Mark Twain and New York in the 1990s

Real Estate Weekly, May 22, 1996 by Daniel Rose

My first thought was to recall that great urban philosopher Mark Twain, who could have been speaking of New York when he said, "The reports of my death have been greatly exaggerated."

The endless litany of problems we hear would lead one to think that weeds will soon grow on the thoroughfares of every old city. The nationwide exodus from center city to suburb or from the old, cold Northeast to the new, warm Southwest is today's "conventional wisdom." Every periodical (and conference) tells us that new technologies permit brainworkers to locate anywhere they wish; that the federal government drastically short-changes New York, taking billions more in taxes than it sends back in any form; that the feds saddle the center cities with expensive unfunded mandates they simply cannot afford; and on and on...

Yet there clearly is another side to the story. Right before our eyes, for example, Los Angeles, in many ways a West Coast version of New York, is getting its act together after devastating urban riots and the earthquakes, floods and painful economic turmoil all California went through. Even Washington, DC, that textbook case of how not to run a city, got a cautiously optimistic forecast this month from the respected Brookings Institution, after an all-day conference analyzing the problems of that troubled city.

So, obviously, the question is more complex than it appears. We all know that cities ebb and flow, that remarkable recuperative powers can come into play if the fundamentals are right, and that major economic or social forces working just beneath the surface can have impacts over time that are hard to discern in the short-run. The profound technological, economic and social changes taking place in the world today are powerful and relentless; but we have entered a period in which New York's many present advantages could permit our city to benefit rather than lose by them, if we are wise enough to capitalize on our strengths and minimize our weaknesses.

Our weaknesses are real, but to a great extent they reflect "self-inflicted wounds." Our strengths are real, too; and we should not lose sight of them.

Over half of all the securities transactions in the world take place in Manhattan's exchanges, and more foreign companies are listed on our exchanges than on those of London, Frankfurt, Paris and Tokyo combined. We have the world's largest concentration of corporate management services, including the head offices of 12 of the 20 largest international law firms, and the head offices of five of the world's six largest accounting firms. Creativity-based industries such as advertising, broadcasting and publishing are all concentrated here, and New York's dazzling array of cultural institutions that nurture and stimulate these industries are without peer.

The newest addition, the New York Public Library's SIBL (a remarkable "state of the art" science, industry and business library) will prove to be another wonderful resource, helping to transform information into knowledge.

Many of us were delighted but not surprised recently when Coopers and Lybrand released an in-depth report on what it called New York's emerging cyber-industry, which did not even exist a decade ago. It is called New Media activity, and is concentrated in Manhattan south of 41st Street in what is becoming known as "Silicon Alley."

New Media involves firms specializing in entertainment software, Online/Internet services, CD-ROM title developers, Web site designers and the like. Coopers estimates New Media employment in the New York area at over 70,000 today, up from under 30,000 in 1992. By 1998, these hard - nosed accounting types expect area-wide employment in this field to be between 110,000 and 190,000 jobs. Four billion dollars in gross revenues were already generated by this industry in 1995 in the metropolitan area; and, as Senator Everett Dirksen said, "A billion here, a billion there, and before you know it, you're talking real money!" This baby industry's growth days are still ahead, as it focuses on the advertising, marketing, entertainment and education sectors; and the outlook is exciting.

But let us return to an orderly discussion of New York's future, a future which will depend on how successfully we react to forces over which we have no control.

The national recession that began in the late 1980s struck our area earlier, harder and deeper than any other part of the country, costing our region over three quarters of a million jobs; and our recovery has been slower and more sluggish than elsewhere. In effect, we have "given back" most of the economic gains of the 1980s.

But the lessons learned, however painful, may prove helpful in the long-run. That is the heart of the matter; and there are indications that we are learning them.

The two chief lessons are that our public expenditures must shift from consumption to investment and that investing in human capital is as important as investing in physical capital.

As in all futures, there is a "best case," "worst case" and probable compromise somewhere in between. The worst case, on which I won't dwell, could come to pass if we don't reverse some of the savagely destructive policies which have hamstrung us in the past, but which can be remedied. The "best case," on the other hand, would require a degree of public understanding and public support that are highly unlikely, given the spirit of the times.