CALIFORNIA : Good Economic News That Must Be Denied

David Friedman, an urban economist, is president of an international business consulting firm

If the best available data hold true, by early next year, California will recover all 520,000 jobs lost in the last recession and generate more employment during 1995 than any other state.

Demographic data also show that, since at least 1980, the state's major ethnic groups--Latinos, Asians and African Americans--are far better educated and earn much more money than in the rest of the country.

Yet, "California Denial" has never been stronger. The state is still relentlessly portrayed as an industrial cripple and as an American Bosnia.

Much of this is self-inflicted. But California Denial has a much deeper, more troubling national dimension. In essence, it's about the inability of America's elites, conservative and liberal, to cope with the country's unprecedented demographic and economic problems with anything more than backward-looking philosophies.

On one side are most Democrats, public employees, academics and ethnic activists advancing a Dystopian agenda: the theory that economic advancement, racial equality and quality of life all revolve around government technology, education and redistribution schemes. Given what they see as the private sector's hopeless inadequacy, they compete for federal largesse by portraying their communities in as bleak a light as possible.

For two decades, California challenged these beliefs. During 1970-1990, it produced a succession of lucrative, high-wage industries while also maintaining a relatively open society that was a magnet for people seeking a better life. By 1990, California had created more high-quality jobs and uplifted more people of all backgrounds than anywhere in history.

To Dystopians, however, the state's defense-led recession, riots and deteriorating municipal finances stripped away the veneer of prosperity. Without its windfall defense spending, California--like anywhere else--was revealed as a simmering, economically dysfunctional caldron of racial inequity.

Throughout the recession, countless media reports, academic studies and political speeches contended that California could only be saved by more government intervention--defense conversion, various training programs, electric cars and the like--and by rescuing its "essential" county governments, no matter how fiscally irresponsible. Dystopians further urged that Californians take sensitivity lessons from Texas and Georgia, where politicians eschewed such "irrelevant" or "divisive" issues as immigration and welfare reform.

Today, however, California is once again a big problem for Dystopians. Unlike New York--the Dystopian home world--which lost more than 600,000 jobs in the recession and has gained back just 160,000, California's remarkable turnaround has been achieved with little help from the public sector. Defense conversion, electric cars and other government fixes simply never materialized.

California's growth, moreover, is being paced by its Southern counties--the epicenter of the state's municipal-finance problems. Since August, 1994, half of all new California jobs were created in Southern California, compared with just 10% in the northern parts of the state, which may come as a shock to some Bay Area journalists eager to take a shot at their southern brethren. Fiscally troubled Los Angeles and Orange counties, in fact, are generating private-sector jobs at among the fastest rates in California.

The state's ethnic realities also do not square with the Dystopian world view. In 1990, for instance, just 17% of Texas' college-eligible African Americans and 10% of the state's Latinos earned college degrees, compared with 24% and 12%, respectively, in California. The percentage of black and Latino households earning $35,000 or more in Texas was just 49% of the white household rate--the lowest among all major states--and far below the extremely high 70% levels such groups achieved in California. The number of black and Latino households earning $25,000 or less fell dramatically, by 19%, in California during 1980-1990 but rose by 4% in Texas, one of the few states registering such an increase.

In Georgia, just 15% of college-eligible blacks earned college degrees, among the worst result in America. The ratio of black households earning $35,000 was just 50% of the white ratio, virtually tied with Texas at the bottom. And while the number of very poor black households in Georgia fell by 9% in 1980-1990, this was far less than the 28% decline that California achieved.

By contrast, the country's New Moralists, the re-energized conservatives who link America's economic and social problems to declining values, also struggle with California. To a legendary degree, the state is home to precisely the diversity, immigration and alternative lifestyles the New Moralists so deeply abhor. Yet, it repeatedly churns out a disproportionate share of the nation's most competitive industries, including computers, entertainment and biomedical.

As with Dystopians, however, California's recession was a blessing in disguise. Finally, the New Moralists could tie the state's "moral degeneration," and the closely related explosion of its regulatory and welfare burdens, to its industrial collapse. As conservative commentator George Gilder wrote: "People are leaving Silicon Valley in large numbers to go to remote parts of Utah . . . because of the moral disciplines that underlie that community and translate into work effort and entrepreneurship." California was the Purgatory from which the New Moralists would save America.

But then the state mounted its inconveniently timed recovery. Few doubt, for instance, that California's regulatory burden is hefty, yet it will lead the nation in job growth for 1995 with only the most modest regulatory reforms having been achieved. The state's world-beating industries are still dominated by quirky individuals and groups with some of the most "countercultural" values in the country; even Disney was recently forced to reverse its long-standing policy and offer "co-inhabitant" benefits so that it would not lose creative talent.

Moreover, while California surged, job growth in such New Moralist heavens as Colorado, Arizona, North Carolina and Georgia has slowed by as much as 64% from 1993 rates. Numerous regions within California--West Los Angeles, Orange County, Silicon Valley, North San Diego County, for example--are far more productive, entrepreneurial and private-sector oriented than most Intermountain and Southern states. It's a closely guarded secret, for instance, that 20% of the non-farm work force in Utah is employed by the government, nearly 30% more than in California.

Finally, the New Moralists' conviction that California's growing diversity and immigration inevitably caused its moral and economic decline is contradicted by Texas--a state they deify, and the nation's top employment producer in 1993 and 1994. Often raised as the positive counterpoint to California, Texas, in fact, has exactly the same proportion of nonwhite to white households as California--except that it is home to far fewer highly educated, high-income Asians, and its Latino and black residents are much worse off than in California. Uncomfortably for the New Moralists, America's two biggest job producers in 1995 are also the nation's centers of immigration and diversity.

California's past development, and its startling recovery, make clear that ethnic advancement and high-skill jobs do not flow from Washington, but also that prosperity is not dependent on bludgeoning society into the mold of the nation's most provincial, homogeneous states. These may be hard truths for California Declinists to swallow. Yet, any effort to renew America must first recognize that it is California where the nation's most critical objectives are being realized to the furthest extent.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World