A Brief History of the California Economy


Following World War II, California experienced another major population boom.  Federal defense spending was a significant element of this period’s economic growth.  The suburban, automobile-dependent style of community development became the norm and California became a cultural bellwether.   

Over the next 25 years, California’s population would grow by about 500,000 per year, and overtook New York as the nation’s largest state in 1963.  Many couples had two or more children, which fueled a “baby boom.”  These growing families generated ever-growing demand for places to live, transportation facilities, and education.   

Housing was in short supply immediately after the war.  In response, suburban communities sprang up and spread prodigiously based on advent of mass produced housing.  The Westchester district of Los Angeles was a prime example of a community built by mass- produced housing.

  A better transportation system was needed to serve this burgeoning economy.  In 1940, the first freeway was opened, the 8.9 mile, six-lane Arroyo Seco Parkway—later known as the Pasadena Freeway—connecting Los Angeles and Pasadena.  Freeway development resumed after a wartime moratorium.  In 1947 the Collier-Burns Act raised the gasoline tax, which enabled significant freeway construction growth.  In the 1950s and 1960s, in addition to the tremendous growth of urban freeway systems in the Los Angeles and San Francisco Bay areas, main highways such as 99 and 101 were expanded in congested areas.  The Ridge Route—now the I-5 corridor connecting Los Angeles and the Central Valley—was expanded during this time, and bypasses were built around Salinas, Carpinteria, Santa Maria and King City.   

The number of licensed vehicles in California rose from 3.4 million in 1946 to almost 17 million in 1975. By the end of the century, there were nearly 30 million drivers in California.

During the baby boom era of the 1950s and the 1960s, California’s system of higher education expanded rapidly and achieved worldwide recognition.  To its existing five campuses the University of California established four new ones at Irvine, San Diego, Riverside and Santa Cruz.  New California State Colleges were authorized at Fullerton, Hayward, Stanislaus, San Fernando Valley, Sonoma, San Bernardino, Dominguez Hills, and Bakersfield.  In 1960, the Donahoe Higher Education Act established what would become the California State University system to administer the California State Colleges.  Between the mid-1950s and the end of the 1960s total college enrollment in California increased five-fold and topped 1,000,000 students.  

The military continued to be an important part of the California economy during the Cold War.  California firms built airplanes and helicopters and manufactured ordnance during the Korean and Vietnam Wars.  These firms also built rocket boosters for space flights, landing gear for the moon flights, satellite control systems and camera controls for the Mars fly-by and communications equipment used for the first moon landing.  Department of Defense civilian payrolls and support services required by military bases were also a significant part of the State’s economy.   

In the initial postwar era, California blossomed into a world-ranked economy.  It had become the most populous state in the nation.  California’s economy consistently outperformed the rest of the nation.  The importance of federal spending to the state’s economic status, however, would become apparent in the years ahead.


Return to Beginning The Gold Rush Plants the Seed 1848-1860  20th Century Industries    1900-1929 Adversity Beget Prosperity 1925-1945 A Modern Economy is Born    1946-1975       Leading the Way   1976-1999