Pacific grim: How the sun set on California’s dream

Sun, sea... and misery. As residents of America's Golden State struggle with an economic and political meltdown – the result of their experiment with 'Direct Democracy' – there are lessons for Britain, says Guy Adams

A tall, revolving Ferris wheel stands like a beacon of contentment at the end of Santa Monica pier. Surrounded by golden sands and an endless Pacific, the famous landmark represents the end point of the old Route 66, the highway that transported generations of American migrants across the continent in search of a better life. Here, amid the sun, sea and swimming pools, is a glamorous celebrity playground that has become embedded in the US psyche as a symbol of the laid-back lifestyle of its wealthy, creative, and quite often famous, inhabitants. It is the spiritual home of what people like to optimistically call the Californian Dream.

But something is slowly taking the shine off the gilded confidence of America's Golden State. In recent years, the era of boundless optimism and endless prosperity has chugged to a halt. The "can-do" mentality that helped its inhabitants create Hollywood and Disneyland, and which built the sprawling suburbs that would turn a local joint called McDonald's into the world's most popular restaurant, has being replaced by a creeping sense of decline. For most of its 37 million residents, California is no longer a land of plenty. The economy is lousy, its political system broken, and public finances are careering towards bankruptcy. While they may still be ooh-ing and ah-ing on the Santa Monica Ferris wheel, the prevailing emotion on the streets can be summed-up in a single word: misery.

That, at least, what you might conclude from reading the 2011 guide to "America's Most Miserable Cities," published this week by Forbes. Taking into account a range of factors used to measure quality of life, from crime rates, to unemployment figures, to commute times, taxes and the numbers of homes which are in foreclosure, the magazine ranked every one of the country's hundreds of metropolitan areas that has a population of over 249,000. And when they crunched the numbers, cities in California occupied a staggering four of the bottom five (and eight of the bottom 20) places on their misery list.

"Good vibes are a distant memory," was how Forbes put it. "The state [faces] a crippling checklist of problems including massive budget deficits, high unemployment, plunging home prices, rampant crime and sky-high taxes." Roughly 12.5 per cent of residents are unemployed, property values have in places declined by two-thirds from their 2008 peaks, and 500,000 homes are in foreclosure. Pockets of huge prosperity of course remain, in places such as San Francisco, San Diego, and the west side of Los Angeles. But venture a couple of hours inland, or take a journey into the poorer ghettos of the inner cities, and it feels like another country. Many are eerily quiet. Though it has been one of the most popular destinations for immigrants to America, California's overall population is down around 500,000 in the past decade.

Last year, I spent several days in Stockton, a commuter town some distance east of San Francisco which had then just been named "America's Most Miserable City" for the first time (this week it retained that crown, with nearby Merced, Modesto, and the State's capital, Sacramento joining it in the Forbes bottom five). Its tale was a classic story of boom and bust: property values there had tripled between 1998 and 2005, pushing the price of an average home to $431,000. Then came the slump. Today that figure is $142,000, destroying the net worth of locals. One in five people are out of a job, and many are unable to service debts acquired during the good times. A smidgen under 7 per cent of all the homes in the city are listed as being in foreclosure.

Statistics only tell half the story, though. The rest is written in human terms. Whole streets of boarded-up and abandoned family dwellings sit a stone's throw from city-centre skyscrapers, with front lawns unmown and mailboxes unemptied. Outside a food bank on the outskirts of town, a long line of the hungry and desperate queued for handouts of food and basic household supplies. The plight of many, such as a former surgical assistant I met called Tina Blanco, had been exacerbated by drawing a losing ticket in the lottery of America's healthcare system. At 45, she had lost her home and all her savings, after quitting work to get treatment for breast cancer.

Like any Californian who falls on hard ground, Tina, a single mother, can no longer expect her political masters to help. Once, the State's government was the envy of the world, with America's finest infrastructure, its best school system, and a network of cheap, public universities that produced generations of upwardly mobile citizens. Now its political system is a joke. Leaders of both major parties have got themselves into the habit of spending far more than they can accumulate, despite some of the nation's highest tax rates. The public deficit has duly spiralled, to its current level of around $28bn. Last summer, California's bank accounts emptied altogether, forcing the administration to start settling debts with IOU notes.

Arnold Schwarzenegger, the outgoing Republican Governor, left office with approval levels that had touched 22 per cent ("a record low" for any incumbent, noted Forbes). His Democratic replacement in the job, which was once held by Ronald Reagan, is Jerry Brown. He took charge last month, and has recently announced an effort to balance the books, slashing public spending on healthcare and schools, dramatically increasing university fees, and seeking to raise some taxes. The Californian Dream was built in a different era, of economic growth, he has argued. The State must therefore enter a new era of austerity.

If this idea sounds familiar, that's probably because it should. The parallels between Brown's California and David Cameron's Britain run deeper than you'd think, and not just because both leaders are seeking commercialise university systems which have for years provided one of the most reliably successful means of lifting poor but talented people out of poverty. Some of the most critical mistakes that have brought America's Golden State to its knees are even now being echoed by Mr Cameron, and fellow architects of his widely-touted Big Society.

But first, some history. The Californian Dream is a relatively modern phenomenon, at least by UK standards. Two centuries ago, the State was largely wilderness: its north covered by mountains and impenetrable forests, its south largely bone-dry desert. Reaching the Pacific coast from the east meant an arduous and often deadly journey, lasting several months. Being situated slap, bang in one of the world's most active earthquake zones didn't add much to its charms, either.

The idea that easy riches awaited migrants who headed all the way west really took hold with the Gold Rush of 1849, which turned San Francisco into one of America's most prosperous cities. LA's time in the sun followed a few decades later, when the newly-minted film industry used the Hollywood Hills, north and west of downtown Los Angeles as the base from which it would swiftly build itself into the most powerful means of mass communication the world has ever known.

During the Great Depression of the 1930s, bankrupt residents of the dust-bowl states (the "Okies" of Oklahoma and "Arkies" of Arkansas) regarded California as a sort of promised land. Oil made multi-millionaires of residents with surnames such as Getty. The concept of celebrity was more or less invented there. After the Second World War, hundreds of thousands of former soldiers, who had trained in the state before setting sail to the Pacific theatre, returned to work in the vast ports of Long Beach and San Diego, or huge factories servicing the growing aerospace industries.

The 1950s and 1960s were perhaps the golden age of the Californian Dream, when Route 66 was known as "America's highway" and the average working man could afford a life of suburban contentment, a short drive from his place of work. His children could go to cheap universities such as UCLA or Berkeley, his wife could own a car, and he could retire early, to concentrate on his golf game. California, as sketched in the recent series of Mad Men, was dynamic, creative and a tiny bit louche. The sun always shone. It took a degree of bourgeois contentment to spawn the generation of young idealists who would enjoy the Summer of Love.

Yet all along, the happy boom was being built on shaky foundations. Spiralling property values slowly forced people to live further from their places of work, clogging up freeways and coating major cities in orange smog. Urban sprawl began to destroy the environment, producing water shortages, landslides, and fires. Infrastructure was neglected. Local government had its fingers burnt, by entrusting civic duties to the private sector. In one famous scandal of the 1950s, LA allowed its world-class tram system to be sold to a company controlled by major US oil firms. They promptly shut the entire system down, hoping to force users into oil-guzzling cars. The city's public transport network has never recovered.

California's greatest mistakes, however, came as a result of its obsession with "direct democracy". In rules designed to put citizens at the heart of government, small interest groups were allowed to create new laws by electoral "ballot measures". Any "proposition" that can attract the support of a few hundred thousand people prepared to sign a petition can then be put to voters in a referendum. If more than 50 per cent of them support it, that "proposition" becomes law.

In theory, this concept sounds empowering. In practice, it has in recent decades resulted in legislative chaos. Ballot papers on election day run to dozens of pages, with referendums on anything from gay marriage to drug legalisation. And dozens of measures, passed over the years by different generations of voters, have left State government paralysed, and unable to properly manage its finances.

Property tax, a mainstay of revenues, was frozen for many residents in the 1970s, as a result of one public vote. Income tax cannot be raised unless two-thirds of lawmakers agree thanks to another ballot measure, passed in the 1980s. A raft of further referendums endorsed by the people control California's spending to the extent that only a only a quarter of its entire budget is considered "discretionary". The rest is already earmarked for a particular cause. Endless business legislation has driven employers to greener pastures.

In this environment, the only way Governors of California can balance their financial books has, for decades, been via borrowing. As a result, even servicing the state's public debt now costs around 10 per cent of all its tax revenue. So in 2008, when a faltering global economy further decimated tax revenues, the already-teetering state was pushed to the brink of bankruptcy, and left unable to protect its most vulnerable citizens.

All of which should be mulled over by architects of Mr Cameron's Big Society. The British Prime Minister is fond of "direct democracy" and has touted plans for Parliament to debate petitions that receive more than 100,000 signatures. This no doubt sounds like a wonderful idea. But it is wrong to think it will produce better laws. California shows that, when an electorate is empowered to make everyday decisions, it tends to vote selfishly. People want low taxes, but expensive services. They vote emotively, and often bad laws. The Golden State may be many time zones from Westminster, and its sun-drenched beaches can feel like they belong to another planet. But in the Golden State's decline into misery, there probably lies a lesson for us all.