Vernon, California and the Global Elite (Part 2)

In my last post I wrote about Council elections in the City of Vernon, California. While the council elections seem to be particularly tame, Vernon found itself in the middle of an intense political battle last year which threatened its ability to maintain the business-friendly practices which have made it such a noteworthy city.

Los Angeles County (and California in general) has a strange geo-political structure which is pretty confusing to a northeasterner like me. In Philadelphia, the boundaries of the County, the City, and School District are all the same. There is no county government. Not so in LA. Los Angeles County is a large county in Southern California. The City of Los Angeles is the largest and most populous city within LA County but is just one of many cities within the county boundaries. Like many cities, the City of Los Angeles is made up of many different neighborhoods or communities which do not have their own governing structure. Some of these are Hollywood, Watts, Bel Air, and Venice. There are 87 other cities in LA County (that I had always thought were just neighborhoods of the City of LA until recently). Some of those cities that you may have heard of are Compton, Inglewood, Long Beach, Beverly Hills, and Vernon. All 88 cities within LA County have their own city government, develop their own city tax codes, and are responsible for providing city services (although some contract with a neighboring city or LA County for some of those services). Confused yet? It gets better. In addition to the 88 cities in LA County, there is also a substantial amount of “unincorporated” territory within the County. These areas have no city government and, therefore, are operated by the Los Angeles County government. While most of the population of LA County live in incorporated cities, 2/3 of the land in LA County is unincorporated and without city government.

Last year, on the heels of a major corruption scandal in Vernon, California Assembly Speaker John A. Pérez introduced legislation that would have disincorporated Vernon. Vernon would have either been absorbed by a neighboring city or simply remained unincorporated and would have been governed by LA County along with its other unincorporated communities. As dissolving Vernon as an independent entity would have subjected the 1,800 businesses based in Vernon to different, more traditional tax structures, disincorporation had major fiscal implications for LA County and California as a whole. Advocates argued that disincorporation would force Vernon’s businesses to pay their fair share in taxes, giving the County and the State much needed revenue during an economic crisis. The legislation was defeated, however, because opponents successfully argued that the state would lose tax revenue in the long run because the businesses would flee the state in search of another tax haven from which to operate.

The threat of businesses relocating was not just paranoia. When Rick Perry caught wind of the moves to subject Vernon’s businesses to more traditional tax laws he sent emails to a number of Vernon-based businesses telling them that they should consider relocating to Texas which has lenient business tax laws and no personal income tax. One Vernon business owner who was seriously considering Perry’s offer, Jose Gavina, was perhaps more open to this type of move than others because his family had already fled radical reforms that sought to increase businesses’ contribution to government in the past. As Gavina contemplated fleeing Vernon’s disincorporation in 2011, his family had fled the Cuban Revolution in the 1960s.

This illustrates a difficult catch-22 for the Left. How can government or communities hold businesses accountable and ensure that they contribute their fair share when there are less regulated markets to which businesses can flee? This is not a new problem. Through deindustrialization, America’s once thriving manufacturing industry was outsourced to nations where business activity was less regulated and organized labor had not made the type of advancements that it had made in the US. This left thousands jobless, cost the US government billions in lost revenue, and completely decimated industrial hubs like Detroit and Cleveland. The only real incentive for manufacturers to maintain any US operations (besides some good PR and reduced import/export costs) would be if they could pay their workers less than workers are paid in countries like China, Mexico, and Indonesia. This, of course, would be well below a living wage here in the US and would essentially make the jobs not worth saving. So the predicament seems to be to allow the businesses to leave and take their jobs and taxes with them or incentivize them to stay through concessions that would undermine their usefulness to poor and working people.

America was once a great industrial nation. For the industrial system to work for people, workers had to pull together and demand concessions from their employers in the form of higher wages, shorter workweeks, and improved benefits. Where the American people’s power was once rooted in our role as laborers, it is now rooted in our role as consumers. While we may not make anything in America anymore, we sure as hell buy stuff. So while the strike may have been the weapon of choice in industrial America, the boycott may be the go to move in the present context. The US is the largest consumer market in the world; more than 3-times larger than Japan which comes in at a distant second. As the world’s largest consumer market, business needs our patronage. American consumers don’t even need to make demands to have a major impact on business practices; we just need to lean in a certain direction and there is a major response. The recent rise of “green” and “organic” products and branding are results of these leanings. Imagine what could happen if American consumers made the conscious decision to influence business the way that American workers once did. If Vernon’s businesses knew that they couldn’t sell in California (the US state with the largest economy) unless they met California consumers’ demands, I bet that move to Texas would have seemed less appealing.

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