However comforting it might be to blame Southern California’s movie industry for unleashing Governor Terminator on the state’s economy, the real seeds of the current crisis were sewn further north, in the seemingly prosperous corporate parks of Silicon Valley. In fact, the dotcom boom and subsequent, inevitable bust are the real causes of our economic malaise. For while Californians were hit first, hardest and most directly by the rise of dotcom-style capitalism, the rest of us are soon to follow.
Put simply, California cannot afford to pay its bills because its tax base contracted at the same time as its investments tanked. Like any of us contending with the double-whammy of lower pay and shrinking portfolios, the state is getting slammed on both income and savings at the same time. Unable to secure credit, the state will instead be forced pay its bills to citizens and local governments with IOUs.
While the pundits point to real estate speculation and bank insolvencies as the chief cause of California–and the nation’s–financial distress, these are both direct results of the late 90’s explosion of computer innovation and Internet proliferation. That’s right: The Internet crashed the economy.
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