POV: The Problem with Los Angeles’ economy The topics of professor Michael Storper's new book on urban economies discussed on KCRW.

Why do some public organizations deny it? Don’t shoot the messenger, please. 

I was recently on the radio show “Which Way LA?,” with a panel discussion devoted to our book on San Francisco and Los Angeles.


One of the panelists was Mr. Hasan Ikhrata, who is the Executive Director of the Southern California Association of Governments.  This is what is known as a “council of governments” under California state law, and a “metropolitan planning organization” under federal law.  Basically, it’s a place where the governments of a region come together to analyze the region’s past and future and consider ways forward, to improve the lives of people in the region.  That’s the goal they state on their website.   Organizations such as SCAG are important, because they produce ideas for the many scattered governments in the region and try to get everybody on the same page to understand and solve problems.

Mr. Ikhrata’s position in our radio debate was surprising, as it was in the interview our team conducted with him during the research for our book.  I would characterize it as “deny everything.”   What I mean by this is that he did not even admit that Southern California has a problem.  But if slipping from 4th place to 25th place among metropolitan regions in the USA is not a problem, then I’d like to know why.

Listening to the interview, Mr. Ikhrata did the following:  first, even though he knows perfectly well (and I stated it clearly before he spoke) that our book compares the whole five-county Southern California region to the whole 10-county Bay Area, he tried to change the subject, speaking about the city of San Francisco and emphasizing its smallness.  This is an elementary error that nobody in his position could possibly commit without it being a deliberate attempt to divert attention.

He attempted to make four other points, which range from vague to clearly inaccurate. First, he noted that So Cal has received a lot of immigrants, as if this is the reason for its economic decline.  But he knows that both So Cal and the Bay Area had the same proportion of immigrants in 1970 (11% each) and the same now (respectively 38% and 39%).  It’s true that the origins of the immigrants are somewhat different, but it’s simply not true to characterize LA as more an immigrant gateway than the Bay Area.

We also clearly show in our book that LA’s slippage is not primarily because it received more of its immigrants from poorer origins than the Bay Area. Instead, it’s that the quality of opportunities (and wages) offered to immigrants in the Bay Area have gotten progressively better over time than in LA, whether for educated or less-educated immigrants and from any origin group.  So don’t blame immigrants, Mr. Ikhrata, blame the failure of LA’s economy to capture the industries that give people high-quality opportunities.

His second claim was that LA’s economy is “diverse.”  As someone working in economic matters, he knows that this term means nothing when applied to a regional economy.  It could be applied to the people of a region, in which case the two populations are indeed “diverse,” by which we mean composed of people from many different cultures and birthplaces.   It could mean what economists call, more accurately, “diversified,” meaning having many different industries and not specializing in much of anything.  This is exactly what we document for LA, and show that it’s a main reason for LA’s slippage down the ranks of regions.  All the world’s wealthy great city-regions are strongly specialized, such as New York in finance or SF in high technology.  LA used to be strongly specialized and is no longer, and this is one main reason why it has become relatively poorer.  So Mr. Ikhrata’s assertion that LA’s economic diversity is a positive thing is exactly wrong.

This is linked to a third assertion he made, which is that because the Bay Area is so specialized in such high-wage activities as information technology or biotech (how terrible is that?) that it will one day collapse, as a one-horse town vulnerable to shocks.  But we show in our book that Silicon Valley is now in its 7th incarnation and that the Bay Area continues to develop wave after wave of new technology and entrepreneurship, the way LA used to do in the middle of the 20th century.   In any case, where is Mr. Ikhrata’s evidence?  There is a long scholarly paper trail on specialized cities that shows that they are not, on average, more vulnerable to decline than highly diversified ones.  It’s the wrong question in fact.  The issue is whether a city-region stays dynamic, innovative and entrepreneurial in whatever it’s activity happens to be, whether it’s highly concentrated in a few sectors or spread over many.  He cited absolutely no evidence for his assertion about impending Bay Area doom, because there isn’t any evidence to cite.

Finally, he repeated that Southern California creates more “high tech” jobs than the Bay Area! I especially liked this brazen, unsupported claim.  But it’s not true.  Not only does the Bay Area create jobs that are “higher high tech” than LA (higher up the technology skills chain and paid much, much more than in LA), but it creates more of them in an absolute sense, even though its economy is only half the size of LA’s.

One doesn’t expect perfect accuracy in every public debate.  Economic development is a complicated matter.  But in our book we chased down every clue we could find and all of our conclusions are amply documented with the best available evidence.  Mr. Ikhrata is in a position of public responsibility.  Why would he deny that the Southern California region has a serious problem and not then turn his organization into a forum for trying to help the region get out of this predicament?  Isn’t that what his organization says it is there to do, with the taxpayers’ money?

One reason he might be denying that the problem exists is that SCAG’s track record is a miserable one.  In our book, we carefully analyzed thirty years of SCAG reports for how their authors viewed the present and future of the Southern California regional economy.  They got it wrong about 95% of the time, hardly ever mentioning the new economy of IT and new forms of entrepreneurship.  They looked backward to the old days of manufacturing.  They advocated strengthening low-wage industries such as logistics.  This was actually before Mr. Ikhrata took up his job at SCAG, so we can’t hold him responsible for the errors of his predecessors. All the more reason for him not to be defensive, but instead to turn his organization around to be realistic, admit the problem, and get to work helping the governments of Southern California to change their vision and move forward into the 21st century.  The well-being of millions of people depends on it.

1 reply
  1. Afiq
    Afiq says:

    Well. For now maybe SA looks great. Too good to be true actually. But property prices is ridiculous over there and it never stops rising. The increase of property is not supported by robust enough wage increases. I believe they will have a huge bubble in SA. So for now, for someone who wants to gain experience or make quick money, go to SA. In the long term better stay in LA. This is just my humble opinion. I love SA and I would love to work there compared to LA. But for a middle income earner like me, living in SA is not possible.


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