California’s economy is a world powerhouse. In fact, in 2018, California’s economy was larger than the economies of India, the UK and France.
In this respect, the Californian economy has come a long way since the start of the 20th century, when the state’s economy was primarily based on agriculture and produce alone. Here, we’ll look at how the Californian economy diversified in the 20th century and assess how it can improve further in the coming years.
How California’s Economy Has Changed Since the 1970s
The diversification of California’s economy from an agricultural one to a highly developed and diverse one can be traced back to the development of Silicon Valley in the 1970s. With the formation of Silicon Valley, California became a world leader in the manufacturing of computer and finance products. Consequently, by the end of the 20th century, the state’s economy began to attract highly skilled and educated workers from all over the world.
As a direct result of this, a growing number of opportunities in the financial industry emerged, and this means that FinTech and financial services businesses have both grown rapidly in recent years. This has been a trend both in California and the USA as a whole, as businesses have adapted to a high-tech world where interconnectivity and globalization are key drivers of growth.
One great example of this is the rise of forex brokers, who have created trading platforms that allow individual citizens to partake in currency trading. Going back 20-30 years, currency trading was only really accessible on Wall Street and in large financial institutions. However, now advances in technology mean that anyone can open a forex practice account and try their hand at trading from home. These accounts allow people to practice currency trading, experiment with currency pairs and build a strategy without risking money. This is particularly important in California because foreign trade makes a huge contribution to the state’s economic output and means opportunities in the local market are always emerging.
However, due to California’s economic diversification since the 1970s, it’s important to stress that the economy of California is now highly diverse. This is because trade, manufacturing and transportation are all still hugely important to the state’s economy. In addition, services remains the largest industry sector in California, accounting for nearly a quarter of all economic output.
The Future of California’s Economy
Over the course of the past 100 years, it’s undoubted that California’s economy has been completely overhauled. After all, agriculture now accounts for less than one-tenth of the state’s income even though farms and ranches in the state received $50 billion in cash receipts for their output last year.
By any measure, California’s economy is in a very strong position. This is because the diversification of the economy means that the state’s economy is well-positioned to withstand any potential economic crashes or bubbles because it isn’t overly reliant on any single industry. However, unemployment in the state remains high (it passed 16% in May) and this means that the state’s economy is slightly unbalanced even though family incomes have risen over the past decade. While Silicon Valley’s
As a result, in the coming 50 years, the state government must focus on how California can tackle high poverty rates, income inequality rates and high housing costs. Otherwise, with an unbalanced economy, the state may struggle to reach its potential.
For example, although middle and upper class Californians are undoubtedly benefitting from the diversification of the Californian economy and the creation of Silicon Valley, working class Californians are not benefitting from these industries and more must be done in the tourism and services industries, in particular, to ensure all Californians are benefitting from the state’s prosperity.
In summary, California’s economy is unrecognizable from how it appeared 100 years ago. However, surges in the tech, finance and manufacturing industry are only helping middle and upper class Californians. In the coming years, to rectify this issue, the state should look to improve the lives of lower-income workers who are currently feeling left out of this booming economy. This way, California’s economy will work for all of its citizens and create sustainable change for the better.
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