For several decades California has played a leading role in the United States and world capitalism, but things have taken a sudden turn for the worse after a period of brilliant growth. Now, at the end of the millennium, California is a microcosm of the national malaise, the accumulated deadweight of a triumphal epoch bearing down on the present, leaving a misguided economy, a disintegrative social order, a decadent politics and the blinding ideology of an Imperium losing its grip. Chances for success in the wrenching process of economic, political and social restructuring depend on a wider political economy than the putative flexibility of California’s industries or the inspiration of its entrepreneurs. My thesis is simple: that California’s dilemmas have fundamental political and social causes, and the state is ideologically unprepared to cope with the profound tasks of industrial retooling, closing the class divide, or integrating a flood of dark-skinned peoples into the body politic.

California is not finished as a capitalist laboratory of Frankensteinian hope and failure. It has put the best and the worst of capitalist development and liberal democracy on offer, and has survived miserable prospects before by reason of both. But the road not taken leaves a deep trace across the political landscape, while the one down which the bourgeoisie are careening seems a desperate course. This course was set long ago by the political triumph of Cold Warriors, Neo-Liberals and White Men whose counter-revolution laid low the best in California’s popular experiments and social struggles; it is to Richard Nixon, Ronald Reagan and the rest of the hell-spawn vomited forth from California to plague the country and the world for the last fifty years that we owe the present dismal time in history.

The three most obvious and general contradictions facing California are the worst economic crisis since the Great Depression, a massive racial recomposition of the people, and a machinery of state unable to govern.

By the time of the Vietnam war, California had taken over as the principal engine of us economic development. This status was confirmed as industries centred in the Midwest and the Northeast—steel, autos, electrical goods, appliances—folded under the pressure of foreign competition in the early 1980s. Out of the shadow of Fordism, its industries were trumpeted as the way forward for a nation losing its knack in manufacturing. On one side was electronics, in which employment was growing furiously, barrelling right through the 1980–82 recession when us manufacturing was shedding over 2 million workers. Silicon Valley was hailed as the world centre of the new computer-information age and emblem of American innovation and entrepreneurship at its best. On the other side was mighty aerospace, the American trump card for beating back both the Soviets and economic decline. Ronald Reagan’s conquest of the White House sealed the case for America’s state of grace, as defence spending shot up to $300 billion per year, California’s share of prime contracts peaked at 23 per cent, and a new generation of ‘smart war machines’ was ushered in. Orange County avionics became the biggest cluster of electronic manufacturing on earth (while the Bay Area received huge new contracts for satellites, guidance systems and Star Wars lasers). Everyone rushed to study Los Angeles and Silicon Valley, the new technopoles.footnote1

Then there was finance capital: California entered the 1980s with the world’s largest bank (Bank of America) and credit card company (visa), the country’s biggest Savings and Loans (led by Southern California impresario Charles Keating’s Lincoln Savings), and the nerve centre of the junk bond market (presided over by Michael Milken). If the 1970s were good, the 80s were sensational. As financial regulations fell, fastbuck s&l operators went to work shuffling the deck of dubious assets including short-term certificates of deposit, land and buildings revalued through ‘flipping’, ‘interest reserves’ paid by the firm to itself, and ‘good will’ (some 40 per cent of all assets by 1986) in place of stable savings; and behind them lay the wizardry of Milken and Wall Street, which made about one-third of its profits in the mid-80s trading with the s&ls in new brands of mortgage securities.footnote2 Backed by fire-sale finance, construction starts ballooned, along with housing prices and commercial rentals. Excess piled upon excess, and the California economy became white-hot.