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  • The Rust Coast

    Posted by Shannon Love on February 25th, 2009 (All posts by )

    The speed with which socialism can destroy a region never ceases to stun me. In the 1960s Los Angeles eclipsed New York as the place to be in America to make things happen. And now...

    “The Rust Coast” seems an incorrect metaphor as California does not have great industries of steel as did the Great Lake states. Yet, what do film, silicon and aircraft aluminum decay to?  

    Whatever we call it, it is the dust of squandered dreams. 

    [h/t Instapundit]

    [Update: (2009-2-25 3:14pm): Steven Malanga via Instapundit,

    But California doesn’t just have a spending problem. Increasingly it also has economic and revenue problems. Even as I write this other neighboring states are running ads in local newspapers inviting California businesses to move their headquarters out of the state. That’s advertising money well spent. A poll of business executives conducted last year by Development Counsellors International, which advises companies on where to locate their facilities, tabbed California as the worst state to do business in.

    There are a host of reasons why California has become toxic to business, ranging from the highest personal income tax rate in the country (small business owners are especially hard hit by PITs), to an environmental regulatory regime that has made electricity so expensive businesses simply can’t compete in California. That is one reason why even California-based businesses are expanding elsewhere, from Google, which built a server farm in Oregon, to Intel, which opened a $3 billion factory for producing microprocessors outside of Phoenix.

    ]

     

    22 Responses to “The Rust Coast”

    1. Robert Schwartz Says:

      Babylon, she all fall down.

    2. seanf Says:

      Yes, the public infrastructure is in bad shape. Prop 13 caused a lot of damage and there has been no real investment since the 1970s.

      But, to some extent at least, geography is destiny. Not only is California a very desirable place to live – real estate in the Bay Area has recorded some of the lowest drops in the nation – the state remains the gateway to the Pacific and the rising Asian powers.

      Allegations of socialism notwithstanding, it is the most entrepreneurial state in the country as evidenced by the number (and success!) of new businesses. The public education system is still the finest in the nation – just one campus, Berkeley, is routinely ranked as the world’s finest public university – and the quality of private universities, like Stanford, is unmatched outside the Northeast. Despite containing many low-wage workers, its workforce contains more workers with graduate degrees than any other state in the nation.

      Finally, California has faithfully represented the American dream, always a step or two ahead of the rest of the country socially, economically and politically. It may very well go down the tubes. But we’d better hope not, not just because of California, but because that means states with fewer natural advantages will be in even more trouble.

    3. david foster Says:

      “gateway to the Pacific and the rising Asian powers”…large new container ports are being put in place on the west coasts of Mexico and Canada. The number of boxes going through these facilities vs the California ports will depend substantially on the California business climate, specifically including the willingness to permit improved rail connections to the ports.

    4. Shannon Love Says:

      seanF,

      Yes, the public infrastructure is in bad shape. Prop 13 caused a lot of damage and there has been no real investment since the 1970s.

      In the 60’s, infrastructure spending was 30% of the state budget, now it is 3%. It’s not about revenues, it’s about priorities.

      the state remains the gateway to the Pacific and the rising Asian powers.

      Not if longshoreman unions and environmentalist continue to respectively oppose the modernization of the ports or shut them down entirely. IIRC, more asian cargo enters America through Mexican ports than California. The Mexican ports are more modern as well.

      …it is the most entrepreneurial state in the country as evidenced by the number (and success!) of new businesses

      Was the most entrepreneurial state. All the recent activity in California as been in the computer industry and that industry can pickup and relocate easily and they will do so if things get worse. Every other kind of industry is being systematically driven from the state. When a surfboard manufacture cannot survive in the state due to government harassment, you know things have gotten bad. The rustbelt states where the center of American entrepreneurial right up to the point that they suddenly weren’t. California will be the same.

      The public education system is still the finest in the nation…

      Was the finest.

      California is coasting on the great energy of the period from roughly 1930-1980 when California was a place of dreams, enterprise and big thinking. Now its dominate political culture hates commerce and manufacturing. It is doomed.

      Had you told someone in New York city in 1970 that ten years later the city would implode and end up bankrupt and unlivable, they would have thought you mad. Likewise, all the residents of the Great Lake states that possessed so many “natural advantages” when it came to industry would have thought the same. Yet, they collapsed suddenly and never really recovered for the same reasons that California is struggling.

      I would be happy to be wrong but the parallels between California and the rustbelt circa 1970 are just to pronounced to ignore. You’re fixated on the glories of the past instead of looking at the long term trends which all point downward.

    5. ____seanf Says:

      David is right about the need for new rail lines. Urban congestion is a problem for CA ports.

      However I’m not sure about shannon’s point regarding mexican ports dominating Asian shipping to the US. For 2007, Los Angeles and Long Beach processed 40% of all freight entering the U.S., and 80% of imports from Asia. See http://www.manufacturing.net/News-Mexico-Seeks-New-Port-To-Compete-With-US-Shipping.aspx?menuid=286.

      Also, if california is no longer the most entrepreneurial state as measured by new business openings, and is no longer generally regarded as having the best public education system, that is news to me! which states replaced us in these categories? do you have any support for those assertions?

      It is possible the software industry will decline. However, it is unlikely to relocate. Industries tend to be very geographically sticky because the ecosystem of technical, financial and legal expertise that supports deals, R&D and entrepreneurship is difficult for any single company to replicate elsewhere. That’s why NY still dominates finance and the publishing world and Hollywood still dominates movies.

      I guess my meta-point is that while klotkin isn’t entirely incorrect, his article needs to be read critically. It’s not all doom-and-gloom. And, I don’t see the connections to socialism? While comforting to have a label to blame economic misfortunes on, that doesn’t automatically make the label correct. Florida, for example, is much harder hit than California is – despite entertaining a considerably more conservative political climate. Care to explain?

    6. david foster Says:

      seanf…the center of the “tech” industry was once the Boston area. It would be interesting for somebody to do an analysis of how it shifted to the West Coast.

    7. renminbi Says:

      Hey guys,don’t leave NY out.We are working very hard to match Cal with our feckless politicos. NYC is very heavily dependent on Wall St.Yes people biched about the high bonuses but the City and state were more than happy to grab their slice. This is one industry not coming back-well not in a big way at any rate.
      I guess I’ll have to be happy living in very big Venice-tourists love places with a great past.

    8. Brett_McS Says:

      To magnify the effect of productive people leaving CA there are the hoards of unproductive people arriving to take advantage of the free stuff and the nice weather. The rust belt states didn’t have that extra kicker to push along their decline.

    9. Shannon Love Says:

      seanF,

      Florida, for example, is much harder hit than California is – despite entertaining a considerably more conservative political climate. Care to explain?

      This analysis has little to due with the current crisis. This crisis will be like the energy crisis was to the rustbelt, the last straw that pushed everything over the edge.

      I will point out again that circa 1970 the rustbelt looked pretty strong and could point to nearly a century of industrial dominance of not only America but the world. Ten years later is was a disaster area and still has not recovered.

      Perhaps California’s natural advantages will win out but again, the rustbelt also had natural advantages. California isn’t the dynamic place it was even 30 years ago. You need to look around and see what countervailing forces can offset the long term trends in California’s decline. California’s trends in education, business, middle-class flight, infrastructure, power generation, size of government etc all point downward.

    10. stevieray Says:

      Culture is destiny.

      Every place, whether city or nation, is the result of the core beliefs of the people who live there. Their actions, based upon the beliefs the residents hold dear, create what a city is… growing or declining; orderly or lawless; honest or corrupt.

      As the population of Los Angeles changes from majority native-born American to majority foreign-born, largely Mexican, the nature of Los Angeles will become indistinguishable from many of the larger Mexican cities… corrupt and violent, with a small, besieged middle class. This is obvious to all who are not blinded by the fraud called multiculturalism. If the beliefs, values, and behaviors of the residents of any two cities are the same, the two cities will inevitably become the same as well.

      Immigration used to be a strength of America. But without assimilation to American values and attitudes, that strength is gone… immigration is now a weakness.

      Multiculturalism is one of the most stunting beliefs yet devised by an academic elite at war with America… one who accepts it’s precepts cannot ever understand the world, its people, or its problems. Multiculturalism and wisdom are mutually exclusive. Southern California will continue to decay until it is virtually indistinguishable from Northern Mexico because the population, its skill sets, education levels, ideas of proper governance, and notions of the correct overall structure of society, will be the same.

      [As an aside: If you see anything above as being racist or bigoted, well, then you are part of the problem. Race and culture are two distinct things. All races are equal, but all cultures are not. Nor are they equivalent, interchangeable, fungible, or “close enough” either. And a culture that accepts high levels of corruption and low levels of education, as Mexico’s has for at least a century, is doomed to decay.]

    11. bustoff Says:

      old metaphor: The Rust Coast
      new Metaphor: Flat Broke Busted Beach

    12. SeanF Says:

      David, I think it’s been done.

      Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (Saxenian)
      http://www.amazon.com/Regional-Advantage-Culture-Competition-Silicon/dp/0674753402

      The conventional wisdom is that SV pulled ahead because of its cooperative and open business culture, and extensive partnerships. No idea if that’s true or not, but it does make sense.

      p.s. my posts are being blocked by the spam filter for some reason, hence the name changes on the posts.

      [Sorry, SeanF. The spam filter is indeed blocking your posts. I’ll try to fix the problem but I appreciate your patience in the meantime. Jonathan]

    13. david foster Says:

      SeanF…thanks for the link.

      Shannon…see this link on the importance of America’s frontier spirit in economic development.

      I think it’s very revealing that, in the “progressive” lexicon, “cowboy” is a term of insult.

    14. John Jay Says:

      There’s one more thing to consider about the Cali entrepreneurship figures if all they do is count new businesses – each film production is a new LLC so that liabilities from a director making a bonehead mistake on the last film don’t carry over.

      If the new business stats for Cali include the film companies, I wonder what the stats would be without them? Anyone know if the stats include the entertainment industry?

    15. Shannon Love Says:

      John Jay,

      I do know that a few years ago I looked at self-employment and IIRC California, like most blue states, had fewer self-employed than red states. That suggest that they don’t have a particularly strong entrepreneurial culture.

    16. SeanF Says:

      True, that is only one measure of entrepreneurial activity.

      Interestingly enough, if you look at per capita figures for small business starts, this 2007 Forbes study ranks Vermont as the most entrepreneurial (550/100,000 people) and Delaware as the least (160/100,000) people.

      http://money.cnn.com/magazines/fsb/fsb_beststates/2007/

      One explanation of Vermont’s placement is that it’s a rural state, there aren’t many large employers so perhaps some people are self-employed out of necessity? Or perhaps Vermonters really are independently-minded.

      p.s. thanks for fixing the filter

      [Filter isn’t fixed, sorry. If you can email me when your comments disappear it will be easier to recover them. Thanks. Jonathan]

    17. Shannon Love Says:

      SeanF,

      Of all the statistics you can look at, the most predictive one is internal migration. When people begin to vote with their feet, you have a problem. People don’t leave vibrant, safe, growing productive communities. They leave failing ones. California’s internal emigration turned postive ten years ago i.e. more American citizens migrated out of California than into it. It was just such an emigration pattern in the Great Lakes region during the late-60’s and early-70’s that presaged the regions collapse.

    18. Jack Says:

      I am a native Angeleno and have been very concerned with the direction things are going in. It does not bode well and if we don’t make serious changes soon there will not be a good outcome.

    19. James R. Rummel Says:

      In Shannon’s original post above, he asks….

      “…what do film, silicon and aircraft aluminum decay to?”

      Dust. They all eventually form dust. The Dust Belt.

      SeanF left a comment

      “…California has faithfully represented the American dream, always a step or two ahead of the rest of the country socially, economically and politically.”

      By all that is holy, I hope you are wrong about that.

      James

    20. Alcibiades Says:

      Well, if their electricity problems continue, it could be called the “Blackout Belt”. Or maybe the “Brownout Belt”.

    21. Mrs. Davis Says:

      The old man was just ahead of his time. If only he’d taken up body building.

    22. Blacque Jacques Shellacque Says:

      …but because that means states with fewer natural advantages will be in even more trouble.

      The only “advantage” this state has that can’t be duplicated in many other locales are two deep-water ports with Pacific Ocean access. That’s it.