Pain was the dominant motif of our public discourse in 2002. The Oakland homicide rate, several spectacular corporate flameouts, a state budget surplus that plunged $34.8 billion into the red -- across the Bay Area, people began to reconcile themselves to the notion that yes, we too can know the Rust Belt's anxiety.
It started slowly, as 2001's economic doldrums proved more tenacious than anticipated. Enron filed the largest bankruptcy in history, but since no one could figure out what the company actually did, we all figured no harm, no foul. Then the bedrock industries began to suffer. Arthur Andersen ceased to exist for all practical purposes. Ford Motor shed thousands of employees, and Kmart and United Airlines went bust. Top that off with rising crime and memories of the energy crisis, and it started to feel like the 1970s.
But where are the Allentowns and Flint, Michigans of our era? Houston and Jackson, Mississippi may have been hollowed out by the Enron and Worldcom supernovae, but neither emerged as national metaphors. We were the national metaphor. Bay Area tech companies slashed their workforces, our dot-com frauds continued to be exposed as such, the Gap hemorrhaged money -- even Charles Schwab took a beating. The Port of Oakland shut down over a bitter labor dispute, costing the West Coast's economy untold billions. One utter schmuck of a referee singlehandedly kept the Raiders out of the Super Bowl, and law school deans were allegedly diddling their unconscious students. Even the HP way -- the famously humanistic workplace culture that stressed dignity and initiative -- fell under the long knives of corporate consolidation. The Bay Area seemed to feel like everything wrong with America in 2002.
Oh, cry me a river. You want to see a real recession? Take a look a 1982 -- that was a recession. When it comes to economic cycles, the media feeds on hype. It overplayed the boom years, and now it's overplaying the hard times. The truth is that while the East Coast media loves to write and rewrite Silicon Valley's obituary, the Bay Area is not Detroit and never will be. With two national laboratories, two research universities, a cluster of dynamic ideopolises, and a regional imperative to import every kind of technical and creative talent from across the globe, Northern California always has remade itself just in time to kick-start the next wave of irrational exuberance. And this year, thanks to a strikingly diversified economy, the East Bay is actually better off than the company towns of Hewlett-Packard and Cisco. Sure, we may have sipped the high-tech Kool-Aid, but we didn't chug it down, and the numbers reflect our prudence.
It's not sexy, but it's true -- the professional infotech class the defines the Bay Area is alive and well, just not in the mood to blow a wad on Pilates classes. All the fretting we did about our second-gear economy was sheer luxury, a pastime for a generation that's never known real pain. If the Bay Area is a symbol, it's the symbol of a country that loved the Internet not wisely but too well, a country that feels a little jumpy about its job security, foolishly disregards the prospects of long-term debt and the shrinking middle class, and doesn't want to think about health care and Social Security. But we still know how to make a buck when the time is right.
The real worries will begin in the next few months, when the state's budget crisis hits home, and the armies of impoverished, uneducated welfare moms and janitors watch the last tendrils of the safety net unravel. Because Sacramento and the counties can't tax stable assets like property -- and is there anyone left in California who doesn't understand the enduring idiocy of Proposition 13? -- government revenue depends on one factor alone: the health of the economy, specifically the rich. And because the rich have taken a comparatively worse beating than the middle class, our state is broke. So while the chattering classes lost sleep over the mildest recession in decades, the people who depend on the government for basics such as food stamps and health care prepared to fall off a cliff.
This is the real story of 2002. And next year, the lumpen poor of the East Bay -- the ghetto underclass to whom we never bothered to impart the skills or education to participate in the tech boom -- will be worse off than they've been since the heyday of crack.People who fret about the local economy simply don't remember when the Bay Area really had something to gripe about, gripes Doug Henton, an economist who studies the financial and social health of the Bay Area for Joint Venture Silicon Valley. Sure, the Bay Area lost 100,000 jobs over the last two years. But when you consider that in the two years prior we added 100,000 jobs in a binge of overinvestment, that puts us back in 1998, which ain't so bad.
"This concept that suddenly everyone's feeling pain, that's relative to what?" Henton says. "The 1900s, when everyone was working on farms? What's changed is September 11 and the sense of security that was lost. There was this idea in the late 1990s that every problem has been solved -- why would anyone think that? We had a bubble, and it broke. Now we're back where we were. But by any other indicator, we're much better off than we were in the early '90s, for example. We have the highest real wages of any region in the country, the highest productivity, the best climate, and the best assets. Everyone wants to live in the Bay Area. Why are we in this doom-and-gloom attitude? Nothing has changed that much."
In fact, Henton claims, history shows that the Bay Area emerges from every boom-and-bust cycle stronger than before, and it's all thanks to the region's uncanny penchant for innovation. The Bay Area developed the semiconductor in the '70s, rolled out the personal computer in the '80s, and popularized the Internet in the '90s. Today, it's head and shoulders ahead of the rest of the nation in biotechnology, and sometime in the next few years, reagents and patented proteins will push us back in the black in a big way. We're not without our problems; our housing shortage and transportation mess threaten to limit our growth and may even force local innovators to migrate to the dozens of other regions bent on building their own biotech corridors. And the imminent war in Iraq, coupled with George W. Bush's trickle-down impulses and the looming peril of deflation, could still stall the economy. But somewhere in the labs of Walnut Creek's Joint Genome Institute or Albany's Plant Gene Expression Center, eggheads are even now thinking us out of the mild economic climate we're so preoccupied with. "It's the low points where innovation has occurred," Henton says. "Someone is thinking something up and inventing whole industries right now."
Who'da thunk that of all the counties in the Bay Area economic powerhouse, it's the East Bay that leads the pack? According to officials with the state Employment Development Department, the counties of Alameda and Contra Costa whittled the unemployment rate down to 5.9 percent in November, while Santa Clara's is pushing 7.8 percent. Although we've taken a big hit in business services in the last two years -- think Web consultants, e-commerce hucksters, and marketing professionals -- we made up for this loss with health and other service jobs as well as the continuing real estate boom. Manufacturing lost a hefty share of jobs this year, mostly in electronics, but Alameda County's food processing sector -- perhaps its largest industry -- remains sound. In short, the East Bay's economic diversity cushioned us from the worst of the tech bust, while greater San Jose has struggled to cope with the loss of tens of thousands of technology jobs.
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