Parochial power struggles between Downtown and the Westside have been overshadowed by new geopolitics and land economics, leaving the problem of who will rule Los Angeles in the year 2000 a surprisingly open question

Where did the money to buy such power come from? Although some of the new wealth on the Westside arose from the military aerospace boom of the later 1950s, the locus of power, as in previous generations, remained real-estate speculation. But, as we have stressed, the game was now played within the new rules of Keynesian suburbanization set by the FHA and Fannie Mae. Two rising groups of entrepreneurs dominated the 1950s building boom from their Westside headquarters outside the radius of Downtown power. First were the merchant builders, mostly 1940s newcomers, like Nate Shapell, Larry Weinberg, Louis Boyar, Ray Watt, Bill Lyon, and (later) Eli Broad. Secondly were the savings-and-loan empires that funneled mortgage capital from all over the country to Southern California homebuilders. In the 1950s this was an extraordinarily dynamic industry with a deposit base growing 21 per cent per annum. The preeminent local firms were Ahmanson’s Home Federal Savings (number one in the USA) and Mark Taper’s First Charter Corporation (number three). Moreover the building and savings-and-loan sectors were complexly integrated by strategic combinations (for instance, Taper’s alliance with Boyar and Weinberg to mass-produce the suburb of Lakewood) as well as by the massive reinvestment of builders’ profits in the thrift industry.

As we shall see in more detail in the next chapter, all this started changing during the Vietnam boom as developable coastal land – the raw material of the Southern California dream – began to disappear. Resulting land inflation, which went ballistic in the late 1970s and again in the late 1980s, profoundly reshaped the distribution of wealth and opportunity. Relative land scarcity also led to a rapid decline of ‘mom and pop’ builders, soon followed by the middle strata of developers. Control over land conversion has been increasingly centralized in huge companies capable of banking scarce remaining blocs of coastal plain, or financing whole new residential or industrial cities in distant interior basins.

The second factor, helping define the mode of recycling, has been the differential in land prices across the Pacific. If land inflation in Los Angeles has radically transformed the economics of local urbanization, it remains yet minuscule compared to the neutron-star densities of property values in Tokyo. In face of the refusal of the ruling Liberal-Democrats to plow Japan’s trade windfalls into higher wages and a Keynesian housing reflation (as demanded by the Socialist opposition), trade-generated surplus capital has instead flooded into stock and real-estate speculations reminiscent of Coolidge’s America. What the Japanese call zaitech, the strategy of using diverse financial technologies to shift cashflow from production to speculation, began to be internationalized in the mid 1980s with a special orientation toward Southern California. In particular, the ‘super-yen’ put the skyscrapers along Downtown’s new Gold Coast at rummage-sale discounts vis-à-vis their most dowdy Tokyo equivalents.

An obvious result of growing financial integration is that control over the Los Angeles economy is being alienated, with incalculable consequences, to power centers six thousand miles away. The Downtown ‘renaissance’, after all, is only a perverse monument to US losses in the global trade war. When the Japanese economy seemed invincible and its supply of exportable capital infinite, this deficitary dialectic did not trouble local elites. But 1980s blind faith in the ‘Pacific Century’ began to buckle at the knees following the kamikaze dive of the Tokyo stock market in early 1990. Los Angeles’s leaders were rudely awoken for the first time to the real nature of colonial subservience upon the inscrutable workings of a Japanese economy bloated with fictional capital. For example, when the Bank of Japan recently decided to raise its discount rate, it drove Tokyo investors to desert Disney Corporation stocks en masse for domestic bonds. The result was unexpected distress and confusion in Burbank. This was an infinitesimal foretaste of what a general real-estate slump in Tokyo or a Japan-centered recession might do to those sectors of the Los Angeles economy – like Downtown or Hollywood – hopelessly addicted to ever-increasing fixes of recycled debt.