Recovering Our Golden Mystique

California survived the 1990s with its enviable economic engine intact, but without fully recovering a sense of manifest destiny that transformed the once-isolated outpost into a crossroad of global civilization. California has never been like other states or regions, because it is both a place and an idea, a symbol of hope, innovation and relentless individualism that doubles as a workshop, a home for businesses, families and children.

Recovering the state’s mystique, which has been battered by a decade of natural disasters, wrenching economic changes and a growing chasm among socioeconomic classes, may prove the greatest challenge for Gov. Gray Davis. The world leader in cyberspace, aerospace, entertainment and a broad panoply of lifestyle industries, California enters the 21st century facing intensifying competition and haunted by self-doubt even amid a powerful economic recovery.

To reconstruct California’s sense of promise, Davis must focus on changing attitudes toward the state. Two diametrically opposed, yet oddly similar views of the Golden State emerged during the ‘90s. One, predominantly pushed by the state’s Anglo conservatives, held that the California dream was being despoiled by waves of immigrants who were permanently restructuring the state’s demography. Since California is already the nation’s most diverse state and home to the largest number of immigrants, this belief essentially cannibalized the hope of a successful future for the state.

The other view, mostly associated with the political left and much of the state Democratic Party, embraced the ideology of victimization, suggesting that the new Californians, as well as traditional “out” groups like African Americans, were becoming pawns in a system that one left-wing writer likened to “apartheid.” Only by redistributing income and benefits along racial and class lines could “justice” be served.

In developing a different approach, Davis might interpret the state’s recovery as invalidating both left and right critiques. Despite a tsunami of negative publicity, dire predictions and huge job losses in the early ‘90s, California has recaptured its preeminent place in “knowledge-value” industries. It enters the 21st century with a huge lead in entertainment and fashion and enjoys a 2-1 edge in high-tech jobs over its nearest rival. California remains home to three of the nation’s top-10 high-tech regions: L.A., San Jose and Orange counties. By decade’s end, according to Palo Alto-based economist Stephen Levy, it will have increased its share of U.S. high-tech jobs to 21%, a record.

The net out-migration of residents, once at the heart of predictions of the Golden State’s decline, has been slowed and perhaps even reversed. Yet, the economic recovery itself is less a testament to those returning to California than to those who stayed, including the immigrants so vilified earlier in the decade. Many corporate giants that dominated California in 1990--Bank of America, Home Savings of America, Lockheed, the remnants of Douglas Aircraft--have disappeared, been swallowed, lost faith or moved away, but new companies, such as Sun Microsystems, Cisco Systems, DreamWorks, Broadcom and Kingston Technology have seized the technological and creative edge.

As important to the state’s comeback are the tens of thousands of smaller enterprises, an increasing proportion of them minority-owned. Companies with fewer than 500 employees generated more than 70% of California’s 1 million new jobs between 1994 and 1997, including hundreds of firms in specialized industries. As a result, the state’s share of the nation’s diversified manufacturing employment is at its highest level in recent history.

Yet, California is far from assuring its continued preeminence. Other states and regions are intent on muscling a share of the state’s assets. California’s high-technology hegemony is a favorite target, since it now accounts for roughly 15% of U.S. economic growth. Other governors, particularly George W. Bush of Texas, will be watching Davis to see if the new governor can assemble a legislative program that supports and nurtures California’s entrepreneurial climate and rebuilds the state’s infrastructure to produce livable communities and educated workers.

Californians also need to resist the complacency that often accompanies economic success and focus on the intensifying, competition with other regions over the growth industries of the future. Either retreat from the state’s current pro-business attitudes or imposition of tougher environmental regulations could spark another ruinous business exodus as occurred in the first half of the decade. This is not to suggest that Democrats merely should ape the Republican approach to wealth creation. Rather, they should follow Davis’ lead and reform the state’s schools, upgrade its aging physical infrastructure and help the working poor and their children improve their lives.

California’s major rivals come from four sources: overseas; the low-cost states of the South and intermountain West; the increasingly reassertive Northeastern establishment; and Texas.

* Foreign competition. The same Asian financial crisis that has cut into the state’s international trade volume has also diminished the value of many of Asia’s currencies, as well as some in Latin America. The devaluations intensify competitive pressures on a host of California industries. Meanwhile, some trading partners, notably Canada and Europe, continue to subsidize California’s competitors in entertainment and aerospace to boost their own domestic producers.

* The hinterland states. The low-balling states of the intermountain West and the South feasted on California businesses throughout much of the 1990s. California high-tech expanded its 1990 job base by only 1% in the period up to 1996; meantime, Nevada, Georgia, Oregon, Washington, Colorado and Utah enjoyed double-digit growth. These states are increasingly competitive in terms of higher education, transportation and technical infrastructure. The intermountain West’s urban center, Denver, boasts the highest percentage of educated people among all major cities. Having slowed down in the late 1990s as California resurged, such regions would be the first beneficiaries if the new regime in Sacramento imposes onerous new costs on California firms.

* The Northeast corridor. Few places exulted in California’s prospective demise more than the long-declining Northeast. Even though states like New York grew slower economically and lost a greater percentage of high-tech jobs and domestic migrants per capita throughout the decade than California, the Northeast, particularly New York City, gained in the battle of perceived “hipness.” Using its powerful and often pliant media, New York has spun relatively small phenomena, like the Silicon Alley multimedia district and an uptick in film production, into showbiz razzle-dazzle portraying itself as a full-fledged rival to far larger Silicon Valley and Hollywood, the linchpins of California’s role as national technical and cultural trendsetter.

* Texas. The Lone Star State is the most formidable threat to California’s lock on the American dream. Only Texas has the population, land, money and entrepreneurial energy to emerge as the 21st century’s new California. Unlike New York, Texas has enjoyed robust economic growth through the 1990s while weaning its economy from dependency on oil, gas and agriculture. It led the nation in the total numbers of new technology jobs between 1990 and 1996, easily surpassing former big players like New York and Massachusetts.

Yet, notes economist Levy, the battle for the future is still California’s to lose. Other states can imitate, subsidize, low-ball and outpromote California in this or that industry niche, but none of them has achieved the Golden State’s critical mass. “If the state becomes unlivable, if education is allowed to fail,” he says, “we open the door for others.”

This competitive challenge will be the defining issue for Davis and California in the next millennium. A new paradigm of the California dream, based on opportunity, knowledge industries, creativity and design, is within the state’s reach. If the new governor and the state’s citizens can rise to the demands of this venture, California can continue to frustrate the naysayers and secure its place as the homeland of the future.