Catching the Next Wave : Goodbye to our lost aerospace business, but welcome the coming flood of opportunities for Southern California in entertainment, fashion and tourism

General Motors’ plan to close its Van Nuys auto-assembly plant has sparked yet another debate about Los Angeles’ industrial future. Almost daily now, Angelenos are accosted by a seemingly unending parade of economic disaster stories, from aerospace shutdowns to mass migrations of local companies to other regions.

Yet, as unfortunate as these developments might be, the greatest threat to the region’s future lies not in the plant closings themselves. Rather, it is in what British historian Martin Weiner called “psychological deindustrialization”--when business and political elites lose their fundamental faith in their community’s ability to compete successfully in the global economy.

In Britain, particularly before Margaret Thatcher’s rise to power, this attitude characterized a large portion of the Tory political and business Establishment, who largely gave up on industrial competition for the chimera of the “service economy” and the social peace provided by an expanding welfare state.

Similarly, Los Angeles’ “psychological deindustrialization” is evident in a growing mood of despair and resignation among significant portions of the business and political leadership. This lack of decisiveness and long-term vision was most painfully obvious in the aftermath of the police beating of Rodney M. King. But it also characterizes the weak response to the current economic malaise and to an increasingly negative image of the city in the national and local media.

Recently, for example, some younger business leaders were astounded when their ideas for a promotional campaign aimed at economic development were rejected by the top leadership of the L.A. Chamber of Commerce. “They just said it wouldn’t help,” recalled one young executive. “You couldn’t do anything to help the image of L.A., the idea being it’s all fouled up--that’s the bottom line.”

Such thinking helps to explain why, as the Economist recently pointed out, the L.A. business leadership has proved virtually “nonexistent” amid the almost ceaseless tide of negative publicity about the city’s economic prospects. One wonders how the great, if often ruthless, entrepreneurs who built the city--Harrison Gray Otis, the Hollywood moguls, Henry Huntington, Tex Thorton--would react to the weak and dispirited performance of their late 20th-Century heirs.

With the Establishment in disarray, it’s not surprising that the prevailing visions of Los Angeles’ future come increasingly from groups who largely devalue market capitalism as a way out of the economic malaise. UCLA’s School of Architecture and Urban Planning, where “progressive” thinking is de rigeur , has successfully promoted its vision of Southern California as an incipient Third World sinkhole cascading to the polarized future portrayed in the movie, “Blade Runner.”

The problems identified by UCLA and others are real and pressing. The proposed solutions range from nostalgic to ruinous. No degree of revived class consciousness or government subsidy, for instance, will bring back the high-paying, unionized factory jobs at Van Nuys. That era of Southern California industry has been vanishing for almost 20 years, more a victim of changing global economics than regional failings.

Nor will the agenda of the emerging “progressive” factions or the much-talked-about coalition of “people of color” likely spark any reindustrialization. For one thing, many associated with this effort have little but contempt for even the basic principles of capitalism.

Not surprisingly, “fairness”stands at the core of the economic program favored by L.A.’s progressives. At the same time, equally uneconomic notions also spring from a plethora of neighborhood activists, who attack virtually any development, no matter how productive or necessary. The self-destructive nature of such attitudes is most obvious in the opposition of some community groups to any expansion of the entertainment industry, long an economic bulwark for communities spread from Burbank to West L.A. With aerospace on the way out, one wonders whether these activists believe our economy can be sustained by natural-foods restaurants and cappuccino parlors.

No amount of political correctness can isolate Los Angeles from the bitter necessity of competing with other regions and around the world. Indeed, without finding a means to compete economically, this region will have few resources to deal with the problems--from education and drugs to the environment and infrastructure--that so rightly concern both the progressives and the Establishment.

But most important, it is not too late for the region to reverse its current economic malaise. Despite the general gloom, Southern California’s overall economy maintains many critical advantages, among them a growing, youthful population blessed with a unprecedented mix of peoples and skills and a favored location at the nexus of the U.S.’s two fastest-growing main trading partners, the Pacific Rim and Mexico.

The industries most likely to propel the regional economy into the 21st Century are:

--Ethnic-owned businesses. Los Angeles is now the nation’s leading center for Latino-, African-American- and Asian-owned businesses. Between 1982 and 1987, the revenues of Asian-owned companies in the Basin more than doubled. At the same time, a burgeoning “underground economy”--largely dismissed by the academics at UCLA--continues to generate dollars and new wealth, particularly in immigrant areas.

--Creative services such as entertainment increased their hiring in the 1980s, with motion-picture employment up nearly 25,000 since the mid-1980s. Meantime, Los Angeles seems likely to continue replacing New York as the center for advertising production. Creative industries are also helping in unlikely places: As car-assembly jobs have disappeared, more than 8,600 jobs--mostly white-collar and well-paying--have been created in design, marketing and research facilities set up by Japanese auto makers alone.

--International trade-related services have produced more new jobs than virtually any major business sector, employing more than 274,000 people in the region by 1989. Since 1980, the area’s international trade has almost tripled in value, increasing nearly twice in volume over arch-rival New York. Even in the recession the ports continue to grow--last year, six times the rate of New York, with most of that in export trade. As expectations of Europe’s post-1992 growth fall closer to reality, the huge advantage of L.A.’s Pacific and Mexican connections will become even more evident.

--Tourism often gets no respect, but it will likely become the world’s largest industry sometime in the next decade. That could be good news in Southern California, which last year attracted 62 million people, and where tourism remains a huge net generator of jobs, providing 163,000 during the 1980s.

--Garments, textiles and the related fashion-design industry should continue to expand, fostered by a steady influx of labor, skills and capital from overseas. Centered in Los Angeles, California’s apparel industry has now passed New York’s. Although often demeaned as “sweatshop” industries, the clothing business historically has provided newcomers with the quickest route out of poverty. Today, nearly half the students at the Fashion Institute in Los Angeles are Latino or Asian.

--High-technology electronics continue to show some growth outside military sectors, with Orange County, in particular, outpacing virtually every major region in growth of technology exports. With the country’s largest cadre of scientists and engineers, the region is already emerging as national leader in many critical new technologies, including biotechnology and medical electronics.

To grow, these industries will require support from a revitalized Southern California civic culture. Despite the mythology, the region’s economic ascendancy of the past 40 years has depended not only upon entrepreneurship, but public investments in universities and colleges, freeways, airports and other critical facilities. Similarly, today’s emerging industries will require a policy environment that comprehends the pre-eminent role of wealth creation in creating opportunities for an evermore diverse citizenry.

The formation of such a civic culture will require the mobilization of an emerging new generation of business leaders--generally younger, more aggressive, more reflective of our economic and ethnic diversity and, most of all, committed to the city’s long-range future. Slowly, this kind of leader is rising to the forefront.

First and foremost, this leadership should press a new economic agenda for the region, one that places priority not on political connections but on the basic underpinnings of economic growth; that sees expanded movie studios, industrial and warehouse facilities as more deserving of government assistance and regulatory relief than high-rise development.

The prospects for a successful emergence of such a new leadership might seem quixotic at best. Yet unless Southern California’s entrepreneurs are willing to defend their own long-term economic self-interest, then our region, for all its strengths, may well not escape the dreary future being projected for it.