Leading Our Economic Revival With a White Flag : California: Republicans call the state ‘a bad product’ and lead the business exodus even as they sit on competitiveness panels. Democrats, take heart.

Finding ways to restart California’s stalled economy may be the ecumenical issue of the day, but Republicans would seem to have the advantage. They have the ties to the business community, the strongest faith in the effectiveness of free enterprise.

But Republican economics have run aground, stuck on an almost perversely negative and self-destructive mind-set about the state. Last week, for example, Gov. Pete Wilson characterized California as “a bad product,” virtually beyond promotion to the rest of the world.

Such negative comments may serve Wilson’s attempt to disassociate himself--and the nearly 10 years of Republican gubernatorial rule--from the current recession. He and his coterie would rather blame defenseless welfare recipients and immigrants for the state’s economic ailments. The common Republican assertion that our young and increasingly minority population presents an unmitigated threat to our state’s economy echoes the spirit of California declinism now the rage in the Eastern press and in some quarters here at home. This specter is frequently accompanied by the contention that “business flight”--largely by white-owned business--is the prime cause of the state’s economic problems.

Ironically, though, some members of Wilson’s Council on California Competitiveness have been, to some degree, identified with what Fortune magazine gleefully described as California’s “goodby wave.” Commission chairman Peter Ueberroth, for example, was recently embarrassed by a decision of Transamerica, of which he is a director, to move 125 jobs out of the state to North Carolina.

But easily the loudest voice in the anywhere-but-California chorus is Wilford “Woody” Godbold, president of Los Angeles-based Zero Corp. and also a member of Wilson’s competitiveness commission. Godbold has become sort of the poster boy for the “I’m leaving California “ movement. Understandably peeved by the state’s often byzantine regulatory policies and the fraud-wracked workmen’s compensation system, Godbold has taken it upon himself to plead to anyone who will listen--particularly the national media--that California is a perfectly dreadful place to do business. CNN even distributed video clips of trucks moving most of Zero’s operations to Utah to local stations that needed footage to show the state’s decline.

Godbold, who says he is uncomfortable with being a media symbol of California declinism, holds several other high-profile positions within the state Chamber of Commerce, as well as serving on the Los Angeles County Economic Development Commission’s “LA Means Business” campaign. He is also widely expected to become the head of the state Chamber of Commerce next year.

According to some insiders, Godbold’s visibility and the economic prominence of other California-bashers are not coincidental, but part of a larger public-relations campaign to promote the traditional business agenda of less regulation and fewer taxes, whatever its impact on the state’s national or global image. “The public-relations guys are telling them the way to get results is to be as negative as possible,” said one executive close to the “LA Means Business” campaign.

It also provides an enormous, if unanticipated, windfall for corporate recruiters in such states as Utah, which couldn’t buy the good notices shoveled their way by high-profile executives like Godbold. But he is not alone. State Sen. Becky Morgan’s husband, Applied Materials President Jim Morgan, has even allowed himself to be used in ads urging California business to locate their new operations in Texas. In a recent conversation, Becky Morgan, widely touted as a future GOP candidate for statewide office, admitted her “embarrassment” at her husband’s hawking for one of California’s leading competitors.

There is nothing wrong with individual entrepreneurs such as Godbold or Morgan choosing to leave or expand outside the state. What does appear a bit incongruous is having such people, and those close to them, lead California’s economic revitalization. It seems unlikely that businessmen in a state with a more finely tuned sense of self-interest, such as Texas, would ever allow--even in the worst of times--their economic development efforts to be usurped by those waving white flags.

Normally Republican growth-company executives are also finding business Establishment negativity counterproductive to their efforts to lure customers and employees to the state. Many of these firms--including a large proportion of the California firms on the Inc. 500 fastest-growing private companies over the past few years--were either founded by immigrants or rely heavily on them for everything from engineering talent to assembly workers. As Orange County computer entrepreneur Rod Hosilyk puts it: “I’m thinking of starting an affirmative-action program here--for people whose first language is not Vietnamese.”

For the Democrats, the mostly Republican spectacle of trashing California’s economic prospects provides an opening. Already, some Democratic leaders--most notably state Treasurer Kathleen Brown, Insurance Commissioner John Garamendi and Assembly Ways and Means Committee Chairman John Vasconcellos--have begun meeting with many of the heads of younger, faster-growing firms such as AST Research Chairman Safi Quereshey.

Quereshey, an immigrant from Pakistan, epitomizes the entrepreneur who, rather than run to the lily-white Shangri-la of Utah, continues to create jobs in multiracial California. Firms like his, in such emerging fields as computers, biotechnology, environmental engineering, software and telecommunications, account for California’s continuing dominance on virtually every list of the nation’s fastest-growing businesses.

Although they are rarely registered Democrats, these entrepreneurs are advising Democratic leaders on how to lighten the regulatory burden, upgrade education and rebuild infrastructure. Their perspectives, in part, inspired the formation of the “prosperity caucus” of Assembly Democrats. Should entrepreneurship as an economic strategy take root in their policy-making circles, Democrats, who now find it difficult to distinguish between a robber baron and a growth-company executive, could be better suited to tap the opportunities presented by California’s changing business and demographic complexion.

Admittedly, such a shift for Democrats who remain loyal to welfare statism, union brokers and the lawyer lobby might be traumatic. But if enough Democrats transform their natural sympathies for the state’s working and middle classes into a coherent, forward-looking economic perspective, the political economy of the 1990s may prove far friendlier to their cause than many might ever have supposed.