Valley Economy Engaged in International Competition GUEST COLUMN By Bob Scott The Southern California region may be losing its grip on foreign and domestic trade. The trend away from wealth-producing commerce in goods and services could mean fewer well-paying occupations, and a local economy ever more dependent on service sector and government jobs. It is an old-fashioned concept and to some an outmoded cold-war term but “capitalism” is still the key to the future success of a region like the San Fernando Valley. In the long term, it’s not just the number or even the quality of jobs, but the collective ability of the private sector to build regional capital that counts. The domestic and global export of high demand goods and services brings new capital into the region, rewarding productivity and the workforce that makes it possible. Manufacturing industries, that trade in external markets are at the heart of this wealth-building capacity. The local workforce transforms raw ingredients and components into finished products exporting the products to other areas and importing money in exchange. The same is true of service industries with external clients, who trade in telecommunications, finance and insurance services. These rely even more heavily on the conversion of human resources into financial capital. Competitiveness is the cornerstone of regional capital development. When products offered are either competitively priced in the marketplace, or unique to the producer, the world markets take notice, often instantaneously. The San Fernando Valley has strengths in patent goods, such as biomedical, pharmaceutical and aerospace, and in intellectual properties such as motion pictures, software and multi-media. These products are for the most part, protectable, earning these industries a high rank in the capital-building food chain. As we move into the era of unlimited international telecommunications, we are losing the last vestiges of the ocean-moats that once protected North America from the rest of the world. Internet content and technologies have created a single, virtual, global community. Nothing escapes the all-seeing eye of this network particularly vendors of goods and services and our ability to make instantaneous value comparisons. On the jobs side of the equation, entrepreneurs are continually creating new and innovative ways to float production and services onto the world market. Manufacturing began to migrate to more efficient countries decades ago. Sectors once thought invulnerable, like intellectual properties, creative and information services, are no longer protected by geography, and are now experiencing similar transformations. Motivated competition There seems to be a never-ending lineup of countries with humble and highly motivated populations families who don’t have two cars in their garages who don’t even have garages! Through global media, they are being exposed to the American Dream and seem anxious to embrace it as their own. The fault is not, as some would suggest, with opportunistic and oppressive employers. It is about the global marketplace. It is about a fundamental human desire to prosper, to grow and to excel one that transcends geography and nationality. With today’s technology and increasing globalization, more and more jobs are becoming portable. It could be argued that it has been our people, not our government, that have been letting our well-paying blue collar and technical occupations be outsourced to the lowest bidder. Ironically, we as consumers have also become the lowest bidders. The Wal-Mart imbroglio is a perfect illustration: Wal-Marts are popular in mid- to low-income areas because of their low prices. They also provide entry-level jobs opportunities for young people to learn valuable job skills and for retirees to supplement their incomes. For the most part these jobs are not intended as careers. But, there are some who believe that minimum wages and entry-level rates should be quadrupled, and that everyone should have a full benefits package. That would be good if the product or service produced by the entry level worker was worth that much. There is plainly no government policy that will stop the global free market from exacting its wage. In spite of the prodigious efforts of protectionist governments and labor unions, the genie of job portability is unlikely to ever be put back in the bottle. Government, labor and the legal system can play their part by allowing this region the latitude to recover its competitive advantage. But, on a local level, it is the people themselves, with a return of the competitive, entrepreneurial spirit, who must guide the economy into the future. Unless steps are taken to become more competitive in the marketplace, our external commerce in goods and services will continue to wane, leaving only self-serving industries and occupations. As important as government, healthcare, food service, retail and other local-serving industries are, they do not export, and therefore do not contribute to the building of regional capital. Southern California, and the San Fernando Valley in particular, have extremely high ratios of self-employed individuals compared to the rest of the country. They have traditionally been strong innovators and entrepreneurs. They have to play a part in keeping the region and indeed the United States more competitive. In this age of advanced communications and globalization, the key to the San Fernando Valley’s future is in understanding its place in the national and global marketplace. Leaders in business, industry and government, have to rethink their strengths and strategies for building capital and well-paying jobs. Whatever is standing in the way of our continued success has to be removed. In order to maintain their standard of living and quality of life, the workforce has to realize that this is an international competition, and that the businesses that are the producers of goods and services are their allies not their adversaries. Bob Scott is a public policy analyst and Director of Civic Center Group in Calabasas.