If Moldova Can Go Its Separate Way, Why Not the Golden State? : California: Independence may be the answer for the world’s 7th largest economy with a multiracial population unlike any in history.

In the midst of its worst economic crisis in nearly a quarter century, perhaps California should consider something drastic--like seceding from the rest of the country. Washington is bleeding away the state’s defense industries and seems unwilling to help with the resulting problems. Maybe if Californians kept their tax dollars and decision-making here at home, they could start anew.

A crazy idea? As the world’s seventh largest economy, California is a more viable candidate for independence than such emerging nation-states as Russia, not to mention Slovenia, Croatia and Moldova. In a world increasingly characterized by “global regionalism,” the state has much to offer.

Today, California’s character--economically and demographically--is ever more at odds with national norms. We are again becoming what Carey McWilliams called “the Great Exception.”

In economic terms, the downturn in the state’s defense industry may be the key harbinger of its growing divergence. Ever since World War II, the state has been bulking up on a steady stream of Pentagon steroids. It has became addicted not only to the billions of dollars transferred here, but on the resultant infrastructure of research grants and guaranteed jobs for a well-paid, middle-class and generally highly skilled workforce.

Yet this military dependence, like steroids, has made California a little slow in the head, dulling its capacity to think about its economic and political destiny. “We sort of lived in a ‘federal annex,’ ” confided a top Northrup executive. “The work was done here, but the decisions were made in Washington.”

But with the era of corporate socialism passing, business is business. Northrup, like a lot of other California-based corporations, is making noises about moving to cheaper pastures. When the purest L.A.-bred companies start talking this way, executives of other large firms whose careers are tied to St. Louis or Detroit can’t be expected to show any loyalty to the Golden State.

Another pillar of the state’s ties to the East is crumbling. For generations, Californians has looked to New York financiers, advertising executives and public-relations mavens to fund its enterprises, sell its products and, to a large extent, define its identity.

Today, the division of labor--some might have seen it as beauty vs. brains--between the nation’s great metropolises is breaking down. New York’s banks lack the capital and resources to launch their once feared takeover of the state’s $500-billion financial market after interstate finance rules were relaxed this year. California, moreover, is beginning to challenge New York dominance in such fields as advertising production and communications. Last year, L.A. garnered roughly one-third of the 9% of the country’s advertising production work that deserted New York.

But it is in terms of the global economy that the rationale for a more independent California seems most obvious. While large domestic corporations are moving out, companies from abroad are bolstering their operations here. California remains far and away the preferred locale for Japanese investment. Last year, when many high-tech executives were crying the “California can’t compete” blues, a Japanese company announced plans to build a new disc-drive factory in Milpitas and to design and eventually manufacture a PBX telephone switching plant in Irvine.

The differences are even marked in East Coast-dominated industries such as automobiles. Asian manufacturers, and increasingly their key European competitors, have been expanding their California operations in research, development and design--including a new $46-million Toyota facility in Torrance. Other foreign investors, notably Koreans and Chinese, are also boosting their stakes here, establishing numerous research-and-development facilities for high-technology industries. Indeed, California is by far the favored investment site of virtually all East Asian groups, including the Taiwanese, who sit on what is today the largest pool of foreign reserves of any country.

Why are Asian firms moving in and domestic mainline companies leaving? Property costs here, high by U.S. standards, are bargain-basement for those used to doing business in Asia. Los Angeles’ cost of living is half that of Tokyo, at least 50% below that of Hong Kong.

Second, California possesses in greater amounts than perhaps anywhere else what these foreign companies need: great research universities, cutting-edge technology, design skills and a highly diverse workforce. Such resources are increasingly in short supply around the world, particularly in Japan, Taiwan and Western Europe. Since 1981, the foreign percentage of attendees at the Westech technical job fairs in San Jose has almost tripled to nearly one in four.

But the most important force defining our diverging interests are human ties. The nature of California’s economic and social life is now radically different from the national norms. Like Gold Rush San Francisco, which historian Hubert Howe Bancroft described as a “medley of races and nationalities,” California has again become a laboratory for a multiracial society, unprecedented in national, even world history.

After nearly a century of absorbing millions of white Americans, making its population more like the rest of America, California, during the past two decades, has returned to the mixtures of its 19th-Century past. In the 1980s, the state attracted roughly one-third of all new immigrants, and larger percentages of Asians and Latinos.

As a result, it can no longer be said, as it arguably could in the 1960s, that California reflects the demographic future of the rest of the country. By the year 2000, California’s Latino and Asian populations will likely be at least three times larger than the national average. Even if immigration levels nearly doubled, according to a General Accounting Office report, the rest of the United States would barely approach our current ethnic diversity by the year 2080.

Already, the Asian immigration flows have perhaps the most profound economic consequences. For more than a generation, this state has educated, nurtured and enriched more Asians than any region in North America. In the next century, California’s technical, professional and business elite will be heavily Asian in a way incomprehensible in virtually any other state besides Hawaii.

Even for those who return to Taiwan or other Asian countries, the links to California remain solid; the road from Taipei to Monterey Park, or from Seoul to Koreatown, seems more a move from one Asian world-city to another. This is particularly true among Chinese businessmen, expert at viewing financial, technical and industrial linkages in a post-national perspective. For them, California, which last year accounted for 50% more patents than any state, represents the ultimate research, development and marketing bridgehead on the world outside Asia.

Similar linkages to Mexico can be expected to develop once the free-trade agreement with the United States is ratified. With its burgeoning Spanish-speaking population, California already is a prime target for expansion and investment by Mexico’s largest industrial families, as well as its financial institutions.

With a young workforce, capital and skills imported largely from Asia, a growing integration with an economically resurgent Mexico, California could become the star performer in the North American economy of the 1990s.

This new reality requires a dramatic change of consciousness, one that recognizes California as an entity increasingly distinct and different from the rest of the United States, if not a nation-state. We certainly cannot expect help or guidance from those who come to California to raise cash and then, as in the case of Texas Gov. Ann Richards, return to pillage our industrial base. Nor should we look for inspiration from the state’s current crop of economically illiterate politicians.

During the 1980s, thanks largely to defense spending and population growth, conditions allowed us to survive a lot of economic foolishness. Not anymore. The coming decade demands a new kind of political leader whose first loyalty lies not with narrow group interests or the latest inside-the-beltway fancy but to the republic that elected them and nourishes us all--the Republic of California.