Cashing in on So Cal Culture

Southern California has always been an invented place. Without a major river, a natural port or even remotely adequate water, the region has always thrived on reinventing itself – from cow town to agricultural hub to oil city, Tinsel Town and the “Arsenal of Democracy.”

Today, the need for the region to reinvent itself yet again has never been greater. Due in large part to regulatory pressures, as well as competitive forces both global and national, many industries that have driven the Southland economy – notably, aerospace, garments and oil – are under assault. A high cost of living, particularly for housing, stymies potential in-migration and motivates industries to look elsewhere to locate or expand.

As a result, virtually every key Southern California industry has been either stagnating or losing ground to competitors. More important, the area in the past decade has lost much of its appeal as a destination for both immigrants and young people, drying up a huge source of potential innovation.

To put it in vaudeville terms, Southern California needs a new shtick. We must look to leverage our natural advantages (beyond just our climate) into a new economic paradigm that can withstand competition from the rest of the world and the rest of the country. This opportunity is best seen as the commercialization of culture. These include, as one recent Los Angeles County Economic Development Corp. report stated, “businesses and individuals involved in producing cultural, artistic and design goods and services.”

This is not largely a matter of museums or concert venues. When it comes to the “fine” arts, Southern California is an increasingly respectable player, but cannot compete on equal footing with London, Paris, New York or Chicago, locales with far older endowments and, arguably, more people with refined artistic tastes. There is also growing competition from cash-rich wannabe cities, from Houston and Dallas to Shanghai, Beijing or Singapore. Fine art has always been for sale to the highest bidder.

Where Southern California retains a decisive edge is in the popular arts – from casual fashion and industrial design to movies, television and commercials – which could provide the basis for a broad-based economic revival. This requires political and business leadership to shift from their obsession with downtown Los Angeles and dense building projects to a focus on nurturing long-term, sustainable employment.

This demands that we do everything to maintain the quality of life, largely a matter of our region's spread-out neighborhoods, that has always been our primary calling card to creative talent. Los Angeles, in particular, boasts by far the largest concentration of artists in the country. Overall, the “creative industries” account, according to a recent Otis Institute study, for roughly 337,000 direct jobs in the Los Angeles-Orange County region. Adding indirect employment, the study estimated these industries employed more than 642,000 people, more than the total employment of the Sacramento area.

Each of these economic drivers deserves a closer look:

Fashion

Over the past quarter century, Los Angeles, with roughly three times as many establishments, has replaced New York as the nation's garment capital. Most of these companies are small, but, together, the fashion industry across the five-county Southland region employs more than 100,000 people.

In recent years, apparel manufacturing has been in decline, losing some 40,000 jobs. But there has been growth in such areas as clothing design and merchandising. The region has become the de facto capital for “fast forward” fashion, paced by firms such as Forever 21 Inc., Wet Seal and Papaya. Orange County, capital of the surfwear industry, is home to firms such as Oakley, Volcom, Hurley, Gotcha International, O'Neill, Raj Manufacturing, Mossimo and Stussy.

These firms, and the businesses serving them, are expected to experience more growth in the coming years, according to the U.S. Bureau of Labor Statistics. Aided by the “onshoring” trend – returning jobs from overseas – and a demand for quicker product turnaround, the Southern California apparel industry seems poised to solidify its hold over the country's fashions over the coming years.

Entertainment

This fashion industry derives much of its success from a link with Hollywood and the rest of the entertainment world. Accounting for more than 40 percent of all creative industry jobs, the entertainment complex is increasingly critical to the region's resurgence. Much concern has been raised about the future of this key industry, whose growth has slowed, due in part to massive tax incentives from other states and countries.

Despite this, the industry has been on something of an upswing recently, adding more than 4,600 jobs last year, a gain of 3.7 percent. At 129,700 jobs, employment in the industry is now at its highest level in four years but still tantalizingly below its levels in 2004 (132,200 jobs) and 1999 (146,300 jobs). Growth derives not so much from studio employment but from the ranks of independent contractors, now more than 85,000, well above the prerecession level. Nearly 80 percent of all new entertainment jobs are from the ranks of independent proprietors.

Digital Arts

The stabilization, and hopefully resurgence, of the entertainment sector could boost other industries, like digital media, hoping to play off the region's extraordinary concentration of artists, specialists and story-tellers. Historically, Southern California, in large part due to a relative shortage of venture capital, has been playing catch-up with the Bay Area, and to a lesser extent, Seattle.

The key to the future is combining other assets besides Hollywood, such as having the largest number of engineers – 70,000 – of any area in the country. Much hope has been placed on the rise of the much-ballyhooed “Silicon Beach” that follows the coastline, largely in Los Angeles, which some people claim is becoming a real competitor to Silicon Valley.

Yet this is not the first time we have heard this story. Similar growth took place in past digital media waves, only to see reductions as the inevitable cratering takes place during market shake-outs. But employing the strong ties to the Hollywood creative community, there is the real prospect for the region to achieve a critical mass that will allow digital entrepreneurs to remain comfortably here rather than head up to Silicon Valley.

Industrial Design

Even as manufacturing employment has declined over time, improving recently to a level of mere stagnation recently, Southern California has maintain a leading position in industrial design. This field is expected to grow, both nationally and in the Southland.

The area has maintained its leadership as center of automotive design, with studios such as the BMW Design Works, in Ventura, and Mercedes Advanced Design, in Carlsbad, as well as GM's Advance Design Studio in North Hollywood. The fact that many international firms – for example, Hyundai (Fountain Valley), Kia (Irvine), Honda and Toyota – maintain their North American headquarters in the Southland provides a critical link to the expanding global auto market.

Primacy in industrial design also extends into other product lines, such as furniture and household furnishings. If this design edge can be combined with automation and the onshoring of jobs, Southern California could enjoy a broad-based resurgence more sustainable than those of more-narrowly based economies, such as in New York or the Bay Area.

Design of Life

As we have seen over the past decade, local industries such as entertainment – not to mention fields like fashion, digital and industrial design – are going to be subject to enormous pressure from both home and abroad. China, for example, is building a massive $8.2 billion film studio in a concerted drive to replace Hollywood as the center of the world entertainment industry.

If we lose our stranglehold on entertainment and other creative industries, there is very little hope for a regional resurgence. We lack the deep digital bench and funding sources of the Bay Area, or New York's financial industry and its ability to dominate the news media. We can never be as cheap, or business friendly, as our emerging cultural rivals in the South, such as New Orleans, Nashville, Tenn., Austin, Texas, or Dallas, nor can we offer the kind of bargain-basement deals that desperate places, such as Detroit or Las Vegas, might offer to creative types.

This means we have to focus on preserving and improving those very things – our cultural legacy and a predominately low-rise and flexible-work lifestyle – that differentiates us from far more congested, structured and often far-less pleasant locales like New York – and, even more so, China. In the past, this region has won the “design wars” by being itself, not by trying to create a faux vision that seeks to mimic Manhattan or Shanghai. Ultimately, Southern California can win only by playing the same aces that for generations have led the creative and the questioning to settle in our sun-drenched metropolis.

Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

This piece originally appeared at The Orange County Register.