For Americans, California once looked like the future. It was a state defined by risk-taking and utopian dreaming. Yet for most Californians today, the upward mobility so central to the state’s ethos is rapidly disappearing. For decades, California was the primary destination for both other Americans and for foreign immigrants. Now, this trend has gone into reverse, with people and companies leaving the state. Population growth, already slowing over the past decade, has turned negative for the first time in modern California’s history, largely due to the state’s shrinking middle and working classes and its loss of families.
California’s difficulties undermine the notion, so fashionable today, that with the right mixture of technology and utopian dreaming, societies can forge a future that is both green and widely prosperous. In reality, California now has America’s worst rates of cost-of-living-adjusted poverty and functional illiteracy, the worst housing affordability in the continental US and a devastating shortage of mid-skilled jobs. What’s more, in 2022, California suffered some of the lowest personal-income growth rates in the country, and its GDP grew at less than half the pace of its arch-rival, Texas.
California’s struggles demonstrate what happens when an economy shuns both industry and solid middle-class jobs. Instead, it has placed heavy bets on ephemera, like social media and entertainment. The failure of this approach now stands exposed. Today, California’s once-huge budget surplus has morphed into a deficit of $25 billion, one that may become even higher in the coming years, given the high chance of recession. Because of this, California’s political class is under pressure either to shrink its expansive welfare state and regulatory regime, or to raise taxes – although taxes are already among the highest in the country. Meanwhile, companies are deserting California in droves, as are some of its top one per cent of earners, who pay roughly half of the state’s income taxes.
All this runs in stark contrast to California’s historic reputation as a land of opportunity. As historian Kevin Starr argued in his 1973 study, Americans and the California Dream, California long ago ‘entered American awareness as a symbol of renewal’. The California dream – one which the Biden administration is seeking to emulate – combines techno-optimism with a new-age spiritualism and, most critically, apocalyptic environmentalism. An amalgam of ‘cybernetics, free-market economics and counter-culture libertarianism’ constitutes what Richard Barbrook and Andy Cameron described in 1995 as ‘the Californian ideology’.
In the early days of the tech revolution, the Californian ideology was notably egalitarian. In 1972, Californian author Stewart Brand predicted that the advent of computers would herald an era of enhanced ‘spontaneous creation and of human interaction’, empowering all of society ‘as individuals and as co-operators’. The ‘early digital idealists’, as computer scientist and writer Jaron Lanier noted in 2014, envisioned a ‘sharing’ web that functioned ‘free from the constraints of the commercial order’.
Initially, this model worked for most residents of Silicon Valley, as well as those inhabiting the aerospace-dominated areas of southern California. High-wage jobs allowed the workforce to buy homes, raise families and send their kids to college. And as left-wing scholars Manuel Pastor and Chris Brenner noted in 2015, Silicon Valley was also among the most egalitarian areas in the US. It was the ultimate beacon of opportunity. That included for immigrants, particularly from east Asia, who set up small tech businesses and launched larger firms.
Today, the oligopolist overlords of Silicon Valley, like Apple, Meta and Google, all enjoy market dominance. Those entrepreneurs who are not embraced by big venture-capital firms live largely at the sufferance of these tech overlords. One online publisher describes his website’s dependence on Google for ad revenue as being like ‘a serf on Google’s farm’.
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Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.