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layoffs. The market share of European computer companies as a group declined. And

what happened to the fledgling European semiconductor industry while it was being

protected? Its market share dropped from 10.2 percent to 5.4 percent from 1988 to 1996.

In this case, government "help" damaged all parties concerned.

Recently, most of the European nations were forced to acknowledge their costly

policy mistake and remove the trade restrictions.

The Hidden Costs of Technology Subsidies

A standard economic rationale for Washington's corporate welfare programs goes

like this: If a tax of a nickel per day per American supports $5 billion in yearly subsidies,

the whole $65 billion per year tab for corporate welfare can be viewed as a "mere" 65 cent

tax per day per American. Shouldn't Americans be willing to pay 65 cents a day to make

U.S. companies the most competitive in the world? The answer to that question should be

no, because subsidy programs don't make industry more competitive. Moreover, the

argument ignores the opportunity cost of that huge amount of spending. For example,

with $65 billion, the capital gains tax and estate tax in America could be eliminated.11

Moreover, there is a basic equity issue at stake here. Consider the tax levy for

corporate welfare as it applies to two groups, average Americans and rich Americans.

That 65 cents per day is $237.25 per year per household, a non-

trivial sum for the average American. It means less money in the pockets of families

struggling to make ends meet: a bicycle not bought, a vacation not taken, or missing the

monthly college fund payment. It is unconscionable and un-American to tax working

families to fund dubious corporate subsidies.

On the other hand, it is much easier to talk about funding corporate welfare by

"taxing the rich" (who pay "only 50 percent" of their income to the government). I am

one of those rich people who can afford to pay more taxes. Although I came to California

with only $700, I became a founder of a start-up chip company that employs more than

2,000 people. My personal wealth comes from the 2 percent of the shares of our company

I still own, most of them held since our founding in 1983. The market value of our

company is now $1.5 billion. Two percent of $1.5 billion is $30 million. I am rich. What

does it matter if the government takes an extra million dollars from me in order to fund

corporate welfare or other programs?

As do many Silicon Valley entrepreneurs who have created wealth, I consume very

little of my net worth. I'm interested in transistors, companies, and competition--not

yachts and airplanes. Consequently, I plow almost all of the money I earn right back into

Silicon Valley. I have already described two of the companies that I not only invest in but

help to run as a board member. There are numerous other companies that I invest in

because I know what they do and why it will add value. In aggregate, I hold shares in