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The Rise and Decline of Los Angeles

August 8, 2011

Terrific new piece from Joel Kotkin in City Journal.   Key section:

Why has Los Angeles lost its mojo? A big reason is a decline in the power and mettle of the city’s once-vibrant business community. Between the late 1980s and the end of the millennium, many of L.A.’s largest and most influential firms—ARCO, Security Pacific, First Interstate, Union Oil, Sun America—disappeared in a host of mergers that saw their management shift to places like London, New York, and San Francisco. Others, such as the Los Angeles Times and the Dodgers, were sold to outsiders. The most influential business leader downtown today, according to a recent Los Angeles Downtown News ranking, is Timothy Leiweke, president and CEO of AEG Entertainment—a subsidiary of the Anschutz Company, which is controlled by Philip Anschutz, a Denver billionaire. The fact that essentially a regional manager is so influential would make the city’s past leaders spin in their graves.

. . . The most influential businesspeople . . . are professionals, or corporate vice presidents charged with sending earnings from L.A. back to their headquarters. As a result, they have little independence and few resources to challenge what (are called) “the public emperors.”

Those “emperors” are the leaders of L.A.’s public sector. As business retreated, power in Los Angeles, largely by default, shifted toward the government and its workers. Through the long decline that started in the 1990s and accelerated after 2005, government employment has climbed. Back in 1990, 13 percent of employed Angelenos worked for the government; by 2008, that figure had jumped to 16 percent. Even after a deep recession, the public sector—both county and city—continues to pull in big payouts. Today, almost 18,000 county workers earn more than $100,000 annually. The city has followed a similar path, with its city council the highest-paid in the nation. In L.A., as in much of California, public employees’ pensions have risen at unsustainable rates.

The machine that controls Los Angeles these days consists of an alliance between labor and the political leadership of the Latino community, the area’s largest ethnic population. Once virtually powerless in the region, Latinos elected to office now control many of the smaller municipalities along the industrial belt that stretches from downtown to the county line. But since they serve at the whim of labor interests, they seldom speak up for the area’s many small businesses and homeowners. It’s a familiar story: because Democrats are almost assured of victory in L.A.’s general elections, candidates must win only the low-turnout, union-dominated party primaries. John Pérez, a longtime union political operative and now speaker of the California State Assembly, won the Democratic nomination in 2008 with fewer than 5,000 votes and then easily crushed the GOP candidate. Pérez’s predecessor as speaker was Fabian Núñez—another L.A. labor official. No wonder the Sacramento Bee’s Dan Walters calls the labor movement “the closest thing to an omnipotent political machine anywhere in the state.”

Read the whole thing

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