Movers & Shakers.

How immigrants are reviving neighborhoods given up for dead

For decades the industrial area just east of downtown Los Angeles was an economic wreck, a 15-square-block area inhabited largely by pre--World War II derelict buildings. Yet now the area comes to life every morning, full of talk of toys in various South China dialects, in Vietnamese, in Korean, in Farsi, in Spanish, and in the myriad other commercial languages of the central city.

The district now known as Toytown represents a remarkable turnaround of the kind of archaic industrial area that has fallen into disuse all across the country. A combination of largely immigrant entrepreneurship and the fostering of a specialized commercial district has created a bustling marketplace that employs over 4,000 people, boasts revenues estimated at roughly $500 million a year, and controls the distribution of roughly 60 percent of the $12 billion in toys sold to American retailers.

"In December we have about the worst traffic problem in downtown," proudly asserts Charlie Woo, a 47-year-old immigrant who arrived in 1968 from Hong Kong and is widely considered the district's founding father. During the holiday season, thousands of retail customers, mostly Latino, come down to the district seeking cut-rate toys, dolls, and action figures, including dubious knockoffs of better-known brands. For much of the rest of the year, the district sustains itself as a global wholesale center for customers from Latin America and Mexico, which represent nearly half the area's shipments, as well as buyers from throughout the United States.

Few in L.A.'s business world, City Hall, or the Community Redevelopment Agency paid much attention when Woo started his family's first toy wholesaling business in 1979. "When Toy-town started, the GRA didn't even know about it," recalls Don Spivack, now the agency's deputy administrator. "It happened on its own. It was a dead warehouse district."

How dead? Dave Zoraster, an appraiser at GB Richard Ellis, estimates that in the mid- 1970s land values in the area--then known only as Central City East--stood at $2.75 a square foot, a fraction of the over $100 a square foot the same property commands today. Vacancy rates, now in the single digits, then hovered at around 50 percent. For the most part, Spivack recalls, development officials saw the district as a convenient place to cluster the low-income, largely transient population a safe distance from the city's new sparkling high-rises nearby.

To Charlie Woo, then working on a Ph.D. in physics at UCLA, the low land costs in the area presented an enormous opportunity. Purchasing his first building for a mere $140,000, Woo saw the downtown location as a cheap central locale for wholesaling and distributing the billions of dollars in toys unpacked at the massive twin ports of Long Beach and Los Angeles, the nation's dominant hub for U.S.-Asia trade and the world's third-largest container port. Woo's guanxi, or connections, helped him establish close relationships with scores of toy manufacturers in Asia, where the vast majority of the nation's toys are produced. The large volume of toys he imported then allowed him to take a 20 percent margin, compared with the 40 to 50 percent margins sought by the traditional small toy wholesalers. Today Woo and his family own 10 buildings, with roughly 70 tenants, in the area; their distribution company, Megatoys, has annual sales in excess of $30 million.

Toytown's success also has contributed to a broader growth in toy-related activity in Southern California. The region--home to Mattel, the world's largest toy maker--has spawned hundreds of smaller toy-making firms, design firms, and distribution firms, some originally located in Toytown but now residing in sleek modern industrial parks just outside the central core. Other spin-offs, including a new toy design department at the Otis College of Art and Design in West Los Angeles and the Toy Association of Southern California, have worked to secure the region's role as a major industry hub.

Woo envisions Toytown as a retail center. But whatever its future, the district's continuing success stands as testament to the ability of immigrant entrepreneurs and specialized industrial districts to turn even the most destitute urban neighborhoods around. Woo notes: "The future of Toytown will be as a gathering point for anyone interested in toys. Designers and buyers will come to see what's selling, what the customer wants. The industry will grow all over, but this place will remain ground zero."

For much of the 19th and early 20th centuries, immigrants filled and often dominated American cities. With the curtailment of immigration in the 1920s, this flow was dramatically reduced, and urban areas began to stiffer demographic stagnation, and in some places rapid decline. Only after 1965, when immigration laws were reformed, did newcomers return in large numbers, once again transforming many of the nation's cities.

This was critical, because despite the movement of young professionals and others into the urban core, native-born Americans continued, on balance, to flee the cities in the 1990s. Only two of the nation's 10 largest metropolitan areas, Houston and Dallas, gained domestic migrants in the decade. As over 2.5 million native-born Americans fled the nation's densest cities, over 2.3 million immigrants came in.

The impacts were greatest in five major cities: New York, Los Angeles, San Francisco, Miami, and Chicago. These cities received more than half of the estimated 20 million legal and 3 million to 5 million illegal immigrants who arrived over the past quarter century. Without these immigrants, probably all these cities would have suffered the sort of serious depopulation that has afflicted such cities as St. Louis, Baltimore, and Detroit, which until recently have attracted relatively few foreigners.

In this two-way population flow, America's major cities and their close suburbs have become ever more demographically distinct from the rest of the country. In 1930, one out of four residents of the top four "gateway" cities came from abroad, twice the national average; by the 1990s, one in three was foreign-born, five times the norm. Fully half of all new Hispanic residents in the country between 1990 and 1996 resided in the 10 largest cities. Asians are even more concentrated, with roughly two in five residing in just three areas: Los Angeles, New York, and San Francisco.

In places such as Southern California, immigration has transformed the economic landscape. Between 1992 and 1999, the number of Latino businesses in Los Angeles County more than doubled. Some of these businesses have grown in areas that previously had been considered fallow, such as Compton and South-Central Los Angeles. In these long-established "ghettos," both incomes and population have been on the rise largely because of Latino immigration, after decades of decline.

A similar immigrant-driven phenomenon has sparked recoveries in some of the nation's most distressed neighborhoods, from Washington, D.C., to Houston. Along Pitkin Avenue in Brooklyn's Brownsville section, Caribbean and African immigrants, who have a rate of self-employment 20 to 50 percent higher than that of native-born blacks, have propelled a modest but sustained economic expansion.

The recovery of such once forlorn places stems largely from the culture of these new immigrants. Certainly Brooklyn's infrastructure and location remain the same as in its long decades of decline. Along with entrepreneurship, the newcomers from places such as the Caribbean have brought with them a strong family ethic, a system of mutual financial assistance called susus, and a more positive orientation to their new place. "Immigrants are hungrier and more optimistic," notes William Apgar of Harvard's Joint Center for Housing Studies. "Their upward mobility is a form of energy. Their presence is the difference between New York and Detroit."

It is possible that newcomers to America might even be able to revive those cities that have not yet fully felt the transformative power of immigration. A possible harbinger can be seen on the South Side of St. Louis, a city largely left Out of the post-1970s immigrant wave. Once a thriving white working-class community, the area, like much of the rest of the city, had suffered massive depopulation and economic stagnation.

This began to change, however, in the late 1990s, with the movement into the area of an estimated 10,000 Bosnian refugees, along with other newcomers, including Somalis, Vietnamese, and Mexicans. Southern Commercial Bank loan officer Steve Hrdlicka, himself a native of the district, recalls: "Eight years ago, when we opened this branch, we sat on our hands most of the time. We used to sleep quite a lot. Then this place became a rallying place for Bosnians. They would come in and ask for a loan for furniture. Then it was a car. Then it was a house, for themselves, their cousins."

In 1998, largely because of the Bosnians, Hrdlicka's branch, located in a South St. Louis neighborhood called Bevo, opened more new accounts than any of the 108-year-old Southern Commercial's other six branches. Over the last two years of the 1990s, the newcomers, who have developed a reputation for hard work and thrift, helped push the number of accounts at the branch up nearly 80 percent, while deposits have nearly doubled to $40 million.

A translator at the Bevo branch, 25-year-old Jasna Mruckovski, has even cashed in on the Bosnians' homebuying tendencies. Moonlighting as a real estate salesperson, she has helped sell 33 homes in the area over the past year, all but one to Bosnian buyers. In many cases, she notes, these homes were bought with wages pooled from several family members, including children. Mruckovski, a refugee from Banjo Luka who arrived in St. Louis in 1994, observes: "St. Louis is seen as a cheap place to live. People come from California, Chicago, and Florida, where it's more expensive. Bosnians don't care if they start by buying the smallest, ugliest house. At least they feel they have something. This feeling is what turns a place like this around."

Immigration also helps cities retain their preeminence in another traditional urban economic bastion: cross-cultural trade. Virtually all the great cities since antiquity derived much of their sustenance through the intense contact between differing peoples in various sorts of markets. As world economies have developed through the ages, exchanges between races and cultures have been critical to establishing the geographic importance of particular places. Historian Fernand Braudel suggests, "A world economy always has an urban center of gravity, a city, as the logistic heart of its activity. News, merchandise, capital, credit, people, instructions, correspondence all flow into and out of the city. Its powerful merchants lay down the law, sometimes becoming extraordinarily wealthy."

Repeatedly throughout history, it has been outsiders--immigrants--who have driven cross-cultural exchange. "Throughout the history of economics," observes social theorist Georg Simmel, "the stranger appears as the trader, or the trader as stranger." In ancient Greece, for example, it was metics, largely foreigners, who drove the marketplace economy disdained by most well-born Greeks. In Alexandria, Rome, Venice, and Amsterdam--as well as the Islamic Middle East--this pattern repeated itself, with "the stranger" serving the critical role as intermediary.

As in Renaissance Venice and early modern Amsterdam or London, the increasing ethnic diversity of America's cities plays a critical role in their domination of international trade. Over the past 30 years, cities such as New York, Los Angeles, Houston, Chicago, and Miami have become ever more multiethnic, with many of the newcomers hailing from growing trade regions such as East Asia, the Caribbean, and Latin America. The large immigrant clusters in these cities help forge critical global economic ties, held together not only by commercial bonds but by the equally critical bonds of cultural exchange and kinship networks.

These newcomers have redefined some former backwaters into global trading centers. Miami's large Latino population--including 650,000 Cubans, 75,000 Nicaraguans, and 65,000 Colombians--has helped turn the one-time sun-and-fun capital into the dominant center for American trade and travel to South America and the Caribbean. Modesto Maidique, president of Florida International University, who is himself a Cuban emigre, observes: "If you take away international trade and cultural ties from Miami, we go back to being just a seasonal tourist destination. It's the imports, the exports, and the service trade that have catapulted us into the first rank of cities in the world."

Like the souk districts of the Middle East, diversified cities provide an ideal place for the creation of unique, globally oriented markets. These souks, which are fully operational to this day, are home mostly to small, specialized merchants. In most cases, the districts consist of tiny unlighted shops raised two or three feet from street level. Stores are often grouped together by trade, allowing the consumer the widest selection and choice.

The emergence of the Western souk is perhaps most evident in Los Angeles, home to Toytown. Within a short distance of that bustling district are scores of other specialized districts--the downtown Fashion Mart, the Flower District, and the jewelry, food, and produce districts are crowded with shoppers, hustlers, and buyers of every possible description. These districts' vitality contrasts with the longstanding weakness of downtown L.A.'s office market, which has been losing companies and tenants to other parts of the city.

Similar trade-oriented districts have arisen in other cities, such as along Canal Street in New York, in the "Asia Trade District" along Dallas's Harry Hines Boulevard, and along the Harwin Corridor in the area outside the 610 Loop in Houston. Once a forlorn strip of office and warehouse buildings, the Harwin area has been transformed into a car-accessed souk for off-price goods for much of East Texas, featuring cut-rate furniture, novelties, luggage, car parts, and electronic goods.

These shops, owned largely by Chinese, Korean, and Indian merchants, have grown from roughly 40 a decade ago to more than 800, sparking a boom in a once-depressed real estate market. Over the decade, the value of commercial properties in the district has more than tripled, and vacancies have dropped from nearly 50 percent to single digits. "It's kind of an Asian frontier sprawl around here," comments David Wu, a prominent local store owner.

Indeed, few American cities have been more transformed by trade and immigration than Houston. With the collapse of energy prices in the early 1980s, the once booming Texas metropolis appeared to be on the road to economic oblivion. Yet the city has rebounded, in large part because of the very demographic and trade patterns seen in the other Sun Belt capitals. "The energy industry totally dominated Houston by the 1970s--after all, oil has been at the core of our economy since 1901," explains University of Houston economist Barton Smith. "Every boom leads people to forget other parts of the economy. After the bust, people saw the importance of the ports and trade."

Since 1986, tonnage through the 25mile-long Port of Houston has grown by one-third, helping the city recover the jobs lost during the "oil bust" of the early 1980s. Today, Smith estimates, trade accounts for roughly 10 percent of regional employment and has played a critical role in the region's 1990s recovery: By 1999 a city once renowned for its plethora of "see-through" buildings ranked second in the nation in total office space absorption and third in rent increases.

Immigrants were the critical factor in this turnaround. Between 1985 and 1990, Houston, a traditional magnet for domestic migrants, suffered a net loss of over 140,000 native-born residents. But the immigrants kept coming--nearly 200,000 over the past decade, putting the Texas town among America's seven most popular immigrant destinations.

Among those coming to Houston during the 1970s boom was a Taiwan-born engineer named Don Wang, who in 1987 founded his own immigrant-oriented financial institution, Metrobank. Amid the hard times and demographic shifts, Wang and his clients--largely Asian, Latin, and African immigrants--saw an enormous opportunity to pick up real estate, buy homes, and start businesses. Minority-owned enterprises now account for nearly 30 percent of Houston's business community.

Says Wang: "In the 1980s everyone was giving up on Houston. But we stayed. It was cheap to start a business here and easy to find good labor. We considered this the best place to do business in the country, even if no one on the outside knows it.... When the oil crisis came, everything dropped, but it actually was our chance to become a new city again."

Increasingly, the focus of immigrants--an their enterprise--extends beyond the traditional souk economy to a broader part of the metropolitan geography. Most dramatic has been the movement to the older rings of suburbs, which are rapidly replacing the inner city as the predominant melting pots of American society. This trend can be seen across the nation, from the Chinese- and Latino-dominated suburbs east of Los Angeles to the new immigrant communities emerging in southern metropolitan areas such as Houston, Dallas, and Atlanta. This move marks a sharp contrast to the immediate postwar era, when these suburbs, like their high-tech workforces, remained highly segregated.

The demographic shift in the near suburbs started in the 1970s, when AfricanAmericans began moving to them in large numbers. In the ensuing two decades, middle-class minorities and upwardly mobile recent immigrants have shown a marked tendency to replace whites in the suburbs, particularly in the inner ring, increasing their numbers far more rapidly than their Anglo counterparts. Today nearly 51 percent of Asians, 43 percent of Latinos, and 32 percent of African Americans live in the suburbs.

This development is particularly notable in those regions where immigration has been heaviest. Among the most heavily Asian counties in the nation are such places as Queens County in New York, Santa Clara and San Mateo counties in Northern California, and Orange County, south of Los Angeles. Queens and Fort Bend County in suburban Houston, rank among the 10 most ethnically diverse counties in the nation.

Today these areas have become as ethnically distinctive as the traditional inner cities themselves, if not more so. Some, like Coral Gables, outside of Miami, have become both ethnic and global business centers. Coral Gables is home to the Latin American division headquarters of over 50 multinationals.

Other places, such as the San Gabriel Valley east of Los Angeles, have accommodated two distinct waves of ethnic settlement, Latino and Asian. Cities such as Monterey Park, Alhambra, and San Gabriel have become increasingly Asian in character; areas such as Whittier and La Puente have been transformed by Latino migration. Yet in both cases, the movement is predominantly by middle-class homeowners. "For us this isn't a dream, this is reality," notes Frank Corona, who moved to the area from East Los Angeles. "This is a quiet, nice, family-oriented community."

The reason the melting pot has spilled into the suburbs lies in the changing needs of immigrants. In contrast to the early 20th century, when proximity to inner-city services and infrastructure was critical, many of today's newcomers to a more dispersed, auto-oriented society find they need to stop only briefly, if at all, in the inner cities. Their immediate destination after arrival is as likely to be Fort Lee as Manhattan, the San Gabriel Valley as Chinatown or the East L.A. barrios. Notes Cal State Northridge demographer James Allen: "The immigrants often don't bother with the inner city anymore. Most Iranians don't ever go to the center city, and few Chinese ever touch Chinatown at all. Many of them want to get away from poor people as soon as possible."

As proof, Allen points to changes in his own community, the San Fernando Valley, which for a generation was seen as the epitome of the modern suburb. In the 1960s, the valley was roughly 90 percent white; three decades later it was already 44 percent minority, with Latinos representing nearly one-third the total population. By 1997, according to county estimates, Latinos were roughly 41 percent of the valley population, while Asians were another 9 percent.

Similarly dramatic changes have taken place outside of California. Twenty years ago, Queens County was New York's largest middle-class and working-class white bastion, the fictional locale of the small homeowner Archie Bunker. Today it is not Manhattan, the legendary immigrant center, but Queens that is easily the most diverse borough in New York, with thriving Asian, Latino, and middle-class African-American neighborhoods. Over 40 percent of the borough's businesses are now minority-owned, almost twice as high as the percentage in Manhattan.

This alteration in the suburban fabric is particularly marked in the American South, which largely lacks the infrastructure of established ethnic inner-city districts. Regions such as Atlanta experienced some of the most rapid growth in immigration in the last two decades of the millennium; between 1970 and 1990, for example, Georgia's immigrant population grew by 525 percent. By 1996, over 11.5 million Asians lived in the South. Yet since most Southern cities lacked the preexisting structure of an ethnic Asian or Latino community to embrace the newcomers, most new immigrants chose to cluster not in the central city but in the near suburbs.

"Well, we still have one fried-chicken place left somewhere around here," jokes Houston architect Chao-Chiung Lee over dim sum in one of the city's heavily Asian suburbs. "It's kind of the last outpost of the native culture lost amid the new Chinatown."

Yet if the successes of immigrants represent the success of the melting pot, the demographic shift also presents some potential challenges. In addition to a swelling number of entrepreneurs and scientists, there has been a rapid expansion of a less-educated population. For example, Latinos, the fastest-growing group in Silicon Valley, account for 23 percent of that region's population but barely 7 percent of its high-tech work force. Part of the problem lies with education: Only 56 percent of Latinos graduate from high school, and less than one in five takes the classes necessary to get into college.

Indeed, as the economy becomes increasingly information-based, there are growing concerns among industry and political leaders that many of the new immigrants and, more important, their children may be unprepared for the kind of jobs that are opening up in the future. Immigrants may be willing to serve as bed changers, gardeners, and service workers for the digital elites, but there remains a serious question as to whether their children will accept long-term employment in such generally low-paid and low-status niches.

George Borjas, a leading critic of U.S. immigration policy and professor of public policy at Harvard's John F. Kennedy School of Government, suggests that recent immigration laws have tilted the pool of newcomers away from skilled workers toward those less skilled, seriously depleting the quality of the labor pool and perhaps threatening the social stability of the immigration centers. "The national economy is demanding more skilled workers," Borjas says, "and I don't see how bringing more unskilled workers is consistent with this trend... When you have a very large group of unskilled workers, and children of unskilled workers, you risk the danger of creating a social underclass in the next [21st] century."

In the coming decades, this disconnect between the labor force and the economy in some areas could lead to an exodus of middle-class people and businesses to less troubled places, as happened previously in inner cities. Across the country, many aging suburbs, such as Upper Darby near Philadelphia and Harvey outside Chicago, are well on the way to becoming highly diverse suburban slums as businesses move farther out into the geographic periphery. Others-in regions including Boston, New Orleans, Cleveland, St. Louis, Dallas, and Indianapolis-now struggle to retain their attractiveness.

If unchecked, a broader ghettoization looms as a distinct possibility, particularly in some of the older areas filled with smaller houses and more mundane apartment buildings. These areas could become--as have some suburbs of Paris--dysfunctional, balkanized losers in the new digital geography. "It's a different place now. We can go either way," says Robert Scott, a former L.A. planning commissioner and leader of the San Fernando Valley's drive to secede from Los Angeles.

Scott grew up in the once all-white, now predominantly Latino community of Van Nuys. "The valley can become a storehouse of poverty and disenchantment," he says, "or it can become a series of neighborhoods with a sense of uniqueness and an investment in its future." As Scott suggests, for these new melting pots, the best course may be not so much to try clinging to their demographic past as to find a way to seize the advantages of their more diverse roles, both economically and demographically. No longer "lily white" enclaves, such communities increasingly must draw their strength, as the great cities before them did, from the energies, skills, and cultural offerings of their increasingly diverse populations.

Joel Kotkin ([e-mail]) is a senior fellow with the Pepperdine University Institute for Public Policy and a research fellow of the Reason Public Policy Institute. Excerpted from the book The New Geography: How the Digital Revolution Is Reshaping the American Landscape by Joel Kotkin. Copyright [c]2000 by Joel Kotkin. Reprinted by arrangement with Random House Trade Publishing, a division of Random House Inc.