On Wednesday, Feb. 24, students, faculty and community members gathered at the UCR Alumni and Visitor’s Center to hear a presentation entitled, “How and Why LA Lost Its Economic Mojo: Lessons for Other Southern California Regions” given by Michael Storper, UCLA professor of urban planning. The event was sponsored by the Center for Sustainable Suburban Development (CSSD), an affiliated research center of the UCR School of Public Policy.
The seminar was predicated on Storper’s book, “The Rise and Fall of Urban Economics: Lessons from San Francisco and Los Angeles.” Storper opened his presentation by talking about the two regions heavily studied and researched in the book, those being the San Francisco region — referring to the 10 Bay Area counties — and the Los Angeles region — referring to the five Southern California counties considered part of Greater LA.
He noted how identical the regions were in the 1970s in terms of economic prosperity. There existed only a 4 percent difference in income during the 1970s whereas today that difference is 30 percent with LA dropping from fourth in economic ranking to 25th according to Storper’s research. This exemplifies what Storper called a “precipitous, very disquieting drop in rank.”
“Greater LA was, by most measures, the most successful American metropolitan region for the first two-thirds of the 20th century. Indeed, around the world LA was considered to be an astonishing story of economic development,” elucidated Storper. San Francisco had already established itself as an epicenter of economic growth during the end of the California Gold Rush of the 19th century.
Until the end of the 1970s, the Los Angeles region experienced a 21-fold growth in population and moved from a moderate-income region to a considerably wealthy region. Not to be caught up in the nostalgia of the times, Storper explained, “We should always remember of course that it was also a story of racial and ethnic inequality and exclusion during those days,” but despite this the general regional dynamic was “pretty good” according to Storper.
However, as the 1970s came to an end the two regions began traveling down progressively different pathways. The obvious factors that attributed to the decline of LA and the growth of the Bay Area was the birth of the Silicon Valley as the world’s high-tech capital. The Bay Area also nurtured lucrative sectors in investment banking, information technology, biotech, digital entertainment distribution, cellphone apps and other high-wage and high-skilled jobs.
Specifically, information technology grew from 2.6 percent of the total population employment in 1970 to 10.2 percent in 2010 while the Los Angeles region remained at around 2.7 percent. The LA region also suffered a decline in aerospace, defense and apparel sectors and experienced growth in logistics, lighting manufacturing and entertainment or medium-wage jobs.
Among other things, Storper pinpointed the 1970s as a critical decade in U.S. economic growth because of the shifting economic structures and the incorporation of burgeoning industries that came out of the time period, explaining, “The old economy dies and the new economy starts to be born.”
He continued on saying that U.S. manufacturing peaked in the ‘70s and signaled the rise of globalization and explosion in technological advancement which in turn reinvigorated regional economies such as the Bay Area that concentrated investment in these innovative new fields. Stroper also expounded on ways that the Bay Area gained an advantage in the current economic landscape through institutions both formal (government) and informal (beliefs, attitudes, networks of leaders).
Though public expenditure was cited as a factor in the Bay Area’s growth, Storper emphasized the importance of informal institutions in stimulating and growing the economy and analyzed the differences between informal Bay Area and Los Angeles institutions.
Quoting Nobel prize-winning economist Douglass North, Storper stated, “Beliefs are really important. That is, what you think about the economy actually has an effect on what you do in an economy.” Storper elaborated that his team looked at the economic beliefs in the two regions as reported by different publications. “What we found was that in Southern California there is hardly a mention of the ‘new economy’. Not back then and not even now.”
The Bay Area’s musings on the economy involve recognition of the rise in necessary regional expenses and of manufacturing as a thing of the past as well as the need to develop high-wage jobs for high cost. In Southern California, however, the opposite happened. Economic and business leaders focused on pushing land prices down and making taxes lower to grow their middle class. “The discourses … that the region’s leaders are telling about change are totally different,” explained Storper.
After several different anecdotes contrasting the strengths of the economic networks of the Bay Area region and economic missteps of current conservative Los Angeles business culture, Storper, recognizing the difficulty of finding a sort of panacea for our regional problems, finally gave his suggestions for how to change our economic trajectory, saying, “We need a new conversation. We need a new relational infrastructure here. It has to go from the leaders up to the elites … It has to be regional … like the Bay Area but it also has to bring together different kinds of people and it has to have some kind of staying power.”