California Failing

From time to time we check in with Joel Kotkin, our go-to source for all things California. At a time when California’s governor Gavin Newsom signals that he is considering a presidential run, it becomes even more urgent to evaluate his track record. That means, to evaluate the success or failure of his progressive California policies.

As has happened in the past, Kotkin reports that California, with its green policies and socialism has basically been self-destructing:

California’s difficulties undermine the notion, so fashionable today, that with the right mixture of technology and utopian dreaming, societies can forge a future that is both green and widely prosperous. In reality, California now has America’s worst rates of cost-of-living-adjusted poverty and functional illiteracy, the worst housing affordability in the continental US and a devastating shortage of mid-skilled jobs. What’s more, in 2022, California suffered some of the lowest personal-income growth rates in the country, and its GDP grew at less than half the pace of its arch-rival, Texas.

How did this happen?

California’s struggles demonstrate what happens when an economy shuns both industry and solid middle-class jobs. Instead, it has placed heavy bets on ephemera, like social media and entertainment. The failure of this approach now stands exposed. Today, California’s once-huge budget surplus has morphed into a deficit of $25 billion, one that may become even higher in the coming years, given the high chance of recession. 

The state tries to make up its fiscal shortfall by raising taxes, but since it has been driving business away, there’s no one left to tax. 

Because of this, California’s political class is under pressure either to shrink its expansive welfare state and regulatory regime, or to raise taxes – although taxes are already among the highest in the country. Meanwhile, companies are deserting California in droves, as are some of its top one per cent of earners, who pay roughly half of the state’s income taxes.

As for diversity, equity and inclusion, California has led the nation… and has shown how destructive these policies are in practice:

California has the fourth-highest GINI inequality index out of American states, and has experienced a sizeable expansion of inequality since 2010, according to American Community Survey data. Despite California’s fanatical commitment to ‘anti-racist’ affirmative action and racial preferences, African-Americans and Latinos perform poorly in terms of income and homeownership in Los Angeles and the Bay Area, with the latter among the most segregated places in the US. The gap between California’s fantastically rich elite and the struggling masses illustrates the emptiness of the elites’ supposedly ‘progressive’ values.

And, green policies have also helped destroy the state economy:

California’s embrace of green ideology has been particularly destructive to the economy. Technology companies have been key backers of California’s unproven and costly climate-centred policies, which are the most expensive in the US. While such policies are less directly damaging to digital companies, they have proven devastating to California’s other industries, notably to manufacturing, logistics and agriculture. California, the ultimate advanced industrial power in the late 20th century, has haemorrhaged industrial jobs in the 21st. Its severe underperformance compared with rivals extends to construction, professional and business services, and increasingly even tech.

Kotin leaves us on a slightly optimistic note:

In its current form, California is less a role model than a cautionary tale. But all is not lost. California still enjoys leads in a series of key industries, ranging from nuclear fusion, medicine, space and semiconductor design to mass entertainment and high-tech agriculture. Much of its population retains a large innovative streak, and could still adapt to changing economic conditions. Any revival, however, will need more than just some minor adjustments by Newsom and the legislature – it will take sustained pressure from Californian voters demanding something very different.