Triumph of the Oligarchs

A new class of overlords are making their bid for world domination.

The Coronavirus has trammeled the prospects of most Americans, particularly low-income workers. But for one small group, the pandemic has proved something like manna from heaven. Already ascendant beforehand, the tech oligarchy—a relatively small number of companies, venture, and private equity funds—are riding the current crisis to unprecedented dominion over our ever-weakening Republic. Read more

The Green Civil War

Like many contemporary social movements—#metoo, Black Lives Matter, the Women’s March—the environmental lobby has tended to create an atmosphere of unanimity. In its struggle to win public and elite opinion, it has frequently evoked “science” as something settled and immutable, warning that those who dissent are either self-serving or seriously deranged.

Yet in recent months, there has been growing criticism about the current green orthodoxy, including from people long associated with environmental causes. Read more

Coronavirus: Why California’s Small Businesses May Not Survive

Whatever the medical benefits achieved from the prolonged coronavirus lockdown, California’s small business community will be suffering severe symptoms, likely for decades to come. The state’s small entrepreneurs, particularly in poorer areas, face major readjustments and perhaps obliteration, a situation further complicated for some by damage stemming from the protests over the killing of George Floyd.

These small firms were already in parlous shape before COVID-19. Despite the immense wealth generated in Silicon Valley and among real estate speculators and the entertainment elite, most of the state’s growth in recent years was in low-end service businesses. As a result, 80% of all jobs created in the state over the past decade paid less than the state median income and half of those well under $40,000, according to Marshall Toplansky, a researcher at Chapman University.

California COVID-19 death rates are far lower than states in the Northeast, but our bifurcated economy is deeply vulnerable to declines in service businesses, and particularly in hospitality, retail and restaurant sectors. Roughly 90% of businesses surveyed this month by BizFed, a Los Angeles County organization of business groups, have been severely affected and nearly half have seen their revenue drop over 50%.

Before the pandemic, California’s boosters and leaders could convince themselves that the state had developed a new progressive and sustainable economic model. COVID-19 and the economic downturn have stripped away the glitzy facade, as our unemployment rates now surpass the national average, worse even than New York, the epicenter of the U.S. coronavirus outbreak. It’s particularly bad in Los Angeles, where less than half of residents now hold jobs. L.A. County has lost over 1 million jobs to the pandemic and suffers an unemployment rate higher than any of the major California urban counties.

Southern California’s greater economic vulnerability reflects, in part, its unusual exposure to some of the hardest-hit industries, notably tourism and hospitality as well as international trade. But the economic damage caused by more than two months of lockdown is spreading to industries that depend on selling goods outside the region — such as apparel and medical equipment — and the entertainment industry, which according to recent estimates may have already lost over 100,000 jobs.

If consumers are slow to resume their pre-coronavirus activities, many small firms already struggling with the state’s business regulations and high taxes may be tempted to head elsewhere. Joseph Vranich, a relocation expert who recently moved his own business from Irvine to Pittsburgh, has identified 2,183 publicly reported California disinvestment events between 2008 and 2016. However, experts in site selection generally agree that at least five relocations take place without public knowledge for every one that does.

The places with the biggest gains from California are in Texas, Nevada and Arizona. Between 2000 and 2013, California was the source of about one-fifth of all jobs that moved to Texas — 51,000 jobs.

Perhaps most immediately threatened, however, will be small businesses that focused largely on serving local residents. Take restaurants. The vast majority of the state’s more than 90,000 restaurants are owned and operated by independent proprietors, employing 1.4 million food service workers, according to the California Restaurant Assn. It generates more sales tax ($7 billion annually) than any other industry and some 60% are owned by people of color. Unless the state finds ways to help, 20% to 30% of these restaurants will never open again, the association has predicted.

Like small businesses across the country, many of these firms have not been able to access federal funds to withstand the downturn. Washington’s bailout program, even some Republican economists admit, has been tilted in favor of Wall Street and larger firms. Particularly excluded, note local advocates, have been smaller, often immigrant-run businesses which lack strong bank relations. They also often lack savings and much of their business is cash-based. Still others are owned and operated by noncitizens, some of them undocumented people.

In many neighborhoods, there is widespread concern that local owners of small shops, apartment buildings and commercial properties won’t be able to hang on and will be taken over by outside investors with no tie to the area. The need for social distancing protocols has worked against small stores that rely heavily on personal contact with customers and can’t make up all of their revenues through online sales. Some already see this trend as accelerating gentrification that was happening before the coronavirus.

“The business owners are scared,” suggests Mirabel Garcia, who works on micro-loans for the East L.A.-based Inclusive Action for the City. “They are worried they will not be able to hold on against Wall Street and the big investors.”

California will emerge from this crisis, but what kind of state will it be? The power of the tech oligarchy — the biggest winners during the coronavirus crisis — will likely further their hegemony. But the reality for most in the business sector will be far less grand: empty stores, broken dreams, defaulted mortgages and less opportunity for the kinds of entrepreneurs who created California’s century of economic dynamism.

In this economic crisis, state government needs to look out for the interests of grassroots entrepreneurs. This includes helping smaller firms adjust to new social distancing requirements and providing technical assistance so they can better compete with megastores or Amazon. It also means protecting small business owners against nuisance lawsuits related to coronavirus claims. Measures like California’s Assembly Bill 5, which seeks to greatly limit contract work, should at least be suspended at a time of record unemployment.

Given California’s deepening budget problems, rooted in huge state costs and pensions, the state cannot afford to prop up deserted business and millions of unemployed workers. There’s only so much that can be done to curb the inevitable “creative destruction” caused by the pandemic.

But entrepreneurs are, if nothing else, resilient. If they are given enough help to survive, they will eventually adjust to the new realities, and find new ways to thrive to the benefit of all Californians.

“It breaks my heart to see all the empty stores,” said Vivian Bowers, who runs her family’s dry-cleaning business, which has been in South Los Angeles for 63 years. “But entrepreneurs are tough. At this business we have survived numerous recessions and two riots. Give people a chance and they can come back.”

This piece first appeared at Los Angeles Times.

Joel Kotkin is the author of the just-released book The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute — formerly the Center for Opportunity Urbanism. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin

Photo credit: Nick Papakyriazis via Flickr under CC 2.0 License.

How Coronavirus Pandemic is Bringing a Return to Feudalism

The COVID-19 pandemic has disrupted many things, but also accelerated America’s descent into a new form of feudalism. The preexisting conditions of extreme economic concentration, inequality and reduced social mobility already were painfully evident before, but the pandemic has made them considerably worse. Read more

The Coronavirus is Also Spreading a Dark New Era of Neo-Feudalism

Adapted from The Coming of Neo-Feudalism (Encounter Books). 

The COVID-19 pandemic is accelerating the global shift already underway towards a neo-feudal society. With the middle-class economy largely shut down and, in the best-case scenario, in for a long and painful recovery, the population that is barely hanging on is expanding rapidly in America and around the world. In the U.S. alone, the ranks of the poor are projected to increase by as much as 50 percent, to levels not seen in at least a half century. Read more

Hygienic Fascism: Turning the World Into a ‘Safe Space’ — But at What Cost?

Author Aldous Huxley once said, “A thoroughly scientific dictatorship will never be overthrown.”

Even as we try to battle the COVID-19 pestilence, we may be contracting a more dangerous virus — hygienic fascism. This involves a process when our political leaders defer to a handful of “experts,” amid what Dr. Joseph Ladopo, an associate professor at the UCLA School of Medicine, describes as an atmosphere of “COVID-19-induced terror.”

Ideologically, hygienic fascism is neither right nor left, nor is it simply a matter of taking necessary precautions. It is about imposing, over a long period of time, highly draconian regulations based on certain assumptions about public health. In large part, it regards science not so much as a search for knowledge but as revealed “truth” with definitive “answers.” Anyone opposed to the conventional stratagem, including recognized professionals, are largely banished as mindless Trumpistas, ignoramuses, or worse. Experience may show that debate and diversity of choices serve the public’s health and general well-being better than unchallenged rule by a few, largely unaccountable individuals.

Even some non-Trumpians — like Elon Musk — see this as less an adherence to scientific standards than a “fascist” attempt to impose often impossible conditions on society and the economy, and without popular recourse. That these orders are often issued by the executive, and in the vast majority of states without legislative recourse, certainly follows an authoritarian pattern.

Big Brother, the ‘Great Helmsman’ and us

The degree of social control being proposed often reveals staggering tunnel vision. Former Vice President Joe Biden’s adviser, Dr. Ezekiel Emmanuel, suggests that eradication of the virus will require a year or even 18 months of lockdown policies. This likely would catapult an already steep recession into something approaching a depression. Scientists and academics, it appears, may be less vulnerable to such a policy than, say, hotel workers, retail clerks or small business owners.

Read the rest of this piece at The Hill.

Joel Kotkin is the author of the just-released book The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute — formerly the Center for Opportunity Urbanism. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin

Homepage photo credit: Christopher Michel via Flickr under CC 2.0 License.

One Nation, Under Lockdown, Divided by Pandemic

The last thing this polarized Republic needs is, well, more polarization, but that is what we are contracting from the pandemic. Americans, irrespective of region, broadly want the same things, such as safety, a return to normalcy, and an end to dependence on China for medical supplies, but they differ in the depth of their experiences with the pandemic.

Rather than rallying the nation, COVID-19 has amplified every fissure in this society from class to race, but perhaps most of all regarding geography. This reflects, in large part, the different experiences felt in various localities and the differences in how economies function from region to region.

On one hand there is the New York City urban area, which has suffered roughly 40 percent of fatalities, and bore the brunt of the crisis. Places outside New York with the most deaths have been central cities such as New Orleans and Detroit, where the vast majority of deaths have been endured by African Americans living in crowded, low income districts.

In past circumstances (after 9/11 or Hurricane Katrina), Americans responded with their customary generosity. New Yorkers, in particular, were seen as heroic, and for a short while Rudy Giuliani, hard as it is to believe now, was “America’s Mayor.” Not this time. Only a person just arrived from Mars would see New York Mayor Bill De Blasio as an inspiring figure, although his nemesis, Andrew Cuomo, has gained some national street cred.

The polarized reaction to the pandemic reflects already established patterns of partisan group-think, particularly in the dominant mainstream media. In early times a pandemic would inspire a surge of unity akin to 9/11 among Americans — even journalists. But the never-ending battle between bombastic narcissist Donald Trump and the equally self-indulgent media seemingly allows for no such genuflection to national interest.

Viral Geography

To the political divide, add a major geographic one. Huge parts of the country have been barely impacted by the virus but almost everywhere has been hit by the lockdowns and social distancing policies. Not surprisingly, extending lockdown orders seems far less compelling in places where the pandemic’s impact has, so far, been minimal.

This pattern of infection and fatalities almost completely parallels that of our political divides, with the generally GOP dominated countryside least impacted, the suburbs only somewhat so, and the big blue cities bearing the bulk of pain. By one estimate, states with Republican governors, mostly in the South, Intermountain West, and the Great Plains have suffered one-third the rate of fatalities seen in Democratic controlled states, which tend to be denser in their settlement patterns.

Read the rest of this piece at Daily Caller.

Joel Kotkin is the author of the just-released book The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute — formerly the Center for Opportunity Urbanism. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin

Photo credit: screenshot from COVID-19 CSSE Dashboard Johns Hopkins.

The Pandemic Road to Serfdom

Even before the outbreak of the Covid-19 pandemic, America, like most higher-income countries, was already heading toward a neo-feudal future: massive inequality, ever-greater concentrations of power, and increasingly widespread embrace of a uniform (albeit secular) religion. The pandemic, all too reminiscent of the great plagues of the Middle Ages, seems destined to accelerate this process.

Read more

Triumph of the Woke Oligarchs

Like the rest of the country, although far less than New York, California is suffering through the Covid-19 crisis. But in California, the pandemic seems likely to give the state’s political and corporate elites a new license to increase their dominion while continuing to keep the middle and working classes down.

Perhaps nothing spells the triumph of California’s progressive oligarchy more than Governor Gavin Newsom’s decision to off-load the state’s recovery strategy to a task force co-chaired by hedge-fund billionaire Tom Steyer. A recently failed presidential candidate, Steyer stands as a progressive funder. He is as zealous as he is rich. Steyer sometimes even found the policies adopted by climate-obsessed former governor Jerry Brown not extreme enough for his tastes.

Some conservatives wistfully hope that the pandemic will push the climate crusaders to the side. In California, at least, the corporate aristocrats, the governmental apparat, and the progressive nonprofits have  the momentum to impose their ultra-green vision on the state’s residents. Steyer may have made much of his fortune on fossil fuels, including coal, but now, approvingly described as “a reverent Christian,” the Bay Area mogul seems to be eager to repent, both through his political largesse and as operator of a fulsomely organic ranch down the coast from his San Francisco manse.

What Kind of Recovery Will the Oligarchy Allow?

Steyer’s failed, self-funded presidential run was full of extreme notions, such as imposing a “state of emergency” to address climate issues, essentially shutting down fossil fuels; and, as a kind of bonus for those who still can find work, promoting a $22 an hour minimum wage while offering alms for the soon-to-be-eliminated legions of miners and energy workers.

If this is what he wants for the recovery, Steyer will simply accelerate the state’s already poor performance in creating higher-wage middle- and working-class jobs outside those created or subsidized by government. Over the past decade, according to Chapman University’s Marshall Toplansky, the vast majority of jobs being produced in California pay under the median wage, and 40% pay under $40,000 a year. Since 2008, the state has created five times as many low-wage jobs as high-wage jobs.

California’s climate regulatory regime, notes relocation expert Joe Vranich, has been particularly hard on manufacturing. Over the past decade, according to BLS data, California has fallen into the bottom half of states in manufacturing-sector employment growth, ranking 44th last year; its industrial new job creation has been negative, compared with gains from competitors such as Nevada, Kentucky, Michigan, and Florida. Even without adjusting for costs, no California metro ranks in the US top ten in terms of well-paying blue-collar jobs; but four metro areas—Ventura, Los Angeles, San Jose, and San Diego—sit among the bottom ten.

Perhaps nowhere will the pain be worse than in Bakersfield, capital of California’s once-vibrant oil industry. That industry is now slated for extinction by policymakers, even as the state has emerged as the largest US importer of energy and oil, much of it from Saudi Arabia. This ultimate effort at “virtue signaling” will cost California as many as 300,000 generally high-paying jobs, roughly half held by minorities, and will particularly devastate the San Joaquin Valley, where 40,000 jobs depend on the industry. “Imagine that the state dictated that the entertainment industry be eliminated from Los Angeles, or the tech industry be eliminated from Silicon Valley. That is what removing the oil and agriculture industries from Bakersfield is like. “It is an existential threat to the entire area,” says Rob Ball of the Kern County Council of Governments.

Read the rest of this piece at RealClearEnergy.org.

Joel Kotkin is the Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute — formerly the Center for Opportunity Urbanism. His last book was The Human City: Urbanism for the Rest of Us (Agate, 2017). His next book, The Coming of Neo-Feudalism: A Warning to the Global Middle Class, is now available to preorder. You can follow him on Twitter @joelkotkin

Photo credit: Gage Skidmore via Flickr under CC 2.0 License.

California’s Post-Corona Challenges

California has, at least to date, escaped the worst effects of Covid-19. Despite predictions by Governor Gavin Newsom that upward of 25 million Californians would become infected, after six weeks of lockdown the state, despite having twice as many residents as New York, has suffered only one-eighth the number of cases and considerably less than one-tenth the fatalities. The numbers could worsen, but if the rate of growth of infection slows, as is now occurring even in New York, the Golden State may well avoid the worst-case scenario. Read more