California growing

I wrote a post in November 2009 entitled “California Ascendant?” Using a Time Magazine article on the future of California as a jumping off point, I wrote that California was not as conventional wisdom had it then (and now) a state in irreversible decline, rather it was a state that likely would be a national leader in the future. I wrote:

The (Time Magazine) article argues that California is and will be in the future a leader in economic growth. With lots of data to back up their assertion. Contrast that to the conventional wisdom that, because of arguably the most dysfunction state government in the country combined with what is thought to be business unfriendly polices, California’s economy is in for long term decline.

Have the folks at Time lost their mind? If you listen to the small government ideologues they have. They argue that the places that will be the economic winners in the future have low taxes, small government and weak unions. Then there are the good government moralizers who argue business won’t invest in places with hyper partisanship and where states and local governments can’t even balance their budgets.

Turns out the stuff on the priority agenda of the small government ideologues and good government moralizers doesn’t matter much to economic success.

As Time argues what matters is that California is: “the greenest and most diverse state, the most globalized in general and most Asia-oriented in particular at a time when the world is heading in all those directions. It’s also an unparalleled engine of innovation, the mecca of high tech, biotech and now clean tech.”

The central important defining characteristic of California that emerges in the article is their future orientation. No matter how screwed up their politics, its a state which, at its core, is at about creating the future, not protecting the past. What matters most is the talent and entrepreneurialism of the people of California. To the degree that policy matters what matters most is their embracing more than resisting globalization and technology. More free trade oriented, more open to immigrants, at the leading edge of green policies, stem cells and now transportation alternatives to the car.

I would add now in addition to open to immigrants, welcoming to all.

Fast forward four and half years and low and behold California is doing well again despite all the predictions of its imminent demise. California’s turnaround is the subject of a terrific New York Times column by Timothy Egan. He writes:

… Just a few years ago California was a punching bag for conservative scolds — a failed state, profligate with its spending and promiscuous with its ambition. Ungovernable. And everybody’s leaving. Mitt Romney compared California to bankrupt Greece. Texas Governor Rick Perry said it was anti-business. (Howdy, Google and Facebook, say hello to Amarillo.) And Fox News, well, take the above and add a series of bluster blasts that will not withstand fact checking. Now some recent headlines: “California Projects $4.6 Billion Surplus.” “California Among the National Leaders in Job Creation.”

… the California turnaround does prove some things, and disprove others — offering a look beyond the binary bind of our politics. First, raising taxes does not kill job creation, but it does annoy job creators. At Brown’s urging, voters in 2012 approved, by a healthy margin, a plan to raise taxes on the high end. This new money is the biggest reason why the state went from a $25 billion budget deficit to a projected surplus of almost $5 billion. Instead of building more prisons, California has restored the funding flow to its once-vaunted public university system. At the same time, job growth has been robust. Trying to poach payrolls in this state, Governor Perry said, “I hear building a business in California is next to impossible.” Maybe a traditional business. But not the new-century kind. California leads the nation in new high-tech, bio-tech and manufacturing jobs, a result in part that Brown attributes to the “yeasty and innovative” nature of the state. Perry can’t duplicate that, no matter how many corporate subsidies he passes around. (Emphasis added.)

… the great exodus never happened. Since the dawn of the recession, the state has added about 1.5 million people — almost three Wyomings. And yes, 67,702 people moved from California to Texas in 2012. But 43,005 people moved from Texas to California.

Does California–then and now–have economic problems? Of course. Certainly a too high unemployment rate and a too low employment to population rate. And maybe most seriously, like the country, it is struggling with a great divide between those doing well and those not. It is a state with both high wage/high income knowledge-based economy regions and families. And low wage/low income regions and families not participating in the knowledge-based economy.

That said, California is now, and almost certainly in the future, a leading edge state. Rather than looking to California to learn what not to do, Michigan leaders should be looking to California for lessons about what matters most in an economy driven by globalization and technology. We have a lot we could/should learn from them.


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