How the Californian dream became a nightmare

For Americans, California once looked like the future. It was a state defined by risk-taking and utopian dreaming. Yet for most Californians today, the upward mobility so central to the state’s ethos is rapidly disappearing. For decades, California was the primary destination for both other Americans and for foreign immigrants. Now, this trend has gone into reverse, with people and companies leaving the state. Population growth, already slowing over the past decade, has turned negative for the first time in modern California’s history, largely due to the state’s shrinking middle and working classes and its loss of families.

California’s difficulties undermine the notion, so fashionable today, that with the right mixture of technology and utopian dreaming, societies can forge a future that is both green and widely prosperous. In reality, California now has America’s worst rates of cost-of-living-adjusted poverty and functional illiteracy, the worst housing affordability in the continental US and a devastating shortage of mid-skilled jobs. What’s more, in 2022, California suffered some of the lowest personal-income growth rates in the country, and its GDP grew at less than half the pace of its arch-rival, Texas.

California’s struggles demonstrate what happens when an economy shuns both industry and solid middle-class jobs. Instead, it has placed heavy bets on ephemera, like social media and entertainment. The failure of this approach now stands exposed. Today, California’s once-huge budget surplus has morphed into a deficit of $25 billion, one that may become even higher in the coming years, given the high chance of recession. Because of this, California’s political class is under pressure either to shrink its expansive welfare state and regulatory regime, or to raise taxes – although taxes are already among the highest in the country. Meanwhile, companies are deserting California in droves, as are some of its top one per cent of earners, who pay roughly half of the state’s income taxes.