‘California Never?’ Utopia faces setbacks as industry flees

Big dreams, sometimes stupid ones, comprise the heart of California’s identity. 

“California Forever,” a project to build a city for 400,000 people from the ground up on land between San Francisco and Sacramento, shows that some Americans can still think big. 

The scheme, backed by Silicon Valley’s elite, plans to build 170,000 houses and establish half a million jobs in Solano County. 

A compelling concept, but with the loss of its lead investor in an industrial development, California Forever is on the ropes.

A new shipyard on land owned by the California Forever development company just lost its first big industrial investor, Saronic, which decided to take its $3.2 billion project to Texas.

Saronic builds autonomous ships, a technology that has already proven its worth by rescuing two downed helicopter pilots in the conflict with Iran. It’s exactly the kind of high-tech industry for which California has long been renowned.

Insiders at California Forever claim Saronic, based in Austin, wanted to locate in California to have an outpost on the Pacific, where American security concerns are increasingly focused, with proximity to both the country’s top engineering schools and Silicon Valley.

The loss of the Saronic project is also a major defeat for Gov. Gavin Newsom. The notorious opportunist and presidential wannabe supported the project, as many of the key investors were his campaign donors. The shipyard project also enjoyed strong support from construction and industrial unions. 

But when push came to shove, the Saronic deal collapsed due to delays and opposition from the area’s local state senator and the Solano County Board of Supervisors.

Such hostility to growth is now an embedded feature of California’s political system. For years, greens and their legislative allies have strangled development, particularly on the urban fringe, while making it all but impossible to build new, state-of-the-art industrial facilities. 

California, once a fearsome industrial power, has continued to deindustrialize at a rapid rate, losing over 610,000 jobs since 2000, the most of any state.

In contrast, Texas, Nevada, Arizona, Tennessee and the Carolinas, seeking robust industrial growth, are more than happy to pick up the slack. So too are resurgent “rust belt” states like Pennsylvania. These all tend to offer lower taxes, less regulation and more reasonable energy prices.

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For years, California’s free-spending government has ignored the industrial sector. After all, the concentration of giant tech companies provided an excess of cash for the larder.  

But now, according to economist Gad Levanson, software employment is down to where it was in 2017. Tech titans like Salesforce, Meta, Google, Amazon and Lyft all have announced major cutbacks, while freelance work in software has declined markedly. 

At the same time, Meta is implementing its program to train skilled labor for data centers in Ohio, Indiana, Texas and Louisiana — the Big Easy serving as the location for the company’s new Manhattan-sized data center.

Meanwhile, hopes that artificial intelligence will bail the state out of its current predicament seem delusional. Recent shifts in stock prices, enormous debts run up by tech companies, growing opposition to data centers and fearsome Chinese competition suggest some potential losses from these companies — and sooner rather than later.

And even now, AI may eat more software jobs than it creates, at least in the near term. The Bay Area alone accounts for roughly half the AI office space in the country, even as the overhauled office market suffers high vacancies, suggesting weakness in other sectors. 

For these reasons, the long-term success of California’s economy depends on an alternative to software. Military and space-related business, part of the rising advanced manufacturing sector, could provide some powerful stimulus. 

The 2024 list of the top 100 National Defense startups have together gained $52 billion in private capital and the clear majority were located in California.

This is critical as advanced technology, including drones and sensors, is seen as a critical means to address a change in military affairs, as suggested by the wars in the Middle East and Ukraine. In fact, lots of potential jobs for Californians are on the table if the state gets a big share of the US Army’s $36 billion procurement overhaul. 

The problem, notes Sean Randolph, senior director of the Bay Area Council Economic Institute, is that once firms have a product, they build it elsewhere. 

Firms producing (and designing) new products would be a gift to the state’s skilled blue-collar workforce. Nationally, these workers are already doing better financially than the products of the diploma mills. 

Artificial intelligence entrepreneur Rony Abovitz suggests AI’s biggest winners could prove to be the “sophisticated, technically capable blue-collar worker.” 

Right now, sadly, California is not amenable to creating such jobs. The massive wave of new investment in manufacturing by companies like Samsung, Taiwan Semiconductor and Mercedes is taking place elsewhere; the expansion of the Intel foundry in Austin to serve SpaceX reflects how much silicon is being winnowed out of Silicon Valley.

But if the state can change its policies, California Forever’s industrial strategy could still work as the bedrock of its ambitious utopian dream.

“This is a wake-up call,” said Robert Hertzberg, former California Assembly speaker, who advises on the project. “We have to send a signal that we can move more quickly.” 

With its ambitious vision for a new city sustained by a fusion of tech and industry, California Forever still retains the promise of California. 

But if things don’t turn around, it may become symbolize something else: California Never.  

Joel Kotkin is the presidential fellow in urban futures at Chapman University and senior research fellow at the Civitas Institute of the University of Texas at Austin.