Strive to Do It Better, Not Cheaper : Economy: Build on our strategic location, network of world-class facilities and abundance of diverse talent.

To create a future of continuous innovation that California needs requires an investment-oriented strategy to make and keep our state competitive.

While other states and nations have narrowed California’s lead in some areas of our traditional strengths, in others we are still robust: We offer a strategic location astride the crossroads of U.S. trade with Asia and Latin America; a network of world-class facilities of higher education and research that has trained generations of innovators; an enormous diversity of physical and cultural environments offering unparalleled freedom of choice; aging but still serviceable infrastructure systems, from water to transportation; an unrivaled pool of scientific, high-tech and entrepreneurial talent that needs to be unleashed; a large domestic market (however, one that increasingly can be supplied from the outside); a still relatively well-educated and skilled work force; a Califorenia attitude of risk, change, flexibility and tolerance.

We need to build on these competitive advantages. First and foremost, we should invest in maintaining critical strategic assets. The infrastructure of trade (one of the surest growth industries for the foreseeable future)--harbors, transportation lines, airports, electronic and other communication links--must be maintained and expanded. Education must not be starved, but it must be held to the same stringent competitive standards as the rest of the economy. Our natural resources must be preserved, and the newest Californians who take extreme risks to come here for a better future must be helped to become productive as fast as possible.

Second, we should recognize that a “friendly business climate” cannot simply mean “minimal government and low labor costs.” California will remain prosperous if its companies can sustain the ability to differentiate their products in the marketplace because they are better, not cheaper. We must reverse the de facto policy of competing on the basis of cheap unskilled labor; we may not want all the jobs that have low labor costs. Not only does this encourage large-scale unskilled immigration that is financially ruinous, but it also guarantees that ultimately we will be pulled down to Third World living standards. We should compete with Japan and Germany, not with China and India.

Similarly, our government must offer better services for roughly the same cost as other jurisdictions, not simply low taxes (and when government costs more, it must offer commensurate value in return). Mindlessly reducing government simply to lower costs will attract those companies who can only survive by selling commodity products or services cheaply. They cannot pay wages that we would find acceptable in the long run, and they will move away the first time they get a better--that is, cheaper--offer.

California government must pursue a strategy of being efficient and effective, not just cheap. We should be moving up market, not down market. Government must decide where it can add value, then operate productively in those areas.

Fundamentally, this means that government has two roles:

* To provide only those services that the public desires and the market will not provide by itself, and to do so as efficiently as possible--the way a profitable business would.

* To make it easier for business to get ideas from creation to production quickly and inexpensively. In other words, helping business compete over the long haul.

California has the talent and energy to pull itself out of economic stagnation. We must nurture and encourage it, not weigh it down with regulation and restriction. We must nurture an economic environment of rampant entrepreneurialism. Apple Computer probably could not be started in someone’s garage today; no one could afford the environmental impact report. For the state to prosper, this has to change.