Why LA missed the new economy

The Rise and Fall of Urban Economies: Lessons from San Francisco and Los Angeles, a new book out this month, should be required reading for people who consider themselves leaders in Los Angeles, whether in politics, business, academia, advocacy, or philanthropy. It is a clear challenge. LA's leaders failed the city in the last generation. They focused on the wrong things and missed the boat on the new economy, which the San Francisco Bay Area commandeered and made its own.

Can we learn from the past? Now's our chance.

storper.jpgIn the 1970s, LA and San Francisco were in the same economic club of cities. While the Bay Area has solidified its position in the very top rank of cities since then, Los Angeles is now in danger of slipping into the rank of middling metropolitan areas. If you look at the facts and compare the trajectory of major American metropolitan areas over the past 40 years, "Los Angeles most closely resembles Detroit," write the authors of this new book.

That's got to hurt, if anyone is paying attention. And they better be.

The lead author of this searing analysis of how San Francisco beat LA to the new economy is a heavy hitter. Michael Storper is an economic sociologist and geographer with appointments at UCLA, the London School of Economics, and Sciences Po in Paris.

He and his co-authors make a persuasive case that Los Angeles and the San Francisco Bay Area were in the same position at the dawn of the high-tech economy in the 1970s. They each had similar resources--great universities, tech talent, investors, civic institutions, nonprofit organizations--and similar weaknesses, including fragmented local governments across a diverse metropolitan region.

But San Francisco kept its eyes on the prize. And LA "foundered," the authors write. As a result median household incomes (after subtracting housing costs) are now 50 percent higher in the Bay Area than in LA. People enjoy higher wages across the board in the Bay Area. They're better educated. There's way more venture capital investment, more creative jobs, more inventions, new companies, and more high-paying jobs being created in the Bay Area.

What happened?

I just reviewed The Rise and Fall of Urban Economies for the San Francisco Chronicle. So I won't go over the case the authors make again here. Suffice it to say it is rigorously constructed and very persuasive. The book is written like a detective story, as the authors systematically examine the usual suspects that LA blames for its fate--geographic expanse, population size, immigration, the collapse of the aerospace industry--and carefully dismiss them one by one.

The fault, they conclude, is not in our stars, but rather in our leaders and our civic and business culture, or perhaps, more accurately, lack of it.

You can argue with this, but ignore it at your own peril. Actually, not just at your own peril, it turns out. At our city's peril.

And that's what I want to focus on here. What went wrong in LA? Can we fix it? Or are we too late?

The short answer is that LA's leaders in government, business, academic, and civic institutions failed to grasp the "zeitgeist" of the new economy--its open-source spirit. They failed to cultivate the "invisible colleges"--vibrant relational networks of investors, entrepreneurs, and scientists--that fostered new technologies, new businesses, and new jobs in the Bay Area. LA's universities, businesses, governments, and civic groups kept each other more at arm's length.

LA's leaders talked about the "new economy," but they actually focused on the opposite: keeping light manufacturing in the city, reducing business and development costs, and improving the vast logistics and transportation system around the ports in San Pedro and Long Beach. That was all well and good, the authors of The Rise and Fall argue, for low paying jobs. But it was a major distraction from the opportunities at hand.

Now we are trying to play catch-up. We've got Silicon Beach, though it's not big enough to have moved the needle significantly, yet. We have an open-source ethos in government, just like everybody else now. And there are efforts underway to change the civic "zeitgeist."

The" Future of Cities: Leading in LA" initiative, founded by public affairs consultant Donna Bojarsky, is one. When it convenes its first big conference in October, it will be interesting to see if it can get beyond the ideological grandstanding and divisive carping which seemed to characterize its debut earlier this summer.

But reforming this city's civic culture is going to take a lot more than a few high-minded salons and gab fests. We are way behind, and there is a long journey ahead. LA's leaders might want to sit down and draw a new roadmap for the city after reading The Rise and Fall of Urban Economies: Lessons from San Francisco and Los Angeles. Then get to work.

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The Rise and Fall of Urban Economies: Lessons From San Francisco and Los Angeles. By Michael Storper, Thomas Kemeny, Naji P. Makarem, and Taner Osman. (Stanford University Press; 328 pages; $60).


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