Econ is more complex than many of us thought. I may need more numbers. I would like to take the point that significant things happen during periods of "flux". This is the point where I used the expression of "transition" from rural to urban. Not too much significant happens at either end. It is during the "transition" where things really get going. Look at physics. If a coil of wire is held stationary in a magnetic field, nothing happens. But when you move the coil, a current is induced in the wire. The Earth has a magnetic field and if you hold a coil of wire in your hand without moving it, nothing happens. But when you move the coil in the Earth's magnetic field an electric current is induced in the coil. That is how it works. You only produce electricity when the coil is moved. Interesting how this has an economic parallel.
Take the fine state of California. It sat there on the west coast for many years doing its local thing until Gold was discovered in 1849. That was when we had the Gold Rush of `1849 and we still call the San Francisco football team the "Forty Niners". Right after 1849 there was all kinds of economic activity in California, but it slowed down as the "Rush" played out. After the Dust Bowl, when many new people moved in, the "Rush" was on again. Next came WWII when California played a major role in the war against Japan. Many more people came to California and many stayed on after the war was over. This unusual flux of people and we are not talking about average people here, had a big economic affect on California. The people who came to California did not look much differently, but they had a very different motivation in their hearts. They were dissatisfied with where they were and wanted some place where they could do "better" or "get ahead". These were different people of the type that are found during these times of flux. See what I mean?
All during this time, California was growing in wealth. Santa Clara valley was renamed Silicone Valley by people who saw opportunity there. California was flying high up until about 1995. That is when fewer and fewer of the types of people who could build California moved in and more of the people who just wanted to "game" the system moved in. I think that Apple Computer is now larger in book value than any company in the USA. Bigger than General Motors and Ford combined. Ford and GMC are unionized while Apple is not. How about that. Is there a growth company in the USA that is unionized. It might be Caterpillar and they are a clear exception to most rules. You know that Caterpillar started out in Fresno, California under the name Holt before they moved to Peoria, Ill. FMC was originally called Food Machinery Company and started in San Jose. Bank of America had its' first bank in Alviso, now a part of the city of San Jose. Now companies are moving out of California about as fast as they can and any expansion is taking place in some other state or country.
As early as 1975 more people who used moving companies were moving out of California than were using moving companies to move in. People were still moving in with pickup trucks and trailers, but the tide was already starting to turn. Didn't know that did you? The problem that we face is to understand what causes the "right" people to move? Remember the "brain drain" after WWII? Sure you do. Many of the best and brightest from around the world were moving to the USA and it had a big impact on the economic growth of the USA. It is one of the reasons for the significant growth in wealth here in the USA and places like California. People earlier moved to Michigan, but later could not move out fast enough. Why do you think that was? When I say the "right" people, I mean those who can help to create wealth, not consume it. That is what we have from Mexico now.
The last time I was in California, I heard Asian people talking about moving back to China. This is the kind of thing that helps when it is moving in your direction and cuts deeply when it turns the other way. This blog is not intended to be the answer, but just to point out the root cause of many of the things that do not get discussed in any Econ ### classes.
