Is Prosperity Possible for California?

It seemingly would be an easy task to paint a bleak picture about California's
economy, specifically given its current dismal condition. The title of this series,
Harsh Realities:  The Issues Facing California and Its Economy, makes it appear
that the premise of this series is to paint such  a picture. It certainly could be justified,
but that's not the intent.  California has had its share of economic challenges. 
California's economic woes have long been documented, exacerbated by high taxes
and an over regulated business environment, but its economy has always bounced
back.  And although it has suffered from drought and natural disasters, e.g., fires
and earthquakes it always bounced back.  But California is now confronted by a host of
new and additional impacts created by the 'Great Recession'. The housing bubble and the
subsequent mortgage meltdown that lead to the collapse of the financial sector have help
bring the state's economy to its knees with double-digit unemployment, the highest
unemployment in nearly 50 years (third or fourth highest in the nation) along with low
consumer confidence and spending, lack of available credit, significant residential
foreclosure (nearly 10 percent of the state's 13 million housing units) along with the need
to address an enormous state budget deficit that also impacts local governments all of
which has created distrust in its state legislature if not all of its state political leadership
as identified by a recent survey from the Field Poll.

But as the old adage goes, timing is everything and as it pertains to this series, it took time
to review these documents as it did for this recession to occur and as it will for it to recover. 
It took most of the summer to read these massive reports from the Pacific Research Institute,
Milken Institute and the Public Policy Institute of California. Personnel from the California
Business Minute hunkered down to read these reports (so much for enjoyable summer reading). 
It would, soon become a pain staking effort to read and write reviews on each, synthesizing them 
into manageable pieces for the busy members of our community, a community  comprised of
professionals from business, community and economic development, workforce training and
redevelopment that have little time to allocate to read such documents even in a booming
economy, let alone during a recession.

However, the timing on these reviews were perfect in context to the chronology of the recession
and its impact on the state.  First, the series coincided with the state’s 2009-10 FY budget fiasco,
making for interesting reviews regarding comparisons and differences in public policy to the findings
of the reports. But it was also at a time when some at the Federal Reserve, including its Chairman
Ben E. Bernanke and other leading economists suggested that the recession had ended.  While
that finding hasn’t yet been made official, it provided some hope and reference to the state’s economy
that the worst is over for the Golden State and some sense of economic normalcy is around the
corner and the critical headlines and media comments being made about the state were and are
simply exaggerated.

Additionally, the series coincided with the publication of three major magazine articles from The
Economist, Time and The New Republic, each presenting a perspective on California’s economy,
adding to the discussion of this series.

Upon their completion, the individual reviews were posted at the California Business Minute’s
blog, the CalBizBlog. But, due to the length of time necessary to complete these, it affected
the posting of other works for which we apologize. However, on the flip side, an unintended
consequence occurred. Internet search engines which ‘crawled’ the site during the summer
subsequently ranked the series high in their search engines, so the length between reviews
aided in the advertisement of the series and increased readership.  Apparently, the loss of
content in lieu of presenting this material was a wash.

So now, this is where you, as a reader, expect that this series presented by seasoned
professionals from community and economic development will provide great wisdom and
insight to presenting solution(s) as if finding the Holy Grail for California, providing a
panacea to reversing California’s economic troubles. Unfortunately, the Socratic like writings
provided at the blog on business and economics coupled with its drill sergeant like directions
(recommendations) have been sidetracked.  Unfortunately, after all of the pain staking effort,
it was uncovered that none of these reports or articles provide a road map for significant solutions,
let alone a Holy Grail.  But they do provide insight and perspective, which is valuable such as
dispelling many issues and illustrating important data that is useful to our readers, thus it is this
information we intend to convey.

                     

CONCLUSION

The three key reports, Pacific Research Institute's report, Assessing the State of the 
Golden State, the Milken Institute's report, Manufacturing 2.0, A More Prosperous California
and The Public Policy Institute Of California's report, New Patterns of Immigrant Settlement
in California provide insight to the major issues facing California. Collectively, these reports
present what can be characterized as some of the 'best academic and applied research' on
the issues facing California in recent memory.  And coincidently, all were published and released
within a short period of one another in the midst of a recession, thus providing an unequaled
opportunity to see three different perspectives from three different respected organization on how
to address the needs of California, specifically in the midst of a recession.

For example, the Pacific Research Institute’s report, Assessing the State of the Golden State,
is an excellent piece on understanding the issues.  While it provides a provides a broad brush
of the issues facing the state, it should be used an introduction to the challenges of California
in the 21st Century.  However, they purposely provide little if any recommendations, because this
piece lays the ground work for their future work on individual issues illustrated in the report and
their analysis and subsequent recommendations. It is an excellent piece on understanding the
issues.

The Milken Institute’s report, Manufacturing 2.0,  A More Prosperous California, examines the
issues impacting manufacturing in the state.  This is a follow on study from their previous work
for and sponsored by the California Manufacturers and Technology Association. Unfortunately,
it really doesn’t provide any eye-opening insight or any significant recommendations to the needs
of the sector.  Manufacturing has been declining not just in California but across the nation, so
their criticisms leveled on the state are hard to swallow.  And little if any eye-popping opportunities
were presented on what to do to reverse this trend, let alone any recommendations related to
enhancing the business environment for the new technologies growing in the state and their
corresponding manufacturing growth. For example, little if any insight was provided on green and
clean technologies, e.g., building of solar panels and electric car manufacturing, let alone any
discussion on the changes created by autonomous technology (robotics) e.g., unmanned aircraft,
ground and sea vehicles that are being produced in the state. The absence of this speaks volumes
about the need to address these issues because of the capacity for economic change due to the
incomparable resources of the world class scientific facilities in the state and the intellectual capital
of California’s population.

Nonetheless, the report provides valuable spreadsheets that compare California to its competitor
states. It is these spreadsheets that illustrate the state's current strengths and weaknesses that
should be used by those in economic development. The report is posted at the California
Manufacturers and Technology Association website - www.cmta.org

The  report, New Patterns of Immigrant Settlement in California by The Public Policy Institute of
California provides a valuable understanding to the changes in immigration patterns.  The report
contradicts public opinion, and validates that the state is no longer the top choice for immigrants. 
While the state still has the most immigrants of any state in the nation, the percentages of immigrants
have changed and are lower than many of the Golden State’s neighbors. In fact the state is not even
in the top 5 states for immigration and hasn’t been for the last decade.  It is an excellent study but
very academic in its presentation and unfortunately, probably a tough read for most, specifically for
those whose lives revolve around a Twitter account.

However, the value of this report is in its Technical Addendum.  The charts illustrate the changes of
immigrant settlement far better than the narrative.  It is strongly recommended to read the Executive
Summary and Technical Addendum to appreciate the value of this report.  The report is posted at
www.PPIC.org.  (Go to the subject topic of immigration at the website).

As stated earlier, timing is everything and three articles from The Economist, Time and The New Republic
magazines also provide further analysis on California during our review.

For example, The Economist magazine in its July 11, 2009 edition portrayed California’s 'dreaming’
days as over compared to the future of Texas in the article- America’s Future, California v Texas. 
As California’s self proclaimed Chief Evangelist Officers, we take task with their comments on the
Golden State, but their argument does hold water, because if California does not work diligently to
turn around its economy, Texas may very well lead this nation towards the 22nd Century.

                       

Time magazine’s cover story - Why California is Still America’s Future, October 22, 2009 is a balanced
and fair article on the economic issues facing the state.  Journalist, Michael Grunwald  covers the
salient issues of the state from a 65,000 foot level, but returns to validate that nowhere else on the
planet except for California can you still find the large sums of capital for innovation, intellectual
capital of California’s population, an unequaled entrepreneurial environment, and a state that is
accepting of business failure as a badge of honor.  Coupled with great weather and geographic beauty,
California has and will continue to act as magnet to bring the world’s best together. The article leaves
the reader with the thought that if world changing actions can’t be done here,  then maybe they can’t
be done anywhere…the dream lives on!
 
                                   

The New Republic’s October 26, 2009, article- End State, is California Finished? by John Judis 
is a reflection of a former state resident drawn to the state (seduced) for the same reason(s)
others came.  But the article diminishes the state for all of the issues illustrated above.
Unfortunately his article comes late to the marketplace and is not very enlightening.  However,
in fairness to Judis, he does illustrate that many of the extreme headlines aimed at the state
are meant only to sell media products and the rhetoric spoken by media talking heads is unfair. 
But he appears to be a two-faced journalist, because even with all of  his denigration, he refuses
to bet against the state and its ability to recover and return to its prominence in the national and
world economies.  Apparently he is not a gambling man.  But his disdain is humorous because he
leaves the door open that maybe, just possibly, the luster and shine will return to the Golden State.

After reading all of these documents, it is impractical to think that everyone gets California.  And
rightly so, because the dynamics that this state and what it faces are staggering. Just one issue,
such as the distribution of water would overwhelm most of our nation’s governors and state
legislatures in finding a solution let alone by researchers at a ‘think tank’ or journalists and their
editors.  Thus the number and magnitude of the issues that California confronts are many and are
the basis for its problems. But that should not be an excuse for a poor performing economy. State
government leadership needs to take a more business like approach, formulate a methodology, a
checklist and corresponding marching orders to address these issues in an orderly but expedited
fashion, because the longer they wait to address these issues, the more difficult they become to
solve.  But it is doubtful that they will be addressed anytime soon and in this recommended manner. 
Because the state is also confronted by several external political actions, such as potential voter
initiatives making the state legislature part-time and dividing the state in two coupled with the potential
if not high probability of a constitutional convention.  These actions seemingly are a reaction to the
lack of state leadership and will help to derail a focused recovery effort.  While many criticize the
governor for his lack of hands on leadership, he has helped place California again in a positive international
light through his stardom.  He has also put the state on the international stage illustrating its position
s a global innovator.

Keeping with this positive direction, many have forgotten or don't know that Californians invested in
California. During the recent economic boom of the Golden State, 1999-2006, California voters
supported multiple ballot initiatives for infrastructure projects, e.g. water and flood control, housing,
community development, schools and transportation projects to the tune of $48 billion.  Preliminary
results illustrate that over 800,000 jobs will be created from these actions over the next 10 years.

As these projects begin and when coupled with the billions from the federal stimulus package for
projects, the future of the state through implementation of capital improvements along with
corresponding innovation from business and industry should bring a strong return to California’s
economy.

In the meantime, the question is - Can California possibly bounce back from all of these issues
towards a return to prosperity?  While unfortunately, none of the reports reviewed provided a road
map for recovery, they did illustrate the issues that are most pressing that need to be addressed  
As illustrated above, it will take time.  It is as chaotic coming out of a recession as it is going into
one.  The California Business Minute believes that California's economy can be resurrected by its
business community returning financial stability and employment opportunities, while simultaneously,
public policy efforts take place to achieve solutions and reforms to help the business community
achieve it.  It may be chaotic, but a synergy between stakeholders that are focused and time bound
is the prescription that can return prosperity and the shine to the Golden State!

We hope that was not too harsh. We appreciate bringing this series to you and would
appreciate any of your comments.



TJohnson@CaliforniaBusinessMinute.com