Through ‘inclusive capitalism,’ California leads from the front

Some pundits and skeptics are questioning whether California can sustain its job-creation success. They’re asking whether businesses are suddenly moving out of state and dooming the “California Dream.” Nonsense.

Let’s look at the facts. California’s economy is the fifth-largest in the world. We lead the nation in areas such as manufacturing and technology.

We see new businesses start at a faster rate than any other state thanks to accessible venture-capital funding, world-class universities, state-of-the-art public and private labs and a diverse talent pool.

{mosads}Importantly, California is also a leader in trade. California-made goods ship to customers in over 200 countries and territories around the world, including electric cars ,which recently became our seventh-largest foreign export. 

Overall, trade creates and supports one in five jobs in California, with 30 percent of those jobs coming from trade between Mexico and California alone, which is why any notion of closing our borders to trade should be dismissed as catastrophic to our economy.

The facts show that California is good for business. But we also face challenges, most significantly with a housing crisis that risks becoming a competitive disadvantage for our economy. 

There is simply not enough supply of housing, which is causing home prices and, in turn, rental units to be among the most expensive in the country. This is especially true in the Bay Area, as it is for all “Tech Rush” cities, such as New York, Seattle and Toronto. 

Gov. Gavin Newsom (D-Calif.) has made addressing the housing crisis a top priority and has already laid out a bold agenda to meet this challenge.

Starting with an executive order to build affordable housing on excess state lands and an unprecedented $1.75 billion budget to spur housing production, he also asked the legislature to work collaboratively on efforts to help renters and protect families from out-of-control rent increases. 

Housing isn’t our only challenge. We are simultaneously the richest and the poorest state. That is something we think about every day. If we want to build an economy that works for all Californians, not just those who live on the coast, it will require us to do more and to do so in partnership with the private sector.

The way forward is what the governor calls inclusive capitalism, a strategy that drives investments and developments in infrastructure, housing and employment so that all parts of the state benefit from our growth. 

We’re making progress. The latest jobs report showed that businesses that believe in expanding opportunity in the state are starting to realize that moving jobs to workers in the central part of the state is good for business and for their employees. They are tapping a high-quality workforce that can work closer to home and avoid extended daily commutes.

Fresno just recorded the second-fastest job growth in California, showing that businesses in the Bay Area searching for new talent pipelines only need to look to the Central Valley and Inland Empire. Tina Daley, the head of demographic research for the state’s Department of Finance, discovered a trend worth watching.

That is that the cities with the biggest shares (average of 67 percent) of residents under 40 is trending to inland communities, like Perris, Madera, Lake Elsinore, Lynwood ad Davis, all communities with less expensive housing.

Work hard, get ahead. That is the basic bargain that has always defined not just the American Dream but America. As we focus on areas such as housing, homelessness, poverty, education, workforce development and business growth, we are committed to leading the way in California. 

It’s something we’re known for doing. 

Lenny Mendonca is the chief economic and business advisor to Gov. Gavin Newsom (D-Calif.) and director of the Governor’s Office of Business and Economic Development (GO-Biz). He is a senior partner emeritus of McKinsey & Company.