The Californian Economy

California has always been one of the states of the USA with an economy that thrives particularly well. The gross domestic product of the state of California alone is greater than that of all but eight countries in the world. However, for the 08/09 budget year, California is facing a $16 billion budget deficit. The global economic crisis has not left California untouched.

The economy before the crisis

California’s economy is traditionally one that goes exceptionally well. The state is responsible for 13% of the Gross Domestic Product of the US, and it is home to many areas that are very profitable to the economy, such as Hollywood, where millions are made through the entertainment industry, or Silicon Valley, where the newest computers and high technology are developed and the money sums we’re talking are unimaginable to the average citizen. There are also many wine trading regions that keep the economy going, as well as Central Valley which is very much used for agriculture, a fast growing and very important sector in the economy of California. Generally speaking, California’s economy is very open and dependent on trade, a sector that is responsible for approximately a quarter of the country’s economical strength; the top export being computers and other technological goods. Of course, tourism is also traditionally a large and important source of income for California’s economy. Historically, the economy has been widely controlled by large corporations such as the Pacific Gas and Electric Company or the Southern Pacific Railroad. In 2007, according to the World Factbook, if California were a country on its own, it would have had the tenth largest economy in the world. Per capita income was around $39 000 in 2006, but this varies widely according to profession and area. Some areas are very rich and also home to astronomically high housing prices. These include for instance Beverly Hills, or Newport Beach in Orange County. The poorest regions are no doubt the agricultural regions in the center of California, and some of those are even ranked as being part of the poorest regions in the USA.

Effects of the global economic crisis
Nowhere has the international boom in housing prices been as scarily pronounced as in California, and various housing markets in California are now considered to be in a housing bubble. The budget deficit is increasing, and there have been suggestions of reducing health care for citizens and raising taxes. Reducing health care and health insurance has of course been met with a lot of harsh criticism, as this would be to the disadvantage of those already impoverished and touched the most by the ongoing crisis. However, negotiations are difficult because the Republican Party signed a bill saying they would not allow taxes to be raised under any circumstances, even if it meant a reduction of health services. This has caused trouble, even though Governor Schwarzenegger has called for more cooperative attitudes in order to find a fast solution to the problem. The Governor is said to plan on reducing state jobs in the very near future in order to reduce the budget deficit. This would mean even more people losing their jobs and thus, the medical insurance that comes with it. There is no doubt that the economic crisis has indeed hit California, and the impact was strong enough. The state seems to be unable to find a solution to escape what could be called a vicious circle in which, as in a lot of other places, no matter the decisions taken or the steps pursued, it is always the poorest of the population and those that are already at a disadvantage that get hurt further. The global lack of motivation and the change in consumer behavior has been said to be just as observable in California; people go out less, don’t spend as much money in their free time, and don’t just go shopping for leisure and so on. Consumer attitudes have undergone a radical change, even in California.


The economy of the state which was once thriving and amongst the strongest of the world has been quite harshly touched by the global recession. All that can be done is hope that a way will be found out of the situation and that the economy will be able to recover quickly.