A Decade After L.A. Civil Unrest: TPR Reprints Kotkin/Friedman Analysis

By: Joel Kotkin and David Friedman

The fires that lit up the skies in Los Angeles last spring brought a glimpse of the future we most feared-a diverse society hopelessly divided by economic class, race and ethnicity. Not since the widespread civil disturbances of the 1960s have the very assumptions of American life-its promise of a better life for all-seemed so perversely twisted and wrecked.

Also in ruins are the political and economic strategies that dominated American urban policy over three decades. On one side lies the clear failure of the traditional liberal approach, embraced by many leaders of the old Democratic coalitions, which equates upward mobility with political influence and which seeks to gain leverage over the existing corporate power structure to steer resources to the underprivileged. On the other lies the inadequacy of conservative urban policy, which has largely ignored cities, and stressed tax abatements and regulatory rollbacks as a means of luring manufacturing firms back to urban areas.

Yet these strategies seem increasingly misplaced for minorities, for our cities, and for America. As liberals and conservatives struggle over how to restore the fading large-firm, Galbraithian economy, they have generally lost sight of the underlying need to foster a vibrant industrial base that can sustain the mobility of all Americans, including the urban poor. Unlike the large-firm economy of the past, success in world markets today depends on sophisticated, flexible, generally smaller companies that collaborate to produce low-volume, high value added goods and services.

Building this sort of economy-the first priority in any long-term revitalization strategy-requires policies and political perspectives radically different from those historically adopted by both the left and right. For progressives, it is thus necessary to "unlearn" most, if not all, of what they have usually associated with promoting the interests of the urban underclass .

Throughout the last two decades, African-Americans have mobilized successfully to gain political power, only to find that their economic and social status continues to remain far below national norms . In some cities where blacks have exercised the most political control-Detroit, Newark, Atlanta-they have actually fared worse than those where their power has not been so pronounced. Clearly, political power has not translated into rapid social and economic improvement for most African-Americans, in Los Angeles as well as most major cities.

Perhaps the most glaring problem can be seen in the relative lack of a strong African-American entrepreneurial class. Today roughly half of college- educated blacks in the U.S. continue to work for government . Blacks have the lowest rate of self-employment of any major ethnic group. Although involvement in corporations or government has meant advancement for many African-Americans individually, it has done little to create a strong capital base or provide new opportunities for a growing and increasingly dangerous underclass, particularly within predominantly minority communities.

The case of Los Angeles aptly reflects the inadequacy of a purely political, public-sector oriented approach. While African-Americans constitute just over 10 percent of the total population, they have wielded considerable political influence . With their disproportionate political strength, many of Los Angeles' African-Americans also have gained access to employment in the government sector and now account for nearly one-third of all government jobs in Los Angeles, three times their percentage of the total population.

Yet as the familiar pattern of ethnic patronage has played out in municipal politics, relatively little has been done to address the more fundamental economic issues of empowerment, entrepreneurial development and self-help. After nearly 20 years of black political ascendancy, the numbers in Southern California are grim:

• Black participation in the labor force is roughly one-third less than that of Latinos and Asians. In depressed South Central only 45% of African-American males were employed, compared to 70% of the neighborhood's Latinos.

• African-Americans have by far the lowest rate of two-parent families in Southern California . African-Americans account for less than 10 percent of Los Angeles County's children, but fully half its foster children.

• African-American women are three times as likely to be dependent on welfare than Latinos or Asians and nearly two times as likely to give birth to drug-addicted babies.

Even today many black and other liberal political, religious and community leaders blame these disparities on racism and push for an accelerated program of set-asides, affirmative action and other race-based preferences. These efforts have tended to focus on large corporate bureaucracies that increasingly seem incapable of spurring indigenous economic development or creating new jobs.

Larger firms in L.A., as in the rest of the world, have become increasingly uncompetitive in the current global marketplace and have been shedding hundreds of thousands of jobs over the past five years. Some use race-related tactics to obtain additional public bail-outs by playing heavily on their minority employees to gain massive governmental support. Ironically, whether intentionally or not, liberal proponents of racial entitlements thus become allied with institutions that are also the least likely to create long-term economic or social opportunities for the urban core.

This traditional alliance has long benefited speculative businesses, particularly in real estate, as well as those public sector bureaucratic interests that feed off programs intended to reconstruct the inner city. Public and private sector efforts in L.A., for example, many of them dating back to the aftermath of the l965 Watts riots, have concentrated on huge retail and office construction projects, increasing racial quotas for government-related jobs and the development of the huge social welfare apparatus.

This process only serves to intensify the essential relationship of dependency between African-Americans and the government without creating commercial and industrial communities in which the indigenous population has an economic stake. Lacking a strong economic link to their community, many upwardly mobile African-Americans-as many as 75,000 by some estimates-deserted the community for the suburbs. South Central, which once possessed a thriving business community, decayed rapidly, its residents, both within the labor force and without, becoming ever more dependent on government. Perhaps more important than the financial loss has been the erosion of values of family, hardwork, upward mobility, and entrepreneurship that have dissipated as a result of this so-called "black flight."

The pain of South Central's decline was all the more pronounced because at the same time other groups in Los Angeles' ethnic mosaic-notably Koreans, Vietnamese, Latinos, and Russian Jews-devoted their fundamental energies to small business development, self-help and education. In many cases they were the ones who owned and worked in the new stores and the small factories that sprang up during the great Southern California boom of the l980s.

While blacks have enjoyed growing political power, these other groups made the greatest progress in terms of business assets. By the late l980s Asians, with a population roughly the same as African-Americans, enjoyed business revenue nearly twice as large. By the end of the l980s South Central L.A., the traditional core of the region's black community, was becoming majority Latino, with much of the business base in the hands of Koreans, who are 10 times as likely to become entrepreneurs as blacks, as well as other immigrants. As a result, Latino and Asian-owned businesses felt the brunt of the riots; in fact, according to both city and Small Business Administration statistics, they accounted for roughly 85 percent of all the businesses damaged in the riots.

But if the left's entitlement strategy has failed to halt decline, the neglect of the right further hastened the demise of the community. All too frequently, "development efforts" did more to improve the bottom line for developers without improving inner city conditions. The few larger firms that did move to South Central, as in most of the country, often offered dead-end jobs at the lowest rung of the administrative structure. These efforts did nothing to steer capital, insurance and resources to local entrepreneurs who could create competitive firms with a real stake in the area.

In light of this history, growing numbers of Angelenos of all races are beginning to recognize the futility of seeking racial or ethnic preferences from declining firms and stagnant institutions. Instead they view the problems affecting South Central L.A. as primarily economic, involving the revitalization of not just the urban core, but the entire regional and national economy.

The Los Angeles riots thus could serve as a watershed for the development of a new progressive urban strategy that rejects both the left's race-based preferences and the right's malignant policy of neglect. The new approach should focus on building a flexible, sophisticated industrial base embedded in the society, fostering in its wake a culture of enterprise, family and self-help.

The principal challenge for progressives in rebuilding American inner cities lies in overcoming traditional liberal biases against business development while assuring that public and private resources go to the firms and institutions most committed to urban revitalization. In this commentary, we propose the following steps for stimulating the growth of flexible, industrial communities in L.A.:

1) Encourage joint public-private "audits" of regional economic resources. To revitalize our urban areas, local leaders must identify, support and secure regional development commitments from the industries, companies and entrepreneurs that can offer the most potential for stimulating inner city economic growth.

2) Expand fiscal, technical and business support to smaller firms.

3) Foster collaborative relationships among regional enterprises. Public policy can assist in building a basis for regional collaboration by supporting the creation of private institutions to build links among local firms.

4) Mediate between regional economies and national and international interests. Rather than isolate local producers from world markets public policy should induce global industrialists to integrate local firms and workers into their worldwide production networks. Overseas firms should be given strong incentives to subcontract, license, or transfer technologies to local firms in exchange for access to American markets or technical resources.

5) Rationalize existing regulations. For many firms, the slow pace of permitting approval and the staggering array of regulatory agencies-not environmental standards themselves -present a stifling burden. We need to identify interventions that can produce the greatest results for the public interest with the most limited impact on business, and to tie tax breaks and regulatory relief to industrial developments in the inner city. Local governments, working with industry groups, should arrive at regulatory concessions only as part of a general strategy that assures regional business opportunities.