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The 'Silver' Age of State's Defense-Aerospace Economy

July 07, 1996|Joel Kotkin | Joel Kotkin, a contributing editor to Opinion, is the John M. Olin Fellow at the Pepperdine Institute for Public Policy and a Senior Fellow with the Pacific Research Institute. He is also business trends analyst for KTTV Fox Television

The end of the Cold War seemed to mark the demise of Southern California's defense and aerospace-driven "golden age," throwing the state into its worst recession in decades. But the region's heritage as the world leader in military and space technology is now poised to boost its burgeoning information age economy.

Indeed, the announcement on Tuesday that Lockheed-Martin will build the new X-33 reusable spacecraft at its Palmdale facility, creating about 2,000 new jobs, fits into a wider picture of a restored Southland aerospace and defense industry.

Between the late 1980s and last year, roughly 55%, or 175,000, California aerospace-related workers lost their jobs. This year, despite widespread predictions of 20,000 additional layoffs, the industry seems to have stabilized; economist Stephen Levy sees the once-reeling sector creating net new jobs through 1999.

Nowhere will this reversal of fortune be more positively felt than in the Los Angeles area--where 80% of all the state's aerospace job losses occurred, including 50,000 in 1993 alone. Even as the two other pegs of the local economy--the "creative industries" and international trade--have grown robustly, the depth of the defense-aerospace downturn seriously slowed growth in the critical high-technology sector.

The recent recovery in aerospace and defense electronics is critical because it has the potential to restore the region's once-strong reputation as a center for technology development. During the economic free-fall of the early 1990s, Southern California was viewed nationally--and often viewed itself--as a technological laggard behind such areas as the Bay Area, Seattle and even Utah. This image of Southern California as little more than a "tinsel town" surrounded by Third World misery hurt the recruitment and promotional efforts of technology-related companies in such disparate fields as computer software and multimedia.

But today, with the resurgence in high-tech aerospace and defense electronics, Southern California's position as a leading edge economic region is being restored. Los Angeles County now has an annual job growth rate equal to Seattle and higher than San Francisco--both widely regarded as boomtowns. For the first time in years, L.A. County's employment engine is running hotter than that in suburban Orange County and the Inland Empire.

The improving defense-aerospace picture stems, in part, from changing federal procurement patterns, growing diversification into commercial fields by local defense companies and increased aircraft sales. Perhaps most important, the turnaround reflects a new emphasis in the U.S. military: away from large-scale weapons systems and toward information technologies. This shift represents, in the words of one analyst at the Army War College, "a revolution in military affairs."

The military's new direction has played directly to Southern California's strength in defense electronics. It is increasingly clear that the Persian Gulf War, with its reliance on satellites and "smart" weapons, represented only the first phase of a continuing "digitalization" of military systems--encompassing sophisticated battlefield communications systems, satellites and anti-missile technology.

Engineers and scientists at TRW, for example, are working on a series of advanced systems for the army's elite Force XXI, which is expected to become the model for the new, "digitized" army. Among the projects being worked on at TRW, most of whose defense operations are in the South Bay, are a new system of computer communications devices for mechanized forces; a special high-frequency identification system designed to prevent "friendly fire" accidents, and laser technologies designed to shoot down incoming missiles from terrorists.

As a result, TRW--a firm that cut roughly 9,000 jobs during the early 1990s--added more than 1,200 last year, largely high-skilled, well-paid workers. And it is planning to add another 1,300 this year. The decision to grow in Southern California is due largely to the region's work force--which leads the nation in mathematicians, engineers and skilled technologists. As an overall scientific research center, the Southern California region ranks third nationally, behind only San Francisco and Boston.

"We chose to stay where we are--and we have asked the question--because fundamentally the No. 1 driver is the pool of technical talent," explains Fred Brown, TRW group vice president for Space and Electronics. More than half of his division's recent hires, he estimates, come from local colleges and universities.

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