California’s Economic Decline

This article, prompted by Northrop Grumman’s moving its headquarters out of California to the Washington, D.C. area, says that California is on its way toward becoming a third-world economy. Once the center of the aerospace industry, Southern California now has no major aerospace firms headquartered there. Once a financial center, California has also lost Bank of America, Security Pacific Bank, Countrywide, and First Interstate, and is now home to no major financial institutions. Once a major center of automobile manufacturing, California recently lost its last auto plant. Meanwhile, there is no inflow of economic activity to offset this exodus.

The corporate exodus brings with it shrinking tax bases, reductions in philanthropy, and of course fewer economic opportunities for Californians.

Bill Watkins, the article’s author, blames this decline on Californians’ expressed preferences for quality of life and environmental preservation over economic opportunity, on high taxes despite declining public services, and on a government more focused on providing benefits to public sector employees rather than public goods for its citizens.

Watkins concludes, “Southern California is starting to look a lot like a third-world economy, service based, inequitable, serving a wealthy, mostly aging few, with little opportunity for younger workers and a large underclass.”

For decades I’ve heard that Florida is about 15 years behind California. I’m a Floridian, and I’m hoping that’s not true.

Randall G. Holcombe is a Senior Fellow at the Independent Institute, the DeVoe Moore Professor of Economics at Florida State University, and author of the Independent Institute book Liberty in Peril: Democracy and Power in American History.
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