California’s climb to the world’s fourth-largest economy marks a milestone and illustrates a paradox.
Fueled by innovation and ambition, we’ve cradled industries of the future and amassed extraordinary wealth. But, for the everyday Californians who keep the lights on in our world-leading economy, this newfound prominence is at odds with their daily struggle to make ends meet.
The trophy we’re hoisting — surpassing Japan in gross domestic product — is tarnished by a jaded reception from the average Californian facing rising housing, health care and food costs.
This paradox calls into question whether GDP is the best measure of financial success for state policymakers. If we’re first in homelessness and first in the cost of everyday goods, does being fourth in GDP matter?
As the glad-handing and horn-tooting settles down, this milestone is also a chance for state and local policymakers to reflect on their economic priorities. For Gov. Gavin Newsom, “California isn’t just keeping pace with the world — we’re setting the pace,” but our pace doesn’t matter if GDP is the wrong race and we’re last in affordability, which is what matters most to everyone living here.
When we take into consideration the high and increasing costs of living, California is the 11th-largest economy, barely beating Italy and trailing both France and the UK, where the cost of everyday goods are about a third or less of what they are in California, as measured by the Consumer Price Index.
The price index helps us understand the average cost of everyday goods, like milk, eggs, transportation, health care and housing, for that community. Unlike GDP, it can measure inflation and gauge how expensive it is to live in once place versus another. California has led the world in this measure of expensiveness since 1997, when our price index surpassed that of the U.S.
The persistence of inflation is not some statistical trend. It reflects structural pressures: a housing market distorted by supply constraints and political inertia; a labor force both indispensable and precariously housed; and a tax regime that funds ambition while threatening the economic health of working families.
A healthy and equitable California economy must reconcile growth with governance and dynamism with discipline. It’s not just about size. To Newsom’s credit, his administration issued a first-of-its-kind “State Economic Blueprint” earlier this year with much less pomp and circumstance than the GDP announcement in April. This transformative plan focuses on bottom-up, regional economic planning to strengthen local economies and help communities deal with the affordability crisis.
Some might call this part of the “abundance agenda,” but California’s leaders don’t need to look to distant political commentators for an agenda. They should look to local organizations, such as Valley Vision, for example, just two miles from the Capitol.
Established in the mid-1990s, decades before the “abundance agenda” was ever discussed, Valley Vision began helping the Sacramento region cope with economic upheaval caused by the shutdown of local military bases, which had provided 80,000 jobs to residents. Utilizing a so-called triple bottom line approach, they called on businesses to work across sectors, governments to look past their boundaries, and people to think beyond their zip codes in the interest of the wider region.
The result is that today, while we still struggle with affordability, Sacramento’s local economy is more diverse, resilient and has the building blocks necessary to ensure future prosperity for all of its residents.
That is, if policymakers can come to a consensus and address costs for consumers.
California must reconcile the gulf between its image as a land of opportunity and the lived experience of those priced out of that dream. Otherwise, our latest global economic ascent marks not the beginning of a new era but the high watermark of an unsustainable model.
Aref Aziz wrote this commentary for CalMatters. He is a marketer, campaign consultant and policy expert who has helped California local governments raise revenue to fund transportation and school infrastructure projects.
