Economic Success Stories Seen as Rebuilding Models

After the urban riots of the 1960s, there was a rush to build new job-creating businesses in South-Central Los Angeles and other inner-city areas.

Shopping centers sprouted, as did factories that made everything from computers to sheet metal. Nearly three decades later, few of those enterprises remain--victims of indifferent outside ownership, a mismatch of jobs and residents, and a changing economy.

Aerojet General Corp.’s tent-making plant in Watts, unable to compete without government contracts, closed in 1976. Lockheed Corp., hit by the downturn in aerospace, shut its Watts airplane parts plant in 1988. The Baldwin Hills-Crenshaw Plaza shopping center, designed to draw affluent consumers to the area, is struggling.

Now, as riot rebuilding efforts gather momentum, there is a cry to do things differently and avoid the mistakes of the past. No one expects it will be easy to apply new ideas on a scale never before attempted.

But, despite the magnitude of the rebuilding job facing riot-damaged parts of Los Angeles, economists argue that market niches exist for future industry--in electric transportation, advanced business services, international trade support, health care.

And there are current success stories both in Los Angeles and other inner-city areas to point the way:

* Solo Joint Inc., a central-city sportswear company, started the old-fashioned way, with the hard work of a group of blacks and other entrepreneurs capitalizing on an innovative concept. Solo Joint succeeded by marketing its clothing specifically to inner-city youths, and it is committed to reinvesting in the community.

* Hundreds of home-based “microbusinesses”--which provide services ranging from sewing to word processing--have been created in Los Angeles, many run by black women, financed by a revolving credit association modeled on ones in Bangladesh.

* The Progress Plaza shopping center in Philadelphia was built in the 1960s in part with small donations from the black parishioners of a neighborhood church as an alternative to banks. The plaza now calls itself the largest black-owned mall in the country.

Part of the problem with the 1960s projects was that the jobs created did not match the skill levels of the community’s residents, requiring special education or job training programs that were often lacking or that expired from lack of public support.

In other cases, investment resulted in strip malls, liquor stores and retail outlets that provided few jobs and siphoned money out of the community.

Perhaps most important, few of these enterprises involved local ownership or involvement by residents, giving the owners little incentive to stay once profits or the economy turned sour.

Lockheed Corp. was one of the few heavy industrial concerns to take up the challenge of building a plant in the inner-city in the wake of the Watts riots in 1965, in a proposed industrial park that never lived up to its advanced billing.

Lockheed opened its Watts manufacturing plant in 1969, and it employed 350 people building parts for the L-1011 commercial jet and the P-3 patrol jet for the U.S. Navy.

Like other projects of the time, the plant discovered it needed to provide basic job training to a work force that Lockheed spokesman Steve Chaudet said “may not have had experience working every single day.”

But it found an enthusiastic labor pool from the community, which turned the plant into Lockheed’s most productive in the late 1970s.

But the plant fell victim to the downturn in aerospace. When the L-1011 and P-3 projects came to a close, the plant was closed down.

Now, says Chaudet: “The base that this industry was able to support (in 1965) no longer exists. We’ll have to look at other ways to be helpful to that community. You couldn’t duplicate that again today.”

Similarly, Aerojet General Corp. built a 200-worker plant in Watts in 1966. It reportedly had similar problems with an inexperienced work force: One account says the company gave out alarm clocks to persistently tardy workers.

The plant was profitable at first, but it began to lose money and was later sold to Chase Manhattan Capital Corp., a subsidiary of the giant bank. Disagreement over the future of the plant led Chase to pull out, and the plant filed for bankruptcy in 1976. Its ultimate failure was blamed on overreliance on government contracts and an inability to function in the marketplace. Officials at Aerojet were not available for comment.

Even plants that have endured are not likely to be duplicated. In New York, IBM has operated a plant in the impoverished Bedford-Stuyvesant area of Brooklyn since 1969. Employment there has fallen to 270 from a peak of 400.

The plant provides relatively high-wage employment to the residents of the area, most of whom are black, and in some cases gives workers enough savings to open their own businesses.

But the plant now provides a service--refurbishing old IBM equipment--that could just as easily be farmed out, sometimes at a lower cost, to an outside subcontractor, admits plant manager Wesley Ratcliff. Only an ongoing commitment from IBM keeps the plant operating, though its lease on life is reviewed every year along with other IBM operations.

Are there new models for industrial development in South Los Anegles?

Black entrepreneur Carl Jones thinks his company is one. He was only 10 years old when his Watts neighborhood erupted in flames the first time. “I remembered I didn’t understand it, and I was afraid,” he recalls.

But a lesson must have rubbed off. With encouragement from his parents, Jones resolved as a young man to get an education and pursue a career in business.

By the time the second wave of riots swept through South Los Angeles last week, Jones, now a 37-year-old fashion designer, had realized his dream of co-founding a business and succeeding beyond expectations--twice.

His first company, Surf Fetish, sold millions of dollars of wildly colored surf wear before Jones sold his interest in 1990 to help start a second company. That firm, Solo Joint Inc., now makes a popular line of colorful young men’s wear called Cross Colours, marketed with a hip-hop and anti-gang theme and aimed at black youths.

With $15 million in sales in 1991, the first full year of doing business, Solo Joint was just named to Black Enterprise magazine’s Industrial/Service 100 list.

Jones succeeded by following a key tenet of any enterprise: identify a market niche that is not being filled and fill it.

But Jones’ company is also something more: a black-owned business dedicated to reinvesting in the community and creating educational and employment opportunities for the youth that are also his best customers.

The company finances a foundation, Common Ground, aimed at curbing school dropouts. Jones also plans to give Mayor Tom Bradley a proposal to build an apparel factory to employ as many as 1,000 people, financed with public and private money, that will provide sewing, cutting and other contract services to garment makers citywide.

“The community has always been very supportive, and we know this, and we’d like to give something back,” Jones said. “And that will be the key to a lot of businesses.”

Of course, not all black entrepreneurs have had such success. Perhaps more typical is Bill Doucette, a printer by trade who has run his own business since 1985.

He started with $600 in savings and a printing press in his garage. He now has his own shop, but has remained small--employing only his son and his nephew--in part because of an inability to get a line of credit from a major bank, despite having been a faithful customer since 1980. “We, as black people, cannot just go out and get enough money we need to do things we need to do,” he says.

In Philadelphia, the Rev. Leon H. Sullivan decided he would tap his own resource, the parishioners of his Zion Baptist Church. In 1962, he asked his flock to agree to contribute $10 a month for 36 months to create a capital pool, the so-called 10-36 plan. More than 200 did, and the resulting funds were enough to create an investment company.

That company in turn sold shares, the enlarged pool was used to borrow money, and the money was invested in community projects from a garment factory to a shopping mall called Progress Plaza. Some of the other ventures eventually failed, but Progress Plaza continues to operate profitably in Philadelphia’s inner city.

Of course, not all retail operations succeed. The most glaring example is the Baldwin Hills-Crenshaw Plaza, which opened in 1988 and was intended to attract mainly middle-class residents from nearby Baldwin Hills. Analysts blame its lack of profitability on intense competition from other high-toned shopping centers that are relatively close.

Many economists and business leaders believe the future of enterprise in South Los Angeles rests in part with businesses run by mom-and-pop operators like Doucette.

The main need, aside from financing, is some way to teach black entrepreneurs the basics of running a successful business, community leaders say.

To address those needs, one innovative program has emerged. The nonprofit Coalition for Women’s Economic Development raises money from foundations and private businesses and creates a pool of money from which women, mainly Latino and black, can borrow to finance home-based businesses: street vending, sewing, jewelry making.

Before the women borrow, they must undergo a 12-week training course in basic business skills. About 800 women have taken the course, said Forescee Hogan-Rowles, a black woman who is executive director of CWED.

Alternatively, would-be entrepreneurs can join a so-called solidarity circle, a group of five women, modeled on a so-called village bank or grameen from Bangladesh.

In a solidarity circle, five women meet for eight weeks, getting to know each other and their businesses. At the end, the group picks one member to borrow money, up to $1,500 at first, to finance the business. After that person makes two payments in a month, a second member is allowed to take out a loan.

The borrowers, who continue to meet with their circle, have a year to pay the loans back. If anyone defaults, she is cast out of the group and the others make up the difference.

The concept is designed to build support, exchange expertise and instill fiscal responsibility. In three years, the circle program has made 75 loans and launched 125 small businesses, with an incredible zero default rate, said program manager Paula Sirola.

The idea has caught the interest of at least one national politician: Democratic presidential candidate Bill Clinton has mentioned it as part of his proposed economic plan.

“Small business, as everyone knows, is the thriving pulse for most communities, and that’s where most local people are employed,” says Hogan-Rowles. “So identifying them as businesses that can employ people may change the thinking of business people and spur the economy in their local communities.”