A Brief History of the California Economy


In 1900, agriculture, mining and the railroads-especially the Southern Pacific-dominated California's economy. San Francisco-the state's largest city-had cemented its place as the economic hub of the Pacific Rim by becoming one of America's great port cities. The Southern Pacific railroad carried produce and other goods to San Francisco to be shipped around the world. The railroad also carried California's produce eastward over the Sierra Nevadas to the nation's mid-section and the East Coast. California was already feeding the world, as it still does today.

Agriculture Dominates
By 1929 California was the nation's leading agricultural state, with crops valued at over $1 billion. Large corporate-owned farms dominated the state. Several large land companies owned farms in excess of 300,000 acres. Diversity has always been very important in California agriculture, which grows over 200 different crops. In contrast, other farm states produce only 12-15 crops.

One of the most important crops grown in California is cotton. The first attempts at growing cotton in California were made in the 1850s when several efforts to establish Southern-style cotton plantations failed. However, in the 1920s cotton was reintroduced to California. In 1921 cotton was grown on 1,500 acres in the San Joaquin Valley. By 1931 cotton acreage had increased to 600,000 acres. Moreover, the yields were triple those of other cotton-producing states. By 1940 California trailed only Texas in cotton production.

California's farmers were the most organized in the nation. The most famous growers cooperative was the Southern California Fruit Growers Exchange founded in Los Angeles in 1893 following several years of financial troubles that resulted from weak distribution and marketing practices. It became a model for farming cooperatives around the world. By enabling growers to cut out middlemen, their fruit could be sold directly to the east coast. The Exchange launched a major publicity campaign promoting the orange and it soon became a symbol of health. By convincing people that oranges were good for them, this campaign changed many consumers' eating habits. Oranges were no longer considered a delicacy, and were now eaten on a regular basis.

Oranges were also used by the railroads and others sell land in California. Orange promoters claimed that you could make more money growing five acres of California Oranges than a Kansas farmer earned from 200 acres of grain crops. The orange helped promoters convince many people that California was America's Italy by fostering the idea that California was a clean place to escape dirty eastern industrial centers. Many wealthy people, such as Chicago meat king Philip Armour, settled in California.
Many new towns also promoted romantic images of California. The most famous of these was Venice, which had canals like

Venice Italy. Many towns also competed for new residents by promoting a romantic vision of California history. The missions were emphasized and restored, and Mission Revival architecture became popular. In 1884, Helen Hunt Jackson wrote the novel Ramona that romanticized the mission period in California history. It was a best seller until the 1940s. The Southern Pacific passed out free copies of the book to California-bound passengers. Once the trains entered the state, crewmen would tell the passengers where certain events in the novel took place and made it seem as if the novel was a true story.

In 1919, the California Farm Bureau was established, which promoted high standards of farming and lobbied state government for funding for agriculture research. Much of this funding paid for research conducted by the University of California (UC) system, primarily at what are now its Davis and Riverside campuses. This research yielded many innovations that have changed agriculture worldwide. The use of airplanes for rice seeding, portable sprinkler systems and the Cerati rice dryer are three examples of agricultural products and techniques developed in California.

Several famous scientists spearheaded agricultural research in California. The most famous was Luther Burbank. He settled in the Santa Rosa area in 1875 and developed 800 to 1,000 new varieties of plants. He developed 40 types of prunes and plums, a white blackberry and the Russet Burbank potato. Today this potato accounts for forty percent of the potatoes sold in the United States.

Because of agriculture's dependence on water, California built massive irrigation projects. By 1945, 63 percent of California's farms used water brought in by irrigation. The largest projects were the Owens Valley, Central Valley Project and the Colorado River Project. To pay for expanded irrigation, water districts charged assessments. These fees forced many small farmers to sell out to bigger growers.

Expanding the available water supply would have a profound impact in other areas of the economy. It would facilitate dramatic population growth in the Los Angeles basin and allow the state's economy expand into other industries not tied to agriculture.

Banking Accompanies Agriculture
California banking developed alongside agriculture. By the 1920s California was home to vast amounts of capital that when loaned locally relieved growers of their dependence on Wall Street. Two of the state's leading banks throughout much of the 20th Century-Bank of America and Security Pacific-had their roots in agricultural lending. Both were popular lenders to many growers.

Canning the Harvest
Another industry that developed with agriculture was canning. Advances in technologies enabled California companies to can food and ship it to the rest of the world. In 1899 at least 1.5 million cases of fruit were produced in California. By 1945 this had risen to 26.5 million cases-increasing by over 500,000 cases annually on average. Several of the best-known canned food labels, such as Del Monte, Libby and S & W, originated in California early in the century.

A Fishing Leader
By 1940 California was a leading fishing state because of the sardine industry. Between 1914 and 1929, an average of 300 million pounds of sardines were caught each year. Sardines were used for fertilizer, fish oil, salmon bait and other products. By 1910 Monterey was the canning capital of the world-with its Cannery Row employing low wage Chinese laborers. In fact, sardines were being over fished and in the late 1930s the catch began to dwindle. In 1967, a fishing moratorium was declared and Cannery Row became one of California's most famous tourist attractions.

California also became the nation's leading tuna fishing state.  Croatians

living in San Pedro established the industry, and it became the nation's tuna fishing capital. In the North Pacific, California companies dominated most of the fishing and controlled seventy percent of Alaskan fishing.

It was also during this era that new industries began to develop in California that were not merely population-serving nor directly connected to agriculture. The provision of new water for Southern California would allow its population to grow dramatically-by 1920 Los Angeles had passed San Francisco as the state's largest city. Manufacturing industries were now emerging and would become a prevailing force in the state's economy in the decades ahead.

Aerospace Gets Its Start
Aircraft-the predecessor to the modern aerospace industry-sprang to life in the 1920s. By 1935, Boeing was the only major airplane manufacturer outside of California. The state's benign weather made California an excellent place to build and test airplanes.

In 1919 Allan Lockheed started Lockheed Aircraft in Santa Barbara, relocating shortly thereafter to Burbank. During World War II, it became a major defense manufacturer. In the Cold War, Lockheed (and its famous "Skunk Works") led the aerospace industry in missile development.

In 1920 Donald Douglas founded Douglas Aircraft, two of whose planes in 1924 became the first to fly around the world. In 1932 the company signed a contract with TWA to produce passenger aircraft. Their first model, the DC-1, could only seat 12 passengers, but in 1935 it rolled out the DC-3, which became an industry standard. Douglas Aircraft went on to manufacture 30,000 aircraft during World War II.

Motion Pictures Immigrate
California also rose to lead the nation's entertainment industry. Hollywood was established by emerging filmmakers, such as Cecil B. de Mille, who were fleeing Thomas Edison's efforts to monopolize the movie industry-through heavy equipment licensing fees-in the New York area. Universal Studios was formed in 1912. In 1913 Universal's first feature length film earned $450,000. In 1914 Universal purchased the Taylor Ranch in North Hollywood and set up a studio. Damon and Pythias was the first film produced at Universal City. Hollywood attracted filmmakers because its sunny climate allowed year-round film production. Another attraction was its proximity to Mexico, which would be advantageous if Edison pursued them on the West Coast.

An important aspect of Hollywood motion picture production during the first half of the 20th Century was the studio system in which the studios signed directors and stars to long-term contracts. For example, Judy Garland had a long-term contract with Metro Goldwyn Mayer (MGM). Director Orson Welles signed on with RKO. Stars were expected to act in four to five films each year. The studios also controlled distribution by owning the large movie theatre chains although this practice was halted in 1949 as a violation of antitrust laws.

Beginning in the 1950s, movie stars and directors become more independent. Instead of long-term contracts, they were increasingly hired on a project-by-project basis. This gave them more control over their careers, allowed more independent film production and eroded the dominance of the major studios. By the end of the century, short-lived, single-project companies and independent filmmakers were producing many films. The major studios eventually came to focus less on film production and more on film distribution, and the provision of a variety of other services-including providing financing, physical facilities and technical equipment and skills.

Many in the motion picture industry viewed the rapid spread of television in the 1950s with considerable alarm. Indeed, television sounded the death knell for low-budget "B" movies, and for many neighborhood "second-run" theaters. From a parochial standpoint, television was a New York-based industry, and Californians stood not only to lose a significant part of a major export activity, but were also forced to watch fuzzy, two-week old kinescope recordings of network programs.

But the setback was short lived. Beginning in the 1950s the major film studios began devoting some of their efforts and resources to producing shows for the emerging television medium. Some of the popular shows produced in California at this time included I Love Lucy, Maverick, Lawman, 77 Sunset Strip, Cheyenne, and Hawaiian Eye. Eventually, Hollywood and nearby Burbank became the center of the television entertainment industry. Today, the vast majority of prime time television originates in California.
By the 1990s, Hollywood, with its vastly superior production and post-production capabilities, had even captured most TV commercial production from Madison Avenue, spurring growth in the already considerable Los Angeles advertising industry. Moreover, the balance of power in the industry continued to shift westward. The classic split between financial control from Wall Street and creative activity on "the Coast" began to break down in the 1980s as studios and independent producers accessed investors directly through limited partnerships-Silicon Valley's venture capital model. Of the four leading commercial networks, two are now owned by California-headquartered companies-Disney (ABC) and Fox.

Apparel Follows the Movies
The growth of the California fashion industry followed the growth motion picture industry. As the public increasingly wanted to emulate movie stars, clothing designers flocked to Hollywood. Major department stores had movie stars endorse their clothes. In 1927 Joan Crawford and Clara Bow endorsed hats for Sears. Eventually, apparel manufacturing followed the designers. Apparel and other textile product manufacturing was a bright star in California manufacturing in the 1990s. Throughout most of the decade, national apparel employment declined steadily while California's increased. By the end of the century, California accounted for one-fifth of the entire nation's apparel manufacturing jobs.

The first three decades of the 20th Century saw the beginnings of the dramatic changes that were in store for California. While the economy was dominated by agriculture and railroads, some of the state's future leading industries sprang to life during this period. California's inherent benefits, including its climate and location, attracted or encouraged the creation of many new enterprises that would play important roles in the upcoming decades. California's dependence on trade with the other states and the world meant that major national and international events were about to profoundly alter the state's economy.

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