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California

05.28.2009

Joel Kotkin asks: Can California make a comeback? Economic developers here in Texas focus a lot on California. Many companies in Texas, especially in the Dallas and Austin technology sectors, are based in California, so chambers of commerce make numerous trips there every year on business retention and expansion visits. California is also viewed as a ripe target for recruitment efforts–comparable talent availability, lower taxes, less regulation, and lower cost of living make Texas an easy sell. So is this the long-anticipated moment of reckoning for California, as Kotkin mentions? If so, what might that mean for economic development in Texas?

The housing bubble distorts the picture, but some of the data is compelling. According to IRS records, nearly 83,000 people moved from California to Texas in 2006-2007. By contrast, the next most popular destination for people leaving California was Arizona, at only 56,000 people. The 2007-2008 data will be available this summer, and it will be interesting to see if this trend continued through the housing collapse and recession.

My take on California: don’t bet against her. Kotkin rightly points to several issues that could have long-term impacts on economic competitiveness. Nevertheless, I lived in California for two years right before the peak of the housing boom, and I witnessed people–especially young people–go to extraordinary lengths to live, work, and start businesses there.

Governance challenges notwithstanding, the bottom line for me is this: As long as talented people are willing to move to California to chase a dream, whether it’s entertainment in Los Angeles, technology in San Jose, or life science research in San Francisco, California will be a center of innovation and a driver of U.S. economic competitiveness.