Thursday, October 8, 2009

Did the success of American government policies cause the failure of California?

Will California become America's first failed state?
This very good question was recently asked by The Guardian (UK)>link<.

Indicators (Wikipedia) of a Failed State:

  1. Demographic pressures
  2. Massive movement of refugees and internally displaced peoples
  3. Legacy of vengeance-seeking group grievance
  4. Chronic and sustained human flight
  1. Uneven economic development along group lines
  2. Sharp and/or severe economic decline
  1. Criminalization and/or delegitimisation of the state
  2. Progressive deterioration of public services
  3. Widespread violation of human rights
  4. Security apparatus as ‘state within a state’
  5. Rise of factionalised elites
  6. Intervention of other states or external factors
Of course, the article envisioned a sovereign nation but most of these factors can be seen in California. They can be seen almost anywhere. What matters is the pernicious interaction of these factors and a lot of that is present in California. Illegal immigration, La Raza - the irredentist movement agitating that California is part of "Greater Mexico," gang violence and drug trafficking acquire more importance together with the economic and political problems of the host organism - the presumed "real life" of an American state. The flight of businesses and productive families from California is remarkable and unique in the history of the state.

How about the idea that this failure began 30-40 years ago - and was concealed by major global factors.
  1. Illegal immigration providing cheap labor and lower effective tax rates(lower wage and no withholding taxes) for employers. What was the economic effect of upwards of ten million illegal immigrants sending remittances home? What did the availability of this labor do to the legitimate labor market?
  2. Capital flight from Hong Kong, Taiwan and other Asian countries - providing exogenous demand for real estate (residential and commercial) and capital infusion.
How about the idea that the failure of California is partially explained by the success of American policies? What would that tell us?
  1. To whatever extent illegal immigration has been reduced, has life in California been improved by it?
  2. The demand from Asia for California real-estate is now not discernible. It is gone. Has economic and political stability in Asia caused the collapse of real estate in California (and elsewhere in the US)?
  3. Changes in defense spending, reducing one of the major sources of work, investment and innovation in California. Silicon Valley's boom and bust and recovery notwithstanding, California has suffered from closing of military bases and movement of defense spending to other states.

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