Please keep in mind you're commenting about a snippet of a televised interview. For all you know Eric Schmidt agrees with everything you wrote above. (He may have even said something along these lines and it was edited out.) He certainly did not say or even imply "the innocent have nothing to hide."
If you have something that you don't want anyone to know, maybe you shouldn't be doing it in the first place.
I'm not convinced, however, that there's a reassuring amount of daylight between these two statements.
I should add that I very much agree with what you said about Google being in a position to make a much stronger stand for privacy rights in this country. I equally think that this is a pointless little shitstorm that detracts from the larger issue by making privacy advocacy look like petty language lawyering.
Also, if it seems it might have been taken out of context, people should rail on what he said anyway, so he has a chance to defend himself. If he doesn't defend himself, there's a pretty good chance he meant it.
It seems like Google might be coming out of the closet as a regular megacorp, just like Apple did a few years ago when it started using DRM, and again a couple of years ago when it made a deal with AT&T, and finally put away any question of them being an exception to the rule when it came out with its app store.
Are you referring to the DRM it also dropped at a later stage after they managed to convince the content suppliers ;)
I'm not arguing for them sacrificing their customer base. I'm arguing for us not letting companies like Apple and Google get away with looking like the good guys when they're just the profit-driven guys like everyone else. Google's "Don't Be Evil" motto makes me sick, just like the squeaky-clean reputation Steve Jobs once had.
I want to live in a world where people have to make dry, quantified, lawyer-pleasing statements all the time just to make sure there is no speculation a lot less than I want to live in a world where Google may hold data about me which the US government can demand. :)
Schmidt could have said "We understand that Google collects a lot of data; we have privacy policies that protect that data and we fire anyone who abuses them. We take data privacy very seriously. But we're aware that people are unhappy that various governments can compel us to disclose data. We believe that this is wrong. We believe that a world where anonymous government employees can see anything you do is a dangerous world. We believe in the power of data, but we want to encourage society to take steps to prevent this kind of abuse."
But he didn't, of course. Instead he told us that the innocent have nothing to hide.
it's unreasonable to expect [Google] to martyr themselves for our sakes
"Martyr", indeed. That is no mere hypothetical. Read this:
http://www.signandsight.com/features/1910.html
This is Herta Mueller, formerly of Romania, describing her life in the Ceausescu regime. There you could, indeed, face harsh reprisals, ranging all the way up to martyrdom, for refusing to spy on your fellow citizens.
I'm not sure it's reasonable to expect those people -- Mueller's friends, stuck in a scary totalitarian regime -- to stick up for their principles and resist the state's order to inform on their friends. (Though many did resist, and paid the price for it.) But Google? Google isn't even human. It has no fingernails to pull out. It is an American corporation, whose leaders live in America, with enough legal budget to sue God himself. I don't think it's unreasonable to expect the company's leader to use some of that power to lobby for good, instead of looking sheepishly at his feet, kicking the dust, and claiming that he's only following orders.