Time to wake up to the California dream

The golden state has been hugely successful at creating jobs in the high-tech sector. That it has done so largely without government interference offers lessons to the UK on the limitations of the role to be played by politicians

THE CHANCELLOR wants to boost high-technology industries in Britain (see Diane Coyle, page 4), but what could he learn from the high-technology capital of the world, California? A brief visit to Los Angeles last week has convinced me of two things. First, that generating new high-tech industries is the best hope not just for job creation but for general economic growth. The second is that boosting high-tech industries is a complex, subtle process in which governments have a role - but not necessarily a very direct one.

The starting point is the extent to which the high-tech sector has become the engine now driving US economic growth. There has been some interesting work on this by the Milken Institute, the LA-based economic research group founded by the controversial American financier Michael Milken but run as an independent not-for-profit organisation.

The institute has split GDP growth into that generated by high-tech activities and that by low-tech ones and come up with the results shown in the graph. As you can see, seven years ago high-tech accounted for only a tiny part of the growth in the economy. Now it is generating three-quarters of the growth. Indeed were it not for the high-tech sector the US economy would have been bumbling along at less than 1.5 per cent growth instead of reaching nearly 4 per cent.

Information technology now accounts from more than 50 per cent of capital spending and in addition some low-tech spending has a high-tech element to it. Further, the US leads the world in the proportion of GDP accounted for by information technology: more than 6 per cent, compared with 4 per cent in Japan, 3 per cent in France, 2.7 per cent in the UK and 2.2 per cent in Germany.

The biggest single beneficiary of this boom has been California. The economy is enormous: were California a country it would qualify as a member of the G7, displacing Canada, and is not far behind Italy in size. The state suffered a serious economic setback in the early and middle 1990s with the rapid downsizing of the aerospace and defence industries. In 1993, 1994 and 1995 there was net outward migration: the number of Californians leaving was larger than the flow of immigrants from abroad. But thanks to the high-tech boom that has been reversed and California and Texas are joint second in new jobs created as a percentage of total employment. (Nevada is way out on top - clearly gambling is a better business even than high-technology.)

Looking ahead at future job creation the same message emerges. Out of the top 10 occupations that are expected by the Bureau of Labor to show the fastest growth in the years to 2006, the top three - computer scientists, computer engineers, and systems analysts - are all related to technology.

So it is surely abundantly clear just how important high-technology has been in the US in general and in California in particular. It is a simple story and an enormously important one. However, when you turn to the second point - whether governments can do much about it - the tale becomes much more tangled.

Take education. Those new jobs for computer scientists and engineers will need graduate qualifications, which in turn requires good basic schooling first. But California has lagged behind the rest of the US in the quality of its basic public sector education. The professional classes have flocked to private schools. There has been the particular problem of trying to cope with Spanish-speaking immigrants, and it has been a hot political issue as to whether these children should be taught in Spanish or English. (Voters have recently decided that it should be English.)

At the conference I attended (organised by the Milken Institute) both the state governor and the mayor of Los Angeles cited public education as a state failure, an area in which they had to do better. Apparently many of these new jobs the economy is creating go to incomers because the education system is not delivering sufficiently well-educated local employees.

But the fact remains that despite poor education, the economy was still generating the high-tech jobs. So it would seem that while good public sector education is essential to train the people to fill the jobs, poor education has not hampered job creation as such.

I suspect this is because the Californian elite is wonderfully educated and educated with that combination of mental agility and "can-do" that is necessary to create the new giant businesses of tomorrow. But that is a general point about the US: the best are terrific and can pull along the rest. What seems clear is that government, either at a state or a national level, has not had a lot to do with the successes of the US education system.

What has government done then? Well as far as Los Angeles is concerned I was told that the great success of local government has come after the LA earthquake. You may recall those pictures of the collapsed freeways and stories about the speed at which they were repaired. I was told that the city, which had had a rough time in the middle 1990s, suddenly pulled together again. Good governance at a local level is arguably more important than any national policies.

If that is right, then the message for a more centrally-governed country like Britain is quite subtle. It is that by all means try and improve the education system. There are all sorts of social and economic reasons for doing so, not least that if you are successful at creating economic growth, you will need well-educated people to fill the new jobs. But the impetus for growth will be bottom-up, not top-down. I always have the impression that people in LA work very hard. Governance there has been very good at not placing obstacles in the path of people who want to work hard. This has resulted in a generally pro-business environment, but also in one which seems to foster the creative chaos which, to the outsider, seems to characterise California. This may seem a rather negative view of the role of government - first, do no harm - but it is not a bad starting point.

This somewhat chaotic Californian model for a high-tech growth economy may not be naturally transportable elsewhere, and there are costs to it. But if you want growth, it is hard to argue with a region that has gone from a starting start to the world's seventh largest economy in three generations, and will, on present trends overtake Italy to become the sixth largest within the next one.

News
Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
artCultural relations between Sydney and Melbourne soured by row over milk crate art instillation
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features playground gun massacre
News
Two giraffes pictured on Garsfontein Road, Centurion, South Africa.
i100
PROMOTED VIDEO
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Travel
travel
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations should be regarded as an offensive act
News
Kenny Ireland, pictured in 2010.
peopleBenidorm, actor was just 68
News
people
News
i100This Instagram photo does not prove Russian army is in Ukraine
News
Morrissey pictured in 2013
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Environment
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
News
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices