Can a Hollywood action hero save 35.6 million citizens and their slightly tarnished paradise?

This story first appeared in the January 22, 2004 issue of WWD. Subscribe Today.

That’s the reality show playing out live in California right now, where first-time politician Arnold Schwarzenegger and his Valentino-clad, Kennedy-clan wife Maria Shriver moved into the governor’s mansion little more than two months ago after record numbers of voters turned out last October for a recall too kooky for fiction. To wit, in a state where 35 percent of registered voters are Republicans and 44 percent are Democrats, the Terminator came out on top.

Whether Ah-nold will continue to wow remains to be seen. The state faces a $14 billion budget shortfall that has put a dark cloud over this otherwise halcyon place.

Three years of falling employment continued last month when employers dropped a net 8,400 jobs — a flashback to the early Nineties recession. Although half of the state’s main industries added jobs — in the information, construction, educational, health and financial services sectors — considerable losses occurred in retail, tourism, mining, manufacturing and natural resources.

The challenges of doing business in California have grown, particularly issues of workers’ compensation, union strikes and government-mandated health care. Yet the bottom line is that it’s becoming more difficult for small- and medium-sized businesses to compete with neighboring states and countries.

Still, many apparel contractors and manufacturers are lauding President Bush’s proposal for a foreign-guest worker program. One out of every five immigrants is estimated to end up in California, most of them from Mexico. In the five-county L.A. area alone, of the 81 percent of production workers who are Hispanic and 16 percent who are Asian, only 17 percent are naturalized citizens, according to the Los Angeles County Economic Development Corp. That said, it’s not necessarily a proposal embraced by California’s entire Latino population, the largest in the nation.

Despite concerns over the lack of job growth — and, therefore, decreased income and tax revenue — California’s consumer confidence remains on the rise. The real-estate market is booming. Production, factory orders and corporate profits are all up. And the state unemployment rate actually declined to 6.4 percent last month; regionally, Southern California saw slightly deeper declines. The monthly payroll employment survey by the state Finance Department doesn’t include very small or new businesses or independent contractors, and 45 percent of the state’s apparel manufacturing firms have fewer than five employees.

As a global player, California exports, especially services, are proportionately higher than any other state in the union. Its outward foreign direct investment is notably high in Asia, according to the Public Policy Institute of California, particularly in product sharing (where multinational companies network production and assemble components at various sites). On that note, more Asian trade flows through California’s ports than any other ports nationwide.

Manufacturing jobs throughout the state and, significantly, the downtown L.A. fashion district, may be down 35 percent from the last peak in 1996, but the wholesale job market is up 43 percent. The once-strong manufacturing area has reinvented itself into a $1 billion wholesale destination, just as the rest of downtown undergoes a development renaissance in terms of residential lofts, fine restaurants and the much heralded Frank Gehry-designed Walt Disney Music Center.

Up north, the tech bust hasn’t quite disappeared from collective memory. But a downtick in unemployment, a bullish housing market and proposed developments are giving many hope of recovery. After all, high tech still leads the way in output, accounting for about 51 percent of the state’s manufacturing exports.

In terms of buying power, California ranks at the top overall, per the 2003 Selig for Economic Growth report. The median household income is ahead of the rest of the nation’s — $47,493 versus $41,999, according to the 2000 Census report, the last figures on record. And more recent data reports that 95 of the nation’s 400 billionaires live in California.

Fortunes continue to be found here. And while the state legislature tries to fix the financial woes, Californians continue to do their thing. They keep setting trends in Silicon Valley and on the red carpet. They’re the masters of mix, where mass meets class, ethnicities fuse and fantasies become reality.

That’s why the world keeps tuning in.

ECONOMICS 101
California generates 13 percent of the U.S. gross national product.
California was the first state to ever reach a trillion-dollar economy in gross state product.
California is the nation’s number one exporting state.
More than 2.6 million small businesses account for 98 percent of all employers in California.
California’s top industries are tourism, manufacturing, construction, agriculture, telecommunications, engineering services, aerospace and entertainment.
California produces more than $1 trillion worth of goods and services each year.
California produces more than 17 million gallons of wine each year.
In Nov. 2002, Scientific American magazine’s “Scientific American 50 List” documented California as having more influential leaders in science and technology than any other U.S. state or nation in the world.

SOURCE: 50states.com, California-colleges-universities.com, Ca.gov

BEAUTY SCHOOL
More than one-third of California females, ages 14 to 35, shop for fashion and/or beauty items three to five times a month.
42.9 percent of California women, ages 14 to 35, admit it is somewhat important to purchase fashion and/or beauty items that are made by popular or well-known brand names. 7.5 percent feel it is extremely important.
56.5 percent of young California females, ages 14 to 35, have spent less than $200 on fashion and/or beauty items in the past three months; 29.2 percent spent $200 to $500, and the remaining 14.3 percent more than $500.

SOURCE: Look-Look Inc., 2003

POPULATION CONTROL
80 percent of Californians live within an hour’s drive of the coast.
30 percent of the state lives in Los Angeles County.
First incorporated city: San Francisco — Feb. 18, 1850.
Latest incorporated city: Rancho Cordova — July 1, 2003.

SOURCE: Nrdc.org, Cacities.org

PRIME REAL ESTATE
The Harris Poll found most Americans surveyed would like to live in California.
In 2003, six of the top 10 most expensive real estate markets based on median home prices were in California:
1. La Jolla, $1,362,375
2. Palo Alto, $1,179,000
4. Beverly Hills, $1,097,250
5. San Francisco, $971,750
8. Newport Beach, $916,000
10. Manhattan Beach, $904,500
California contains 1,100 miles of coastline, 40 million acres of forest, eight major mountain ranges, 500 peaks more than 2 miles high and vast chunks of three different deserts.
Highest point: Mt. Whitney (14,494 feet).
Lowest point: Death Valley (282 feet below sea level).

SOURCE: Ca.gov, Biz.yahoo.com, Nrdc.org, Cacities.org