How California embraced Corporate Socialism

Edward Ring

Director, Water and Energy Policy

Edward Ring
January 28, 2020

How California embraced Corporate Socialism

Gavin Newsom, the lily white, urbane, coiffured scion of San Francisco’s posh royalty, is California’s highest ranking Democrat. He presides over a party that has taken progressive ideals beyond absurdity to the brink of tyranny. One would think that the party of Gavin Newsom is bent on destroying everything Gavin Newsom represents. So what’s going on?

To understand the rise of Newsom, and every other hyper-privileged Democrat that even today remains in firm control of the progressive movement, it is necessary to define a 21st century version of corporate socialism. This goes well beyond the use of the term merely to describe government subsidies for, say, the oil and gas industry, or, for that matter, the wind and solar industry.

Corporate socialism in California today is a marriage of convenience between, on one hand, monopolistic corporations and the oligarchy they’ve spawned, and on the other, a seething coalition of progressive socialists with an agenda that is best described as a self-contradictory mixture of nihilism and idealism. What California’s corporate socialists have done is concoct a profitable interpretation of this agenda, implementing those elements that will aggrandize them, and paying lip service to the rest. There are ample examples of this practice.

To ensure “diversity,” an amazingly lucrative profession has emerged, embodied in “Diversity, Equity and Inclusion” departments inside every institution of higher education, as well as embedded in the human resources departments of every major corporation.

To protect wilderness, sound principles of land management such as controlled burns, maintenance of firebreaks and access roads, selective logging and salvage logging have been either banned altogether or mired in prohibitive levels of bureaucratic delays, leading to catastrophic fires that were blamed on the “climate.”

To protect the “climate,” land development outside of existing cities has been all but frozen, restricting the supply of new homes and driving prices to unaffordable levels. For similar reasons relating to “climate,” clean conventional energy from natural gas and nuclear power are are being systematically reduced in favor of heavily subsidized “renewable” energy providers.

To ensure housing “affordability,” the Homeless Industrial Complex has arisen, with budgets so padded that the average cost to build “permanent supportive housing” in California now exceeds a half million per unit.

To respect the rights of the homeless, as well as “alternative lifestyles,” hundreds of thousands of vagrants, most of them either insane, substance abusers, predators, or all three, have been permitted to camp on the sidewalks and in the parks of every major California city. To assist them, tens of billions are being spent on public employees and nonprofit personnel, and the problems just get worse.

And finally, central to all of this, public sector unions have fervently supported every expansion of government regulation and its requirement for new agencies and staff. They have “negotiated” pay and benefit packages for their membership that have made California’s government itself unaffordable, with personnel costs crowding out investment in infrastructure and public services.

All of these policies derive from socialist ideals, but benefit corporate interests. This is corporate socialism in the 21st century, California is its epicenter, and it is an unmitigated disaster.

California Before and After the Rise of Public Sector Unions

It is ironic that California in the 1950s and 1960s offered a good example of a state government that respected property rights and nurtured competitive businesses, yet engaged in massive public investment in those areas where it was not possible to make competition effective. During this golden age, barely twenty years in duration, in partnership with the Federal government, the State of California built the most comprehensive network of water conveyances in the world. At the same time they built the finest system of public colleges and universities in the world, and they built freeways and expressways that enabled urbanization and affordable market housing.

In those days, a middle class family could expect to own their home, travel on uncongested roads, and pay college tuition for their children. Today, none of that is possible. What happened?

In California’s case, the simplest explanation would be that the state itself became a special interest, viewing bigger government as central to its special interest agenda. By the end or the 1970s, nearly all of California’s state and local government agencies had become unionized, and these unions became increasingly aggressive pushing their agenda, which was to grow government in order to collect more union dues and acquire more power and influence. Like any organization, government unions sought to aggrandize themselves.

The problem, of course, was that the government does not operate in a competitive environment. Government unions collect money through dues withheld from government paychecks. Public-sector unions do not negotiate with management accountable to shareholders, but instead with politicians whom they help elect and, therefore, are accountable to the unions. Moreover, politicians, unlike corporate executives, typically occupy their offices for shorter periods of time. And politicians, unlike corporate executives, don’t own shares that might be devalued after they leave office due to decisions they made while in office.

Not only are politicians far more accountable to the unions they negotiate with than to the people they serve, but the consequences of giving in to outrageous demands from public-sector unions are much less immediate and personal for the politicians. When a corporate executive gives in to union demands that are unsustainable, the corporation goes out of business. Union negotiators know this, and in the private sector, the possibility of business failure tempers their demands.

But the survival of government agencies doesn’t depend on efficiently competing in a market economy where consumers voluntarily choose to purchase their product or service. When government agencies incur expenses that exceed revenues, they raise revenues by increasing taxes. Consumers have no choice but to pay the higher taxes or go to jail.

If electing their own bosses and compelling taxpayers to guarantee revenue sufficient to fulfill their demands weren’t enough, public-sector unions have another advantage denied private sector unions. They operate the machinery of government. Their members run California’s public schools, its transportation agencies, its public utilities, its administrative bureaucracies including code enforcement and construction permitting, its public safety agencies; everything.

This confers countless unique advantages. Depending on the intensity of the issue, the percentage of unionized government employees willing to use their positions as influencers, educators, gatekeepers, and enforcers may vary. But within the permanent bureaucracy of government, it doesn’t take a very large minority of committed operatives to wield decisive power.

Public-sector unions epitomize the establishment. Politicians come and go. But like the so-called deep state, public-sector unions are permanent, embedded in the bureaucracy, running the show. And if the show’s script calls for running in place, or even running backwards, so long as corporations and bureaucracies can amass more profit and more power, no problem.

How Government Unions Acquired Allies and Formed the One-Party State

During the 1980s and steadily thereafter, these unions acquired powerful allies. The rising environmentalist movement was particularly useful. It is indisputable that California needed to aggressively address the problem of air pollution in its coastal cities, boxed in by mountains and beset with unhealthy levels of smog. But by the 1990s, with air pollution reduced to a fraction of what it had been in the 1960s despite the state population doubling, environmentalism had become full spectrum, affecting every aspect of economic life in California.

For a while, California’s left wing, the government unions and the environmentalists, fought against corporate interests in a political battle where neither side completely dominated. But after the turn of the century that began to change.

The last big chance to stop California from becoming a one-party state dominated by Democratic Socialists may have been the special election of 2005. It’s easy now to forget the excitement incoming Governor Schwarzenegger had generated among the GOP faithful in California. Here was a candidate, as far removed from the establishment as Trump was a decade later, sitting in the guest’s chair, telling Jay Leno and half of America that “it’s the unions that are breaking California, and I’m going to terminate them.”

Schwarzenegger tried work with legislators to enact reforms during his first year as Governor, and he got nowhere. So in 2005 he took his case to the people, filing four initiatives – a balanced budget, redistricting reform, lengthened evaluation period for teacher tenure, and paycheck protection. His consultants, what a surprise, talked him out of a fifth – pension reform. And what happened?

There Schwarzenegger was, on television again, saying it was up to the people to save California. But he said it by himself. Alone. Where was California’s GOP during that entire election season? Instead of tapping into the populist momentum that had put Schwarzenegger into office, and giving it voice, most of them were running away from Schwarzenegger as fast as they could.

Nobody who condemns Schwarzenegger for later pivoting left should forget that back in 2005, while the unions spent well over $100 million to defeat his initiatives, the GOP and its donors did not step up to match them in money or, more importantly, in their tone. They went to their safe spaces, protected their safe seats, and continued as the minority party.

By 2010, with pro-business Republicans becoming a permanent minority in the state legislature, with every one of California’s state office holders from the Governor to the Superintendent of Public Instruction in the hands of Democrats, and with Democrats in firm control of nearly every major city, the business community moved further and further towards also supporting Democratic candidates. Searching for the candidates least likely to lean far left, up and down the state, they gave up on conservatives.

Also happening during the 2010s was the rise of the super billionaires of Silicon Valley. Always a center of global wealth and a liberal stronghold, the latest tech wave, the social media monopolies, brought onto the scene politically active billionaires that were even wealthier and even more liberal than their predecessors. With these turns, California went from being a state dominated by socialists with at least a viable conservative opposition to being a one-party state dominated by not merely socialists, but corporate socialists.

Today Democrats don’t hold a super-majority in the state legislature, they now hold what’s been dubbed a mega-majority. That is, they control not two-thirds of all seats in both houses, but three-quarters of all seats in both houses. With the legislature, the governor, the judiciary, and the most powerful special interests – government unions, the environmentalist lobby, corporations, and individual billionaires – operating in consensus – there are no checks on their power.

The Face of Corporate Socialism

Every era has its unique brand of collectivism, and California in the 21st Century will not offer exact analogues to socialist regimes a century ago in Europe, nor should it. California is not a brutal totalitarian regime, nor has California’s economy come anywhere close to that most extreme version of socialism, communism where the state owns all property.

Instead, California is run by an oligarchy, working in partnership with a legislature that is controlled by a handful of powerful government employee unions. These oligarchs and their counterparts, the union leaders, form a defacto politburo. The most accurate way to describe the political economy of California would be corporate socialism. A more vivid, and equally accurate description would be feudalism.

If one were to examine the concept of California as a feudal state, all the pieces would be identifiable. The aristocracy are the wealthy billionaires and the titans of the high tech industry. The knights and the nobles are the public employees. The clerisy are the academics and the nonprofit activists, which would include environmentalists, homeless and low income housing advocates, and social justice warriors. Everyone else would be serfs. These serfs would either be members of California’s dwindling middle class and small business owners, paying crippling tithes to the feudal regime, or they would be the lower class and the unemployed, who would rely on alms from the nobles for their sustenance.

Other metaphors work as well. To use Soviet metaphors instead of feudal metaphors, the aristocracy becomes the politburo, the nobles become the nomenklatura, the clerisy become the commissars, and the serfs become everyone else. The feudal metaphor is perhaps more applicable for California today, because unlike in the Soviet Union, private property is alive and well, so long as you are one of the fabulously wealthy few, and willing to partner with the state legislature.

The darkest but nonetheless somewhat apt metaphor for California is Nazism, for two fairly encompassing reasons. First, because the economic models are almost identical; private oligarchs and subsidized monopolistic corporations operating in partnership with a micromanaging government. Second, because where the German Nazis condemned Jewish wealth in particular, and capitalist profiteering wealth in general, California’s Democrats focus their scapegoating on “fossil fuel” wealth, or wealth amassed via unwarranted “privilege,” while enacting laws designed to penalize all wealth.

When individualism gives way to collectivism, tyranny eventually and inevitably follows. Californians who are sanguine about the future of their quasi-socialist, one-party state, may cite the extraordinary cultural revolution taking place, where individual freedom to express whatever gender they wish is celebrated, as is the freedom to experiment with any drug. Surely the German Nazis had views antithetical to this sort of individual freedom! This is true, but misses the point.

Where the German Nazis had a collectivist tyranny that suppressed what they considered to be social or sexual deviancy, California’s Democrats have a collectivist tyranny designed to suppress any individual who advocates for traditional conservative social or sexual behaviors. Equally pervasive and equally if not more sinister, they also have a collectivist tyranny that seeks to suppress and ostracize anyone who questions “climate change,” and they are using the supposed climate emergency to enact increasingly restrictive intrusions on property rights and business operations. Collectivism is creeping into every aspect of life in California. It might not have the same face of Nazism, but it has the same essence.

California’s Democrats differ from the German Nazis, of course, insofar as they haven’t opened up death camps, and probably never will. But they also differ in their level of hypocrisy. One might argue that California’s state legislature, and the Democrats that run it, are even more hypocritical than the German Nazis were. Despite their ritual demonization of profits and wealth, the private wealth that has accumulated in California in recent years, with the social media monopolies piling countless billions onto the piles of wealth already amassed in previous tech booms, has few if any rivals in the history of civilization.

The Consequences of Corporate Socialism

As California’s aristocracy has consolidated its power, an epic transfer of wealth has occurred. Corporate monopolies, financial intermediaries, wealthy individuals, public sector treasuries and public employee pension funds have all become spectacularly endowed. At the same time, at the other extreme, California has become a magnet for welfare recipients and economic refugees from around the nation and the world, who survive by collecting state funded benefits. Meanwhile, California’s middle class and small businesses, beset by a high cost of living and crippling regulations, watch their investments and their enterprises dwindle away.

The consequences of California’s descent into feudalism are well documented. High Taxes. Overregulation. Record high homelessness with feces and discarded needles littering the streets. High gas prices. Spikes in crime. Crumbling infrastructure due to green initiatives. Failing public education. Middle class flight other states. Housing policies that limit new housing construction. Rent control policies that limit private investment.

But these failures serve a purpose. They are the product of California’s long standing one-party regime controlled by oligarchs and public sector unions, buttressed by the politically useful fanaticism of social justice warriors and environmentalist extremists. They have disenfranchised the middle class, at the same time as they have rendered low income and undocumented communities utterly dependent on government handouts, and to the extent they vote, turned them into reliable Democratic voters.

Meanwhile, public employees don’t have to suffer the consequences of what California’s Democratic politicians are doing. Why should it matter if housing is expensive, if you are collecting pay and benefits package that amounts to twice what you would make in a market based hiring environment? Why should you feel pressure to pay off your exorbitant mortgage before you retire, if you will be collecting a pension that is likely to be equal or greater than the pay you received when you were working?

Giving public employees job security, compensation and benefits far in excess of private sector norms creates a conflict of interests between public employees and the citizens they serve. It undermines the value of citizenship itself, by making ordinary private citizens eligible for a package of government benefits that are more comparable to (if not less than) what undocumented immigrants receive, while the far better path to job security, a middle class lifestyle, and retirement security lies with the privileged public sector.

This inherent conflict of interests plays out in countless ways that damage trust in government and undermine faith in American institutions. Why should we control our borders, if membership and dues revenue in the teachers union depends on increasing public school enrollment by any means necessary? Why, for that matter, should immigration laws at least favor newcomers who have job skills and can support themselves, if that would mean fewer unionized employees in public education and elsewhere within the public bureaucracies to provide for the special needs of the illiterate and the destitute?

And how, for the record, does it help nations with out-of-control birthrates if a few hundred thousand end up in the public schools of Los Angeles County, when tens of millions are added to their burgeoning populations every year? But it surely does benefit the teachers union.

The cold truth confronting ordinary Californians is that they can expect no help from the oligarchs. They have secured for themselves obscene profits and investment returns thanks to a regulatory environment where only the biggest corporations can afford to comply, and thanks to politically contrived artificial scarcity that has rewarded preexisting holders of assets and locked out newcomers.

Ordinary Californians may, however, eventually find growing support from members of public sector unions who, one at a time, drift away from their leadership’s blind adherence to the corporate socialist agenda. The plain and obvious fact that this agenda is not working – not in any phase of public policy, from public education to housing, homeless, and transportation – will move many of them to support alternative policies. For the sake of their less fortunate cousins, in-laws, and friends they will begin to question current policies, and seek new solutions.

It is possible they will mount an insurgency within their unions, and turn some of that public sector union political power to work for all the people.

Fight to lower barriers to building new suburbs on open land, instead of letting the oligarchs and greenies cram everyone into the footprint of existing cities. Fight for water infrastructure projects – storage, desalination plants, aqueduct upgrades – that are completed on time and under budget, like they were back in the 1960s. Fight to build more freeways instead of “light rail” that nobody wants to ride, and to build practical intercity commuter trains instead of a grossly overpriced “bullet train.”

Fight to get help for the mentally ill and substance abusers, instead of only helping a fraction of them by building a boondoggle archipelago of “affordable” apartments that cost taxpayers $600,000 per unit. Fight to restore sensible wildland management practices to prevent future infernos. And fight for school vouchers so we can save a generation of school children, regardless of where they come from and what they bring to the classroom.

Deep in the tarnished Golden State, one may still hope.

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Edward Ring is a co-founder of the California Policy Center and served as its first president. This article originally appeared on the website American Greatness.

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