Steve Malanga at City Journal supplies us with a modern version of that old fable by recounting the sorry recent history of California. Once called the Golden State and considered the driver of the American economy, it has now sunk to the point where if businesses were fleeing any faster they'd have gridlock on all the eastbound highways. New businesses are avoiding California as though a nuclear accident had contaminated the entire state, and employment is flat-lining. The reason is, as it often is, the enormous burden the state government has placed on those who want to operate a business in California.
California's legislature, like the farmer in the allegory, has for the last twenty years demanded that the state's businesses lay two golden eggs rather than be satisfied with just one:
Last year, a medical-technology firm called Numira Biosciences, founded in 2005 in Irvine, California, packed its bags and moved to Salt Lake City. The relocation, CEO Michael Beeuwsaert told the Orange County Register, was partly about the Utah destination’s pleasant quality of life and talented workforce.Malanga traces the history of California's hostile relationship with business since 1974 and claims that at every turn government has imposed policies on business that businesses simply can't afford, and so they're leaving, or dying.
But there was a big “push factor,” too: California’s steepening taxes and ever-thickening snarl of government regulations. “The tipping point was when someone from the Orange County tax [assessor] wanted to see our facility to tax every piece of equipment I had,” Beeuwsaert said. “In Salt Lake City at my first networking event I met the mayor and the president of the Utah Senate, and they asked what they could do to help me. No [elected official] ever asked me that in California.”
California has long been among America’s most extensive taxers and regulators of business. But at the same time, the state had assets that seemed to offset its economic disincentives: a famously sunny climate, a world-class public university system that produced a talented local workforce, sturdy infrastructure that often made doing business easier, and a history of innovative companies.
No more. As California has transformed into a relentlessly antibusiness state, those redeeming characteristics haven’t been enough to keep firms from leaving. Relocation experts say that the number of companies exiting the state for greener pastures has exploded. In surveys, executives regularly call California one of the country’s most toxic business environments and one of the least likely places to open or expand a new company. Many firms still headquartered in California have forsaken expansion there. Reeling from the burst housing bubble and currently suffering an unemployment rate of 12 percent—nearly 3 points above the national level—California can’t afford to remain on this path.
In 2007, California-based Google built a new generation of server farms not in its home state but in Oregon, employing 200 people. The following year, one of California’s most successful tech companies, Intel, opened a $3 billion production facility in Phoenix, Arizona. Earlier this year, eBay, based in San Jose, said that it would add some 1,000 back-office jobs in Austin, Texas, over the next decade.There is much more in this vein in Malanga's depressing tale, and everyone should read it in order to understand the dynamics at play when government abuses its power to tax and regulate. The moral of the story is simple. It's the same moral captured in the old fable about the stupid, greedy, myopic farmer who killed the goose that laid golden eggs.
Smaller firms have exhibited the same pattern of expanding outside the state. In fact, Silicon Valley lost one-quarter of its computer, microchip, and communications-equipment manufacturing jobs from 2001 to 2008, say Valley entrepreneurs.
