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California Capitalism

After years of inaction by the US federal government, state governments like California's have forged ahead with solutions to challenges such as climate change and labor-replacing automation. Indeed, the state is developing its own distinctive political economy.

BERKELEY – Despite multiplying policy challenges, the United States is crippled by political polarization and consumed with rancorous partisan arguments (often on Twitter and without facts). The resulting paralysis at the federal level means that progressive federalism and initiatives by individual states will be the main channels for policymaking in 2020, and likely beyond.

Once again, California, the world’s fifth-largest economy, is leading the way. The state is developing its own distinctive political economy, “California Capitalism,” through fiscal responsibility, innovation, and cross-sector partnerships to foster inclusive, sustainable, long-term growth. 

Since its last employment peak before the 2008 financial crisis, California has added more than two million payroll jobs, the unemployment rate has fallen to a record low of 3.9%, and average per capita income has increased almost 25%. Since the expansion began in 2010, California has added 3.4 million jobs, more than 15% of the nation’s total. With almost four million small businesses, California also leads the country in new business formation, reflecting the fact that it receives more than half of all US venture-capital funding. Whereas national economic growth is projected to slow in 2020, California will continue to outpace the rest of the country, owing to forward-looking tax credits and its diverse set of global industries – from manufacturing, agriculture, and trade to technology and entertainment.