California, a western U.S. state, stretches from the Mexican border along the Pacific for nearly 900 miles. Its terrain includes cliff-lined beaches, redwood forest, the Sierra Nevada Mountains, Central Valley farmland and the Mojave Desert. The city of Los Angeles is the seat of the Hollywood entertainment industry. Hilly San Francisco is known for the Golden Gate Bridge, Alcatraz Island and cable cars.
California’s economy is so large, and has grown so quickly, that it is now the fifth-biggest in the world all by itself, according to US government data.
Figures released on Friday by the US Department of Commerce put California’s effective GDP from 2017 at around $2.747 trillion. It said the state’s economy grew by 3.4% in the past year.
That growth puts it ahead of the United Kingdom, which has a GDP of $2.625 trillion, according to data published last month by the International Monetary Fund.
Here is how the 15 largest world economies look if you also include US states (in bold) as separate entities:
1. United States $19.391 trillion 2. China $12.015 trillion 3. Japan $4.872 trillion 4. Germany $3.685 trillion 5. California $2.747 trillion 6. United Kingdom $2.625 trillion 7. India $2.611 trillion 8. France $2.584 trillion 9. Brazil $2.055 trillion 10. Italy $1.938 trillion 11. Texas $1.696 trillion 12. Canada $1.652 trillion 13. New York $1.547 trillion 14. South Korea $1.538 trillion 15. Russia $1.527 trillion
According to the Associated Press, California’s boom has been especially pronounced because of its thriving tech, entertainment and agricultural industries.
The difference is even more stark in light of the respective economies’ populations: Britain has around 66 million inhabitants, compared to California’s 40 million.
The United Kingdom has experienced sluggish growth in the past year and many consider its future economic prospects in peril because of its impending exit from the European Union, characterised by fraught negotiations.
It also highlighted currency fluctuations which helped increase the US dollar figure for California’s economy at the expense of Britain’s.
It is no secret that California is the largest and most productive state in the United States. Between Silicon Valley, Hollywood, agriculture, and tourism, there is plenty to be excited about in the Golden State.
California’s GDP last year was $3.2T, representing 14.6% of the total U.S. economy. California’s economy is so big that if it were a country, it would be the 5th largest economy in the world, more productive than India and the United Kingdom.
So, what is California’s secret? Is it the weather? The higher wage rates? No, it is not either of these. If we look at this from a mathematical viewpoint, the single biggest factor driving a state’s economic success is the size of its population. The correlation between these two factors is a staggering 98.2%. Yes, Vermont has the smallest economic output, but that can be explained by the fact that only 623K people reside in the state whereas California has 39.5MM people. Of course, there are other factors that drive economic growth, such as education levels, entrepreneurial business environment, availability of capital, etc. But these are topics for another day. I simply want to highlight the real driving force of the U.S. state’s economic output levels: population.
While not on top on a per capita basis, no one would argue the economic importance of the state. California’s economy is diverse one that is dominated by technology, trade, media, tourism, and agriculture.
The two strongest economic areas are those that surround Los Angeles and San Francisco with media, trade, and tourism driving the former and technology, trade, and tourism driving the latter. While California is the top agricultural producing state in the U.S., it only represents less than 2% of the states GDP. However, according to the California Department of Food and Agriculture, “California agriculture is a $42.6B industry that generates at least $100B in related economic activity.”
If we were to classify California’s economy by its different industries, here is how they contribute as a percentage of the total.
