases. Reagan’s presidency, which pushed politics rightward, derived electoral profits from massive congressional investments made over the decades after the war.

While many agree on the importance of markets, the hand of government—sometimes hidden from view—has been equally essential to economic success. The history of high tech has revolved around a genuine partnership between markets and government, not one or the other. To destroy the partnership threatens to destroy what has made the U.S. economy great. Every American will be forced to pay the cost.