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news | World | Americas | 2001-01 The lights are going out in the Golden State

The West Coast is on the verge of crisis. Collapsing dotcoms, a drugs epidemic and now an energy emergency are attacking its nerve-centre

By Andrew Gumbel

28 January 2001

The last time California felt like it was falling apart, in the early 1990s, it was racked by earthquakes, floods, brush-fires, drive-by shootings, the crack-cocaine epidemic, raging unemployment and, finally, the LA riots. But at least the lights stayed on. It has been a roller-coaster of a decade, from those battle-scarred days of virtual race warfare in South Central to the sun-kissed complacency of the digital revolution and the untold riches that have come in its wake. Until very recently it seemed as if the good times were here to stay for ever, the tormented past no more than a bad dream or a distant memory.

But chaos is beckoning once more, and whichever way you look the news does not look good. The dotcom bonanza has turned to bust, with thousands of young people who had hitched their star to the promise of stock options and the digital future being tossed out of their high-paying jobs, all the way from San Francisco's Multimedia Gulch and the low-rise industrial parks of Silicon Valley to the hardwired new office blocks of Los Angeles's post-industrial oceanfront. Last week's announcement of 16,000 job losses by Lucent Technologies, the San Francisco-based telecommunications equipment company, was particularly devastating because it proved that even hardware the tech investment of last resort is not immune from the meltdown.

Meanwhile Hollywood, which had itself looked to the internet as the new frontier of the entertainment industry, is battening down the hatches in expectation of a full-blown strike by actors and writers this summer; at the same time, it is watching more and more film and television production move away from California to cheaper climes overseas.

The promise of greater social and racial harmony is also looking fragile. The Los Angeles Police Department is once again awash with corruption scandals, with crooked cops planting evidence and shooting suspects for sport. The state has an exploding prison population larger than the inmate numbers of most northern European countries combined which in turn is being fed by a growing army of young drug addicts and pushers caught up in an unforgiving criminal justice system. California may have seen a gratifying drop in violent crime, but it also leads the western world in the production and distribution of methamphetamine, also known as ice or crank; addiction rates, as well as police busts of rudimentary labs in rural farmlands, are reaching epidemic proportions.

And now, in the middle of all this, comes the gravest threat of all, an energy crisis out of nowhere that threatens to plunge America's largest, most affluent state economy into temporary darkness and lead it on a rapid road into recession. For a variety of reasons, starting with the fatally flawed plan by which the state deregulated its electrical utilities five years ago, California is suddenly unable to generate enough power for its own use and cannot buy enough from neighbouring states because of temporary shortages and soaring wholesale prices.

The consequences could be devastating. The two main electricity providers are all but bankrupt, forcing the state to intervene with hundreds of millions of dollars in public funds that it will probably never see again. The state grid is on the verge of collapse. And although blackouts have been limited to just a few hours so far, the very threat of them has cast a pall on an electricity-hungry economy; from dairy farmers who need to extract, pasteurise and store their milk, to the technological giants of Silicon Valley who can't survive without a reliable power source and are already making noises about moving their operations out of state. California is nothing if not manic-depressive in its economic cycles, so it should surprise nobody that there are predictions of worse to come. According to Al Checchi, a billionaire businessman who ran for governor in 1988, the energy crunch is merely "the tip of the iceberg", the harbinger of a much broader crisis of underinvestment. Although California's population is projected to increase by 20 million people over the next quarter-century adding to the 35 million already there it is suffering from a whole generation's neglect of its schools, its roads, its already scarce water supply and its network of health provision, particularly for pensioners. "Unless we radically change the management of our public institutions and invest in a long-term and comprehensive strategy to support this growth," Mr Checchi warned, "a spike in electricity rates and a few brownouts will be the least of our problems."

If California is destined to dip into recession and it seems oddly apposite that this most devoted of Clinton-supporting states should see its fortunes dwindle the very moment Mr Clinton leaves the White House it will partly be because it has priced itself out of the market, and in the process destroyed some of the very things that attracted people in the first place. That is certainly true of the San Francisco area, where property prices have rocketed so high that faltering dotcoms have crashed far faster than they would have done, say, in rural Idaho (where many of them are now heading). In the meantime the bohemian culture for which the city is known has all but disappeared because no artist or musician can afford the rents.

It is also true of the entertainment industry, which first came to Hollywood because land was cheap and the sun shone 300 days a year. The place has not been cheap for a while, but the imperative to stay close to studio headquarters has diminished rapidly with the development of new technology. Why keep production in California when everything from film footage to soundtrack mixes can be whizzed around the world by e-mail, and when computer processing can make up for any deficiencies in local climate?

All California lacks, in fact, to complete its forebodings of doom is one of its periodic natural disasters, which have a habit of coinciding with economic downturns. But the state has proved over time that it is nothing if not flexible and resourceful, and there are still plenty of people refusing to be swayed by the prevailing pessimism

-- Martin Thompson (, January 28, 2001

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