The Domestic and Global Economic Grandeur of California

California’s impact on not only the US economy but also the global economy is unprecedented, and affects the fiscal workings of the world in more ways than one. The state is home to some of the most prosperous, exciting, and innovative industries in the modern world as a hub for entertainment, technology, tourism and hospitality, and even boasts the largest agricultural industry that America has to offer, bringing in the most revenue on agricultural exports compared to all other states, even among other agricultural heavy hitters like Nebraska, Texas, Iowa, and Illinois. The “sunshine state” is also the 3rd largest state by square miles in the US and has excellent geography for industry and tourism with a warm coastal climate, lots of sandy beaches, and excellent farmland suited for the warm weather. This attracts a large number of businesses and wealthy individuals seeking to live a lavish lifestyle and adds to the state’s culture of glamour and celebrity. It has the largest population of all other states in the country at 39.51 million people and has the most electoral college votes to boot with 55 votes to go with its 53 house representatives and two senators in congress. It also boasts not only the highest economic output among states in the United States but also ranks among some of the wealthiest countries in the world. If it were a national economy, it would have the 5th highest national GDP of all countries, right below Germany and right above India at a bewildering 3.2 trillion dollars in 2019. While the Covid-19 pandemic took a major toll on the states economy due to some of its largest industries like entertainment and tourism having to go dormant due to safety restrictions, the state continues to leave large footprints on the global economy and holds large amounts of influence, consistently attracting foreign businesses and investors who are looking to capitalize on the booming industries in the region that always seem to be making international business news. This makes California’s politics extremely important not only for growth in its state economy or even the United State’s national economy but in regards to the sway of global economics as well, as policy decisions that can affect capital flow and trade liberalization or regulation can be executed by public officials to great economic influence allowing increased foreign investment, the creation of jobs, and overall economic growth. In this paper I will be exploring the different ways California’s expansive economy affects the growth and direction of America’s domestic economic policies and as well as the effect that it has on the global economy.

The Entertainment Industry

Perhaps California’s most historical and prominent claim to fame is the world-famous movie industry that it boasts, commonly known as Hollywood. For the last century Hollywood has been producing some of the most well-known and profitable movies in history and has been able to do so largely because of trade agreements that have been in place since the aftermath of WWI as the war “seriously disrupted European film industries and forced them out of international markets.”[1] These agreements were America’s route towards globalizing their films as America and the MPAA viewed films as “commercial products that should be subject to market forces”[2] This was in contrast to how European countries saw their films, as they believed their films were more tied to national identity and should be a special commodity, but in the end the US won out. This allowed Hollywood's productions to skyrocket to international dominance, and propelled it to becoming the number one producers of movies worldwide. By the numbers, in 1913 Hollywood had produced 32 million feet of film, and by 1925 production had risen tenfold to 235 million feet of film, and had begun exporting all around the world to Europe, Asia, Latin America, and Africa. The film business today contributes nearly 3 percent of the nation's GDP and employs almost 2.5 million workers and pays out almost 181 billion in wages along with comprising 93,000 businesses.[3]It remains one of the largest industries in the state and is a major reason why America has been the cultural epicenter of mainstream media that it has become.

Silicon Valley and the Explosion of the Tech Revolution

California’s tech industry may be the most intriguing and important to remain watchful over however. Some of the biggest companies in the world like Google, Tesla, Amazon, and Apple, were developed in California’s Silicon Valley, which has become the renowned center of technological innovation in the country and one of the most prominent in the world next to other competitors like China’s Shenzhen in the Nan Shan district, and Hong Kong. It’s become the mecca of startups and the most attractive place for young tech professionals to be in order to facilitate themselves as part of the quickly advancing industry. In fact, Silicon Valley attracts some of the most temporary residents in the United States as cities such as Los Angeles and San Francisco find high population turnover rates, due to people coming for opportunities in film and technology, and leaving once they’ve made their money due to California’s high cost of living. The amount of people that moved out of San Francisco to other cities within 100 miles of it was 42,826 in 2017 census data.[4] The population turnover rate explains the booming nature of California’s technology industry and why it’s so attractive. Careers are fickle in the valley but highly sought after as landing a job at a fortune 500 tech company can pay big dividends, but on the flip side, companies in the valley are also fickle. In Silicon Valley, investors do not simply look for the next big thing that’s going to upend an entire industry. Companies like that are too far and in between and are very risky investments. Instead, investors look for start-up companies that will develop a product or service that will ultimately end up benefiting another bigger company and be bought off at a high price through an acquisition. Along with this, startup companies are very good for the economy. In 2015, startups generated nearly 2 million jobs and 66% percent of startups outsourced work to other startups building more cooperation and trust within our economy. California came in just behind Florida for the state with the most startup companies being formed with it’s rate of new entrepreneurs coming in at just over .42 percent.[5] Overall, the tech and computer industry remains the fastest growing in the US economy at a projected compound annual growth rate of 9.4% to a market value of 944 billion in 2021.[6]

California’s Booming but Worrisome Agricultural Sector

Adding to California's enormous amounts of profitable industries comes one of it’s least talked about but undoubtedly one of its most important. California’s agricultural industry is the nations most profitable and most exported around the rest of the world at over $38,082,531,000 in cash receipts coming in from California crops alone, with over 400 different commodities grown locally and ten of which having market values of over a billion dollars, the top three including dairy products at 7.34 billion, Almonds at 6.09 billion, and grapes at 5.41 billion, and rounding out the bottom tomatoes valuing in at 1.17 billion. California’s climate and geographical position makes it the perfect state entity to house such a massive and profitable export industry as it’s warm weather and water resources allows entrepreneurial minded individuals the opportunity to take advantage of its access to trade and an enormous population market. However, in the coming decades, California’s agricultural output is expected to slow with the incremental effects of global heating and climate change. Recent studies predict that by the end of the century, rising temperatures and shorter winter years and winter chill time will have a significant effect on the productiveness of California’s agricultural sector for crops that require it such as avocados and almonds.

“By 2050, yields are projected to decline by 40 percent for avocados and 20 percent for almonds, table grapes, oranges and walnuts.”[7] This will not only have large impacts on the food production within the United States, as the agricultural industry in California provides a majority of a distinct set of popular foods that export domestically to other states as well as around the world. 97 percent of kiwis, 97 percent of plums, 95 percent of celery, 95 percent of garlic and 90 percent of all broccoli from the United States for instance, is grown in California. Losing this to climate change would be a huge blow to the overall economy of California.

California as a Global Economy

As California’s large GSP and excess of industry makes it a worldwide centerpiece of investment and trade, California actually engages in less outward foreign investment than is normal, instead opting to focus resources on the industries at home. However, there is an exception in two distinct areas, these being industrial machinery and electronic equipment. It shares these industries mostly within Asia, which boasts countries that have rivaling technology manufacturing sectors such as Japan and China. But as manufacturing exports go, California exports a high proportion of its output at around 28 percent.[8] It’s exporting has allowed internal growth and has made California the richest state in the United States. It’s able to do this because of many factors. One, because of its access to trade and the business activity of its ports. Its two biggest lie in Los Angeles and Long Beach, though a large amount of its trade comes by air travel. California policymakers focus on increasing merchandise exports and inward investment to strengthen California’s economy and create jobs, but other provisions may be needed to keep up with the modernizing global world, such as training their workforce to deal with levels of income inequality and the rising homeless levels in cities like Los Angeles. Enabling social safety nets would also bolster the economic output of the state allowing people to afford opportunities to receive the foundation to pursue education and support themselves, which would also assist the efforts to keep skilled and valuable workers within the state enabling a more valuable workforce.

Conclusion

California’s large and valuable industries make it a crucial part of the American economy. It’s geography, climate and culture allows for a highly productive agricultural sector and attracts businesses that want to innovate and stay ahead of the curve, advancing industries like computer development and design, software and technology and entertainment. It’s cultural impact throughout the world economy can be seen by the technology and entertainment products it exports in mass quantities, allowing America to impact the global culture in enormous ways and attracting investors and dreamers wishing to make it big in America’s economy. As America’s largest economy, if it succeeded from the union it would effectively become the world’s fifth biggest economy with a 3.2 trillion dollar economy and would steal away 14.8 percent of America’s GDP, 12 percent of America’s population, and 17 percent of America’s job growth in the last half decade. It’s impacts are truly unprecedented as a state home to many of the world’s premiere and cherished goods as well as a hardworking and ambitious population that advances and pursues new economic heights.

Works Cited

Kevin Lee, "The Little State Department": Hollywood and the MPAA's Influence on U.S. Trade Relations, 28 Nw. J. Int'l L. & Bus. 371 (2008).

https://scholarlycommons.law.northwestern.edu/njilb/vol28/iss2/14

Moon, Chris. “Urban Migration Patterns Show a Majority Leaving Biggest Metros for More Affordable Markets.” ValuePenguin, ValuePenguin, 18 May 2021, www.valuepenguin.com/2019/11/metro-migration-patterns.

“What Makes a Successful Startup Team.” Harvard Business Review, 21 Mar. 2019, hbr.org/2019/03/what-makes-a-successful-startup-team#:~:text=with%20the%20team.-,What%20makes%20a%20successful%20startup%20team%3F,success%20of%20a%20new%20venture.

Kauffman, Ewing Marion. “2017 Kauffman Index Startup Activity State Report Final.” DocumentCloud, 2017, www.documentcloud.org/documents/4451416-2017-Kauffman-Index-Startup-Activity-State-Report.html.

How Globalized Is California’s Economy?, PUBLIC POLICY INSTITUTE OF CALIFORNIA, June 2003, www.ppic.org/content/pubs/rb/RB_603HSRB.pdf.

California Agricultural Production Statistics, California Department of Food and Agriculture, 2019, www.cdfa.ca.gov/Statistics/#:~:text=2019%20Crop%20Year%20Report,of%203%20percent%20from%202018.

[1] Lee, The Little State Department’: Hollywood and the MPAA's Influence on U.S. Trade Relations, 3 [2] Lee, The Little State Department’: Hollywood and the MPAA's Influence on U.S. Trade Relations, 4 [3] Motion Picture Association, THE AMERICAN MOTION PICTURE AND TELEVISION INDUSTRY CREATING JOBS, TRADING AROUND THE WORLD [4] US Census Bureau 2017, [5] Kaufman Index, State Trends in Rate of New Entrepreneurs [6] The Business Research Company, Computer Hardware Global Market Report 2021 [7] CDFA, California Agricultural Production Statistics [8] Public Policy Institute of California,