Monday, April 23, 2012

The New Robber Barons

Joel Kotkin has spent a career figuring out things well most of the rest of us recognized that there was an issue to be thought about.   In Saturday's WSJ there was an interview with this forward thinker.    Joel, who I came to know when he wrote about the folly of trying to redesign American business along the Japanese model (when everyone else was writing books about how the Japanese model).   In one sense his caution (that the Emperor had no clothes - keiretsu - which literally means a headless combine) was that the hierarchies of Japanese industry would not work in the new economy of the 1980s.

But this interview is different.  Kotkin's thesis is that California is not working.  There is plenty of evidence.   In the last two decades California has had 4 million more people leave the state than come to it.  That certainly is not the history of the state that I grew up in.  But two decades of essentially one party rule have allowed all sorts of nonsense to take place.   California has energy prices that are 50% higher than the rest of the country.  It has  perennial budget deficit that dwarfs state budgets in many other states. It has a public employee base that has instituted a huge sinecure of public pensions that are a bit more generous than Croesus could have expected in tribute.  It led the country in establishing a punitive system of torts, environmental regulation and planning restrictions that have made housing in key areas of the state prohibitively expensive.

So what has all this melange of policies produced?   He argues that the effects of all these things have had caused little change on the people who support the ruling elites.   But the average person in the state had been buffeted (no pun intended but the Sage of Omaha would be quite at home with most of the nonsense  Kotkin describes) into moving.   A young family whose combined income is $250,000 has a hard time in finding a house and in paying bills in many areas of the state. Smart growth has argued that the bureaucrats know better than the consumer and have tried to force people who cannot afford a million dollar fixer upper - into multi-family housing.  Thus, the policies have created an almost permanent underclass while actually leaving the wealthy untouched.   If you have ever read the muck-raker's discussion of the Robber Barons - there are amazing parallels.   But in this case instead of capitalism run wild this is government gone wild.   You should read the interview by clicking on Kotkin's name at the start of this post.

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