Will California Become the US's First Failed State?

That's the title of a sharp article penned recently in the Guardian. As the author points out:

From its politics to its economy to its environment and way of life, California is like a patient on life support. At the start of summer the state government was so deeply in debt that it began to issue IOUs instead of wages. Its unemployment rate has soared to more than 12%, the highest figure in 70 years. Desperate to pay off a crippling budget deficit, California is slashing spending in education and healthcare, laying off vast numbers of workers and forcing others to take unpaid leave. In a state made up of sprawling suburbs the collapse of the housing bubble has impoverished millions and kicked tens of thousands of families out of their homes. Its political system is locked in paralysis and the two-term rule of former movie star Arnold Schwarzenegger is seen as a disaster – his approval ratings having sunk to levels that would make George W Bush blush.

But the most striking image in the article is the following:

Outside the Forum in Inglewood, near downtown Los Angeles, California has already failed. The scene is reminiscent of the fallout from Hurricane Katrina, as crowds of impoverished citizens stand or lie aimlessly on the hot tarmac of the centre's car park. It is 10am, and most have already been here for hours. They have come for free healthcare: a travelling medical and dental clinic has set up shop in the Forum (which usually hosts rock concerts) and thousands of the poor, the uninsured and the down-on-their-luck have driven for miles to be here.

And, of course, California is in the process of cutting its "healthy families" program which enrolls millions of the poorest children in the state.

Now the first thing that comes to mind when thinking of California, for many, is "It is the Golden State: a playground of the rich and famous with perfect weather. It symbolizes a lifestyle of sunshine, swimming pools and the Hollywood dream factory."

California is a rich state.

In California, as in every capitalist economy on the planet, the amount that's socially produced by all far exceeds the amount needed to meet the subsistence needs of everyone in the state. This is called a social surplus, because it's socially-produced through a massive web of coordinated social labor that involves nearly everyone in the entire state.

Yet, given that there is a large surplus, how is it that so many Californians continue to go without the most basic needs? Why are institutions designed to meet those needs (healthcare, education, and so on) being placed on the chopping block when, despite a deep recession, there continues to be a very large (indeed much larger than most economies in the world) social surplus?

As it currently stands, a fraction of the surplus is taxed, while the majority of it is appropriated by a very small percentage of the population. Note that the state budget only pertains to that (relatively) small fraction of the surplus which is taxed and used for public spending.

But the obvious question here is: why are very, very well-off Californians allowed to sequester themselves in their gated communities and, in effect, hoard large swaths of the social surplus while so much widespread misery ensues throughout the state?

Why is it that the rich are so keen on participating in society in boom-times when they're earning large sums of cash, but when hard times hit they suddenly withdraw and claim independence?

To take a rather extreme example, imagine that there are three households in an isolated small town. Due to a serious crisis beyond the control of the town, two of those households (through no fault of their own) are facing a serious shortage of food. But the third household has a massive surplus of food stored up that far exceeds the needs that they will ever need in a lifetime to sustain themselves.

Now from the standpoint of community, say a discussion involving all three households about how best to arrange social policy in the town, the obvious thing to do is for the household with a massive surplus to cede some of it to meet the needs of those facing starvation. The thought is that although the household with the surplus may have attained it through legitimate market transactions, the human needs of the community trump the preservation of market distributions of property. In other words, the community should ask: what is more important at this moment, property titles or human well being?

California's 'budget cut fatalism' answers strongly that property titles are its priority, not human well being.

But, some will object, why should property titles be weighed against anything at all? The reason that we should weigh property rights against general welfare is because property rights are only created and made possible through social cooperation, through having a community that recognizes and legitimates them.

The people that have large surpluses of capital today, could not have amassed it apart from a massive scheme of social cooperation. Given that everyone's help was needed, in a broad sense, to make all of this possible, everyone should have a say in what the most important priorities and values of that society are.

We are already doing this implicitly, insofar as we tax the surplus, but this fact is often ignored in favor of illusory, mythical rhetoric about how "in America, we don't spread the wealth".

All governments, in virtue of what they are, redistribute the social surplus in some way. Even if we had the Newt Gingrich-favored "flat tax", it would still be redistributive (i.e. spreading the wealth) because the wealthy would pay more in real terms than the poor (i.e. 10% of a million is a lot more than 10% of 10,000/yr).

We're already cooperating and coordinating our actions on a large scale. We're already redistributing part of the social surplus. So given what's already going on, why can't we have a discussion about whether this is done effectively or fairly? Why is it that this concrete fact of our social life is masked, while we are bombarded with endless fatalist laments about how we "must" cut education budgets, throw students out on the street, lay off millions of workers, let infrastructure crumble, etc. ?

Again, California is a rich state. The fundamental egalitarian thought is that there is something absurd and profoundly unjust about a situation in which some have massive stockpiles of the surplus (far exceeding what anyone could ever need) while a large number of others go without the most basic human necessities. And, for me, it's not just that the wealth are 'failing to do their duty' in not giving more.... it's that they are actively doing something socially harmful in hoarding what they've got and refusing to cede any of it to ameliorate a massive amount of suffering.

Laying more people off, cutting more essential services, strangling one of the most effective and prestigious university systems in the world, in short causing untold amounts of misery, is not the only course of action here.

When there are natural disasters, "price gouging" (i.e. undertaking legitimate market transactions and cashing-in on human suffering) is an illegal act in many states. Although price gouging is a run-of-the-mill market transaction in most respects, it is banned precisely because the human costs of the practice far outweigh the alleged benefits (i.e. keeping markets and property rights sacrosanct). Price gouging bans, in effect, are a case of existing law in which social welfare trumps market imperatives, and human needs trump property rights. This isn't a foreign idea: there are many more "American" examples.

So given that this is already happening in so many different situations today... why not have a broader, more inclusive discussion about what our social priorities should be writ large? Why not have a big discussion about whether in hard times, the property-rights line really should trump the social well being of many members of our community? This is supposed to be a democratic society.