Palm Springs, CA

For years, conservatives across America have used California as a political punching bag—a cautionary tale of progressive overreach. They paint the Golden State as a dystopia of high taxes, burdensome regulations, and liberal social policies that strangle innovation and chase businesses away. In their telling, California is less a beacon of the American dream and more a bloated bureaucracy on the brink of collapse.

But then the numbers dropped—and they told a very different story.

In 2024, California’s economy officially overtook Japan’s, making it the fourth-largest economy in the world, according to the International Monetary Fund and the U.S. Bureau of Economic Analysis. With a nominal GDP of $4.1 trillion, California is now only behind the United States as a whole, China, and Germany.

Let that sink in: A single U.S. state—governed by Democrats, led by Governor Gavin Newsom, and often labeled “anti-business”—now has a larger economy than the entire nation of Japan.

So how does the conservative narrative reconcile with this stunning economic performance? Short answer: It doesn’t. The longer answer is a complex story about the intersection of progressive values and capitalist success, where regulation meets innovation and investment in people fuels a booming tech-driven economy.

A Model Built on Innovation, Inclusion, and Investment

Governor Newsom didn’t mince words when he addressed California’s rise. “Our economy is thriving because we invest in people, prioritize sustainability, and believe in the power of innovation,” he said. These aren’t just buzzwords—they’re the core tenets of California’s economic model.

The state has poured billions into green energy, public education, housing, infrastructure, and tech research. While some decry California’s climate laws as onerous, the state’s clean energy sector is now a global leader, attracting investment and creating jobs. In fact, California’s growth rate of 6% in 2024 outpaced even the U.S. (5.3%), China (2.6%), and Germany (2.9%). From 2021 to 2024, the state saw a remarkable average GDP growth rate of 7.5%.

Business Isn’t Fleeing—It’s Evolving

Conservatives often cite headlines of companies leaving California as proof of decline. But these anecdotes obscure a larger truth: The state continues to dominate in tech, entertainment, agriculture, and clean energy. It’s home to Silicon Valley, Hollywood, and some of the most productive farmland on Earth.

Sure, some businesses may flee high operating costs or taxes, and certainly the state needs to step it up on incentives for Hollywood however, many more businesses are born every day—especially in fields that prioritize innovation over extraction. The startup ecosystem in California is unparalleled, and venture capital continues to flood into the state. Talent still flocks to the Bay Area, and the University of California system pumps out more PhDs and patents than most countries.

The Irony of Conservative Critique

The irony is thick: A state constantly derided as anti-capitalist is outpacing capitalist powerhouses. A place where progressive values are embedded in policy—strong labor laws, environmental regulations, public health mandates—has built an economy the size of Japan’s.

If this is failure, what does success look like?

California’s story challenges the binary thinking that paints regulation and growth as mutually exclusive. It shows that investing in people and the planet can go hand-in-hand with economic power. And it forces critics to grapple with a reality where liberal governance doesn’t hinder prosperity—it enables it.

The Road Ahead

California’s economic rise isn’t guaranteed to continue forever. Certainly at the local level, the permitting process can be vastly improved for new businesses and home renovations. Also, projections suggest India may surpass the state by 2026, and challenges from federal trade policies and climate risks loom large. But for now, California stands as proof that you don’t have to choose between progress and prosperity.

You can have both.

Pictured, Downtown Palm Springs, CA