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PSA: California Economy In Tatters
Aug. 28th, 2009 04:57 pmThe recent news that the NUMMI plant in Fremont is closing (the last car manufacturing plant in California) is absolutely no surprise to me. What I am amazed by is the fact that Toyota kept it open so long despite losing lots of money. The California state legislature, in its infinite wisdom, even taxed the upgrading of manufacturing equipment!
Why is the California economy tanking out?
-- Loss of manufacturing and industrial jobs.
-- Priced out of the global market. Labor costs plus land costs.
-- Too much service industry (selling pizza to each other is NOT an economy, folks).
-- Excessive costs of regulation compliance, often exceeding direct costs. San Francisco requiring employers to provide health care for all employees, that's creative. Making up a complex scheme that requires 20 hours per week of accountant to comply for a 50 employee business, that's just nasty.
-- Private Attorney General's Act which allows painful class-action lawsuits. A general litigious climate that makes business risk unpredictably costly.
-- Uneven enforcement of government regulations and costs so that there is a massive incentive towards non-compliance for the shady operator, while the legitimate business pays through the nose and can't win or keep the customers in competition.
As is far too common, the Republicans do a great job of pointing out problems. It is their proposed solutions which far too often fail the giggle test.
From a systems theory perspective, the biggest issue is that government actions on the economy are unpredictable. Smart businesspeople can thrive even when costs are high -- if those costs can be planned for and budgeted accordingly. It is unpredictable costs that are the killer.
How to communicate this to the Legislature? The buzzword is "favorable business climate" and people think that means lower taxes and less corporate accountability.
What it really means is closer to "Steal from us if you must, but set up a regular schedule of payments!"
Why is the California economy tanking out?
-- Loss of manufacturing and industrial jobs.
-- Priced out of the global market. Labor costs plus land costs.
-- Too much service industry (selling pizza to each other is NOT an economy, folks).
-- Excessive costs of regulation compliance, often exceeding direct costs. San Francisco requiring employers to provide health care for all employees, that's creative. Making up a complex scheme that requires 20 hours per week of accountant to comply for a 50 employee business, that's just nasty.
-- Private Attorney General's Act which allows painful class-action lawsuits. A general litigious climate that makes business risk unpredictably costly.
-- Uneven enforcement of government regulations and costs so that there is a massive incentive towards non-compliance for the shady operator, while the legitimate business pays through the nose and can't win or keep the customers in competition.
As is far too common, the Republicans do a great job of pointing out problems. It is their proposed solutions which far too often fail the giggle test.
From a systems theory perspective, the biggest issue is that government actions on the economy are unpredictable. Smart businesspeople can thrive even when costs are high -- if those costs can be planned for and budgeted accordingly. It is unpredictable costs that are the killer.
How to communicate this to the Legislature? The buzzword is "favorable business climate" and people think that means lower taxes and less corporate accountability.
What it really means is closer to "Steal from us if you must, but set up a regular schedule of payments!"
