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Steven Erie is Director of the Urban Studies and Planning Program and Professor of Political Science at the University of California, San Diego. His first book, Rainbow's End: Irish Americans and the Dilemmas of Urban Machine Politics (UC Press, 1998) received the American Sociological Association's Robert Park Award for the best book in urban sociology and the American Political Science Association's award for the best book in urban politics.

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Globalizing L.A.

STANFORD UNIVERSITY PRESS

Contents

Tables, Figures, and Photos...........................................................................viiPreface...............................................................................................xiI Overview..........................................................................................11. "Gateway for the Pacific Rim"......................................................................32. Regional Trade Catalysts: Local Markets and Governments............................................21II Historical Development: Entrepreneurial Visions and Deeds, 1880-1992..............................433. Local Foundations: Creating the Global Gateways, 1880-1932.........................................454. Building for Regional and Global Markets: Leadership and Innovation, 1933-1992.....................77III Mounting Challenges: The Riordan Years, 1993-2001.................................................1135. Weathering Storms at the Ports.....................................................................1156. Building Trade Corridors...........................................................................1447. International-Airport Development: At Stall Speed..................................................172IV The New Millennium: At the Global Crossroads......................................................2018. Rethinking Global Los Angeles: New Challenges and Formulas.........................................203Notes.................................................................................................233Index.................................................................................................283

Chapter One

The development of this city as a gateway for the Pacific Rim in particular, but really the whole world, ... was something so clear to me that I never questioned it. International trade and the Southern California jobs created directly or indirectly by the Harbor Department prompted me to improve the Port of Los Angeles.... And the international terminal at the airport was something which I recognized was important.... I either called or visited the airport every day just to see how the construction was going.... [The port and the airport] have become a truly major force in the economy of Southern California, ... tied in with international trade, ... and I'm proud of that achievement. -former Los Angeles Mayor Tom Bradley, 1995

Central to our region's economic vitality is international trade. To be the Los Angeles of the 21st century, we must invest [in infrastructure] today to increase our capacity for international trade tomorrow. -former Los Angeles Mayor Richard Riordan, 1996

Globalizing L.A. is a study of trade, infrastructure, and regional development in Greater Los Angeles: from the fierce railroad and harbor battles of the late nineteenth century, to the twentieth-century building of one of the world's greatest trade-transportation complexes, to L.A.'s emergence as a leading trade center, and, finally, to new uncertainties regarding its twenty-first-century global future.

A major focus of this book is the epic battles fought since the early 1990s over the nation's most ambitious trade-infrastructure development plan: the development of the Los Angeles and Long Beach ports; the Alameda Corridor rail project; the Los Angeles International Airport (LAX) Master Plan; the plans for a new international airport at the former El Toro military air base in Orange County; and the North American Free Trade Agreement (NAFTA) border-infrastructure improvements. I consider the myriad of challenges to these mega-projects, pitting the forces of globalization and the economy against community and environmental resistance, and analyze the strategies devised by project supporters and opponents to shape Southern California's community, regional, and global future.

Los Angeles has become one of the world's great regional economies and global laboratories. In 2001, the five-county Los Angeles metropolitan area (consisting of Los Angeles, Orange, Ventura, San Bernardino, and Riverside counties) had a gross regional product of $651 billion, making it one of the world's largest economies. Table 1.1 compares the Los Angeles regional product for 2001 with the gross domestic product of the top twenty-five national economies. If Greater Los Angeles were a nation, its economy would rank ninth in the world, below those of Italy and Canada and above those of Mexico, Spain, and India. Were L.A. County a separate country, its $390 billion economy would rank fourteenth in the world, below those of Brazil and South Korea but above those of the Netherlands, Australia, Russia, and Taiwan.

Greater L.A.'s global significance extends well beyond its world-scale economy. The region has become a premier crossroads for migration from the Pacific Rim, Mexico, and Latin America. The region is now home to one-fifth of the country's new immigrants. With Hollywood and major industries in multimedia, fashion, and design, L.A. is a capital of the global entertainment industry and a leading incubator of global culture and design innovation. Yet, Southern California also aspires to be the nation's leading Pacific Rim gateway and a major center for trade with Mexico under NAFTA. L.A.'s trade ambitions and the catalytic role of its trade infrastructure supply the main focus here.

Building L.A.'s Gateways and Trade

This study weaves together history and policy analysis to trace the arc of the region's trade, infrastructure, and economic development. I explore Southern California's meteoric rise historically as well as its still uncertain future as a leading center for global trade and transshipment. A primary concern involves the strategies devised to plan, finance, and build one of the world's great trade-transportation complexes-the ports of Los Angeles and Long Beach and LAX. These are the world's third busiest port and airport facilities. I also examine the development of major trade corridors, such as the landmark Alameda Corridor rail project, which connects the ports with the downtown rail yards, as well as the extensive network of rail, highway, and land port-of-entry links to Mexico and the rest of North America.

More so than most regions, L.A. trades on its superior infrastructure; its other trade-development efforts pale in comparison. Yet, as these pages reveal, the building of L.A.'s global gateways was an improbable and remarkable achievement. In 1900, Los Angeles lay a distant twenty miles from the ocean. The region had no natural harbor. San Pedro, then a separate city, had a small, inadequate port with shallow sloughs and unprotected open-sea anchorages. Neighboring Long Beach also had no natural harbor. The present site of LAX was a bean field. The region's seaport and airport sites originally lay in private, not public, hands. How the municipalities of Los Angeles and Long Beach improbably came to own these facilities and, despite daunting challenges, to publicly develop them (albeit with federal, state, and private assistance) into the mighty trade portals now globalizing the Southern California economy is a major focus of inquiry.

Of paramount importance was the fashioning of appropriate local institutional arrangements for infrastructure provision. Progressive-era Southern California rejected the eastern model of regional public authorities. Instead, L.A. and Long Beach created powerful municipal proprietary departments (semi-autonomous agencies armed with formidable city-charter protections and powers) to develop and manage the region's early "crown jewels": its public water, power, harbor, and airport facilities, which were crucial to the region's improbable yet dramatic twentieth-century economic development. A key question addressed here is whether early reliance on city agencies to provide regional infrastructure vitiated the later growth of regional institutions and cooperation, which are now being called for to address pressing areawide problems such as airport development.

Powerful, semi-autonomous public enterprises created strong incentives for public entrepreneurs to engage in long-range strategic planning and innovative development policies. My concern with the dynamic interplay between structure and agency borrows from Jameson W. Doig's study of the semi-autonomous Port Authority of New York /New Jersey and its troika of leaders-General Counsel Julius Henry Cohen, Chief Engineer Othmar Ammann, and Executive Director Austin Tobin. Because multiple agencies and actors complicate the Southern California story, I examine how organizational structures and roles have shaped strategic behavior and policy. With institutional structure thus playing a conditioning role, strategies for public-agency trade and infrastructure development ranged from early trade programs and missions, to competitive pricing and agile market responses, to building electoral and interest-group coalitions for infrastructure financing and development, to lobbying City Hall and the state and federal governments, and, more recently, to managing and mitigating community and environmental concerns regarding today's mega-projects.

While acknowledging the catalytic roles of high-profile elected officials such as Mayor Tom Bradley as well as local business organizations and leaders, I also highlight the unsung public actors who profoundly shaped the region's trade and infrastructure development: public servants and citizen commissioners. For example, Clarence Matson was an early visionary manager of L.A.'s Harbor Department, mapping out L.A.'s Pacific Rim trade strategy as early as the 1920s. In the post-World War Two era, Frances Fox and Clifton Moore served as innovative managers of L.A.'s Department of Airports. Both were effective proponents of airport expansion and international passenger and air-cargo service. L.A. airport commissioners such as Donald Belding masterminded successful bond campaigns for facility expansion. In Long Beach, early Mayor and later City Manager Charles Windham, considered the port's founding father, led the city's harbor and trade-development efforts in the pre-New Deal era. Later, Eloi Amar, a long-serving Port of Long Beach general manager, and David Hauser, a Long Beach harbor commissioner, facilitated harbor and rail projects. These and other unheralded public servants were master politicians whose influence rivaled that of elected officials and business leaders.

Policy Debates

Today, the nation's metropolitan areas, from New York to San Diego, are examining their global engagements. Local officials, businesses, and civic and community organizations are concerned with developing regional strategies to increase globalization's local benefits while reducing its costs. This study contributes to the growing dialogue concerning globalization's local impacts and appraisals of various ameliorative strategies.

There also is a current scholarly rethinking of the role of global cities and regions not merely as corporate and financial command centers but as vibrant places for international trade and commerce. The L.A. case illuminates new theories of trade regionalization and particularly the advantages of superior trade infrastructure. Compared with earlier trade theories, the so-called New Economic Geography, exemplified in Paul Krugman's Geography and Trade (1990), shifts the focus from nations to regions and firms. As national tariffs are reduced or eliminated, transportation costs become a major trade determinant. World-class port and airport facilities can confer substantial regional advantage by lowering such costs, which, in a just-in-time economy, now include shipping time and reliability.

This study seeks to bring physical capital investments and transportation infrastructure back into contemporary policy debates concerning regional and trade development. Today, there is a preoccupation with the role of social capital in regional growth. Thus, sociologist Richard Florida offers a creative-capital theory of regional prosperity, in which a bohemian "artistic class" is seen as the new catalyst of development. Political scientist Robert Putnam and others see economic growth as tied to a community's level of civic participation and social cohesion. Economists stress the role of "human capital"; according to this theory, growth is driven by workforce educational levels. Yet successful regions also require enormous physical capital investments in infrastructure-ranging from water and power systems to ports, airports, highways, and rail lines-to attract and retain businesses and remain competitive.

A related aim is to restore infrastructure's pride of place in trade-development debates, where its importance is frequently downplayed. The development of ports and airports is, after all, a lengthy, expensive, and contentious process. As a result, such mega-projects have become anathema to many local public officials, who, in an era of term limits and poll-driven policymaking, have short-term policy horizons and seek to avoid angering voters. Local politicians tend to prefer trade initiatives with immediate benefits and few costs: sister-cities programs, local and overseas trade offices, and high-visibility trade missions.

Despite growing political impediments, infrastructure retains extraordinary value as regional trading strategy. For places such as Los Angeles, infrastructure remains the sturdy bedrock of trade and regional development. L.A.'s innovative port, rail, and airport governance, financing, and developmental policies merit serious study by policymakers concerned with infrastructure and trade across the nation and around the world. In the 1990s, with the telecommunications and dot.com speculative bubbles, it became fashionable to dismiss transportation systems as somehow antiquated and primitive and to focus instead on telecommunications as the new conduit of global trade for the then high-flying, high-tech economy. In the so-called new economy, trade was about intellectual property rights, not the movement of people and goods. Yet, as argued here, the now-struggling new economy also depends fundamentally on the global connectivity supplied by gateway airports such as LAX.

Closer to home, I endeavor to bring issues of trade, infrastructure, and local government's catalytic role to the forefront of debate concerning L.A.'s globalization and regional development. I critically evaluate the leading perspectives on global restructuring in Southern California-the so-called L.A. School and what might be termed the New Boosterism-pointing out their failure to take seriously the region's trade infrastructure and local government's role. I also assess the benefits and costs to a region such as Greater Los Angeles of becoming a major trade center and transportation complex, a topic of interest to regional policymakers everywhere.

Although L.A. has a reputation as a trade underachiever, these pages reveal a different story. Its goods exports may lag, but its strong service exports and enormous imports warrant its status as one of the nation's and world's leading trade centers. The crucial question concerns the overall trade/infrastructure balance sheet for local communities, Southern California, and the nation as a whole. Premier gateway regions such as L.A. facilitate both regional and national trade. However, trade can create regional losers as well as winners. Further, infrastructure investments in ports and airports generate sizeable dispersed economic benefits (jobs), but in dense, urban environments they also can produce significant, concentrated environmental costs (noise, traffic, and air pollution).

Also explored here is why mega-projects in Los Angeles, as elsewhere, are so much harder to build today than in the past. Projects now face fierce community and environmental opposition and constrained funding. I thus examine how the strategic environment for infrastructure development has changed dramatically since the 1970s because of the breakdown in the consensus on growth, the rise of NIMBY ("not in my backyard") community resistance, and the creation of supralocal regulatory-policy regimes. New environmental policies have included the National Environmental Policy Act (NEPA) and the California Environmental Quality Act (CEQA), which mandated project environmental-impact reviews and mitigation. In California, the passage of Proposition 13 (1978) and later tax-reform measures dramatically altered local-government finance and thus further threatened L.A.'s mega-projects.

I analyze these stringent environmental and fiscal rules and assess their potentially inhibiting effects on the region's ambitious port, rail, and airport plans under L.A. Mayors Richard Riordan (1993-2001) and James Hahn (elected in 2001). Significantly, these are the first two L.A. mayors under term limits (two four-year terms both for the mayor and for the city council). As argued here, term limits can adversely affect long-term capital planning and investments. Port and airport projects have twenty-year to as much as fifty-year planning and investment cycles, a span that closely matches the career horizons of bureaucrats. Yet, term-limited politicians receive little short-term benefit from such long-term investments. In the case of infrastructure projects, they can be exposed to significant short-term political costs because of NIMBY voter anger. Under term limits, politicians have little incentive to champion expensive, controversial, and lengthy projects that promise long-term regional economic benefits but impose short-term political costs.

Los Angeles's recent troubled history with its trade mega-projects is a cautionary tale concerning the potentially adverse effects of these new regulatory and electoral rules. Faced with state property-tax raids, Mayor Riordan saw the ports and airports as convenient "cash cows" to be milked to balance the city's budget and to pay for additional police. I chronicle the epic battles in the 1990s over the Riordan administration's revenue-diversion efforts, which pitted City Hall against the shippers, airlines, and even state and federal governments. In the Hahn administration, the threat of municipal secession (by the San Fernando Valley and Hollywood) became another incentive to placate short-term community and environmental concerns at the expense of long-term infrastructure development. Further, the September 11, 2001, terrorist attacks made security, not expansion, the watchword at the region's ports and airports.

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Excerpted from Globalizing L.A.by Steven P. Erie Copyright © 2004 by Board of Trustees of the Leland Stanford Junior University. Excerpted by permission.
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