Never one to miss a reason to crow, Gavin Newsom, the governor of California, was out in front of the media at the weekend, bragging about how his state now boasts the world’s fourth largest GDP, surpassing Japan. This is a natural posture for a potential presidential candidate, a chance to show how under his leadership California has thrived.
Unfortunately, few are likely to believe him. Newsom must realise that the notion that California is a model for the rest of the United States – the rationale for the Newsom-led “resistance” against Donald Trump – is no longer widely accepted. In a national 2024 survey, only 15 per cent of respondents felt that California is a model other states should copy; 39 per cent said the state should not be emulated. Barely one in three state residents – and only one in four younger voters – now thinks of California as a good place to achieve the American dream.
Even the GDP news has to be taken with a grain of salt. For one thing, Japan’s downgrade is likely to be partly a result of the decline of that country’s currency, which has been weakening against the dollar for several years.
But beyond GDP, the illusion of Californian success is also a product of high asset values, like real estate, exacerbated by regulatory policies, with house prices typically more than twice as high as the national norm. Add to this the huge capital gains accruing to a handful of tech firms, who over the past decade have doubled their share of the S&P, and you have a large part of the explanation for California’s asset boom.
Rather than the exemplar of a new “progressive capitalism”, or a model for social justice, as Newsom and his cadre assume, the beneficiaries of the state’s growth have been very much concentrated on the upper crust. It may be springtime for Apple, Google, Nvidia and Meta (formerly Facebook), but the prospects for most Californians are anything but sunny. In reality, modern California increasingly resembles a feudal country – like Qatar, Brunei or the United Arab Emirates – where fantastic wealth is largely owned by a small elite.
Once an example for upward mobility, today California manages to be both home to the highest number of billionaires and the highest cost-adjusted poverty rate. The state’s poverty rate continues to worsen. Seven in ten Californians say economic inequality is getting worse, according to a recent survey. The Public Policy Institute of California (PPIC) estimates nearly a third live in poverty or near-poverty – roughly 13 million people in total.
Even the geography of growth since 2017 has been highly concentrated in three Bay Area counties, bolstered by four of the world’s seven companies with trillion dollar valuations. By some counts, real GDP in these counties rose at four times the rate of the US average while the rest of the state, home to the vast majority of the population, has grown well below. The same can be said about race; California may talk boldly about “equity” but in reality, its economy is remarkably unequal, with majority black or Hispanic counties growing well under the national average.
Overall, California today is one of the worst states in the nation when it comes to creating jobs that pay above average, while it is at the top of the heap in creating below average and low-paying jobs. Between 2008 and 2020, the state created five times as many low wage jobs as high wage jobs. In the past three years, the situation worsened, with 78.1 per cent of all jobs added in California from lower-than-average paying industries versus 61 per cent for the nation as a whole.
As tech stocks and housing in Montecito (home of Meghan and Harry) soar in value, Californians suffer the nation’s second highest rate of unemployment, lagging in job creation in comparison to its chief rivals, like Texas and Nevada. In the past year, its GDP growth has also been among the lowest in the country.
This will be in no small part because California has the highest energy prices in the continental US, double the national average, which has also exacerbated “energy poverty,” particularly among the poor and those in the less temperate interior.
Much of this reflects the impact of climate policy, a favourite hobby horse of the state’s dominant elite. But these same policies increase poor and working family costs, and shift billions of dollars to the wealthy, in the relentless pursuit of unilaterally modelled emission targets that even advocates admit cannot possibly “fix” the global climate.
It’s working class jobs – construction, logistics, manufacturing, energy – that have been most severely hit. Even without adjusting for costs, no California metro area ranks in the US top ten in terms of well-paying, blue-collar jobs. But four – Ventura, Los Angeles, San Jose, and San Diego – sit among the bottom ten. They are also far more negative about the future of the economy than those nationally, and particularly compared to people in competitor states such as Texas.
Rather than the land of entrepreneurial opportunity, California increasingly presents a picture of medieval inequality. Huge wealth is concentrated within in few hands while around a quarter of the nation’s homeless population lives in the Golden State, many concentrated in disease and crime-ridden tent cities in Los Angeles or San Francisco.
If this is the model of Newsomian capitalism, it’s unlikely to have many buyers in 2028.
This piece first appeared at: Telegraph.
Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. He is Senior Research Fellow at the Civitas Institute at the University of Texas in Austin. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.
Photo: GetArchive in Public Domain.
Email this Story
