Pension Funds May Help Heal L.A. Rift

The recent devastating rebellion--or riots, as most called it--in southern Los Angeles should force the entire country to take a new look at an old but much needed, rational concept loosely known as “industrial policy.”

President Bush doesn’t like it, complaining that it smacks of socialism. He wants to rely primarily on uncoordinated, competitive forces fighting one another in a “free market” economy to resolve the nation’s increasing economic woes, which are exacerbating the deep troubles in inner-city areas such as southern Los Angeles.

An industrial policy is not socialistic. The government would not plan the entire economy, or nationalize industry. Instead, it would work with business and labor to coordinate those forces, as the Japanese and several Western European countries do with considerable success.

A small step in that direction is the formation of the still-amorphous Rebuild L.A. project, an extra-governmental task force created by Mayor Tom Bradley and headed by Peter V. Ueberroth, whose purpose is to revive ravaged communities and create “sustainable jobs on a profitable basis.”

Many individuals and some corporations have made meaningful initial contributions on a small scale without waiting for action by Ueberroth, or for Congress and the White House to do something about the charred buildings and other ugly remnants of the disorganized, spontaneous rebellion against social, economic and judicial injustice.

It looks as if Congress and the Bush Administration may agree on nearly $500 million in relief for victims of the Los Angeles tragedy. But what is also needed is an industrial policy to coordinate both government and private programs. One of the most promising pattern-setting moves that is already beginning to function is the one here that was initiated by the AFL-CIO Los Angeles County Labor Federation.

Even before the disturbances ended entirely, William R. Robertson, head of the local federation, put in a hurried call to AFL-CIO President Lane Kirkland in Washington asking for help on two levels.

One, unrelated to industrial policy, was Robertson’s request for a quick financial contribution to the local federation’s Crisis Relief Fund that is distributing more than $200,000 worth of food and other essential goods to help meet immediate community needs. The United Auto Workers alone gave $100,000.

It is the second level of help, however, that should be much longer lasting and could revive the industrial policy idea nationally:

Through the AFL-CIO Housing and Building Investment Trust, investments of up to $75 million, and possibly more, are being made from workers’ pension funds to revive or create small businesses and build low-cost housing in the stricken communities.

But investments in inner cities can be risky. There has to be cooperation between government, business and labor to ensure that workers’ retirement funds are not put at risk by investments that are sound in humanitarian terms but may be unsound financially.

Business and labor jointly run the AFL-CIO pension investment trust. Government is involved by, for example, providing some loan guarantees. That relatively modest form of industrial policy needs to be expanded into many areas besides inner cities.

It has to be used for, among other purposes, converting our multibillion-dollar military-industrial complex to more constructive uses, such as meeting social needs.

Cooperation among government, business and labor is needed now to make communities such as southern Los Angeles safe for pension fund investments.

Then--with perhaps a new Administration in Washington more concerned about solutions than pejorative labels such as socialism--government, business and labor can together tackle larger economic problems nationwide.

To make pension fund investments here, project proposals have to be thoroughly checked, risks shared and some government guarantees obtained.

Underlying all of these business decisions must be major new government commitments to health, education, job creation and job training.

This kind of action would make inner cities viable so the investments can pay off for the community and for the workers whose pension funds are being used for such a valuable cause. Unfortunately, most of the talk in Washington and in state capitals such as Sacramento is how to trim, not expand, essential programs to deal with the nation’s basic problems in health care, housing and education.

Other steps can be taken, though, and California’s state treasurer, Kathleen Brown, wants to expand the AFL-CIO’s program to use other pension funds to help rebuild the wreckage left by the rebellion in Los Angeles. She is getting favorable response to her proposal for a “summit meeting” of the state public, private and union pension funds to “explore joint investment programs to rebuild California urban centers.”

Brown has considerable clout on two of the nation’s largest pension funds. She is a director on both the giant California Public Employees Retirement System and the State Teachers Retirement System, which between them have funds of more than $100 billion.

Asked if she is concerned about a political backlash from conservatives who may criticize her proposals as left-wing industrial policy, Brown told me: “Labels like that don’t bother me.

“The important thing,” she said, “is for government, business and labor to bury their hatchets and work together on projects such as prudent investments of pension funds to rebuild our cities.”

Brown is right, although that kind of cooperation won’t be easy to achieve, especially in a presidential election year. But prudent use of the billions in pension funds could help enormously in the effort to deal with the tragic problems facing inner cities, and at least a start has been made here by the Los Angeles labor federation.