California’s Economy

Source: Public Policy Institute of California, 2004

Source: Public Policy Institute of California, 2004

California’s Natural Resources

and Primary IndustriesA primary industry involves the extraction of wealth from the natural environment. These activities are the most basic elements of any economic system.

• Energy• Agriculture• Forestry

EnergyPetroleum (2000) In-State 49.5% Alaska 24.8% Foreign 25.7%

Electricity (1999) In-State 82% Imports 18%

Natural Gas (1999) In-State 16% Canada 28% Rockies 10% Southwest 46%

Energy

Electricity

California's 2003

Energy Portfolio

Renewable Resources 8.00%    Biomass and waste 2%    Geothermal 3%    Small Hydroelectric 2%    Solar 0%    Wind <1%Coal 18%Large Hydroelectric 20%Natural Gas 42%Nuclear 12%Other 0%Total 100%

Enery Resources

California Energy Commission, 2003

Geothermal (<5%)

The Geyers, Santa Rosa, CAWorld’s Largest Geothermal Plant

Wind (1%)

Wind Turbines along Interstate 10, Palm Springs, CA

Nuclear (16%)

Diablo Canyon Nuclear Plant, Central Coast

Hydroelectric (24%)

Shasta Dam, Lake Shasta, Mt. Shasta

California’s Energy Crisis• Deregulation of energy production in 1999 forces utilities to sell generation plants and makes them subject to market for wholesale power

• Prices utilities could charge for power capped (not deregulated) until 2002

• Wholesale power costs soar during “shortages”

• Many shortages caused by plants being taken off line for “maintenance”

• 2001 Rolling blackouts

• 2001 State allows customer bills to double and triple

• State bail-out transfers billions to utilities and their stockholders

Top farming state for over 50 years. California produces more than 90% of world’s almonds, artichokes, dates, figs, kiwi, olives, raisins, and walnuts.

Cotton, almonds, grapes, oranges, beef, wheat, walnuts, rice, prunes, alfalfa/hay

Forestry

Where are the forests?

How important is forestry to the California economy?

Which trees are most valuable?

Environmental issues?

How much old growth is left?

What are sustainable harvests?

Where are the forests?

How important is forestry to the California economy?

•California is the third largest producer of forest products in the US, after Oregon and Washington.

•California forest products companies produce more than $14 billion worth of products every year.

•Since 1987, 60 sawmills, plywood plants, veneer plants, pulp mills and board plants have closed in California.

•They are the leading employer in many Northern California counties.

Which trees are most valuable?

Ponderosa Pine Douglas Fir Coast Redwood

Douglas Fir provides the largest number of logs, but Ponderosa Pine and Coast Redwood provide the highest dollar values because of their exceptional quality.

Environmental Issues

How much old growth is left?• Less than 10% of the original old-growth forest is left and much less than that of old growth redwood.

What are sustainable harvests?•Most of California’s forests are second or third growth forests, many of which were clear-cut.

•Today environmentalists and forests scientists still can’t decide whether trees should be harvested every 30, 40, or 50 years. Also, most argue that clear cutting must stop.

Clearcut, Mendocino County

California’s Modern Industries and Services

A secondary industry involves the manufacture of products or the processing of natural resources.

• Factories • Oil Refineries• Apparel and Textiles• Printing and Publishing

A tertiary economic activity involves the sale or provision of a good or service in exchange for payment.

• R & D • High Tech • Education• Retailing (Tourism)

Long Beach Harbor

Oracle Software Redwood City, CA

California Economic IndicatorsRecession in early 1990s, Huge Resurgence in late 1990s, Slow

Growth during early 2000s

• Massive military cutbacks after fall of Soviet Union.

• Middle class manufacturing jobs lost, few migrants for these jobs.

• Oddly, highly skilled workers and low-skilled immigrants kept arriving.

There has been an overall transition and restructuring towards tertiary sector and high-tech manufacturing. Traditional products such as cars, auto parts, steel, and tires have virtually disappeared in California. However, the apparel industry remains a major employer of low-wage workers.

Manufacturing in CaliforniaMost important products: food processing, computer parts, textiles, furniture and fixtures, printing, chemicals, and petroleum products.

SoCal represents the greatest manufacturing belt in North America, especially if you include Tijuana.• Employs 1.1 million workers• Centered south and east of downtown and in Long Beach• Mass production is out.• Specialty producers with quick response times for textiles, apparel, furniture are in.• High tech products such as office equipment, computers, electronics face a skilled labor shortage.

Aerospace in CaliforniaLucrative mixture of R & D, education, manufacturing, and corporate

welfare.

In 1996, Boeing (Seattle) consumed Rockwell (El Segundo) and McDonnell-Douglas (Long Beach and Huntington Beach). • Rockwell built the space shuttle.• Manufacturer of jetliners, attack fighters, spacecraft.• Some jobs lost and profits now flow to Seattle.• Boeing now largest aerospace employer in SoCal and still producing planes.• Northrop-Grumman remains in Century City.

Lockheed Martin, Palmdale

Silicon ValleySanta Clara Valley changes from a farming community to the largest

concentration of computer industry millionaires in the world.

Silicon Valley led us out of the recession (along with communications and biotech in other communities).• Agglomeration of computer industry firms reaffirms importance of geography.• Social capital in the area may be just as important as financial capital.• Some jobs lost and profits now flow to Seattle.• Relationship with Stanford important.• Region was first an electricity research area.

Steve Jobs and Apple Computer

• First personal computer, The Apple, debuted at The Homebrew Computer Club in Palo Alto in 1976.

• Computing power doubles every 18 months.

• Fortunes continue to be made.

Apple II. 1977. It came with a plastic case, could display some graphics, and could access 64k of memory.

Apple I. You had to build most of it yourself, including the case. Cost: $650

SoCal High TechThis region reflects well the transition to high technology throughout California’s urban landscapes.

• Disney animation studios in Burbank. Hollywood has turned to high tech.• JPL and CalTech in Pasadena: terrain mapping and Global Positioning Satellite (GPS).• Irvine Spectrum - successful high tech business park will eventually house 5,000 companies!• Biotech and Communications firms in San Diego have taken up the aerospace and defense slack. Qualcomm is a major player in San Diego’s economy today.• San Gabriel Valley• Walnut and City of Industry are center of a computer assembly region• Taiwanese-American entrepreneurs complete “Golden Triangle” of Taiwan/Silicon Valley/San Gabriel Valley.

SweatshopsOn August 2, 1995, discovery at an apartment complex in El Monte, California, of seventy-two Thai garment workers who had been held in slavery for up to seventeen years, sewing clothes for some of the nation's top manufacturers and retailers. •The workers labored over eighteen hours a day in a compound enclosed by barbed wire. •Armed guards imposed discipline. • Crowded eight or ten into bedrooms built for two, rats crawled over them during their few precious hours of sleep..• Starvation wages, long hours, and illegal working conditions are standard business practices in the industry.

Tourism in CaliforniaLos Angeles alone estimated to receive $12 billion/year in travel

expenditures supporting 122,000 jobs!

California is #1 tourist destination in U.S. despite keen competition from Florida (Orlando) and Nevada (Vegas). • Disneyland, Anaheim. 14 million visitors/year.

• California Adventure: a $1.4 billion flop?• Knott’s Berry Farm• Universal Studios• Magic Mountain• Cruise Ships and Cruise Gambling (LA, San Francisco, San Diego, Avalon)

- gambling banned from 1993-96• Indian Gaming ($50 billion nationwide! Compare that to the $12 billion made by Hollywood).

Ecotourism in California• Destinations include the Sierras, Big Sur, Deserts, National Parks• Gas, food, motels, retail all provide much needed dollars to communities large and small. • In much of America small towns have died off as malls and Walmarts force “mom-and-pop” stores out. In California we are so mobile that tourism supports many small towns almost completely.

Columbia State Historic Park