Los Angeles Joins National Slump
International trade has grown rapidly, but so have housing prices, regulations on business
TRAFFIC congestion. Smog. Illegal immigration. Housing costs. Education woes. The dreary litany of urban problems that has become synonymous with Los Angeles is also the list of key hurdles to the city's economic future. The problems are being heard on the lips of corporate chiefs like James Morgan of Applied Materials, which makes silicon wafers for microchips. He recently chose Texas over possible sites in southern California for a $100 million facility for 2,000 workers.Skip to next paragraph
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And they are on the lips of auto-parts distributors, soy-sauce makers, and furniture builders who say the city's march to global prominence is beginning to hurt the working people who helped get it there.
``L.A. has reached a new phase in its history, ... that of a world city,'' says Joel Kotkin, author and a senior fellow at the Center for the New West. ``The emerging pattern is those industries which don't need to be in a world city will move out, while those that do will move in.''
Three-and-a-half million people came here in the 1980s, the largest tide of humanity since Europeans flooded New York at the turn of the century. A population above that of 42 states produced an economic output that would make the 4,100-square-mile metropolitan area the world's eighth most productive nation.
Obliterating its image as merely an entertainment capital (Hollywood accounts for only 2 percent of the region's jobs) and aerospace center (another 7 percent), southern California has become one of the strongest and most diverse economies in the world. Pacific Rim trade has made the Los Angeles/Long Beach port the most important center of international trade in the US, outpacing the Port of New York in annual tonnage.
``Los Angeles has become the global intersect of the North American economy with Asia and Latin America,'' says Phillip Vincent, an economist for First Interstate Bancorp. ``It has become a must for any global corporation that wants to do anything in North America.''
With world-class status comes world-class problems and the often-stifling regulations to control them. Regulations on travel, parking, building, and manufacturing are beginning to straitjacket the citadel of sun and freedom.
The world's most ambitious attempt to combat air pollution - a minutely detailed, 20-year strategy - has the business community gasping for air. The three-foot-high document drawn up by the South Coast Air Quality Management District (SCAQMD) governs everything from the consistency of glues and paints for jets to the use of barbecues at theme parks. Estimated cost of compliance for the area's 67,000 small businesses: $3 billion to $6 billion, the state commerce department says.
Many have moved to Mexico, others to surrounding states. Local news reports are peppered with stories of businessmen who have replaced the question, ``Why leave?'' with ``Why stay?'' David Hensley, an economic forecaster at the University of California at Los Angeles, says that, by the year 2000, the departure of companies could be a flood.
The tide of immigrants ready to take their place - many of them poor, many illegal - is contributing to a dumbbell-shaped economy, with the affluent rich at one end, and a swelling underclass at the other. Many wonder whether Los Angeles will continue growing as a vibrant, stable economy or become a third-world metropolis like Mexico City.