Tuesday, February 3, 2009

california: the long term forecast

Ever wondered what will happen to the Golden State in the next decade or two? Well, the trends are there for everyone to see. It does not look so good to say the least. Of course, any dismal outlook needs to be tempered by the notion that California is very important strategically for the US. 

So important that the young country went to great lengths to tame the badlands and near-deserts around what was once the dusty Pueblo de Santa Maria de Los Angeles. The impoverished pueblo became a metropolis known as Los Angeles. 

In the process the fertile Owens valley was laid to waste. So too was northern Baja California, but that is not our problem you say? It doesn't stop there though. Hundreds of dams were erected, the "other" Yosemite valley flooded, and the Sacramento river delta depleted of one of the finest salmon fisheries anywhere; its ecosystem forever changed. Such was the cost extracted to colonize the Southland and turn it into concrete and golf courses.

It is clear that the country will go to great lengths to preserve access to the Pacific and to keep California thriving. If something were to happen to California, a breakup of the US would become a reality.

I suspect the US will eventually break up, but it may be a long time in coming. The trends that affect California also affect the country as a whole and the forces driving towards a breakup are very strong. I am not speaking of political activism, acts of savvy business people, deeds of brave heroes, or overall sentiment. In my opinion these are only responses to, and outward appearances of a set of much  stronger underlying currents.

The first problem California will have to deal with is desertification. It appears that by 2030 the desert will reach well into what is known today as Northern California (but is in reality in the middle along the N-S axis). What that means is that droughts will be frequent and severe. Since Northern California not only supplies water to itself, but also contributes significantly to the Southland, that does not bode well for agriculture or human habitation.

Unless another mega-diversion project gets started, or unless we are willing to pump tons of energy into desalination, California agriculture appears on the skids. California's agriculture is entirely dependent on irrigation. The irrigated area is relatively small (smaller than Ohio's agriculture for example), but the value of crops grown here is very high. Agriculture is big business in the Golden State.

However, mega-projects are expensive and will only postpone the inevitable. California's long term outlook is poor. Over time, California will probably follow the example of Iraq. Once known as the Fertile Crescent, the cradle of civilization, the region between Tigris and Euphrates is now a salt-encrusted desert where barely anything grows.

The second trend is an aging population. This trend affects the whole country and is especially pronounced in the dominant ethnic group, Caucasians. California is seeing a shift as whites are already a minority in the state. This trend will only accelerate further. Influx into the state is dominated by non-whites. The non-Caucasians living here, also have much higher birth rates.

Newer populations will shape the state. They are more conservative, less well off, and more heterogeneous. The demographic trends will continue to erode the housing situation over the medium term. The State is now wildly overbuilt and its housing problems could well lead to an accelerated decline that further impoverishes the State. California may become a series of protected beach enclaves where rich people hide from the poor masses all around.

The third trend is an exhaustion of cheap resources. The climate for innovation is disappearing. Not because of any policies or politics, or the lack of smart people. Quite simply because the State is running out of cheap land, cheap water, cheap labor, and a large consumerist throw-away market. The key to Silicon Valley success was the ample availability of all four. The fourth is disappearing as quickly as the first three now that half of the American households are done spending on gadgets. Silicon Valley for all its fame and creativity depended heavily on consumers willing to throw out its goodies after a few years, so as to replace them with newer and "better" versions.

California, it appears, is riding into the sunset.

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