One of the overwhelming challenges facing fiscal conservatives is how to cut government spending without harming economic recovery. It may seem obvious that governments eventually have to stop relying on borrowing to finance their deficits, but eliminating government spending deficits can only partly rely on spending cuts. Economic growth is the other essential element.

To explore and catalog worthy prescriptions for economic growth, the California Public Policy Center has launched a new project, the California Prosperity Forum. We seek informed and constructive policy ideas and analysis from any source, guided by our core belief that prosperity and opportunity will return to California through a combination of common sense reforms in Sacramento, greater freedom for the private sector, and innovation in our public schools.

Opponents of austerity are not only concerned about the potentially negative impact of reduced government spending on the economy, but also the ability of individual government workers or beneficiaries of government entitlements to pay their bills. This concern is particularly acute in California, which has the highest overall cost of living in the United States. But the way to address this concern is not to abandon a measured reduction in excessive pay and benefits for government workers, but to simultaneously enact policies designed to lower the cost of living for all Californians.

To this end, another core belief that must inform any prosperity oriented policy forum is competition. To accelerate innovation and lower prices requires competition between businesses in a free market. California’s Silicon Valley coined the phrase “better, faster, cheaper,” to describe spectacular advances in information technology. But that phrase applies to innovation throughout history, describing how lowering the cost of living has continuously raised the standard of living for humanity.

Lowering the cost of living in California through competition requires dramatic shifts in policy priorities. For example, lowering the cost of energy requires responsible development of California’s massive shale oil and shale gas reserves. Lowering the cost of housing requires easing California’s draconian restrictions on land development. And lowering California’s overall cost of living also requires California to step back from having the highest tax rates of any state in the U.S. And to propel these reforms through California’s state and local governments will mean taking on powerful monopolies who benefit from high prices and minimal competition.

The theme of fostering competition to rejuvenate California’s economy applies to commerce, but applies equally to education. California’s former Senate Majority Leader Gloria Romero has called the inadequate performance of public schools the civil rights issue of our time. Educational outcomes have been consistently found to improve when students and their parents have alternatives. When students can opt-out of attending a failed school, this not only immediately benefits those students, but impels the failed school to try new solutions and make tough decisions to improve. Needless to say, improved education translates into a more employable workforce.

Critics of free-market policies often point to the Wall Street meltdown of 2008 and the growing wealth of the so-called “one-percent” as an indictment of free market capitalism. But they are mingling together what are two very distinct versions of capitalism. Productive capitalism, the ecosystem of corporations, entrepreneurs, investors and inventors who compete and collaborate to create affordable products and services that improve our lives, is the engine that has produced virtually all of the material amenities we enjoy today and take for granted. Speculative capitalism – for want of a better term – is a globalized casino of high-frequency trading and market manipulation that produces nothing. In its currently grossly overbuilt iteration, speculative capitalism is an economic parasite. It may be comforting to equate productive capitalism with speculative capitalism, but they are vastly different.

Successfully advancing a prosperity policy agenda requires championing productive capitalist efforts. It requires unlocking California’s vast reserves of energy and land, rescuing our public schools, and restoring California as a business-friendly state. But a prosperity policy agenda also requires opposing the monopolistic financial interests who make billions issuing bonds to finance state and local government deficits. It requires opposing the financial interests who make billions in commissions and management fees to collect and invest unsustainable public sector pension funds.

Austerity should appeal to any fiscally responsible citizen as tough, necessary medicine. But prosperity is the other side of the coin. It deserves equal if not greater attention from anyone determined to see California recover its historical reputation as a land of great opportunity and promise. To that end, we offer the California Prosperity Forum.

Ed Ring is the executive director of the California Public Policy Center.