California Is a Bastion of Innovation Marred by Deep Inequality. Is That America's Future?

Everyone seems to be California dreaming these days. Much of America, particularly its red parts, see California as a hopeless dystopia best understood as everything the nation should avoid. Meanwhile, for the progressive Left and many around Joe Biden, California is the Mecca, a great role model being attacked by jealous reactionaries.

As in so many cases, both sides have a piece of the truth.

To be sure, despite the many well-documented problems, California still has an impressive economy that will shape the country's and the world's economic future—through the entertainment, space, critical software and social media industries and international trade. A spirit of experimentation and innovation persists across the state and fuels this industriousness.

Sadly, along with new technical and cultural innovations, the everyday reality outside the glamor zone presents a prospect as cautionary as it is aspirational, a harbinger of innovation marred by massive social inequality.

For the parade of startups and youthful billionaires coexists with the country's highest cost-of-living adjusted poverty rate, the largest gap between the middle class and the rich, the most crowded housing and second lowest homeownership rate.

California once projected the essence of our common national dream. Today, its leaders increasingly see it as a kind of post-America, with its own racial, gender and environmental standards. It's an approach welcome in Malibu or Palo Alto, but most Californians are left coping with the nation's worst homeless crisis and rising crime. A ride on Highway 33 through the impoverished expanses of the Central Valley reveals a vast and bleak landscape of abandoned cars, dilapidated houses and threadbare shops.

The pandemic has accelerated California's class divide, vastly enriching the tech elite and financial oligarchs but leaving California with the nation's highest unemployment rate and making it the second hardest place to find a job.

Silicon Valley was once among the most egalitarian regions in the nation; today, as it has become more aggressively woke and taken to massively funding progressive Democrats, it has become one of the most segregated places in the country, what CityLab has described as "a region of segregated innovation."

Times may be flush for venture capitalists and serial tech entrepreneurs, but they're not so great for those who clean their own buildings and work in the food service industry. Nearly 30 percent of Silicon Valley's residents rely on public or private financial assistance. African Americans and Latinos have seen declines in real incomes. The one percent pay roughly half of the state's income tax and windfalls from IPOs fund the state's ultra-generous pensions and an ever expanding welfare state—and yet, none of this creates good jobs.

Over the past decade, 80 percent of all new jobs in California paid under the median income and half under $40,000 annually, a poverty wage in the high cost state. New employment in manufacturing, construction and professional business service jobs lags national averages and is well behind rivals like Texas or Arizona. To make matters worse, California has also decided to eliminate the state's once thriving oil and gas sector, a move that according to a study by the Los Angeles Economic Development Corporation, threatens over 366,000 high-paying, largely blue-collar jobs, about half of them held by people of color.

Even the tech sector is now under threat with growth shifting to other states and major players like Oracle, HP Enterprises and Tesla all leaving the state. Since the onset of the pandemic, many leading tech firms expect a large proportion of their workforce to work remotely, with workers now increasingly seeking out cheaper, more scenic, and less congested climes. California now ranks 50^th—in other words, last—on a list of u-haul destinations.

When I moved to California in 1971, few could imagine that this state—in my mind the most dynamic place in North America for the last half century—would lose its magnetic appeal. And yet, most California counties have been losing young people; over the past 20 years, Los Angeles, once the avatar of youth, has seen its population under 25 fall by a remarkable three quarters of a million.

Pushing people out of California or persuading them not to come is an enormous if tragic accomplishment. How was it achieved?

Progressive politics, in short. In the post-war era, California prided itself on good schools, great roads and brilliantly designed water systems, all driving the creation of new, family friendly communities. Now, the once efficient government has become plagued by massive fraud in its welfare system, an education system increasingly driven by a desire to indoctrinate while performing abysmally for poor and minority kids, and a road system that has fallen into disrepair.

And don't forget California's obsessive need to be acknowledged for its climate leadership. As the tech billionaires operate with impunity, more traditional business that traditionally brought opportunities for working- and middle-class families like construction and manufacturing have been stymied. Attorney Jennifer Hernandez has aptly coined it "the green Jim Crow" due to rising energy poverty, high rents and limited employment options for the non-college crowd.

Even for those who find good jobs, entering the middle class is increasingly difficult. The state is now home to six of the 10 worst cities for first time homebuyers. In Los Angeles, San Jose and San Francisco, it would take well over hundred years for the median income household to make a down payment on a median priced new home, according to a study for Knock.com.

All this has led some red staters, and particularly the newly converted, to put California behind them, like a glitzy Soviet Union. And yet, this may prove harder than it sounds. What happens in California tends to go everywhere, given its domination of entertainment, top technologies and social media. The state's ecotopian policies, for example, are the model for other states and the Biden-backed "green new deal."

California has created much of the modern world, from the promise of space travel to the dystopic meanderings of the metaverse. But it also presents the prospect of a high-tech dystopia, with ever increasing gaps between a wealthy elite and increasingly beleaguered masses.

California cannot be ignored. It needs to be addressed, particularly by those of us who live here. In seeking to restore upward mobility here, we confront issues that will shape the rest of the country and the world in the decade ahead.

People like me are always being asked when we are going to move, but it may be better for all Americans if Californians put their shoulders to the wheel and stay to fight for the future of our state.

Joel Kotkin is the Presidential Fellow in Urban Futures at Chapman University and executive director of the Urban Reform Institute. His new book, The Coming of Neo-Feudalism, is now out from Encounter. You can follow him on Twitter: @joelkotkin.

The views expressed in this article are the author's own.