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Recovering Our Golden Mystique

January 10, 1999|Joel Kotkin | Joel Kotkin, a contributing editor to Opinion, is a senior fellow at the Pepperdine Institute of Public Policy and a fellow at the Reason Foundation

California survived the 1990s with its enviable economic engine intact, but without fully recovering a sense of manifest destiny that transformed the once-isolated outpost into a crossroad of global civilization. California has never been like other states or regions, because it is both a place and an idea, a symbol of hope, innovation and relentless individualism that doubles as a workshop, a home for businesses, families and children.

Recovering the state's mystique, which has been battered by a decade of natural disasters, wrenching economic changes and a growing chasm among socioeconomic classes, may prove the greatest challenge for Gov. Gray Davis. The world leader in cyberspace, aerospace, entertainment and a broad panoply of lifestyle industries, California enters the 21st century facing intensifying competition and haunted by self-doubt even amid a powerful economic recovery.

To reconstruct California's sense of promise, Davis must focus on changing attitudes toward the state. Two diametrically opposed, yet oddly similar views of the Golden State emerged during the '90s. One, predominantly pushed by the state's Anglo conservatives, held that the California dream was being despoiled by waves of immigrants who were permanently restructuring the state's demography. Since California is already the nation's most diverse state and home to the largest number of immigrants, this belief essentially cannibalized the hope of a successful future for the state.

The other view, mostly associated with the political left and much of the state Democratic Party, embraced the ideology of victimization, suggesting that the new Californians, as well as traditional "out" groups like African Americans, were becoming pawns in a system that one left-wing writer likened to "apartheid." Only by redistributing income and benefits along racial and class lines could "justice" be served.

In developing a different approach, Davis might interpret the state's recovery as invalidating both left and right critiques. Despite a tsunami of negative publicity, dire predictions and huge job losses in the early '90s, California has recaptured its preeminent place in "knowledge-value" industries. It enters the 21st century with a huge lead in entertainment and fashion and enjoys a 2-1 edge in high-tech jobs over its nearest rival. California remains home to three of the nation's top-10 high-tech regions: L.A., San Jose and Orange counties. By decade's end, according to Palo Alto-based economist Stephen Levy, it will have increased its share of U.S. high-tech jobs to 21%, a record.

The net out-migration of residents, once at the heart of predictions of the Golden State's decline, has been slowed and perhaps even reversed. Yet, the economic recovery itself is less a testament to those returning to California than to those who stayed, including the immigrants so vilified earlier in the decade. Many corporate giants that dominated California in 1990--Bank of America, Home Savings of America, Lockheed, the remnants of Douglas Aircraft--have disappeared, been swallowed, lost faith or moved away, but new companies, such as Sun Microsystems, Cisco Systems, DreamWorks, Broadcom and Kingston Technology have seized the technological and creative edge.

As important to the state's comeback are the tens of thousands of smaller enterprises, an increasing proportion of them minority-owned. Companies with fewer than 500 employees generated more than 70% of California's 1 million new jobs between 1994 and 1997, including hundreds of firms in specialized industries. As a result, the state's share of the nation's diversified manufacturing employment is at its highest level in recent history.

Yet, California is far from assuring its continued preeminence. Other states and regions are intent on muscling a share of the state's assets. California's high-technology hegemony is a favorite target, since it now accounts for roughly 15% of U.S. economic growth. Other governors, particularly George W. Bush of Texas, will be watching Davis to see if the new governor can assemble a legislative program that supports and nurtures California's entrepreneurial climate and rebuilds the state's infrastructure to produce livable communities and educated workers.

Californians also need to resist the complacency that often accompanies economic success and focus on the intensifying, competition with other regions over the growth industries of the future. Either retreat from the state's current pro-business attitudes or imposition of tougher environmental regulations could spark another ruinous business exodus as occurred in the first half of the decade. This is not to suggest that Democrats merely should ape the Republican approach to wealth creation. Rather, they should follow Davis' lead and reform the state's schools, upgrade its aging physical infrastructure and help the working poor and their children improve their lives.

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