America's Economic Refugees

In an overregulated economy, the best preparation for survival may be a Third World education

Glenn Garvin from the November 1993 issue

(Page 6 of 8)

"You have to watch out for the police," she says. "They don’t always make trouble for us. But sometimes they do. They’ve taken my food, thrown it away. One day I bought a $125 urn so that I could branch out a little bit, offer my customers a chocolate drink. I bought it on a Friday. On Saturday the police took it. I was sad, but what can you do?

"Nobody’s ever hit me or taken me to jail, because when they tell me, ‘That’s against the law,’ I always look timid and say, ‘Oh, OK, I’ll leave.’ But I’ve seen a lot of other people mistreated. I know I’ve been lucky."

Attempts to legalize street vending in Los Angeles have met violent opposition from forces who don’t even make a pretense about their motivations. "We’re getting to be a Third World country," Gertrude Schwab, one of the most vocal opponents of vending, told the Los Angeles Times. "It’s nasty. It’s not clean. ...They set up outside like a fruit market. They’re selling pillows on a stick. They’re going door to door selling tamales. It’s disgusting."

And even if the vendors’ allies manage to slip a compromise proposal through the Los Angeles City Council, it’s unlikely that many of the vendors would comply with the requirement to get licenses. One of the principal attractions of vending is that it requires little start-up capital. (Marta, remember, started with $50, and some vendors launch their enterprise with as little as $10.) But the ordinance under consideration by the City Council would require a hot-dog vendor to buy nearly $1,000 worth of permits, plus a special cart that costs between $1,000 and $2,000.

Most vendors don’t do as well as Marta. A survey last year by the Coalition for Women’s Economic Development pegged average daily profits between $18 and $40. But it’s also clear that a few vendors do take a stab at becoming the next Donald Trump. John Ortega, who owns the 500-store Clothestime women’s-wear chain, got his start as a street vendor selling clothes in the mid1970s. Juan Corona, a multi-millionaire who owns Los Angeles area restaurants and several clothing stores, also started out as a clothing vendor.

"Not everybody is going to do that well, not by a long shot," says business consultant Legaspi. "But don’t sell these guys short–vending is a real business and they have real entrepreneurial skills. It takes an eye for merchandise; a mango vendor learns to cut the mango just so to look appealing. And they learn how to treat the customer, how to sell the customer. They sell mostly to fellow members of their ethnic group, so they understand what products the market wants and how to sell them.

"I’ve seen a lot more sophisticated merchandising among vendors than I have with anyone else. These people may not even know the techniques they’re using–

it could all be sort of unconscious–but it’s effective. They catch your eye by carving the fruit very artistically. Or, as somebody approaches, they squeeze a lemon onto the fruit. When I smell that, I just start salivating."

Many successful vendors graduate from the street into the bazaars known variously as swap meets or flea markets, the collections of stalls located in old warehouses or former drive-in movie lots. For suburban America, the swap meets are places to take some old junk from your garage to sell while buying someone else’s old junk. But in communities with large immigrant populations, swap meets have become a poor man’s shopping mall.

"If you go to the swap meets in East Los Angeles, you’ll see very little used merchandise," says Daniel Morales, who runs the 21st Century Business Clinic for minority entrepreneurs. "Most of the merchandise is very cheap, but it’s new. These things are very immigrant-oriented. In Asia and Latin America, this is how people do business–they use a big central market. It’s a concept that’s not familiar to Anglo-Americans. "

Stalls at Los Angeles swap meets rent for about $7.00 a square foot–about the same price as space in mid-tier shopping malls "But in a swap meet you can start small, with maybe 100 square feet," points out Morales. "In a mall you’re going to have take couple of thousand square feet at the minimum. And the mall is going to want a year’s lease with two or three months’ deposit plus financial statements, plus documents that show you’re a legal resident. The swap meet doesn’t require any of that."

The swap meets also don’t care whether stall operators have business permits–a good thing, since almost none of them do Because the city requires advance payments of sales tax fron some merchants, permits for a small shop can easily cost $600 or more.

Some swap-meet merchants become mini-magnates, operating chains of stalls in several different flea markets. "One of my clients is a guy who sells cassettes of Mexican music," says Morales. "Every time I turn around he’s expanding. He has at least six stalls operating now."

The involvement of immigrants in the informal economy has spawned a growing, and quite paradoxical, body of academic literature. Most of it is written by sociologists and anthropologists who spend untold hours among the immigrants, painstakingly documenting the regulatory roadblocks that send them into the informal economy. Then, almost inevitably, they suggest that the answer to the problem is more regulation.

Sociologist Fernandez-Kelly, herself a believer in protective regulation, acknowledges the contradiction. "One of the constant pains to left-of-center observers is that conditions you would consider to be close to unacceptable are considered rather desirable to immigrants," she admits. "I spent a good deal of time researching the maquiladora industry along the Mexican border. I got a job as a seamstress, to see with my own eyes what it was like, and I also interviewed 500 women.

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