Getting the Southland Back on Track : Regional economy: Creating an industry to make the vehicles of the future could arrest the shift to low-wage, low-skill jobs.

Southern California’s economy is faltering. In the absence of decisive action, this problem will continue. More and more, we hear people asking if it is possible to reinvent the region’s economy, to escape the ever-deepening crisis of deindustrialization and job loss.

We think there is a way. In part, this region’s problems are the result of a long-term downswing in federal defense expenditures. To a significant degree, they are also the result of declining competitiveness of the region’s industries, as more and more of the local economy shifts into low-wage, low-skill, sweatshop forms of production. These problems represent far more than just a cyclical and eventually self-correcting aberration; on the contrary, without intervention they are likely to continue over the very long run.

One encouraging counter-trend to this downward spiral has been the emergence of a fledgling electric-vehicle industry in Southern California. Another major opportunity for economic development grows out of the Metropolitan Transportation Authority’s 30-Year Plan. The plan calls for spending $183 billion, or $6.1 billion a year--two-thirds of what the Defense Department spent in Los Angeles County for defense procurement in 1990--on renewing the county’s transportation infrastructure. Judiciously spent, this enormous sum of money could help jump-start an advanced ground-transportation industry.

In a study done at UCLA’s Lewis Center for the MTA, we examine how this goal might be achieved.

The existing industrial skills and assets of Southern California put it far ahead of any other region in the world as a potential center of new high-technology, ground-transportation-equipment industries. We have in mind sectors like “intelligent” vehicle and highway systems, command-and-control devices for long-distance rail and subway networks, advanced rail-car equipment, high-speed trains, new high-technology transportation infrastructures, alternative-fuel vehicles of various kinds, to cite just a few.

New industries can also be developed to produce a wide array of related technologies such as fuel cells, flywheel batteries, sensors and displays, fiber optics, magnetic-levitation devices and geographic information systems. A widening circle of growth and development could be set in motion by linking together clusters of interrelated producers.

But the region must move quickly to gain a durable competitive edge over other areas--especially Europe and Japan--that are headed in the same direction.

Private entrepreneurial effort, competition and markets must play a pivotal role. However, in the new global economy of the 2lst Century, regional competitive advantage is also secured by appropriate public policies, particularly those that foster technological research and labor training and create the conditions for more collaborative forms of regional economic activity.

There are a number of highly focused tasks ahead before this vision of a vibrant ground-transportation industry can be realized. Southern California must:

* Actively promote transportation technology research and work to achieve strong private and public patronage for the proposed California consortium for transportation research and development.

* Create a manufacturing-skill base by investing in worker training, and establish appropriate programs in local schools, colleges and universities.

* Provide high-risk capital investment funds for small, innovative manufacturing firms. We recommend forming a private / public financial intermediary charged with this mission

* Encourage industry consortia and collaborative manufacturing organizations in order to enhance interindustrial cooperation and the pooling of critical technologies and skills.

* Promote a transportation-equipment research and manufacturing zone, perhaps around the old General Motors plant in Van Nuys or in South-Central Los Angeles.

* Form a Southern California transportation equipment industry council as a forum for bringing together relevant parties (manufacturers, banks, labor, community groups, local government agencies) in order to seek broad agreements about solutions to industry problems and about future regional priorities.

The practical experience of developing an electric-vehicle industry has already demonstrated the value of a two-pronged public-private approach to industrial renewal in Southern California. We believe that a major new ground-transportation industry can emerge in the region on the basis of this approach.

The stakes are high. The advanced ground-transportation industry offers a tantalizing glimpse of an alternative future for the our region, one based on rising wages, rising labor skills, an expanding job base and greatly improved competitiveness on both national and global markets.