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In a piece for the Wall Street Journal,
Joel Kotkin tells of the demise of Los Angeles. No,
you won't see Snake Plissken or Rick
Deckard racing through the City of Angels just yet. But the city's
political machine is doing all it can "to leave behind a dense,
government-dominated, bankrupt, dysfunctional, Athens by the Pacific,"
explains Kotkin.
The fact that government is visibly
destroying L.A. is especially ironic, given that government policy made the
southern California metropolis what it is — a sprawling sea of tract
homes laced with ribbons of concrete highways — providing hope for a
better life in the sunshine on the sunset coast.
Los Angeles was once a sleepy
Mexican pueblo, Kotkin points out in his book The
City: A Global History, but business leaders like railroad
magnate Henry Huntington imagined L.A. to be "destined to become the
most important city in this country, if not the world."
The Pueblo de Los Angeles was
founded in 1781 by Felipe de Neve where the Los
Angeles river emerges from the foothills.
The water (which would soon be
heavily subsidized) allowed for irrigation, and soon citrus groves and fields
replaced the dusty cattle ranches. After agriculture came oil discoveries,
and as Robert Fishman points out in Bourgeois
Utopias: The Rise and Fall of Suburbia, the first of many land
booms happened in the 1880s. "From the first, the great migration to Los
Angles was a migration of prosperity," writes Fishman, "of people
with capital and skills seeking a more comfortable life."
Not all observers are as charitable
as Fishman. In fact, most writers view Southern California with contempt.
Frank Lloyd Wright once remarked, "It is as if you tipped the U.S. up,
so that all the commonplace people slid down to Southern California."
In an article entitled
"Paradise" for The American Mercury, James M. Cain wrote
what H.L. Mencken judged "the first really good article on California
that has ever been done."
In "Paradise," Cain
marvels at the division of labor in the car business — repair and
otherwise. "As you might expect, there is a great skill in everything
that pertains to the automobile, that extends much
further than the roads it runs on." At the same time, Cain complained,
"you will not strike one place where you can get a really distinguished
meal." He especially disliked the locally served oysters. "If you
can imagine a blend of fish, seaweed, copper, and pot-washings, all smelling
like low tide on a mud-flat, you will have a faint
notion of what an Olympia oyster is like."
"The whole place is overrun
with nutty religions," wrote Cain, but he was impressed with the
sobriety of the L.A. Chamber of Commerce for realizing that the business
climate must be promoted, not just the meteorological one.
Cain's final point about Los
Angeles was that everyone living there believed "that some sort of
destiny awaits the place." The United States no longer had a destiny
according to Cain.
In the beginning, its destiny was
to reduce a continent, and that destiny, as long as it lasted, made
everything hum; transformed the most shiftless bacon-and-beaner
into a pioneer, placed epic frame around our wars, gave the most trivial
episode the stature of history. But the continent has been reduced, alas, so
that destiny has blown up.
Businessmen flocked to L.A. and
most of the California coast. Although ostensibly in the railroad business,
Henry Huntington was first and foremost in the real-estate business, buying
up as many orange groves and vegetable fields as he could. And while the city
attracted the burgeoning film and oil industries, as Fishman explains,
"The biggest industry, however, was the business of growth itself: land
speculation and house building based on the great expectations of the
future."
In Los Angeles Realtor,
California Real Estate Commissioner Stephen Bornson
wrote in 1931, "I see California as a deluxe subdivision — a
hundred million acre project." And FDR's housing agenda gave Bornson's vision a massive boost. The Home Owner's Loan
Corporation created 90 percent loan-to-value, long-term mortgages in 1933,
and a year later the Federal Housing Administration (FHA) was born. FHA would
standardize the home-building business from subdivision conception and
design, to the appraisal requirements needed for loan approval for the final
home buyer, along with every step in between. Builders could even draw on FHA
mortgage guarantees for working capital.
The FHA "allowed the subdivider to look beyond the rapid turnover of lots and
make a longer-term commitment to both subdividing the land and building the
houses on it," writes Fishman. The government program allowed for
economies of scale and speed. The standard California ranch house was born
and duplicated over and over.
What once were orchards could now
be complete subdivisions of nearly identical houses within months. As Fishman
notes, "Using this method in the late 1930s, a single developer in the
City of Bell was able to build and sell 236 houses in twenty months." By
the 1930s, single-family residences accounted for 93 percent of the city's
residential buildings.
From the 1940s onward, L.A. was
transformed from 900 square miles of agricultural land to vast swaths of
suburban tract homes with 500 miles of freeways.
The defense and aerospace
industries flocked to Los Angeles during World War II and the city became
home to the nation's largest port. Over time an "entrepreneurial class
of immigrants — Middle Eastern, Korean, Chinese, Latino —
launched new businesses in everything from textiles and ethnic food to
computers," writes Kotkin in the WSJ.
Now, however, former labor
organizer Antonio Villaraigosa is the city's mayor
and "has little understanding of private-sector economic development
beyond well-connected real-estate interests whom he has courted and which
have supported him," Kotkin explains.
The mayor has visions of public
infrastructure boondoggles dancing in his head: a downtown football stadium,
a downtown entertainment complex, and a $40 billion subway to the sea.
The former labor organizer must not
realize that Los Angeles's downtown business district employs a tiny fraction
of the area's workforce. "Los Angeles demonstrated to the world a new
model of urban growth — dispersed, multi-centered, and largely
suburbanized," Kotkin writes.
So while the mayor wants to use
government largesse to ramp up superfluous downtown projects for his friends
in construction and development, Villaraigosa's
other friends, the environmentalists, are strangling businesses with more
regulations to curb emissions. And of course the mayor is working to expand
the union presence on the docks at the expense of small entrepreneurs.
The unemployment rate for Los
Angeles County was officially 12.4 percent in June, after peaking a year
ago at 13.4 percent. However, the worst is likely not over. As Kotkin explains, the Panama Canal is planning to widen
and there are plenty of ports on the eastern seaboard looking for business.
Also, the Golden State's renewable-energy mandates are estimated to increase
energy costs by 20–25 percent. Californians already pay 53 percent more
than the national average.
And the taxman is especially brutal
in California, with a top rate of 10.3 percent, which kicks in at a $1
million in earnings. Sure, not many are pulling down that much, but the
second highest rate, 9.3 percent, applies to those making $46,766 and above.
The state's minimum wage is $8 an hour, 75 cents above the federal rate. And
restaurant employers may not use tips earned as credit toward this obligation
as is the case in many states. California employers are required to pay
"exempt"
employees double the state minimum, putting these employees in the 6 percent
tax bracket.
"As California goes, so goes
the nation," goes the old saw. As bad as Los Angeles has it, the city is
only just ahead of the rest of the country. California voters want to have
their cake and eat it too. Back in 2003, Todd S. Purdum
wrote for the New York Times,
Californians — like the rest
of the country, only maybe a little bit more so — want it all, all the
time: lower taxes and smaller classrooms; tighter pollution controls and
bigger S.U.V.'s; cheap labor and fresh produce but tighter limits on
immigration and provision of social services.
Economics professor Clifford F. Thies found that left-liberal cities "tend to
have higher unemployment, more murders and shrinking populations, and weakly
tend to have higher overall crime." These cities and their citizens are
only kept alive, and their politicians kept in power, with transfer payments
from state and federal governments.
What once was believed to be a city
of destiny (paradise on earth) is being destroyed by government looting; and
now its saviors, the state of California and the federal government, have
been looted as well.
Cain decided to stay, back in 1933.
"The climate suits me fine," he wrote. But who can afford the
sunshine now?
Douglas French
Mises.org
Douglas French is president
of the Mises Institute and author of Early Speculative Bubbles &
Increases in the Money Supply. See his tribute to Murray Rothbard.
Article originally published
on www.Mises.org. By authorization of the
author
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