California and Texas: Two Border States at the Forefront

By Javier Arreola and Patricio Gutiérrez Velarde

Several American states contain groups of cities with significant economies and industries. For instance, California and Texas are an example to other states because of their economic, political and social progress. The size of their economies makes them comparable to other countries. If California and Texas were countries, California’s GDP would be the 10th largest in the world, while the Lone Star State would rank 14th—both above Mexico. For this reason, we ask: What are their growth models? How are they both alike and different? What is the current status of their relations with Mexico?

In just a few years, California went from partisan paralysis to betting on a progressive, center-left development model. The state bases its growth on highly specialized jobs, supplemented by other low-training service positions. California took time to recover from the Great Recession, but thanks to its technological innovation and an increase in productivity, it has experienced a sustained economic growth. Wages, income taxes, and the number of people enrolled in the health system have all increased. Consequently the state has emerged from a deficit and now operates a budget surplus. Additionally, its demographic distribution most resembles the one the U.S. is expected to have in 2050. Additionally, California holds first place for job creation.

Texas, on the other hand, swiftly exited the Great Recession and was key in fueling growth throughout the United States. For several years, it was the state with the highest job creation rate. Texas uses a traditional economic model with a center-right agenda, the fewest regulation possible, low taxes, a business-friendly environment, and a diversified industry mix—including strong construction, manufacture, technology, and agriculture sectors,  with energy being the most significant.

The fact that Mexico shares a border with two of the most prosperous states of the Union is a huge opportunity for bilateral growth and shared progress. 37% of Mexicans living in the U.S. have settled in California, compared to 21% in Texas. However, these two states have a very different relationship with Mexico.

California, on one hand, is announcing initiatives with Mexico and promoting both business and investment. For example, the San Diego-Tijuana region is the most dynamic along the border. The evolution of California’s border, immigration, and business policies has positioned the western state as the leading voice in border states’ relations.

On the other hand, Texas—in a bipolar way—is economically more integrated with Mexico, but politically more distant, especially with regards to the militarization of the border. Improving political relations should be of utmost concern: Mexico is Texas’ number one trade partner and an invaluable source of direct foreign investment.

We must change the image that depicts the border as a dangerous zone requiring military intervention. Although the border should be secured, the solutions should be bolder: fewer walls and more intelligence and communication can also contribute to safer borders.

Facing national polarization and legislative deadlock, the states and counties should implement innovative and effective policies. Other states could emulate the form and content of security, trade, immigration, development, and inequality reduction policies in Texas and California.. Innovation in the aforementioned policies and institutional trust in Texas and California will remain crucial in maintaining a good climate for business negotiations in both states, as well as setting an example for our countries.

Published at AEM Magazine  on June 8th, 2015.