Napa, CA – California’s rise to become the world’s fourth-largest economy marks a significant milestone, underscoring the state’s global economic influence. Yet, beneath this impressive statistic lies a glaring paradox that has become impossible to ignore. While the state leads the world in innovation, amassing extraordinary wealth and fueling industries of the future, its residents continue to struggle with rising costs of living—particularly in housing, healthcare, and food.

In April, California surpassed Japan in gross domestic product (GDP), a point of pride for state officials, including Governor Gavin Newsom, who declared that California was “setting the pace” for the world. However, for many Californians, this newfound prominence feels disconnected from their daily realities. Rising prices and increasing economic inequality have left many questioning whether GDP is the best measure of success.

In a state where homelessness is at an all-time high and the cost of basic goods continually rises, the question lingers: Does being the fourth-largest economy in the world truly matter when the cost of living makes it nearly impossible for many to thrive?

The Price of Living: A Stark Contrast

Despite its position as an economic powerhouse, California’s cost of living remains the highest in the United States—and among the highest in the world. The Consumer Price Index, which tracks the cost of everyday items like food, transportation, and healthcare, highlights a troubling trend. California has topped the global list of the most expensive places to live since 1997, outpacing even the United States as a whole.

For the average Californian, these rising costs are not theoretical. The combination of a strained housing market, inadequate wage growth, and persistent inflation has created a financial burden that many are struggling to carry. As of 2025, a significant portion of the state’s population is living paycheck to paycheck, with little hope of upward mobility.

In fact, when adjusted for cost of living, California’s economy ranks only 11th globally—barely surpassing Italy and trailing behind nations like the United Kingdom and France, where the cost of living is about one-third lower than California’s.

A Flawed Metric

This contrast between California’s impressive GDP and the daily struggles of its residents raises a critical question: Is GDP an appropriate measure of economic success? Critics argue that GDP, which tracks the total market value of goods and services produced in the state, fails to account for inequality, cost of living, or quality of life. While the state may boast an impressive economic growth rate, it’s increasingly clear that those benefits are not trickling down to everyone.

Policymakers, such as Governor Newsom, have focused heavily on California’s role as an economic leader. However, many residents see this progress as hollow if it does not translate into more affordable housing, healthcare, or basic goods. The issue is further compounded by a housing market that remains out of reach for many, driven by insufficient supply and political gridlock.

The Case for Bottom-Up Economic Planning

To address these issues, experts suggest that California’s economic policy must shift from a focus on GDP growth to one that prioritizes affordability and equity. Newsom’s administration has taken steps in this direction with the release of the “State Economic Blueprint,” which emphasizes bottom-up, regional economic development. This plan aims to strengthen local economies, support small businesses, and create job opportunities while addressing the affordability crisis that plagues many parts of the state.

One successful example of such an approach is Valley Vision, a local organization based in the Sacramento region. Founded in the mid-1990s, Valley Vision helped the community navigate the economic fallout from the closure of local military bases, which resulted in the loss of thousands of jobs. Through a collaborative approach that engaged businesses, local governments, and residents, Valley Vision helped diversify and stabilize Sacramento’s economy, positioning it for future growth despite the earlier setbacks.

Sacramento’s success in this regard offers a model for other regions in California struggling with affordability and economic uncertainty. By focusing on local, community-driven solutions and fostering partnerships across sectors, there is hope that other areas of the state might achieve similar resilience in the face of economic challenges.

Looking Ahead: Reconciliation or Stagnation?

California’s future economic success hinges on reconciling its rapid growth with the pressing need for affordability. While the state’s GDP may continue to rise, its policymakers must confront the reality that many Californians are being left behind. If the gap between the state’s economic growth and its residents’ quality of life continues to widen, California’s latest milestone may not signal the dawn of a new era—but rather the peak of an unsustainable model.

As the state moves forward, the challenge will be to strike a balance between ambitious economic goals and the basic needs of its people. The question is whether California’s leaders will prioritize the well-being of their residents—or whether they will continue to chase a growth model that fails to deliver for those who need it most.