The self-imposed Greek financial tragedy has rocked the world economy and brought the European Union almost to its knees, but you ain’t seen nothing yet. The parallels between what has caused Greece to get to this point and the looming disaster in California go way beyond the surface. Whether California will have the same effect on America that Greece has had on Europe is yet to be determined.
Governor Chris Christie makes an effective argument for New Jersey being America’s Greece. In fact, the New Jersey state deficit exceeds California’s as a percentage of its overall budget, and no one would argue that the public employee unions in New Jersey are less entrenched than in California or Greece. But at least New Jersey has the newly-elected Christie, who speaks with honesty and candor about the state’s challenges, and provides a slice of reality to its residents. California, in contrast, has the hapless Arnold, who has been in La-La land for six years with no end in sight.
To hang these financial calamities on the public employees alone would be misguided. In a recent study of 183 countries regarding ease of doing business, Greece came in 109th – but at least they can be comforted that Somalia and North Korea were worse. Like Greece, California lags in comparison to other states; it is ranked 47th for business environment. Having oppressive public employee unions certainly adds to the challenge, but both Greece and California suffer from the same anti-business mix of high taxes, overwhelming government regulation and high labor costs. One could say Greece is in the middle of the pack, compared to California which is near the bottom of the state rankings.
Greece does even worse with its protection of investors, where it ranks 154th. Similarly, there are few states which do worse protecting investors than lawyer-rich, lawsuit-happy California. Los Angeles has more lawyers than the country of Japan. Californians are not only moving their businesses to other states, but almost anyone who can is registering the entities elsewhere to protect themselves from lawsuits.