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The once Golden State surrenders its economic future to partisan politics and vision-less, ineffective ''leadership''

LOS ANGELES – 03/04/09 – In January 1853, Capt. John Rodgers, U.S. Navy, was allocated a budget of $125,000 and commissioned by a far-seeing Congress to “prosecute a survey and reconnaissance for naval and commercial purposes, of such parts of the Behring Straits, of the North Pacific Ocean and of the China Seas, as are frequented by American whale ships and by trading vessels in their routes between the United States and China.”

His mission accomplished three years later, Rodgers summarized his experience in a letter to the Secretary of the Navy which he closed with a remarkable prescient observation.

He wrote: “We, through California, inherit the trade of the Pacific; for we are the only nation upon it which cultivates foreign commerce…my sense of its importance [that is, the just completed survey] has been quickened by seeing the wonderful energy of California, and her progress under its influence.”

That was then; this is now and, just a little more than a century-and-a-half later, it’s difficult to share the good captain’s enthusiasm and heartbreaking to ponder what’s gone so terribly wrong.

“For years, California has had a deserved reputation as a trend setter, and the trend it has been setting in recent years is one of fiscal brinkmanship,” writes Lou Cannon in a recent edition of the Capitol Journal.

The state is “unable to sell its bonds or pay its bills” and “in desperate straits, perhaps foreshadowing the economic circumstances that could confront the nation when the recession ends. At that point the United States and other industrialized nations will be awash in accumulated deficits, facing protracted belt-tightening and a lowered standard of living.”

Effectively outlining the past fifty of California’s “glory years,” Cannon nostalgically harkens back to the days of genuine legislative bipartisanship – a time that, for all its occasional demagogic moments – meant difficult decisions by governors and legislators who, in challenging times, cared more about their state than their party.

What’s happened? How could it all have gone so wrong?

Perhaps the Wall Street Journal best described what’s been called California’s “sorry descent into political dysfunction.”

California, the paper editorialized, "which a decade ago was the booming technology capital of the world – has been done in by a steady diet of two decades of chronic overspending, over-regulating and a hyper-progressive tax code...” – a toxic trio that have blended into a corrosive mix that have slowly sucked the life force out of everything that once made the state a great place to live and do business – summed up in what the good Capt. Rodgers called “the wonderful energy of California, and her progress under its influence.”

Rodgers saw California, in effect, as a doorway to trade and the prosperity that would be the natural result of that trade. It’s more than sad that the bureaucrats in Sacramento lack the good captain’s vision.

Created years before and managed effectively during its first decade of existence, the California Technology, Trade & Commerce Agency had by 2003 been mismanaged into the ground by political hacks who, over time, turned a professionally-run agency attuned to the needs of the international trade community, into a dumping ground for political hacks who knew as much about foreign trade and business as they did about astrophysics.

With a single sweeping motion, masked by the dust kicked up by the acrimonious reall of failed Governor Gray Davis, the legislature shuttered the agency and, at the same time, shut down every one of the state’s overseas trade promotion offices.

The move – staggeringly stupid, even by Sacramento’s standards – put California in the position of being the only state in the Union without any effective mechanism to promote international trade or assist the state’s global business community in finding overseas markets for its products and services.

And the bureaucrats, patting themselves on the back for a job well done, have never looked back.

“Trade promotion” junkets to China, Austria, Japan, Canada, and Mexico have yielded great photo opportunities, but no appreciable business [except that dredged up for a chosen select few cronies], while virtually nothing has been done to reestablish a working relationship with the state’s international business community.

Highly paid state officials hold lofty titles, but they accomplish nothing, while more than half a dozen state Assembly and Senate committees supposedly formed to promote and facilitate trade produce never convene, or at best, generate nothing but hot air. All the while, bought-and-paid for consultants and bureaucratic staffers busily race about the halls of the capitol text-messaging on their iPhones and flapping their arms, making a lot of noise trying to convince the business community and the public that they’re earning their bloated pay and handsome percs.
Things are no better at the top of the pile, either. Governor Schwarzenegger, elected to clean house in the 2003 recall, continues to be handled by a Hollywood-style entourage like a movie star who happens to be the state’s chief executive, rather than the other way around.

In the dim past, television commercials showing the governor luxuriating in a polo shirt with a glass of wine and waxing eloquently on the appeal of California’s oh-so-cool attitude and its balmy clime may have had an impact on companies pondering a move either into or out of the state, but those days are long past and the money expended on their production could have been better spent on more productive pursuits.

“For many, it seemed warm weather, beaches and a vibrant culture would be enough to keep film production, bioscience and information technology companies satisfied - and firmly rooted in the Golden State, but California has been a neglectful host,” reads an editorial in a recent edition of the Los Angeles Daily News.

“While the state's politicians are busy in endless debates over budget cuts, new taxes and elephant enclosures,” it said, “other states [and cities] are trying to lure away California businesses, enticing them with financial incentives and relocation assistance.”

Take Denver, Colorado, for example.

Last month, the city’s Economic Development Office sent Valentine-style mailings to corporate executives, and even hired a plane to tow an 80-foot-long “Colorado Loves CA” banner over Los Angeles.

The thinking behind the effort is that Colorado has lower taxes and lower living costs than the Golden State, as well as a better quality of life and a better educated workforce – the key elements in attracting business. "In California, the economic climate just isn't conducive to expanding," said Janet Fritz, director of marketing at Metro Denver Economic Development Commission.

Then there’s Nevada and Arizona, and Washington and North Carolina, all of which are actively luring California-based companies with creative packages of customized tax breaks, minimized red tape, expedited licensing, and other incentives.

And then there’s Georgia, which Forbe’s Magazine has rated as one of the best states in the country in terms of attracting – and retaining – job-producing, revenue generating business, particularly business driven by international trade. "

As the U.S. economy has slowed, we have cast our eyes globally and sought international business. We consider this a harvest from the '96 Olympics," says pro-business Georgia Governor Sonny Perdue.

The ground work for this international recruitment was laid out long before the Centennial Olympics, the magazine says.

Georgia opened an economic development office 22 years ago in Seoul, South Korea. One of the positive results of that move was the decision by Seoul-based Kia Motors to open a new $1.2 billion car manufacturing facility in West Point, Georgia.

Kia expects to hire 2,500 employees, and another 5,000 or so workers will be needed for the numerous auto suppliers popping up around the Kia site.

A striking point to note: California wasn't even on Kia's list of potential sites for the new assembly plant.

 "The number of companies needed to support these big business is the silver or even gold lining of a major manufacturer locating to your state," a representative of  Georgia’s Office of Economic Development told Forbe’s.

The Seoul office is one of 10 economic development offices Georgia opened outside the US. Others include Tokyo; Mexico City; Munich, Germany; and Sao Paulo, Brazil.

Last April, an office was opened in Beijing, a move spurred by the fact that the state has seen a host of Chinese companies, including General Protecht, Lehui and Sany, establish operations in Georgia over the past several years.

According to Forbe’s, Georgia leads most rivals with its incentive programs to lure businesses, ranking fourth according to a study on state government incentives, conducted by Pollina Corporate Real Estate, a study that the magazine incorporated into its national analysis.

It isn't something that Governor Sonny Perdue, a veterinarian and former small-business owner, wants to hang his hat on. "We don't think Georgia needs to be nor do we want to be the low-cost leader in [incentives]. We think it is about value," he says.

But with North Carolina, Virginia and South Carolina - the top three states when it comes to incentives – as neighbors, Georgia is often forced to utilize tax breaks.

"The core strength of Georgia's incentives and economic development department are its job training and tax-credit programs," Brent Pollina, who authored the study, told Forbe’s. Perhaps Georgia's best selling point is its logistics infrastructure.

Atlanta's Hartsfield-Jackson airport is the world's busiest, serving 89 million passengers a year and supporting the operations of 16 cargo airlines flying high-priority cargo in and out of the US Southeast.

Meanwhile, the Port of Savannah is one of the fastest-growing ports in the nation, now its fourth busiest, and considered by many to be the country’s Gateway to the America’s.

Bottom line: Georgia’s deepwater ports of Savannah and Brunswick and its inland barge terminals support more than 286,476 jobs throughout the state annually and contribute $14.9 billion in income, $55.8 billion in revenue and $2.8 billion in state and local taxes to the state’s economy.

Last November, Georgia hired a representative in California to tout the state’s positive business environment and cultivate the seeds of exasperated discontent witlessly planted by California’s out-of-touch political leaders – leaders who have failed completely to grasp the fact that the primary driver that energizes California’s symbiotic global economy is its international trade relationship with export - and import - partners around the world. 

Is international trade a panacea? No, but it certainly presents a tangible component of the rational solution to California’s seemingly insurmountable economic problems.

To put it in terms the governor might understand: international trade is like the background music in a movie. It may not seem essential to the overall plot of the film, but you sure do realize how important it is when it’s not there. International trade cultivated in an environment that helps – and not punishes – business creates jobs, generates taxable revenues, and stimulates investment.

Tragically, that’s a simple truth that Sacramento has chosen to ignore. It’s bad enough when other states, and even other cities, are eating California’s lunch in this regard; it’s another thing when those with the power and the wherewithal to do something to revitalize the state’s sputtering economy serve it up on a silver platter.

Is anybody listening, and does anybody care?

Michael D. White          CalTrade Report        [email protected]

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