Can California cultivate anything better than the seeds of its own destruction? Urbanologist Joel Kotkin tallies the state’s ills

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

Joel Kotkin on the rise and fall of the Golden State:

Twenty-five years ago, along with another young journalist, I coauthored a book called California, Inc. about our adopted home state. The book described “California’s rise to economic, political, and cultural ascendancy.”

As relative newcomers at the time, we saw California as a place of limitless possibility. And over most of the next two decades, my coauthor, Paul Grabowicz, and I could feel comfortable that we were indeed predicting the future.

But much has changed in recent years. And today our Golden State appears headed, if not for imminent disaster, then toward an unanticipated, maddening, and largely unnecessary mediocrity.

Since 2000, California’s job growth rate— which in the late 1970s surged at many times the national average—has lagged behind the national average by almost 20 percent. Rapid population growth, once synonymous with the state, has slowed dramatically. Most troubling of all, domestic out-migration, about even in 2001, swelled to over 260,000 in 2007 and now surpasses international immigration. Texas has replaced California as the leading growth center for Hispanics.

Out-migration is a key factor, along with a weak economy, for the collapse of the housing market. Simply put, the population growth expected for many areas has not materialized, nor the new jobs that might attract newcomers. In the past year, four of the top six housing markets in terms of price decline have been in California, including Sacramento, San Diego, Riverside, and Los Angeles. The Central Valley towns of Stockton, Merced, and Modesto have all been awarded the dubious honors of the highest foreclosure rates in the nation during the past year.

Even with prices down, many of the most desirable places in California are also among the most unaffordable in the nation. Less than 15 percent of households earning the local median income can afford a home in L.A. or San Francisco. In Santa Barbara, San Diego, Oxnard, Santa Cruz, or San Jose, it’s less than a third. That’s about half the number who can buy in the big Texas or North Carolina markets. Moreover, state officials warned in October that they might have to seek as much as $7 billion in loans from the U.S. Treasury. This is a disappointing turn for a state that once saw itself as the harbinger of the future.

Not surprisingly, few Californians see a turnaround soon. In the most recent Field Poll in July, a record high 63 percent of Californians said they are financially worse off than they were a year ago, while a record low 14 percent described themselves as better off. Poll director Mark DiCamillo called it “the broadest sentiment of pessimism we’ve ever seen.”

Of course, California can still attract many newcomers, particularly young and ambitious people who dream of a career in Hollywood or Silicon Valley. The problem is that when you grow up and have failed to secure your own dotcom or television series, life in Texas, Arizona, North Carolina, or even Kansas starts looking better. According to real estate analysts, the only thing preventing the current outflow from being worse is that homeowners cannot sell their residences in order to move.

All of this suggests a historic slide of California’s role as a bastion of upward mobility. In 1946, Californians enjoyed the nation’s highest living standards and the third highest per-capita income, noted journalist John Gunther. As recently as the 1980s, Californians generally got richer faster than other Americans did. Now, median household income growth trails the national average while the already large divide between the social classes—often bemoaned by the state’s political left—grows faster than in the rest of the country.

Today, notes a recent Public Policy Institute of California study, California has the 15th highest poverty rate in the nation. Only New York and the District of Columbia fare worse if the cost of living is factored in. Indeed, after accounting for cost of living, L.A., Monterey, and San Francisco counties—all places known for concentrations of wealth—have poverty populations of 20 percent. “San Francisco,” says historian Kevin Starr, a native of the city, “is a cross between Carmel and Calcutta.”

There’s a lot more — including the possibility of a happy ending.

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