California's Institutional Sclerosis

by: Robert Cruickshank

Sun May 09, 2010 at 09:00:00 AM PDT

On the other side are those who adamantly refuse to believe that change is either necessary or desirable, who believe that the status quo works just fine and absolutely must not be changed. Some of them instinctively know that change is coming, but because they have invested so deeply into the 20th century model of America - sprawling, dependent on oil, dominating the world yet delusional about the costs of maintaining that dominance and prosperity - they see any proposal to change as some kind of inherent attack on their America.

The primary form that divide has taken is between the "Tea Party" movement and progressives. But here in California, the divide manifests itself somewhat differently. It's not between decent society and a bunch of wacko racists claiming that the president wasn't born in the US. Instead the divide is between those who seek greater public investment in building the elements of 21st century prosperity - from high speed rail to universal health care to renewed investment in our schools - and those who refuse to see such investment as necessary or desirable and come up with reason after reason why we shouldn't do it.

You can see it in Palo Alto where a bunch of people are fighting to kill the high speed rail project merely because they don't like the way the trains will look. You can see it in those who advocate for privatizing public schools instead of investing more to ensure all of California's children can learn.

Although the forms of the divide are different in California, the effects are the same. The defenders of the status quo - who are actively resisting efforts to produce change that can ensure greater prosperity for all - are generally people who already enjoy considerable political and economic privilege. This is not to say they are wealthy, although a good number of them are, but that they enjoy a kind of economic security most of the rest of us lack. They can look at something like high speed rail or affordable higher education and see it as unnecessary because, hey, they've got theirs. Why worry about the rest of us who look at rising oil prices, soaring tuition, and a lack of jobs and see a situation that threatens to permanently exclude us from prosperity?

This sort of situation isn't new, unfortunately, and is familiar to those who study political systems for a living. And as we enter a period of major changes in how we live and how we make a living, where the 20th century status quo is swept away by something new (and still unformed), the forces protecting the status quo become a threat to us all.

In the coming days and weeks I'll be writing more about this, influenced to a great degree by Richard Florida's new book The Great Reset. Florida's argument is very similar to the one I've been making on Calitics since at least 2007: that California is entering a period of significant change in how our economy works, how our land use policies work, and that we must act now to embrace the changes or be left behind.

Florida's specific argument is that we're entering the third "Great Reset", with the Long Depression of 1873-1897 as the First Reset and the Great Depression/World War II of 1929-1945 as the Second Reset. The first reset produced an industrialized, urban America; the second reset produced a suburbanized modern America; the third reset's outcome is still unknown but will not be built on unaffordable suburbs, unaffordable dependence on oil, or an unaffordable reliance on homeownership and financial sector.

Those places that prove themselves adaptable and willing to embrace change are those places that will thrive. And those places that do not prove to be adaptable - that resist change - are those places that get left behind.

As you'll see over the flip, California's "institutional sclerosis" - a political system that empowers those who resist change and block those who seek change - creates a very real risk that California will be one of the places left behind, and that instead of surging forward into a 21st century prosperity, we might instead be locked into a fatal dependence on the failed 20th century model, headed for a slow and steady decline.

While Resets push some regions to the fore, others decline. Growing regions grab hold of new technology and attract new talent. But as these leading regions grow and evolve, some eventually fall victim to what the late economist Mancur Olson called "institutional sclerosis."

Committed to old behaviors and social systems, old technologies, and, even more important, outmoded and hard-to-change institutions, organizations, and business practices, they are either too slow or literally unable to change.

This is what stymied growth in many of the early manufacturing cities, such as Paterson, New Jersey, the mill towns of Massachusetts and upstate New York, and older Rust Belt cities in our time. It's why, Olson argued, new technologies and and new economic systems so often arise in locations that were previously less prominent. In this way, economic Resets provide the jolt that hastens these geographic shifts.

California in the 20th century was a direct beneficiary of the institutional sclerosis of the East Coast. The movie industry took root in Hollywood not because of a deliberate search for the ideal location, but because it combined sunny year-round weather with a continent's distance from Thomas Edison's lawyers, who had sued the industry into the ground back east to protect his monopoly in the 1910s. The aerospace industry took off in the same wide open spaces of Southern California.

Silicon Valley took advantage of new suburbs that had just replaced orchards and proximity to publicly funded universities (much of the research at Stanford was government-funded) to grow the high-tech industry.

All of that was supported by a state government seen in the 1950s and 1960s as one of the nation's best. The State Water Project was backed by a population that understood the need to build and innovate our way to prosperity, who had no preexisting wealth to extract, not much preexisting infrastructure to rest upon. Instead they knew they had to create new things to prosper, and they did so.

Today's California is a very different place. The combination of the desire to protect existing wealth from new taxation and the irrational, unrealistic belief that our economic and urban landscapes are ideal and can last forever and should never be changed, are producing institutional sclerosis on an alarming level.

Here are just four of the many ways California is paralyzed by institutional sclerosis:

• The 2/3rds rule. This not only gives a veto to conservatives over all new policy initiatives, but to those interests conservatives protect - those who already have wealth, and those who most adamantly refuse to part with the 20th century model. In other words, people who don't want to be taxed to build high speed rail, or who refuse to accept that the game of endless sprawl is over, or who already benefited from affordable higher education and don't want to pay to extend the same privilege to others, have in the Sacramento Republican caucus a group of people empowered to stop anything that can challenge those privileges.

• Prop 13. Related to the above, Proposition 13 was created specifically to lock into place the vision of suburban sprawl from people like Jerry Brown who were talking about the need to move to a denser, more equitable model of prosperity. As Brian pointed out, Prop 13's primary beneficiaries are existing businesses. In other words, new businesses face obstacles that older ones do not, making it that much more difficult to innovate and create. Similarly, California's high housing costs to newcomers will eventually stymie growth and creativity in order to privilege a small group of older homeowners. And of course, Prop 13 starves government of the funds to support the new infrastructure and programs needed to make the necessary changes to adapt to an economic Reset.

• Domination of politics by those with existing wealth. Detroit was strangled by the very auto industry it depended on, as the Big 3 controlled the city's politics and refused to allow the city to pursue the path of innovation necessary to move away from dependence on the industry over the last 30 years. Will the same happen to California? Our political system, where corporate spending on ballot initiatives is virtually unregulated and financially unlimited, where wealthy donors call the shots in the legislature, protects the companies of the past while blocking new policies needed to sustain the economy of the future.

• California Environmental Quality Act. CEQA is well-intentioned but a total failure in practice, and the sooner progressives realize they need to support major reforms to it, the better off we will be. It is right to have rules requiring assessment of environmental impacts of new projects, but when those rules get used to do things like allow NIMBYs to block high speed rail because they don't like the way it looks, or block wind farms, or block new density, then we have a serious problem. CEQA should be replaced by a statewide planning model that privileges new projects that reduce carbon emissions, similar to what is used in Washington State and Portland, Oregon. Without such reforms, the legislature will merely continue to exempt projects entirely from CEQA, which isn't an ideal way to protect the environment or conduct new planning.

Many of those institutional barriers are sustained by a cultural or ideological barrier - the belief, in the face of all the evidence, that the California of the second half of the 20th century, where people spent their money buying cars, houses, gas, and consumer goods was the pinnacle of human civilization and that any change to it is a step on the road to ruin.

California used to be a place where individuals reinvented themselves and created new ideas, new products, and new prosperity. It's what catapulted a former backwater to global prominence.

But unless we sweep away the institutional sclerosis, California's fate could be that of Detroit, or of Rochester NY, or of some other place that history and prosperity have left behind as we cling to fantasies that have long been rendered obsolete. Some other place - Seattle? Austin? Minneapolis? Pittsburgh? - will take our place and lead 21st century prosperity.

The progressive vision is of a California where change is not only possible, but embraced. It is a California where economic security is shared by all - a diverse, sustainable, urban future supported by a strong public sector that takes care of our basic needs and preserves our natural beauty. A California where the injustices of the past are swept away by a way of living that prizes the right of all Californians to live a prosperous life with equality and dignity.

That vision must be what animates our work in California. It's not just about beating back the right - but about eliminating the institutional and ideological obstacles that block our movement from achieving the goals we've always had, and learning how to contextualize those goals in a new century without losing their basic essence.