Is California Becoming a Third World Nation?


California on the brink?

California on the brink?

A new day, a new sign that California is sinking into a metaphorical, if not literal, ocean.  True/Slant colleague David Knowles points out a new UCLA study that shows 1 in 4  Californians are uninsured. The day before, Michael Roston took a look at the state’s spectacularly bad unemployment numbers and saw nothing short of a Dust Bowl migration in reverse. The number of people  unemployed is now equivalent to  the total populations of Nevada, New Hampshire and Vermont combined.

Let’s not forget that nearly 22,000 of the state’s teachers were handed pink slips yesterday.  Let’s not even start on the usual steady march of fires, mudslides and early-morning earthquakes. Is it any shock that even immigrants are choosing places like Detroit or Minneapolis to live, instead of California?

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So, California’s doomed, right? Maybe. Fans of schadenfreude should think again, though, because if California goes under, so does the U.S.  Here’s why California is the state that’s too big to fail.

The rest of the nation has a tendency to overstate the troubles of California when it’s doing badly and understate its successes when it does well.  13% of the U.S. GDP comes from California. Alone, it would be the world’s 5th largest economy.  However, the real sin committed by the other 49 states is a failure to acknowledge the primacy of California in the national economy.

A quick tour through recent history proves my point. The first tech boom of the 90s, the second tech boom, and the real estate bubble all not only started in California, they ended there, too.  The nation’s fortunes rise and fall with California’s in a way know other state (ok, maybe Texas on a bad day) can match.

No Jobs Here

No Jobs Here

Yet, it’s also the Rodney Dangerfield state, unable to get any respect. In January, Republican Gov. Arnold Schwarzenegger asked for $6.9 billion in federal funds to save the state. The Obama administration, which moved so rapidly to shore up the financial markets, has essentially told the state that it’s on its own. It’s technically illegal for the state to declare bankruptcy,  but services across the state continue to be axed and the threat that state employees will once again be paid through state I.O.U’s (as they were last summer) looms large.

At the same time, California’s economy has always been one of boom-or-bust, starting with the gold fields of the 49′ers. When the gold dried up, silver came along and so on and so forth through defense contracts, oil, tech and real estate.  Obama & Co. keep talking about how they want to move America off the boom & bust cycle and create long-term sustainable growth, but then ignore the place that’s the poster child for booming and busting.

Admittedly, many of California’s problems are its own. The state government is a mess and thus far, all attempts at reforming it have failed. There’s a pretty good bill in the legislature right now that would go a long way to ending the gridlock, assuming gridlock doesn’t kill the bill first. However, it’s naïve for the rest of the country to leave California to sink or swim on its own, when so much of its fate is bound up in the rest of the country.

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