Riots Seen as Springboard for New Urban Strategy : Rebuilding: Report by the Progressive Policy Institute refutes myths about the unrest and calls for development of smaller businesses.

The Los Angeles riots could serve as the springboard for an aggressive new urban strategy that targets development of smaller, more regionally oriented businesses as a way to empower inner-city residents, according to a report by a key Democratic Party think tank.

The report, released Thursday by the Washington-based Progressive Policy Institute, refutes several so-called myths surrounding the causes and meaning of last year’s civil unrest--that the riots were an inevitable rebellion, were racially driven or the work of criminal elements--and lays primary blame on the failed economic policies of liberals and conservatives.

Thus, the most effective responses to problems facing South-Central Los Angeles and other turbulent inner cities lies in charting a new economic course that relies less on mega-firms, industries and massive government spending and more on small business development, say authors Joel Kotkin and David Friedman.

“I think the Los Angeles riots essentially started the 1990s and are a key reason why Bill Clinton was elected President,” Kotkin said at a news conference. “The (riots) were a dramatic illustration that we have lost control of our cities in a fundamental way.”

Established in 1989 as the main policy forum for the Democratic Leadership Council, the think tank has emerged a key center of thought for the moderate wing of the Democratic Party. Its strategy of coupling increased opportunities with mainstream values and responsibilities has found a powerful adherent in President Clinton, who served as chairman of the leadership council in 1990.

Kotkin and Friedman, two locally based economists and authors, likewise have emerged as key players in the Los Angeles mayoral race, with many of the major candidates incorporating the duo’s economic innovations into their platforms.

The cornerstone of their revitalization plan includes:

* Identification of industries that offer the most potential for stimulating economic growth and then using public resources--technical assistance, tax and financial incentives--to secure development proposals.

* Creation of new institutions, lending policies or governmental markets as investment sources for smaller companies.

* Creation of industrial cooperatives or other experiments to foster a more collaborative environment.

* Drafting new laws and regulations that would define a national technological policy and encourage exchange of know-how among international and U.S. companies.

* Development of regulatory programs that produce the greatest results with the most limited impact on business.

Kotkin and Friedman contend that, contrary to prevailing assumptions, Los Angeles--with all of its ethnic diversity--has many strengths, including its location on the cusp of the Pacific Rim, a large and motivated work force, and access to international markets.

“The prime emphasis must be on building a competitive local economy in order to assist the vast majority of African-American, Latinos, Asians and Anglos who actively seek job opportunities,” the study said. “These people already share the basic values--belief in self-help, the ideal of upward mobility and a work ethic--that make them natural beneficiaries of improved economic conditions.”

But the authors say it will take a strong political leadership to promote new economic ideas and overcome politically driven pressures.

“The only thing we can offer is a vision that may solve the problems,” Kotkin said. “The question is whether the leaders will have the strength and stamina to say no once they get in office.”

Kotkin and Friedman were not the only ones offering proposals for the future of the Los Angeles economy Thursday. City Councilman Mark Ridley-Thomas, who chairs a council committee on community and economic development, convened the first in a series of public hearings intended to formulate an economic strategy for the city. Also, Assembly Speaker Willie Brown (D-San Francisco) will hold an economic summit in Los Angeles next week.