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.

California grew bigger than all but six or seven countries in income and output, with a gross domestic product of $700 billion in 1990. From 1979 to 1988, the state added 2.6 million jobs, over one-sixth of all job creation in the us in that period, for a total of 13.6 million jobs. Average income per capita doubled from 1980 to $16,400 in 1990 (18 per cent in real terms), one-sixth greater than the us average. Well positioned on the eastern flank of the Pacific Rim, California became the national leader in exports to the global market, rising from 10 to 20 per cent of us foreign trade, and in direct foreign investment received. The main growth poles are the San Francisco and Los Angeles metropolitan areas, but San Diego and Sacramento became two of the fastest growing us cities: in the 1980s, la metro grew from approximately 11.6 to 14.6 million (26.3 per cent), the Bay Area from 5.2 to 6.0 millions (16.3 percent), San Diego from 1.9 to 2.5 million (34.2 per cent) and Sacramento from 1.1 to 1.5 million (34.7 per cent). Southern California manufacturing employment peaked in 1988 at over one and one-quarter million jobs, making it the biggest industrial centre in the United States; the Bay Area more than doubled its employment from 1970 to 1985 behind Silicon Valley, which became the highest concentration of manufacturing in the us. footnote³

Although Los Angeles had become the biggest city in the state by 1920, it has had difficulty getting out from under the political and cultural suzerainty of San Francisco. In the 1980s it appeared that at last Los Angeles had triumphed utterly over a badly weakened rival, seizing its last strongholds, finance and the arts. The Bay Area went into a sharp downturn in 1985–86 which Southern California hardly felt. An overheated Silicon Valley was forced to pull back and regroup and Bank of America was on its knees,footnote⁴ while museums were springing up like weeds around the la basin. la even stole Oakland’s beloved football team, the Raiders. But the euphoria of Southern California was to be short-lived.