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Pacific Perestroika, or Putting the LA in Glasnost

The indispensable Joel Kotkin, a professor of urban development currently residing in California, has a great piece in Forbes on the fate of his home state, and the way forward from the chaotic mess we currently see there. Governor Brown, he argues, has not turned out to be a man of change like Chairman Gorbachev was in the Soviet Union, but perestroika is not far off on the horizon for California.

The Soviet parallel is entertainingly apt:

California’s “progressive” approach has been enshrined in what is essentially a one-party state that is almost Soviet in its rigidity and inability to adapt to changing conditions. With conservatives, most businesses and taxpayer advocates marginalized, California politics has become the plaything of three powerful interest groups: public-sector unions, the Bay Area/Silicon Valley elite and the greens. Their agendas, largely unrestrained by serious opposition, have brought this great state to its knees.

But Kotkin goes on to explain that this “troika” is losing its grasp. As deficits run up and stale “reforms” and tax hikes continue to keep California in a stall, voters are turning on the principles of these groups.

Far fewer voters, for example, support Gov. Brown’s high-speed rail venture, which proves to be more expensive and unnecessary by the day. San Diego and San Jose have been some of the first cities to take on public-sector unions, showing how troublesome they can be to a city’s budget, and suggesting the same on the state level. The enormous tech sector in California will no doubt be a big asset to the state for years to come, but even it has hit road bumps recently, most notably a disaster of an IPO for Facebook, Kotkin points out.

The first great leftie bard to sing about California was Woody Guthrie: California, he said, is a great place to be — if you’ve got the dough-re-me. Unfortunately his ideological successors don’t have enough dough-re-me to keep playing out their fantasy adventures and change is going to come.

Read Kotkin’s whole piece. When something can’t go on forever, it won’t, and that is the point California is reaching today.

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  • Mrs. Davis

    Things won’t keep going on as they have, but how they change may be problematic. I left there 10 years ago because it was clear where things were headed and so far things still seem headed toward out of doors political activity of unknown intensity.

    The problem with Caliphornia is the voters. Too many get too much from Sacramento. Too many others have bought the line of the teachers and prison guards hook line and sinker. And the unions still own the democrat party.

    It would be nice if the primary election victories in SJ and SD were harbingers of the direction of change, but I’ll wait to see general election bond propositions go down in droves before I get excited. And even then the legislature will have to rein in spending on the unions. It won’t be pretty. In fact I expect it will make Greece seem like a garden party.

  • bay area

    Doomsday predictions as usual… enjoy Utah.

  • thibaud

    Once correction: The “enormous tech sector” isn’t all that big in California. Much of the profits are kept offshore, and much of the employment growth is occurring offshore.

    Andy Grove used to point out that, on a net basis, Silicon Valley did not add any jobs at all from 2000 to 2010. This is not at all like the auto industry of the last century, and it won’t save California.

    btw, Joel Kotkin is a Democrat who does not support either the Tea Party and “starve the state” lunacy.

  • thibaud

    To be specific, Kotkin, who voted for Jerry Brown, describes himself as a “Pat Brown-Harry Truman Democrat” who is “not against taxes or regulation.”

    Kotkin supports a broad middle class sustained by manufacturing, and would probably, given his self-description as a follower of Harry Truman, support universal health insurance as well.

    Kotkin crusades against environmentalist-tinged “gentry politics” that favors banksters and stupid urban unicorns like light rail, or technobabble unicorns like, say, Kickstarter and Richard Florida’s “Cool Cities” that are populated by technology yuppies instead of boring old middle-class families.

    A detailed interview with Kotkin on his politics, conducted by a Pittsburgh resident and supporter of the labor movement, is here:


    “Q: Is a city like Pittsburgh doomed, in the sense that there is nothing we can do to regenerate manufacturing?
    A: I’m always reluctant to say what a place can do. It’s like asking a shrink what your problems are after the first session. But I would try to find out if there are companies that are expanding. Are there companies that would like to expand? Are there companies that want to stay? Ask them what they want. We live in this dream world where we say, “Well, if we have a fancy stadium with sky boxes, that will keep businesses here.” Well, what do you mean by businesses? Do you mean the gauleiters who represent multinational corporations, so they can hang out at a fancy football game? Or are we talking about somebody who’s got 15 people working for him in a shop somewhere in the suburbs and would like to get to 30? What are his issues? Are they tax issues? Are they training issues? Are they regulatory issues? You’ve got to go ask! I don’t see anyone interested in that anymore. It’s all “What does some 23-year-old, footloose student want? Does he have enough jazz clubs to go to?” Or some footloose 50-year-old corporate henchman. “Does he have enough arts facilities?”
    As a country, we’re kind of delusional about our economies. I’ve found a few places in the country where they focus on this stuff, but I’m kind of becoming a persona non grata for raising these issues. I’m not raising them as a conservative, saying we shouldn’t have taxes or shouldn’t have regulations. I’m just saying, “How do you provide for a broad-based economic opportunity for your people? Isn’t that what’s it about?” Unfortunately, for most mayors in America, that’s not what’s it’s about. What it’s about is, “How do I keep the public employees happy? How do I keep the people at the very top of society happy? And how do I put on a good enough show so that everybody thinks I have a hip, cool city.”

    Interviewer: You mentioned earlier you were a Pat Brown-Harry Truman Democrat. What’s that?

    Joel Kotkin: In other words, meat and potatoes; get the job done; that you understand that a Democrat is first and foremost a representative of a middle-class party that has middle class values and is the party of upward mobility and is willing to use the public sector where necessary to lead that charge — that’s why I’m not a Republican….

  • Kris

    “When something can’t go on forever, it won’t, and that is the point California is reaching today.”

    Let me display my unmatched gift for aphorisms: Government can stay irrational longer than businessmen can stay solvent.

  • Eurydice

    @thibaud – thank you for the excerpt. It sounds similar to the argument about what’s wrong with higher education – the construction of random buildings to attract donors so that they can give more money to construct more buildings to attract more donors – basically, the aggrandizing of a city/university as an entity apart from the people it’s supposed to serve.

  • cubanbob

    @thibaud when business are incentivized to keep their retained earnings offshore, they will. When business are incentivized by excessive regulation and costly taxes and mandates to offshore their output, they will. The Democratic party is a lot of things, but champions of the middle class they are not. Rather the progressive policies in toto are a boat anchor that is dragging the middle class down.

  • Kolya

    Middle class entitlements are turning the middle class slowly into takers as opposed to makers. They vote accordingly.

  • thibaud

    @ Eurydice #6: as Kotkin notes, the problem is not government per se – he explicitly states that he’s “not against taxes, not against regulation” – but a really ignorant and incompetent political class.

    They’re just as ignorant and incompetent in Alaska and Oklahoma (50% underfunded pensions) as they are in Illinois or California.

    As Kotkin the Harry Truman Democrat would agree, we need better government, not less government.

  • thibaud

    @ #7: you TPers are yet again being played for suckers.

    Read this in-depth, expert, fact-based expose, from those real reporters that Via Meadia hates with such intensity, of how Apple’s army of accountants and tax experts employ delightfully arcane perversions so as to avoid BILLIONS in taxes each year:

    Get out of the TP cocoon and educate yourself. Complex world out there.

  • thibaud

    Here’s a New York Times reporter’s account of teh “Double Irish,” one of many Apple tax-evasion scams that in this case exploited that poster child of the financial debacle, the offshore, sad-sack patsy for corporates and corrupt banksters known as Ireland to house more than ONE-THIRD of APPLE’S TOTAL WORLDWIDE EARNINGS!

    “The Double Irish

    “In the late 1980s, Apple was among the pioneers in creating a tax structure — known as the Double Irish — that allowed the company to move profits into tax havens around the world, said Tim Jenkins, who helped set up the system as an Apple European finance manager until 1994.

    Apple created two Irish subsidiaries — today named Apple Operations International and Apple Sales International — and built a glass-encased factory amid the green fields of Cork. The Irish government offered Apple tax breaks in exchange for jobs, according to former executives with knowledge of the relationship.

    But the bigger advantage was that the arrangement allowed Apple to send royalties on patents developed in California to Ireland. The transfer was internal, and simply moved funds from one part of the company to a subsidiary overseas.

    But as a result, some profits were taxed at the Irish rate of approximately 12.5 percent, rather than at the American statutory rate of 35 percent. In 2004, Ireland, a nation of less than 5 million, was home to more than one-third of Apple’s worldwide revenues, according to company filings. (Apple has not released more recent estimates.)

  • Vale

    China is likely to grow Old beorfe it grows Rich is a comment I have been seeing.I have also noted that without Democracy to force a change in direction (flexibility) when policies aren’t working, and to disrupt the systems of patronage and corruption that develop over time, China’s management of its economy is much less efficient than the Anglosphere’s.In fact no culture that doesn’t adopt the Three Pillars of Western Culture1. Capitalism (Free-Enterprise)2. Democracy3. The Rule of LawWill ever be able to compete long term with the Anglosphere. Sure they can play catch up very quickly because the technological trail has already been blazed for them. But to actually break trail past the Anglosphere, would take the cultural attributes of creativity, entrepreneurial activity, and support for the feedback of competition, which are not present in the backward and inferior cultures the declinists are always touting as the next hegemonic power.

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