California Dreamin'

Voters in California in the United States are due to go to the polls Tuesday in a special by-election to attempt to mend the state's finances, and they appear virtually certain to turn down at least five of six measures sponsored by Governor Arnold (the Terminator) Schwarzenegger despite the fact that proponents have raised as much as US$30 million in the attempt to woo a yes vote.

The muscular movie star and action hero took over the state in 2004 after the voters had turfed out the luckless and lackluster former governor, Gray Davis, with a promise to dragoon California's perpetually squabbling ladyboy legislators, as he called them, into line to fix the state's finances.

Well, so much for that idea. The state's budget shortfall has now grown to US$16 billion, more than 10 percent of its US$145 million annual budget. Under Schwarzenegger, general obligation debt has tripled to about US$140 billion, forcing the state to spend about 6 percent of its annual revenues to service the debt.

Despite the fact that their schools are deteriorating, their roads are jammed to capacity, their prisons are overcrowded to the point where some 20,000 inmates must be released early, one in five state parks are to close for lack of personnel to run them, and other problems too numerous to detail, the voters are almost certain to say no. No new taxes, no new powers.

There is a solution, one used by the French in 1804 and the Russians in 1867 to mend their leaking finances. Sell. Put up a sign. Sell California to China. Japan is a possibility, with reserves almost as big as China's, but they got badly burned during the endaka period when, for instance, a Japanese company paid an undisclosed but stratospheric amount for the Pebble Beach Golf Course in Monterey, only to sell it back seven years later for what was believed to be a fraction of the original purchase price. Humbled by the way the Yankees took them to the cleaners on other properties, including Rockefeller Center and cattle ranches in Montana, the Japanese have been largely quiescent since. But California has existed for 150 years as the mythic land of riches called Gold Mountain that lured tens of thousand of laborers to dig for gold -- and perhaps coincidentally, to start laundries, build railroads and invent chop suey, something nobody in China ever heard of.

Sale of vast tracts of the Americas are not unprecedented, and mostly they have worked out pretty well.

What the French lost in empire when they gave up the Louisiana Purchase to Thomas Jefferson they appear to have never missed, unlike the English, who fought a four-year revolution, lost and to this day have an on-again, off again relationship with their former colony. Likewise, when the Russians sold Alaska to Secretary of State William Seward in 1867 because they thought it would be impossible to defend, the Americans thought they had euchred the Tsar. Instead, they got a wilderness that produced Sarah Palin. It would be gratuitous to bring up the Dutch, who bought New York from the Native Americans for US$26, then traded it to the British for an obscure island in the Molucca chain.

With US$2 trillion in foreign currency reserves, China probably wouldn't have hard bargaining in a distress sale. With the western world in parlous shape at best, Lou Jiwei, the head of China Investment Corp., China's flagship sovereign wealth fund, announced earlier this year that he is willing to start looking overseas again despite bath the fund took buying into overseas financial operations just before the world financial regime tipped over into disaster. So why bother with individual investments like Blackstone, which cost the fund untold billions, when you could get a whole state?

Washington, DC, the nation's capital, has never been truly comfortable with California viewing it -- with justification -- the wellspring of far too many dangerous populous movements. It was there where Ronald Reagan got his start and convinced the nation that, as he put it, government wasn't the solution, it was the problem. It was there that the anti-tax movement, started by two elderly lizards named Jarvis and Gann, got its start. Hippies, gays, godlessness and hordes of illegal Hispanic immigrants have overwhelmed the country from there.

Partly, it wouldn't be that big a deal. Some 43 percent of undergraduates at the University of California, Los Angeles, are Asians. They account for 40 percent of the students at UC Berkeley. Some of the most remarkable Chinese food in the world lies in the Asian belt that stretches east from Los Angeles towards Monterey Park. What would China get? For one thing, NGOs say China, with 20 percent of the world's population on 7 percent of its land, has been looking the world over for agricultural land to provide food security, leasing ag land from Africa to Vietnam to Burma to Cambodia. California has the most productive agricultural land on the planet. They would get the San Francisco Giants baseball team, which is struggling, but also the Dodgers, who are in first place in their division. The Golden Gate Bridge, which needs painting every year, is a bit of a bother, but it's pretty. And, at last count, 44 percent of the cars sold in California were Asian – made in Japan, admittedly, but still. And, at the rate newspapers are disappearing, there will shortly be no pesky journalists around to give them a hard time over their sometimes, ehm, primitive human rights practices.

If China just paid off bills, the state's 38,2 million residents would probably just breathe a sigh of relief. If they threw in a bit of cash, they would be ecstatic. The Terminator seems increasingly willing to terminate his interest in the state and politics. Let the bargaining begin.