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For a century, it worked, and brilliantly. The “California model” rested on massive investments in higher education, development of industrial zones in places such as the South Bay and Silicon Valley, and persistent upgrading of basic infrastructure.
Yet the system that made California dynamic and prosperous for so long is now broken and backward-looking. The state still provides ample opportunities for technological and financial elites but leaves behind a broad spectrum of the middle and working classes.
This failure is reflected in the state’s poverty and unemployment rates (both the highest in the nation), and its tepid job growth. Meanwhile other states — Texas, Florida, Arizona, the Carolinas and Tennessee, for example — have copied the California model and they have done it, as Californians once did, based on the goal of lifting up all classes. Long reactionary in their politics and social structure, these states’ business-friendly policies now have something to teach the progressive Golden State.
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The defense and aerospace industries are showcases for California’s problem and missed opportunities. The state still leads in numbers of aerospace engineers and creates cutting-edge technologies. But once companies develop products based on all that innovation, they’ve tended to move the manufacturing, with its high paying blue-collar jobs, elsewhere, chasing fewer regulations, cheaper energy and a less expensive cost of living.
Take Jet Zero, which makes fuel-efficient planes. The company, based in Long Beach, is ready for prime time, with large orders for its new planes. But those jets will be built in Greensboro, N.C., in a $4.7-billion plant employing more than 14,000 people over the next decade. The company also plans to move its headquarters to Greensboro when the plant is finished.
Elon Musk’s story is well-known. The space economy is expected to be worth trillions, but Musk’s rocket company has already decamped in large part from California to Texas. Space X and Jeff Bezos’ Blue Origin have built large test facilities in Brownsville and Van Horn, Texas, bringing a blue-collar bonanza to traditionally poor regions.
Even companies that plan to stay headquartered in California are making big investments elsewhere. Anduril, a fast growing tech-driven defense company, designs its systems in Orange County but has announced plans to build a 4,000-job plant in Ohio and is also expanding its operations in Mississippi.
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This pattern should alarm the state’s leaders who seem more concerned with boosting green energy, fighting Trump and saving Hollywood. Assemblyman Al Muratsuchi has been pushing for a space commission, as exists in Texas and Florida, but so far to no effect. The California Coastal Commission’s recent rejection of Space X’s request to double launches at Vandenberg Space Force Base, ostensibly over environmental questions, is another sign that the state’s focus is anywhere but on aerospace.
The loss of potential new aerospace investment is tragic. Imagine if Anduril’s and Jet Zero’s plants were going up in Fresno, Bakersfield, San Bernardino or Modesto — areas afflicted with high levels of poverty. Manufacturing remains the key to productivity growth, packs a far higher multiplier effect on local economies than retail, trade or finance and generally pays far higher wages.
You might hope that California’s tech sector would make up for the loss, one of many in a long decline in industrial jobs in the states. But in tech too, California is losing to emerging players. The Computing Technology Industry Assn. 2024 assessment found that Texas led in new tech jobs, with Florida second, and Georgia, Tennessee and North Carolina making significant gains. California, not surprisingly, isn’t high on the association’s list of states projected to enjoy the biggest growth in the sector over the next decade.
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Artificial intelligence and Washington-pushed chip manufacturing could prove a new source of growth, and at the very least create capital gains needed to boost the state’s poor fiscal position. However, California’s highest in the nation energy prices , tough land-use regulations and lack of blue-collar skills education discourage the construction of new data centers by the likes of Nvidia and Samsung.
To be sure, the Bay Area is an AI startup epicenter but this is likely to offer opportunities for the investor class, a handful of entrepreneurs and well-compensated “genius” programmers, not middle- and working-class Californians.
Is there hope for a recovery? San Francisco city economist Ted Egan suggests President Trump’s tariffs, with their emphasis on electronic goods, could help make California an ideal place for “reshoring” various kinds of aerospace, computer and other tech manufacturing, but only if the California model is modernized to suit these industries’ land use and energy needs.
And there are California entrepreneurs — bred to look at and shape the future — who are not ready to abandon the state’s reservoir of expertise and talent, and who are committed to making things as well as developing concepts. “We’re inventing the new factory town, and recovering the sense of what works in America,” says Cameron Schiller, whose Rangeview Corporation startup uses 3-D technology to make castings for the metal parts used in aerospace, one of dozens of industrial startups in the former aerospace stronghold of El Segundo.
To revive the California model, we need dedicated visionaries and an evolving workforce, but mostly we need state government to remember what it means to be willing and able to help the visionaries and the workers succeed.
Joel Kotkin is a contributing writer to Opinion, the presidential fellow for urban futures at Chapman University and senior research fellow at the Civitas Institute at the University of Texas, Austin.
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Ideas expressed in the piece
The traditional California model of investing in higher education, industrial development, and infrastructure worked brilliantly for a century but has become broken and backward-looking, now serving technological and financial elites while abandoning middle and working classes[1][3].
California suffers from the nation’s highest poverty and unemployment rates alongside tepid job growth, while other states like Texas, Florida, Arizona, and the Carolinas have successfully adopted California’s former approach with business-friendly policies that lift all economic classes[1][2][3].
The defense and aerospace industries exemplify California’s fundamental problem, as companies develop cutting-edge technologies in the state but move manufacturing and high-paying blue-collar jobs elsewhere due to excessive regulations, expensive energy costs, and high living expenses[1].
Major companies are abandoning California manufacturing despite maintaining innovation centers there, with Jet Zero building its $4.7-billion plant employing 14,000 people in North Carolina, SpaceX relocating operations to Texas, and Anduril expanding to Ohio and Mississippi rather than investing in California’s economically struggling regions[1][5].
State leadership prioritizes green energy initiatives, political opposition to Trump, and protecting Hollywood over economic development, as evidenced by the Coastal Commission’s rejection of SpaceX launch expansions and the lack of progress on establishing a space commission[1].
California is losing its technology sector dominance to emerging players, with Texas leading in new tech jobs, Florida ranking second, and states like Georgia, Tennessee, and North Carolina making significant gains while California faces an uncertain growth trajectory[2][5].
The state’s highest-in-the-nation energy prices, restrictive land-use regulations, and inadequate blue-collar skills education programs discourage construction of new data centers and manufacturing facilities, even as artificial intelligence and chip manufacturing present growth opportunities[1].
Different views on the topic
California continues demonstrating economic resilience by adding 15,000 jobs in July 2025, accounting for 20.5 percent of national job gains despite representing only 11.3 percent of total national employment, showing the state’s job creation outpaces its proportional share[1][4].
The state has experienced substantial job recovery since April 2020, gaining over 3.1 million positions at an average of approximately 50,000 per month, with year-over-year growth of 92,900 jobs between May 2024 and May 2025, indicating sustained employment expansion[4][7].
California maintains significant advantages in high-value technology sectors, with Silicon Valley continuing to house the best companies and highest-paying positions in the tech industry, preserving the state’s competitive edge in innovation-driven economic segments[5].
Personal income growth reached 5.2 percent annually in the first quarter of 2025, demonstrating that despite job market challenges, California workers are experiencing meaningful wage increases that support economic vitality[6].
The state’s unemployment challenges reflect broader national economic patterns rather than California-specific failures, with the national unemployment rate also increasing during similar periods and California’s rate movements mirroring federal trends[1][4].
Remote work capabilities developed during the pandemic enabled high-earning workers to relocate to lower-cost areas while maintaining their California-based employment, suggesting job losses reflect geographic redistribution rather than fundamental economic weakness[2][5].
Specific industry sectors continue showing robust growth, particularly Private Education and Health Services, which posted gains for 40 consecutive months through May 2025, driven partly by the state’s aging population and expanding healthcare needs[4][7].
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