January 18, 2012

I THINK WE’RE GOING TO FIND OUT: What Would New York Look Like With A Smaller Financial Sector?

I think you can credit the financial industry for New York’s revival. Oh, one can point to all the vibrant creative arts and their near-cousins in advertising and publishing; one can sing paeans to the city’s energy, its tremendous diversity, its nearly unmatched food culture. But let those of us who lived there in the 1970s and the 1980s also recall that it was violent, crime ridden, and oh yes, depopulating. (Between 1950 and 1980 the city lost more than 10% of its population). Its infrastructure was decaying, particularly the subway, and no one who had alternatives rode the subways after rush hour. In the early 1970s, the city flirted with bankruptcy; after the 1977 blackout, it endured widespread looting that bordered on riots.

What turned this around was not the creative class, who were still flocking to rent-controlled apartments in the safer parts of town. No, what made the difference was money. Money bought peace among the city’s various interest groups, repaired infrastructure that had been neglected for decades, and paid for more police. It created jobs in construction and services and almost everything else you can imagine. And where did that money come from? Deregulation, and a 17-year bull market that inflated Wall Street salaries, and tax revenues right along with them. Without the financial renaissance, these days New York might well look a lot more like Detroit or St. Louis.

So it’s interesting to contemplate what it will look like, if the financial industry gets shrunk down to the size that many are hoping. The last time that happened, in the 1930s-1960s, New York had a lot of other businesses: shipping, manufacturing, and for that matter, being the corporate headquarters for so many national businesses. That’s pretty much ended. New York is now a specialist city: creative industries, finance, and tourism.

Well, they’re not going out of their way to make the tourists feel welcome, either.

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