|Millions Flee California’s Predatory Liberalism|
By Troy Senik
Thursday, September 27 2012
In their masterful book, “Why Nations Fail: the Origins of Power, Prosperity, and Poverty,” Daron Acemoglu and James Robinson write, “political and economic institutions, which are ultimately the choice of society, can be inclusive and encourage economic growth. Or they can be extractive and become impediments to economic growth. But this means that the choice of institutions – that is, the politics of institutions – is central to our quest for understanding the reasons for the success and failure of nations.”
Acemoglu and Robinson’s focus is global, but their instruction bears on events much closer to home. And California, once the crown jewel of the Union, is now demonstrating that their principles apply equally to states.
Underscoring Acemoglu and Robinson’s emphasis on the importance of institutions is this undeniable fact: fate dealt California nothing but high cards.
The Golden State boasts nearly 850 miles of pristine Pacific Ocean coastline; some of the world’s most breathtaking forests, deserts, and mountains; abundant oil, gold, and agricultural resources, and, in the heavily-populated coastal regions, one of the world’s most temperate climates. Grafted on top of that natural bounty is an equally impressive cultural abundance: the verve for experimentation and innovation that birthed the entertainment industry in Southern California and Silicon Valley in the north.
Yet California has squandered that inheritance, becoming nothing less than the nation’s prodigal son. The culprit? You guessed it: institutions.
Though the Golden State is beset by high unemployment (10.6 percent in August, behind only Rhode Island and Nevada) and consistently ranks as the nation’s worst business atmosphere, Governor Jerry Brown and the state’s reigning Democrats are frantically pushing a “temporary” tax increase on the November ballot – which would leave California with the unenviable distinction of boasting the nation’s highest income and sales tax rates, in addition to arguably its worst legal and regulatory climate.
What is this, if not exactly the kind of extractive mindset that Acemoglu and Robinson warned about?
The fatal flaw at work here is the belief that there’s some mystical force that ensures California’s success in perpetuity. That’s the conviction betrayed in Brown’s statement last year extolling the “tremendous dynamism of the California economy” and boasting that, "We continue to be a place of pioneers, of people who have left one place because they want to make something better, and that's the genius of California."
The governor was a bit too trigger-happy on that use of the present tense. His paean to the Golden State would have rung true in the 1950s and 1960s, when his father served as governor. It would have even resonated during Brown’s previous tenure in the late seventies and early eighties. But it bears precious little resemblance to the California of today.
As a recent study by Tom Gray and Robert Scardamalia of the Manhattan Institute (where I’m also a contributor) notes: “For the past two decades, California has been sending more people to other American states than it receives from them. Since 1990, the state has lost nearly 3.4 million residents through this migration … A finer-grained regional analysis reveals that the main current of migration out of California in the past decade has flowed eastward across the Colorado River, reversing the storied passages of the Dust Bowl era.”
Could there any be more poignant testimony to the damage wrought by bad government? What a natural disaster wrought 70 years ago is now being replicated by a rapacious public sector.
Where are these Californians going? Unsurprisingly, to states with better institutions: “Most of the destination states favored by Californians have lower taxes. States that have gained the most at California’s expense are rated as having better business climates. The data suggest that many cost drivers—taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs—are prompting businesses to locate outside California, thus helping to drive the exodus.”
Translation: The state is essentially engaging in the voluntary deportation of its productive class. This is a trend that bodes ill for the future of a place that was once recognized worldwide as a beacon of opportunity and optimism. If dysfunctional institutions are the culprit in a democracy, after all, they can only be changed at the ballot box. But increasing numbers of Californians are making the rational choice to pursue prosperity in other states now rather than hoping it can be brought back to California after a few decades of hard-won reform.
One wonders if that trend will lead the Golden State to become irretrievably lost, abandoned by its economic elites as the political class spirals deeper into self-parody. Indeed, as the state continues to bleed citizens and money, Sacramento seems increasingly obsessed with social marginalia. A new law implemented earlier this year, for example, prohibited the sale of foie gras, a culinary delicacy made from fattened goose liver. The contrast couldn’t be more instructive: A state that doesn’t think twice about wringing the neck of the golden goose can’t bear to see its domesticated cousin perish.
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