California Dreaming for a Good Rhode Island Future

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Joel Kotkin compares the economic development of San Francisco and Los Angeles over recent decades, with Los Angeles being the example of what not to do.  Not surprisingly, the City of Angels reminds me of the Ocean State, particularly in this paragraph:

Storper and other critics suggest that Los Angeles failed in part because it tried to maintain high-wage blue collar industries while the Bay Area focused on information and biotechnology. The problem now, however, are the factors in L.A. that drive industry away, such as ultra-high electricity prices and a high level of regulation. Even amidst the recent industrial boom in many other parts of the country, Los Angeles has continued to lose manufacturing jobs; Los Angeles’ industrial job count stands at 363,900, still the largest number in the nation, but down sharply from 900,000 just a decade ago.

My “to be fair” thought, for both Los Angeles and Rhode Island, is that they were linked to a different technology subsector than San Francisco, with emphasis on defense- and manufacturing-related technologies, while San Francisco turned toward “commercial application” of technology, which was more attractive to private investors.  How much that was a choice of local governments or even the whole community would be difficult to say.

However, there is something in the mentality of Rhode Island and, apparently, Los Angeles that may have made the difference:  The attempt to preserve certain jobs in manufacturing and government (including the services that state and local governments provide to manufacturers and the federal government and the employment bases of each) can lead to the sorts of policies that prevent private investors and innovative businesses from taking root in an area.

In other words, while players in different sectors or subsectors can certainly occupy the same local economy, using government policy to preserve one can be a barrier to others.  And if that one is fading for reasons that are more significant than local policy (which is usually the case), finding a new direction would actually be more important than salvaging every bit of the old industry that can be salvaged.

Naturally, the reference to electricity prices and high levels of regulation suggests that a deeper mindset is at play, and that’s a point made on this site on a regular basis.



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