It's a true but misleading statistic economists routinely pull out of their hats: the US has averaged only about 2% GDP growth since the beginning of the 21st century, despite averaging closer to 4% in the previous half century.

It begs the question: "what are we doing wrong?" Instead, we should be asking: "where is the breakdown of the growth, and what can we learn from it?"

Indeed, if you break the data down into states and regions, what becomes clear is that some parts of the US - particularly the West Coast and the energy boom Dakotas and Texas - are still matching that 4% growth clip of the past, while the states of the Upper Midwest and the Bible Belt have mostly ground to a halt and drag the overall numbers down.

California is a particularly fascinating case.

The Golden State has, by far, the most progressive (read: high) tax system of any US state. It's labor policies are as stringently pro-union as exists in 2016. It has significant financial industry and environmental regulations. And yet, it has the sixth largest economy in the world, with annual GDP of nearly $2.5 trillion that is larger than France and India, and 4% annual growth.

Think about that for a second: California, with only about 2/3 as many people as France, is just as productive, and growing at a robust 4%, rather than stalled - like France and most European economies. It has less than one in twenty-five people when compared to India - yet it is economically larger and growing nearly the same dollar for dollar annually - despite the innate growth advantage that a developing economy has over a developed one.

In short, California offers a recipe solution for what the future of successful economic growth looks like, and it's a different model than any currently being used as a popular shorthand.

California certainly doesn't follow the Nordic model: it may have nearly as progressive a tax system but it is far more favorable to immigration, vastly more multi-cultural and more productive.

It doesn't follow the French or European models: California does its best within the American system constraints to mimic the French social safety net but it celebrates its wealthy citizens, rather than demonizing them, and flaunts its entrepreneurial and startup credentials to the world. California is where you go to build a business; France is where you drown it in red tape.

And it certainly doesn't follow the US conservative model: nearly every policy in California today is a near mirror rejection of both Trumpian populism and 1980s conservatism.

No, what California represents is a blend of entrepreneurial capitalism, multicultural embrace, and social protection. In English: work hard and create something, embrace each other, and pay through the nose for taxes and regulation, but do well because you will live surrounded by the best people and in a more open and productive society.

Published on: Jan 19, 2017