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Californians are fleeing the state, with the population falling by about half a million since 2020.
If you want to know why, a clue may lie with a convict called Luis Angel Hernandez. He is serving time for murder and armed robbery – but after hearing that Los Angeles’ radical public prosecutor George Gascón would lop 10 years off his sentence, the grateful prisoner vowed to have the district attorney’s name tattooed onto his face.
Sweeping into office on the back of lavish donations from foundations, Gascón and other radical prosecutors like him undertook policies such as downgrading property-related theft to a misdemeanour – a much lesser class of crime – and aggressively pursuing police officers in the courts for manslaughter.
California’s cities have been left reeling from this woke criminal justice drive. Violent crime rose 6pc in 2020 but 20pc in Oakland, east of San Francisco Bay. The public blames radical attorneys. San Francisco’s DA, Chesa Boudin, was recalled by appalled voters last year and there have been three attempts to unseat Gascón, though none successful.
Residents are also voting with their feet, with families leading this Gold Rush in reverse. School enrolments have plummeted since the start of the pandemic, giving the state an ageing profile.
Besides rising crime, there are many other good reasons for seeking a new life elsewhere.
In neighbouring states, Arizona’s income tax ranges between 2.5pc and 2.98pc, while Nevada has no state income tax at all.
By contrast, California’s income tax can reach as high as 12.3pc – on top of federal income tax, of course – and the state throws in a higher sales tax too, for good measure. California’s tax system ranks 48th out of 50 in the Tax Foundation’s State Business Tax Climate Index this year.
This is a problem of its own making. The state voted to diminish land taxes in 1978, resulting in eye-gouging taxes on income and transactions.
Elsewhere, California has the highest commercial and industrial electricity rates per KwH of any mainland state – and the second-highest gasoline prices too.
Texan factories enjoy energy costs just one third of those in California, so few can have been surprised when Elon Musk moved Tesla Motors HQ from California to Texas, although Tesla retains a large production plant in the Bay Area.
The state retains some major manufacturers, including defence contractors but high energy costs will only make relocations more attractive.
The timing of this shattering of the Californian myth is ironic, given we have the most California-friendly prime minister ever. Rishi Sunak spent two years at Stanford completing an MBA, met his wife there and returned to the state last week on holiday.
Successive prime ministers have long praised the enterprising spirit in California. But is the state really a model to emulate? Not for the urbanist Joel Kotkin, for whom California is “resembling a stagnant and depopulating European state, living off past glories”.
In reality, California’s reputation as a technological and industrial powerhouse has been on thin ice for years. It was the microprocessor revolution of the late 1970s that gave Silicon Valley its technological leadership, stealing the mantle from the East Coast towns and cities around northern New York state and Massachusetts.
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But the big semiconductor fabrication plants, or fabs, are distant memories. Intel closed its last Californian fab in 2008. The same year, long-time rival AMD – whose founder Jerry Sanders once boasted that only “real men have fabs” – spun out all of its plants to a new entity, Global Foundries. None are in California.
The internet further advanced California’s technology halo, but it also helped to detach it from reality. Rather like a cargo cult, VCs wish that the good times of the dot.com era would return.
Social media, with its ability to engineer how people and communities engage, gave chief executives and investors a taste of megalomania. From then on, they were confident they knew how the world would work. Deep and complex problems could be fixed with a quick “hack”.
But the world doesn’t work like software, which can be produced in abundance at a marginal cost close to zero. Many real-world business sectors stubbornly refuse to “scale” in the same way as a Facebook. Just ask WeWork.
On top of this, very often the ideas being bankrolled by VCs were dreadful – more of a reflection of an era of low interest rates, rather than brilliant insights or technological breakthroughs.
The “sharing economy” was clever in identifying under-used resources, like spare rooms, and creating a marketplace for them. However, Airbnb today looks like a conventional business, rather than a paradigm shifting innovation.
As for Web3, which sought to replace the internet’s basic plumbing with exotic software instruments such as crypto currencies and blockchains, that was a triumph of hope over reality. Today, the mania for “artificial intelligence’ also reflects a desperation for the bubble era to return.
Nothing seems to dim chief executives’ appetites for telling us how we should structure society: OpenAI founder Sam Altman suggesting the world should adopt a wealth tax to fund a universal dole is just the latest example.
The greatest irony is that the world has changed, but California’s technology mindset hasn’t.
It’s going to miss out on reshoring, as manufacturing jobs return to the United States. The high energy costs and punitive taxes mean that for once, the revolution is taking place with California as a mere spectator.
A California-friendly prime minister is the last thing Britain needs
Punitive taxes and violent crime have sidelined the Golden State in the latest tech revolution