California to outstrip Britain in wealth table By James Langton in New York

California - The 5th Largest Economy on Earth [11 Jun '01] - Los Angeles Economic Development Corporation [LAEDC]

THE state of California has become an economic powerhouse richer than most Western countries, having just overtaken France and now threatening to displace Britain in the international wealth league. Figures published by America's "Golden State" show that, if California were a nation, it would rank fifth in the world in terms of economic strength, with a gross domestic product last year of £950 billion.

Not content with rivalling France as a producer of fine wines, California swept past the French economy earlier this year - with its £921 billion GDP - after easily outstripping Italy three years ago. Despite being plagued by power blackouts in recent months, California remains the tiger economy of the United States, growing by nearly 10 per cent last year - nearly three times faster than Britain.

Next year, if the pound continues to fall against the dollar, the economy of the state (population about 38 million) is set to overtake the £1,011 billion GDP of the United Kingdom (population 60 million).

"Our performance last year was fantastic," said Ken Ackbarali, an economist with the Los Angeles Economic Development Corporation (LAEDC), which draws annual comparisons between California's economy and others'. He predicted that, with economies on both sides of the Atlantic slowing this year, Britain's position depended heavily on an improvement in the pound, now at its weakest against the dollar for 15 years.

France can blame its demotion on the euro, which has also plunged against the dollar on international currency markets in the past year, despite a series of US interest rate cuts. Figures from the Organisation for Economic Co-operation and Development show, unsurprisingly, that America has by far the world's richest economy, with a GDP - at today's exchange rate - worth £7,119 billion in 2000.

Japan is in second place, with a GDP of £3,296 billion, followed by Germany and then Britain. However, California's energy shortage appears to be hitting the state's economic prospects, with the LAEDC predicting more modest growth of less than three per cent for the rest of this year. Statisticians say they expect Britain's economy to grow by 2.6 per cent this year.

A study commissioned by a group of Californian businesses last month concluded that power shortages could cost £10.6 billion in lost production and sales, and cause total household incomes to fall by £3.3 billion. The state is also considered vulnerable in a recession because it is the centre for the US high-technology industries, which have performed poorly in recent months. Some economists fear a "recessionary death spiral", in which California's economic woes pull down the rest of America and, perhaps, even the world.

The new figures, though, show that California's problems are tiny compared with many other places. The GDP of Sierra Leone, probably the world's poorest country, is £1.9 billion - or only £379 per person - while the US per capita figure is more than £21,400.

California was once briefly an independent nation after long being part of the Mexican empire. In 1846, the Mexican army was expelled in a war that ended with some settlers in the north briefly establishing a "Bear Flag Republic". The former Spanish colony was incorporated into the US in 1850.

Once a poor and largely empty agricultural region, it began attracting immigrants seeking their fortune in the 1848 gold rush. Since then, the state has become a byword for the good life, reflected in the growth of Hollywood and Silicon Valley.

To underline California's wealth, Los Angeles County, which includes the city and suburbs, would rank as the world's 10th largest economy if it were a nation. The county, with a GDP of £430 billion, is richer than Spain.

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-- Martin Thompson (mthom1927@aol.com), June 28, 2001