[Congressional Record Volume 142, Number 108 (Monday, July 22, 1996)]
[Extensions of Remarks]
[Pages E1331-E1332]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

[[Page E1331]]


 HIGH-TECHNOLOGY RESURGENCE IN LOS ANGELES OFFERS PROMISE OF ECONOMIC 
                                 GROWTH

                                 ______
                                 

                            HON. JANE HARMAN

                             of california

                    in the house of representatives

                         Monday, July 22, 1996

  Ms. HARMAN. Mr. Speaker, for some time it has been clear to me that 
America can no longer afford to maintain two separate industrial 
bases--one for defense and another for commercial products. The cost 
and inefficiencies are too great, and we are finally beginning to learn 
that each sector can leverage the advances of the other.
  The key to leveraging is dual-use partnerships, which have been at 
the core of several small Federal research programs like the Advanced 
Technology Program, the Technology Reinvestment Program and the 
Manufacturing Extension Partnership--each of which has been targeted 
for reduced funding, if not elimination, in this Congress.
  Recently, Joel Kotkin contributed an article to the Los Angeles Times 
noting how recent trends in dual-use research are restoring strength 
and vibrancy to the economy of southern California. Several of the 
examples are the result of changing policies and procurement patterns 
in the U.S. military. More importantly, all are examples of how 
businesses in southern California are taking advantage of the rich 
defense industry heritage and the continuing high quality of workers--
an example that may be a model for other parts of the country.
  I commend the article to my colleagues:

               [From the Los Angeles Times, July 7, 1996]

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

                            (By Joel Kotkin)

       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 1998.
       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 turn-around reflects a new emphasis in the 
     U.S. military: away from large-scale weapons systems and 
     toward information technologies. This shift represent, 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 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.
       Much the same process can be seen at other key defense 
     firms in Southern California. Rockwell recently added 400 new 
     jobs at its Anaheim Autonetics and Missile Systems plant and 
     Hughes Electronics is expected to add another thousand 
     workers this year. Although this is not the en masse hiring 
     of factory workers that occurred in the 1980s and earlier, it 
     signals a marked improvement in market conditions for the 
     region's scientific, engineering and technical talent.
       Contributing much to the improving prospect has been the 
     ability of defense firms, both large and small, to shift 
     technologies into commercial markets. In contrast to the 
     heavily hyped but relatively ineffective government 
     ``conversion'' programs, such as the Calstart electric car 
     effort, Los Angeles' real defense restructuring has been a 
     classically capitalist ``creative destruction''--with the 
     associated dose of pain.
       Take TRW's gallium arsenide technology, developed for 
     military use in satellite and communications systems. It now 
     has large new markets in such commercial areas as cellular 
     phones, leading TRW to consider keeping its Redondo Beach 
     foundry on 24-hour shifts to meet both commercial and 
     military demand.
       Similarly, Hughes, based in El Segundo, has focused on its 
     satellite technology and its successful Direct TV enterprise, 
     turning the defense firm into something of a 
     telecommunications superpower. Defense has dropped from 
     nearly two-thirds of the company's from nearly two-thirds of 
     the company's revenues in the late 1980s to roughly 40%. 
     Rockwell, another aerospace powerhouse, has cut its 
     dependence on defense spending over the past decade from 50% 
     to 15%. High-tech electronics now account for the largest 
     share of company revenues.
       An equally dramatic conversion has taken place among a 
     plethora of smaller technology companies. Nurtured by 
     research monies from the military or NASA, these firms are 
     now shifting into commercial markets.
       Particularly promising are a group of companies now using 
     military-derived simulation and image processing technology 
     to enter such growth fields as special effects and 
     educational software. Raj Dutt, President of R&D Laboratories 
     in Culver City, has spent a decade creating advanced 
     satellite systems for the military. Now the same technology 
     can also be used to carry heavy data loads, something of 
     increasing interest to telecommunications and entertainment 
     firms.
       Dutt, who expects to boost his nondefense share of business 
     from 10% to nearly half over the next two years, suggests the 
     biggest problem for companies like his may be ``cultural.'' 
     Essentially, defense firms, large and small, must move away 
     from their ultra-metriculous, 8-to-4 culture, to the more 
     fast-paced environment characteristic of the commercial 
     sector. ``We have to learn how to compete in the real 
     world,'' says Dutt, a Caltech-trained physicist.
       Yet, like RDL, many smaller defense firms find confronting 
     reality not only necessary, but profitable. Perceptronics, 
     based in Woodland Hills, is now using its warfare-honed

[[Page E1332]]

     simulation system for such things as electronic training 
     systems for commercial trucking companies. Illusion Inc., a 
     small contractor in Westlake Village, is now taking ``virtual 
     reality'' technology, developed for designing aircraft and 
     military training exercises, into such diverse venues as 
     museums and movie special effects. In each of the past three 
     years, Illusion Inc. has doubled its revenues and expects to 
     expand to 50 employees by 1997, up from its current 20. ``The 
     future for companies like ours,'' said Peter Beale, Illusion 
     Inc.'s chairman, ``is to combine the creative vision of 
     Hollywood with the engineering vision of the defense 
     industry.''
       Such new uses for military technology and talents could 
     also prove critical in providing the Southland economy with 
     an important new source of high-wage jobs that lessen its 
     current dependence on the volatile film industry or the 
     always uncertain course of foreign trade. As Southern 
     California begins to harvest the overlooked fruits of its 
     rich defense industry heritage, it may enjoy the broad, 
     diversified economic recovery that many thought could never 
     happen here again.  

                          ____________________