By Joel Kotkin, December 3, 2013
I arrived in Los Angeles almost 40 years ago, there was a palpable
sense that here, for better or worse, lay the future of America, and
even the world. Los Angeles dominated so many areas — film,
international trade, fashion, manufacturing, aerospace — that its
ascendency seemed assured. Even in terms of the urban form, LA’s
car-dominated, multipolar configuration was being imitated almost
everywhere; it was becoming, as one writer noted, “the original in the
Yet today the nation’s second-largest city seems to have fallen off
the map of ascendant urban areas. Today’s dynamic cities in terms of job
and population growth are the “new Los Angeleses,” such as Houston,
Dallas, Phoenix or Charlotte; at the same time LA lags many more
traditional “legacy” cities in job creation and growth, notably New
York, Boston and Seattle. Worst of all, LA has lost its status as the
dominant city on the West Coast; that title, in terms of both economic
and political power, has shifted to the tech-heavy Bay Area.
With a weak economy and little media outside Hollywood, the city has lost much of its cachet. A Businessweek survey last year ranked San Francisco as America’s best city to live in. Los Angeles was 50th, behind such unlikely competitors as Cleveland, Omaha, Tulsa, Indianapolis and Phoenix.
In another survey that purported to identify the top 10 cities for millennials, Seattle ranked first, followed by Houston, Minneapolis, Dallas, Washington, Boston and New York. Neither L.A. nor Orange County made the cut.
LA’s relative decline reflects a collective inability to readjust to
changing economic conditions. Some of this has to do with the end of the
Cold War, but also with the loss of the headquarters of many of the
area’s top defense contractors, such as Lockheed and, most
recently, Northrop Grumman. In 1990, the county had 130,100 aerospace
workers. A decade later, that number dropped by more than half to 52,400. By 2010, the county’s aerospace jobs numbered 39,100.
With the exception of drone technology, the region’s aerospace industry, as one analyst put it,
has become “dormant,” a victim of a talent drain and a difficult
business environment. This decline has weakened the metro area’s
standing as an industrial center — LA has lost almost 20% of its
manufacturing jobs since 2007. Meanwhile STEM employment in the Los
Angeles-Santa Ana area is still stuck below its 2002 levels; once
arguably the world’s largest agglomeration of scientists and engineers,
the region has now dipped below the national average in the proportion of STEM jobs in the local economy.
In contrast to the Bay Area, whose tech community also was largely
nurtured by defense contracts and NASA, LA’s defense and aerospace
industries never pivoted into the vast civilian market. Capital, too,
has played a role. The LA area has lots of rich people, but a relatively
weak venture capital community. For example, the Bay Area was a
recipient of roughly 45% of U.S. venture capital investment in the third quarter of 2013, while far more populous Los Angeles-Orange County took in under 6.5%.
The growth of VC-financed companies is one reason why LA has been
less able to produce high wage jobs than its northern rival. According
to a recent projection by Economic Modeling Specialists Inc., high-wage jobs will account for only 28% of L.A.’s job growth from 2013 through 2017 compared to 45% in the Bay Area.
Far greater problems can be seen further down the economic food
chain. The state’s heavy industry — traditionally the source of
higher-paid blue-collar employment — entirely missed the nation’s broad
manufacturing resurgence. In the first decade of the 2000s, according to
an analysis by the Praxis Strategy Group, LA lagged all but 10 of the
nation’s 51 large metro areas in creating manufacturing jobs.
Two other once-unassailable economic niches in LA, its port and
entertainment, also are under assault. The expansion of the Panama Canal
has increased the appeal of the Gulf ports, as do plans for expanded port facilities in Baja, California. These shifts threaten many of the roughly 500,000 generally well-paid blue-collar jobs in the local logistics industry.
Then there’s the slow but steady erosion of LA’s dominance in its
signature industry, entertainment. Motion picture employment is down
11,000 since 2001. In the same period New York has notched modest gains
alongside growth in New Orleans and Toronto. New announcements of industry expansions and an uptick in production in LA show that Tinseltown is far from dead, but challenges continue to mount from overseas and domestic competitors.
Perhaps most shocking has been the tepid response to this relative
decline among LA’s business and political leaders. Once local
entrepreneurs imagined great things, like massive water and port
systems, dominated the race for space and planned out the suburban
dreamscapes of Lakewood, Valencia and the Irvine Ranch.
Arguably the signature achievement of this past decade, and the one
getting the most attention in the media, has been the revival of
downtown as a residential and cultural hub. Having essentially abandoned
the model of a multipolar city, LA has poured billions in
infrastructure and subsidies into a half-baked attempt to turn Los
Angeles into a faux New York. This is something of a fool’s errand since
barely 3% of area residents work downtown, and most cultural consumers
live far away on the Westside or in the San Fernando Valley.
New Mayor Eric Garcetti is also a density advocate, and is placing
huge bets on the massive building of high-end high-rise housing, all
this despite weak job and population growth. In his campaign he emerged
as the candidate of developers who want to densify the city, including Hollywood, over sometimes fierce grassroots opposition.
Compared to his inept and economically clueless predecessor, Antonio
Villaraigosa, Garcetti represents something of an upgrade. He at least
knows jobs matter at least as much as development deals for
contributors. Yet he remains pretty much a creature of the failed
leadership culture of L.A., which is dominated by public employee
unions, subsidy-seeking developers and greens, largely from the city’s
Can LA turn itself around? The essential ingredients that drove the
city’s ascendency remain: its location on the Pacific, its near-perfect
climate and spectacular topography. The key now is for the region to
build an economic strategy that allows it to use its assets, and build
around its increasingly immigrant-dominated grassroots economy.
Innovation in music, fashion and food continue at the grassroots level,
with much of the inspiration coming from the city’s increasingly
racially diverse mestizo culture.
What LA needs now is not a slick media campaign, but a concerted
effort to tap this neighborhood-centered energy. The city of the future
needs to reinvent itself quickly, before it fades further behind its
competitors on the coasts and in Texas. Successful cities such as
Boston, San Francisco, Seattle and Houston all managed to find ways to
nurture new industries to supplement their traditional ones. Los
Angeles should be able to do the same, but only if it seizes on its
fundamental assets can it again become a city with a future.