Thursday, December 3, 2009

Getting Out

Readers may be shocked that the title of this post doesn't refer to Afghanistan. Mark pointed out a fantastic blog post comparing Texas and California. Here are the key points:
...Both the Brookings Institution and Forbes Magazine studied America’s cities and rated them for how well they create new jobs. All of America’s top five job-creating cities were in Texas. It's more than purely economics and regulation can explain, though. Texas – and Houston in particular – has a broad mix of Hispanics, whites, Asians, and blacks with virtually no racial problems. Texas welcomes new people and exemplifies genuine tolerance. When Hurricane Katrina hit, Houston took in 100,000 people. Not surprisingly, Houston has more foreign consulates than any American city other than New York and Los Angeles...

But, how did this happen? What’s wrong with California, and what’s right with Texas? It really comes down to four fundamental differences in the value systems embodied in these states:

First, Texans on average believe in laissez-faire markets with an emphasis on individual responsibility. Since the '80s, California’s policy-makers have favored central planning solutions and a reliance on a government social safety net. This unrelenting commitment to big government has led to a huge tax burden and triggered a mass exodus of jobs. The Trends Editors examined the resulting migration in “Voting with Our Feet,” in the April 2008 issue of Trends.

Second, Californians have largely treated environmentalism as a “religious sacrament” rather than as one component among many in maximizing people's quality of life. As we explained in “The Road Ahead for Housing,” in the June 2009 issue of Trends, environmentally-based land-use restriction centered in California played a huge role in inflating the recent housing bubble. Similarly, an unwillingness to manage ecology proactively for man’s benefit has been behind the recent epidemic of wildfires.

Third, California has placed “ethnic diversity” above “assimilation,” while Texas has done the opposite. “Identity politics” has created psychological ghettos that have prevented many of California’s diverse ethnic groups and subcultures from integrating fully into the mainstream. Texas, on the other hand, has proactively encouraged all the state’s residents to join the mainstream.

Fourth, beyond taxes, diversity, and the environment, Texas has focused on streamlining the regulatory and litigation burden on its residents. Meanwhile, California’s government has attempted to use regulation and litigation to transfer wealth from its creators to various special-interest constituencies.

They go on to make six forecasts:

1. ...expect to see California’s loss of jobs to Nevada accelerate...
2. ...expect to see a backlash in California and across the country against regulations, especially green initiatives that can’t clearly demonstrate a positive ROI...
3. Watch for the smart money, including venture capital, to begin migrating to Texas for start-ups in many areas, including energy, info-tech, manufacturing, and biotech. Just as Delaware’s tax laws once encouraged numerous businesses to incorporate there, even when they had no connection to the state, Texas will become a magnet for new businesses by offering cheap land, a favorable regulatory environment, a business-friendly culture, and a large supply of skilled labor. Unless California revamps dramatically, expect to see its economy languish, even as the recovery takes off.
4. To make its business climate even more business-friendly, Texas will invest heavily in secondary education and work hard to attract the best talent to its research universities (note the recent Tier 1 proposition and funding). Keep an eye especially on the University of Texas, which already has a first-rate campus and faculty. Within 10 years, UT, as the locals call it, may well rival Stanford or Berkeley.
5. Other states will adopt tort reform measures pioneered in Texas. Unlike California and most other states, Texas has been aggressive in minimizing the enormous burden of frivolous lawsuits...
6. Look to Texas to become a cutting-edge cultural mecca. Houston has always offered a vibrant cultural scene, ever since the Alley theater company was founded there in 1947 by Nina Eloise Whittington Vance. In the 1950s, John and Dominique de Menil moved to Houston with one of the most significant private collections of art in the world and began donating art and money to the Houston Museum of Fine Arts. Both institutions have grown to world-class status since then. In the coming years, this trend will spread to the major cities of Texas, attracting the best talent and money and shifting the cultural balance of the nation away from New York and San Francisco.
This poster focused on the differences between Texas and California, but the original article seems to focus more on America's future path.

A brief look at California shows we're in trouble. From a CNN article on overall American migration:
For years, Americans have been fleeing the Golden State. The population kept growing only because of foreign immigration and births. All through the 2000s there has been a net loss in domestic migration, with 800,000 more Americans leaving than moving in during the three years ended in 2007. As it became more difficult to sell homes, that out-flow eased. That, combined with the newcomers, meant the population fell by only 144,000 in 2008.
That article goes on to try to tie California's domestic population loss to Florida's more recent population loss, blaming it on the housing market. Given that California has been losing domestic population since long before the housing market woes, it defies logic to make that claim.

California's high taxes and massive regulation (on businesses and individuals) are the causes people and businesses cite as their reason for leaving.

Applying that to America, if we follow the California model for governance, the nation will see our population flowing to Canada and Mexico, but we won't see greater prosperity. Eventually, as California's are doing, massive U.S. social programs would collapse under their own weight. For success we'd need to look to the Texas model.


self certified genius said...

during the gold rush, California Indians hoped the Americans would leave when the gold ran out. One Indian said, before the white man came, the land was covered with flowers. The white man brought thistles, smallpox, and slavery.

When the gold ran out, the white man stayed. That would be one disappointed Indian.

Andrew said...

Interesting. Might I have a source on that?

I ask because there are a few indications the quotation itself might not be historically correct.

Indian tribes regularly enslaved each other during conflicts. Also, for example, on the trail of tears many of the deaths were African slaves held by the Native Americans. In short, the white man didn't bring slavery, and any Native American knew that.

Also, smallpox blanket warfare was used significantly prior to the gold rush if memory serves.

In any case, what the flagging gold supplies couldn't do, poor government absolutely can.