Of all the prevailing media narratives around Gavin Newsom, the one that is most conspicuous by its absence is how under its two-term governor California became the top performing economy not just among its 49 siblings but also any developed nation. No wonder Elon Musk quietly sought Newsom’s help when the world’s richest man sought to move a bunch of
Tesla Inc. engineers back to the state after relocating them to Texas.
Amid the thousands of headlines referencing California failings with wildfires, droughts, floods, mass transportation, aging roads, education, homelessness, unaffordable housing, widening inequality and poverty along with the exodus of billionaires, corporate headquarters and longtime residents -- never mind
the “slick” label whenever
the betting favorite for the 2028 Democratic presidential nomination is mentioned in the press – the Golden State (population 39 million people), just supplanted Japan (123 million) as the fourth-largest economy.
Gross domestic product surged 40% to more than $4 trillion, accounting for more than 14% of US output, after Newsom took office in January 2019. China’s, the world’s second-largest economy, expanded 32% and No. 3 Germany increased 16%, according to data compiled by Bloomberg.
The US is an also-ran competing with California's prosperity, based on indexes compiled by the Federal Reserve Bank of Philadelphia that take state level nonfarm payroll employment, average hours worked in manufacturing by production employees, the unemployment rate and wage and salary disbursements that are then deflated by the consumer price index.
California's not-so-secret sauce happens to be the diversity between its citizens' ears instead of the fossil fuels generating the biggest share of Texas growth. Of the 10,000 companies in the Bloomberg World Large, Mid & Small Cap Index, the technology sector’s 20% share of their total value is the largest of any sector. And within that subset of technology, California leads with 41-based firms producing a 603% total return (income plus appreciation) over the past decade. That’s almost four times the gain of their global peers the past two, three and five years. Tech’s contribution to California’s GDP increased 59% since 2019, outperforming the 40% gain for states overall.
Healthcare shows a similar trajectory. The industry's contribution to California GDP increased by 52% since 2019 and including 2025, a year when President Donald Trump and Congressional Republicans
enacted major cuts to Medicaid and reduced Affordable Care Act premium tax credits, resulting in an estimated 15 million people losing health coverage. California's uninsured rate declined to a record-low 6.4% in 2023, the largest drop in the US, from more than 17% a decade ago, helped by the
Covered California and
Medi-Cal expanded coverage programs.
Although “some of California's most prominent venture capitalists have a proclivity for slamming their state, arguing that fiscal mismanagement and high taxes will cause startups to form elsewhere,” the opposite is happening, according to Axios. “California startups raised a whopping 62% of all U.S. venture capital dollars in 2025,'' Axios notes, citing the
PitchBook-NVCA Venture Monitor, more than either 2024 (54.2%) or 2023 (46.9%), as well as the decade-earlier mark of 47.2%.
Even accounting for less than 12% of the US population, California contributed more than 40% of the growth in the value of nation's publicly traded equities as measured by the companies in the Russell 3000 Index, which returned 182% for investors since 2019. California accounted for 70 percentage points, more than triple No. 2 Washington (20 points), almost five times No. 3 Texas (15 points) and No. 4 New York (13 points) and almost 12 times No. 5 Ohio (6 points), according to data compiled by Bloomberg. California-based companies overall returned 328% to investors, crushing the equity returns from the world's largest economies: US, 182%; China, 89%; Germany, 110%; Japan, 96%; and India, 63%, data compiled by Bloomberg show.
None of this is accidental. Sixteen years after it became a state in 1850, California passed its first compulsory education law, requiring children aged eight to 14 to attend school. With more than 600 colleges and universities, California today has no peers in higher education, whether in the US or any of the world's developed economies. No. 2 New York has 423, Germany 420 and the UK no more than 300. California graduates more engineers than any state and pays the highest wages when they join the workforce.
