Out of Control Policy Blog

Regulations and Economic Growth in California

Paul Krugman used his Sunday New York Times Column (September 4, 2011) to, among other things, dismiss the role regulation plays in private investment, expansion and job creation. While not necessarily intending to rebut Krugman, Joel Kotkin has some insight into regulation's pernicious effects on the California economy over at Newgeography.com (also September 4, 2011). Joel discusses several factors leading to California's economic demise, but regulation is one of them:

"Nowhere was California's old technological ethos more pronounced than in agriculture, where great Californians such as William Mulholland, creator of the Los Angeles Aqueduct, and Pat Brown, who forged the state water project, created the greatest water-delivery system since the Roman Empire. Their effort brought water from the ice-bound Sierra Nevada mountains down to the state's dry but fertile valleys and to the great desert metropolis of Southern California. Now, largely at the behest of greens, California agriculture is being systematically cut down by regulation. In an attempt to protect a small fish called the Delta smelt, upward of 200,000 acres of prime farmland have been idled, according to the state's Department of Conservation. Even in the current "wet" cycle, California's agricultural industry, which exports roughly $14 billion annually, is slowly being decimated. Unemployment in some Central Valley towns tops 30 percent, and in cases even 40 percent.

"And now, notes my friend, Salinas Mayor Dennis Donohue, green regulators are imposing new groundwater regulations that may force the shutdown of production even in areas like his that have their own ample water supplies.

"Salinas was the home town of John Steinbeck, author of The Grapes of Wrath and great chronicler of Depression-era California. Today for many in hardscrabble, majority-Latino Salinas, home to 150,000 people, The Grapes of Wrath is less lyrical than real. "California," notes Donohue, a lifelong Democrat, "remains intent on job destruction and continued hyper-regulation."

"California's pain is not restricted to farming towns. The state's regulatory vigilantes have erected a labyrinth of rules that increasingly makes doing almost anything that might contribute to increased carbon emissions—manufacturing, conventional energy, home construction—extraordinarily onerous. Not surprisingly, the state has not gained middle-skilled jobs (those requiring two years of college or more) for a decade, while the nation boosted them by 5 percent and archrival Texas by a stunning 16 percent over the same time period."

Samuel Staley is Research Fellow


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