George Boardman: California shines again, much to the annoyance of our critics
May 13, 2018
Whether it was the social unrest of the '60, the embrace of alternative life styles in the '70s, or just general annoyance with the apparently happy sun-tanned residents of the Golden State, our fellow Americans have been trashing California for decades.
I first became aware of this when I was in college in the '60s. The national dead-tree media, all headquartered in New York City, started noticing that the nation's attention was shifting to the west. Nothing annoys New Yorkers more than the thought they're no longer the center of the universe.
Then as high tech started to gain traction and New York banks opened major money centers on the West Coast, conservatives professed to not like the trends they were seeing: High taxes, regulation, a world class university education at practically no cost to students? The likes of William F. Buckley, Jr., shuttered.
So you can image my surprise (actually, I'm not surprised anymore) when I picked up the paper recently and discovered that California is now the fifth largest economy in the world, surpassing the United Kingdom. The state's gross domestic product rose by $127 billion to over $2.7 trillion in 2017, according to federal data.
As Associated Press noted, the "data demonstrate the sheer immensity of California's economy:" An ever-expanding high technology sector, the entertainment capital of the world, the largest agricultural economy (in terms of dollars) in the country, and large financial services and real estate sectors.
California's been here before: The state was ranked fifth in 2002 and fell as low as 10th in 2012 following the recession. We edged out the UK last year due primarily to exchange rate fluctuation, but our continued economic resilience illustrates the power of the California story.
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The state benefits from the ongoing national migration from rural areas to the urban centers of the country, even when the economy is in the tank. The 2007-09 recession spurred the movement of young people to big cities, particularly those from rural America. The number of young people in their prime working years, age 25 to 54, grew almost 6 percent in large metropolitan areas since 2008; it fell in rural areas and small towns, and was stagnant in smaller cities and suburbs.
The lack of workers in some of the flyover states has become so acute that places like Hamilton, Ohio, Grant County, Ind., and North Platte, Neb., are offering economic incentives for individuals — not businesses — to move there. "The mere fact that they're doing what they're doing highlights the headwinds they are facing," said Enrico Moretti, an economist at UC Berkeley. "There is no one in San Francisco trying to move people here."
Moretti is the author of "The New Geography of Jobs," a compelling explanation of the most fundamental economic trend of our time — the widening split between dynamic urban areas and struggling cities and small towns. Places like western Nevada County need to take note.
Moretti argues that the knowledge economy depends on constant innovation, which turns out to be a social process. To succeed, cities need a critical mass of highly educated workers engaged in the regular exchange of ideas. Innovation hubs attract new innovators in a self-reinforcing process, while areas lacking this critical mass fall further behind.
But, places like Nevada County want to believe, new technologies will eliminate distance and allow people to do creative work in rural areas and communicate their ideas anywhere in the world. (All we need is the technology to do it, a big issue in our case.)
Moretti argues this thesis rests on an excessively individualistic understanding of creativity. In fact, remote exchanges of ideas are no substitute for the elemental human process of face-to-face communication. Innovators don't do their work in isolation; they stimulate one another.
California has been able to achieve its economic success despite high taxes and what critics consider excessive regulation, something that really annoys conservatives. It is an article of faith among our conservative brethren that low taxes (like in Nebraska) and modest regulation (Mississippi is a good example) are what really drive the nation's economic engine.
Two leading conservative economist, Arthur Laffer (of Laffer Curve fame) and Stephen Moore, recently published an analysis that purports to show how low-tax red states are triggering a mass migration from high-cost blue states. One statistic they like to site is California's net loss of one million residents from 2007-16.
Aw, but that's only part of the story. The state Legislative Analyst's office reports that the people moving out of the state were making $55,000 or less a year, had children under 18, and possessed a high school diploma or a couple of years of college education at most. They were replaced by people making more than $200,000 a year, people between the ages of 26 and 35, many with bachelor's or master's degrees. The face of California is changing into one that looks wealthier and middle age.
To be sure, California has its share of challenges, king size challenges that match the state's ambitions: Poverty, expensive housing, some of the worst traffic congestion anyplace, higher education that's becoming too expensive, and an increasingly contentious urban-rural divide. There are at least three active movements trying to break-up the Golden State, and plenty of red state residents who are sympathetic to the effort.
What's the alternative? North Platte, Neb.? There are no beaches or Redwood trees, and the winters are really nasty. Forget about mountains — the place is so flat, you can watch you dog run away from home for two days. Maybe that's why they're having a hard time getting people to take their money — the catch is you have to live there.
George Boardman lives at Lake of the Pines. His column is published Mondays by The Union. Write to him at email@example.com.
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