The Outsider Connection : With the corporate presence in Los Angeles fading, Riordan must reach out to a new type of businessperson for political support.

Although a pro-business mayor, Richard Riordan’s biggest problem, ironically enough, is drumming up support for his policies among his natural allies in the corporate-busi ness community. But with the char acter of the urban economy, particularly in Los Angeles, undergoing dramatic change, the mayor may have to look more and more to “outsider” entrepreneurs to fill the corporate vacuum.

In the past, a moderate conservative like Riordan could reliably expect the support of a well-organized core of influential corporate leaders. Today, such a mayor is more likely to be greeted by their threats to desert the region that nurtured their companies unless this or that tax break is granted.

Given new communications technologies, relentless shareholder pressure and mobile labor markets, many large corporations no longer believe they require an urban presence. Many are retreating to smaller cities and rural locales, where they enjoy special tax breaks, slavish local governments, weak union movements and feeble environmental controls.

This corporate flight is reflected in the investment patterns of large companies. Today, the regions with the largest per-capita concentrations of big-company workers encircle such smaller cities as Nashville, Columbus and Charlotte.

For those left behind, the results have often been nothing short of disastrous. Since 1960, as big companies have moved to ever more remote locales, the urban core’s share of U.S. poverty has grown from 27% to 43%. The decline is particularly marked in Detroit, Atlanta and St. Louis, where massive out-migrations of both middle-class residents and leading businesses has occurred.

The same forces have loosened the economic moorings of greater Los Angeles. Many of the top corporate powers most active in transforming the region into a global economic center--Security Pacific, Pacific Mutual, Carter Hawley Hale, for example--have either moved or been absorbed by outside firms.

One result is that the community commitment of the remaining corporate elite, with the notable exception of ARCO and the utility companies, which cannot move, is increasingly half-hearted and poorly focused. This has deprived Riordan of a critical source of support when taking on anti-business opponents.

“For years, the corporate elite in this town was made up of 20 guys--and now a lot of them are gone,” laments one Riordan aide. “Now people tend to look inward and hope someone else will look into the regional problems.”

The corporate neglect has been exacerbated by the peculiar nature of Southern California’s economic makeup. Key industrial groups in most other regions, notes Tom Monahan of the Committee for Economic Development, a New York-based business think tank, tend to identify with regional concerns. As examples, he points to community activism among Silicon Valley’s electronics community, the medical-research industry around Minneapolis and New York’s financial-service industry.

But in Southern California, Monahan notes, two of the key industries--aerospace and entertainment--have tended to downplay their links to regional interests in favor of national or international connections. “In L.A. . . . it’s a bit of a silo mentality. You have an entertainment silo, an aerospace silo, that doesn’t connect to the rest of the economy.”

These emerging realities may compel Riordan to rethink his strategy for bolstering business support for his agenda. Instead of relying on large units--the strategy that backfired on his friend Peter V. Ueberroth at RLA--he will need to develop support among smaller, more grass-roots-oriented entrepreneurs who increasingly dominate the region’s employer base. According to a recent study by Cognetics Inc., Los Angeles and San Diego have a higher percentage of jobs in companies with under 100 employees than any of the largest U.S. cities.

In the future, these companies could constitute the backbone not only of the city’s economic but of Riordan’s political base. They and their employees, for example, might pressure City Council members, traditionally more responsive to the concerns of anti-business community groups, to back tax and regulatory reforms more conducive to job creation.

This possibility has not been lost on the mayor or his top aides. Already, Riordan has taken big steps in this direction by appointing business executives, such as Frank M. Sanchez, Dennis A. Tito, Donna F. Tuttle and Steven L. Soboroff, to oversee commissions called to streamline the city’s bureaucracy. This could help staunch the flow of smaller, growing companies out of state, as well as the far larger exodus to outlying, more business-friendly cities such as Burbank, Glendale and Santa Fe Springs.

Equally important, Riordan is reaching out to smaller-company owners who tend to be apolitical or too preoccupied with business to serve on commissions. “We have to figure out how to motivate neighborhood entrepreneurs,” says one Riordan political adviser. “(Riordan’s) very effective and cheerful in your face and small business people respond to ‘in your face.’ ”

Riordan’s first attempt at this new coalition-building involved the garment and textile industries, now the region’s biggest manufacturing employers. He has repeatedly met with industry leaders and begun to take steps to deal with their primary concerns, particularly stepping up security in the crime-ridden area around the California Mart.

But to be truly effective, Riordan will have to expand his efforts to include such industries as medical equipment, high-fashion furniture and business services. Since these industries comprise scores of smaller, unconnected companies, the mayor may have to spend time with individuals who have never been the “usual suspects” for the attentions of politicians.

At the same time, Riordan must continue wooing the entertainment-related sector of the economy, now arguably the city’s most critical source of new wealth-creation. But the mayor must be attentive not only to the large studios, but also to the broader spectrum of more than 7,000 entertainment-related specialty firms. These companies account for more than two-thirds of all industry employment and constitute the critical element that distinguishes Los Angeles from all production centers.

For Riordan, reaching out to these smaller companies represents a tremendous sociological as well as economic challenge. In contrast to the relatively tight-knit and homogeneous world of corporate Los Angeles, the new economic players in town frequently hail from a bewildering array of classic “outsider” groups--women, gays, immigrants, ethnic minorities, creative artists--who, as individuals, traditionally have little impact on city politics.

In many ways, an emphasis on bringing “outsider” entrepreneurs into the political community would be similar to that of the cities of classical antiquity and the Renaissance. Then, as today, the vast majority of the population lived outside the urban centers. Most economic activity took place beyond the cities as well. Alexandria, Venice, Baghdad and Amsterdam thrived by providing a cosmopolitan atmosphere attractive to talented urban minorities, such as Jews, Arabs, Huguenots. As the historian Fernand Braudel notes, “ . . . the miracle of toleration was to be found wherever the community of commerce convened.”

By successfully reading the political implications of the city’s new economic paradigm of smaller, more diverse companies, Riordan could yet make Los Angeles a modern Alexandria.*