News stories about California’s troubled economy continue to saturate the media. Lately, it seems almost impossible to find a day when the state’s financial woes are absent from the headlines. How did a state that once enjoyed such tremendous prosperity find itself in this position? We recently turned to James Flanigan, seasoned journalist and author of Smile Southern California, You’re the Center of the Universe: The Economy and People of a Global Region (Stanford General Books), who shared his insights on the economic volatility of the region.

MuniNet: What was the driving force behind writing, “Smile Southern California …?”

Flanigan: As a reporter for the past 45-plus years, covering business and the economy – both domestic and international – I observed trends and noticed developments in Southern California that were unique to the region. So I decided to explore these trends over time and publish my observations in a book that Stanford University Press agreed to publish.

MuniNet: How would you summarize the rise and fall of Southern California over the past century? What factors led to its peaks – and its valleys?

Flanigan: The early uptick in Southern California’s economy can be traced back to the early days, when Sam Goldwyn, D.W. Griffith and so many others discovered sunshine and brought the motion picture industry to the area. The movies and the dawn of the mass consumer communications age made the first significant contributions to the rise in California’s economy, particularly in the Los Angeles area. The highly visible nature of the industry, as well as the glamour associated with it, influenced migration to the area, thereby increasing demand for local services, retail sales, housing market, etc.

Perhaps more than anything, it attracted an enormous variety of talented people to the region – and not just movie stars and entertainers. From the brilliant minds that created lighting and sound effects to the skilled business executives who ran global “empires,” as they became, the area became home to a variety of gifted and capable talent.

MuniNet: But there’s more to it than just the glitz and glamour of the entertainment industry, right?

Flanigan: Absolutely. Air flight pioneers like Northrop, Wiley Post, Douglas, and others led California to become a base of development during World War II – and then to expand into new industries after the War, driving further significant growth for the area.

After the slowdown of the aerospace-defense industry in the early 1990s, Southern California became the center of the technology boom. The “Silicon Valley,” as it came to be known, was the birthplace for a variety of technological innovations, including the Internet, which was first invented at the University of California-Los Angeles (UCLA). The tradition of innovation and an entrepreneurial spirit continues among area companies today, and serves as the mainstay for Southern California’s economy.

MuniNet: Yet now California is facing tougher economic challenges than perhaps any other state in the U.S. … What happened?

Flanigan: California’s economic troubles can be attributed to a breakdown in its political system, and a broken tax structure in great need of reform. California’s delegation in Washington is often disunited, while state representatives serving other states do a much better job of working together in the interests of their state. Also, after building a model for higher education – and, indeed, all education – the state is now ignoring this critical asset.  Shortsightedness and narrow ways of thinking have cost the state – in more ways than one.

MuniNet: In your opinion, does California face greater challenges – economic, demographic, or other – than other states?

Flanigan: Racial and ethnic persecution and discrimination against various ethnic groups have led to raucous riots and terrible acts of violence in California throughout the years. However, its diverse culture has also been one of its greatest benefits.  Due to its demographics, California enjoys a variety of advantages that many other states do not share: diversity, youth, and opportunity. The challenge, as mentioned earlier, is to educate our youth. Economic hurdles revolve around the state’s tax and political systems and a need to reorganize existing tax structures.

MuniNet: Do you see a recovery in sight for California?

Flanigan: I do see a recovery on the horizon for California – for three basic reasons. California is the nexus of the global economy, with strong connections to Asia and Latin America. Two thirds of the world’s population between the ages of 15 and 40 live in Asia, bound to be the future of the world’s economy. California is linked to Asia not only by commerce, but by its large Asian population who maintain strong ties – via trade and other interaction – with their countries of origin. The same can be said for its Latin American population.

In addition, California has a growing population, not only because of the large influx of immigrants, but also because of their offspring who are born, raised, and settle in the area. The young population is one of the area’s greatest assets, yet presents some of the greatest challenges because of increasing needs and costs in the area of education.

The continuing tradition of entrepreneurial companies developing innovative products and services will also contribute to the area’s economic recovery. Southern California is home to several prestigious research universities that are leaders in the sciences and other cutting-edge industries.

About James Flanigan

James Flanigan, business columnist for the New York Times, Los Angeles Times and other publications, has covered national and international business and economics for 46 years. He has focused on every aspect of business and finance and examined in major articles the economies of countries stretching from Europe to Asia, Latin America, the Middle East and Africa.

For 20 years he wrote a column in the business section of the Los Angeles Times. He now writes for the New York Times and recently published a book entitled, Smile Southern California, You’re the Center of the Universe: The Economy and People of a Global Region (Stanford General Books), focusing on Southern California’s vibrant business climate and its relation to the global economy.

Flanigan started as a financial journalist at the New York Herald Tribune in 1963, having joined that paper in 1957 while attending college. During 17 years with Forbes Magazine, he served as bureau chief in Washington, Los Angeles, London and Houston and later in New York as assistant managing editor. His journalism has won numerous awards.