New York City on the Edge

Ric Burns and his collection of talking heads and writers gave us a history of New York in film and print. But, argues FRED SIEGEL, they celebrate the New York that almost went bankrupt. And if they have their way, New York’s end-of-century glory will disappear with the end of the Giuliani administration.

Three powerful currents, each likely to surge turbulently against the others, are shaping the terrain of post-Giuliani New York. First there is the emergence of a digital economy, symbolized by Silicon Alley, which gives New York its first new economic sector since television. Then there is intensified immigration, which means that New York is now 35 percent foreign-born and headed higher. Finally, there is the likely return of the Dinkins Democrats to City Hall. The danger is that these currents will come together to create not a mighty river but rather a brackish backwater, cut off from the main currents of innovation and economic power in Silicon Valley and the Sunbelt.

It was with these currents in mind that I turned to Ric Burns’ New York: A Documentary Film , 10 hours of video done for PBS that recently aired in New York and nationally, and the series’ companion book, New York: An Illustrated History , published by Alfred A. Knopf. Mr. Burns’ Gotham stands alone in this profoundly provincial documentary. It is always the first, the biggest and the best or the worst. There is no sense of how New York fared compared to other great cities like Chicago or London. We learn from the video that “New York is America,” and that it was not London or Amsterdam but New York that invented modern capitalism. We’re also told that, in the words of architect Robert Stern, air transport is such that “you see New York, and then you see the rest of America.” None of this is true. Mr. Stern will be shocked to discover there are now direct flights from almost every corner of America to almost every corner of the world.

Mr. Burns’ mythopoetic treatment is not just bad history, it leaves us worse prepared to face our coming challenges. An accurate assessment of our past would have mentioned our race against rivals Philadelphia and Baltimore to reach the trans-Allegheny West. It would have noted that the skyscraper was developed first in Chicago, and that the consolidation of the five boroughs in 1898 was driven in part by the fear that Chicago was about to surpass Manhattan in population and prestige. And Mr. Burns might have recognized London’s enormous influence on New York: everything from subways to settlement houses. That’s the sort of discussion that might help prepare the city for both global competition and the new digital economy, in which we are neither first nor foremost but are, despite the current new media boom, still a second-rank player in high tech, well behind-gasp!-Dallas.

The video describes how the Erie Canal reorganized America’s economic geography and, in the words of a 19th-century observer, “defied nature and used it like a toy.” The same can be said of the Internet and the digital economy, which have already turned San Francisco into a suburb of Silicon Valley. It’s made Fairfax County in northern Virginia, which has more than double the office space of downtown Boston, Philadelphia, Houston, Denver, Dallas or Seattle, into a center of Internet traffic. In fact, northern Virginia has more office space than all but four of America’s cities. And most surprising of all, the new economy has made Cape Cod-yes, Cape Cod-into a home for high-tech start-ups.

In this new economic landscape, New York is by no means the Empire State. It ranks but 44th out of the 50 states as an entrepreneurial hot spot, while the New York City region ranks 47th for entrepreneurship out of the 50 largest metro areas, according to economist David Birch of Cognetics Inc., a highly respected Cambridge, Mass., research firm.

Nineteenth-century and early 20th-century technology was centralizing. When, in the late 1860’s, telegraph wires were strung between New York and other Eastern cities, we gathered in most of their financial business. But the digital economy, like the automobile, disperses economic activity. Network technology means that price information is instant and almost ubiquitous, so that trades can bypass the floor of the New York Stock Exchange. The “Net” effect is that, between on-line competition for the exchange and bank mergers, financial-sector employment in New York City has dropped almost 8 percent during the course of the 1990’s equities boom, with further reductions to come.

But there’s been a saving grace. The record employment growth of the last two years has finally brought back almost all the jobs lost in the Dinkins years. One hundred thousand jobs, one-third of the new work, have come from new media and software firms. The hardware of the digital economy is created in what Joel Kotkin, senior fellow at the Institute for Public Policy at Pepperdine University, calls “nerdistans,” the campuslike settings of exurbia where teams of middle-aged engineers feel most at home. But the twentysomething content providers for the Internet are drawn to the straight and gay singles scenes of the big city. They’ve been richly rewarded. In 1998, $500 million was invested in New York Internet companies. In the first nine months of 1999, that number grew to $4 billion, producing, according to Crain’s New York Business , 1,000 new millionaires.

The ripple effects of the tech boom have been extraordinary. Dot-com advertisers have produced a 30 percent increase in radio advertising, and even greater leaps in rental and co-op costs. Even more important, they’re changing the way people think about doing business. Manhattan’s corporate economy runs along fixed and formal lines, but in the e-world the lines blur, as accountants and lawyers are becoming accustomed to taking equity shares from start-ups in lieu of payment for their services. Landlords, said Harry Greeley of the Cushman & Wakefield real estate firm, “need a different psychology to deal with a continuous flow of tenants rather than one continuous tenant.” And instead of the usual boundaries between competitors, the numerous small firms of the e-world engage in what’s called “co-opetition,” a series of shifting alliances in which one month’s competitor can be next month’s ally to tackle a new project.

The Sandpaper of Politics

So far the digital sector has been small enough to fit into the interstices of the Manhattan real estate market and city politics. But if growth continues, the frictionless world of e-commerce will collide with the sandpaper world of New York politics. The digital world, explains Richard Johnson, chief executive of the fast-growing search firm Hotjobs.com Ltd., is organized around “a war for talent.” The value of software programmers, for instance, is sharply stratified by what’s been described as “the Hollywood effect.” The best, the most creative programmers are worth many multiples more than the others.

But to attract the top talent, firms run into the rent control problem, which imposes enormous costs on newcomers looking for apartments, costs that are, of course, then passed on to the e-companies who are competing not just with other New York City firms, but with companies around the country and globe. Similarly, when e-companies look to move or expand, they run into New York’s land-use regulations, which keep them out of the garment district and littoral areas zoned for light commerce. The largest companies, like Doubleclick Inc., are pushed into cutting the same kind of deals that the corporate big boys like The New York Times have won. But for small, fast-growing companies, the search for new space can lead them to either move out or expand outside of Manhattan.

Kevin O’Connor, chief executive of Doubleclick, just wants the government to go away and get off his back. At a recent Crain’s breakfast, he was challenged by David Shaw, the founder of Juno Online Services Inc., who argued that the city needs a more expansive government to reduce economic inequality. A few minutes later, however, Mr. Shaw explained that he was moving a number of his operations to India to take advantage of the lower costs. It’s Mr. Shaw who is likely to have his way when it comes to expansive government.

At the same time that the Net has been thriving, the traditional tide of New York’s statist politics has begun to breach the sand barriers to spending temporarily erected by the Giuliani interregnum. In November, Mayor Rudolph Giuliani’s ill-conceived effort to deny Public Advocate Mark Green the mayoralty doomed charter reforms designed to “lock in” city tax and spending constraints. The coalition of public employee unions and Democratic politicians that defeated the Mayor’s charter proposals by 3 to 1 set the stage for the upcoming labor negotiations with all of the city’s major unions. After seven years of spending constraints, the pressure for wage and benefit increases that outstrip productivity will be unavoidable, if not in this administration, then in the next, when the unions’ raises are likely to be treated as constituency service.

New York After Rudy

The coalition that defeated Mayor Giuliani on the charter is a dry run for the next mayoral election, when public sector unions will be joined by the social service industry in seeking additional money from a city already near the legal limit for public debt. The next Mayor, quite likely to be supported by a coalition that includes the Rev. Al Sharpton and perhaps even Lenora Fulani, will argue that it is only fair for a city with a considerable surplus in the midst of a boom to provide generous support for those who have “suffered” through the Giuliani years.

Viewed from the perspective of the Ric Burns video and the accompanying book, New York: An Illustrated History , this will be only right and just. In the Burns video, New York is always brutally divided between the rich and the poor; there is no middle class, there is no upward mobility. Nothing stands between the government and the individual. There are no voluntary organizations, no ethnic organizations, no religious institutions to help people up the social ladder. Neither private sector growth nor state sponsorship of infrastructure projects that aid the private economy can do much to alleviate the suffering of the poor: Only the paternalist state can do that.

As an example of this mindset, consider the video’s treatment of Gotham’s crucial 1886 election. We are told by the video only that the radical Henry George was the sole hope of the immigrant masses and that Abram Hewitt, the lowdown Tammany candidate, defeated him. But there was far more to this election, including the third candidate, the young Teddy Roosevelt, who goes unmentioned. Hewitt was the son-in-law of Peter Cooper, the founder of the Cooper Union for Arts and Sciences (I’m a professor there), where the bright children of immigrant mechanics could receive a free education. Hewitt, a visionary reformer who accepted Tammany support only reluctantly, joined George in campaigning against the city’s “fat cats.” But while George’s solution was redistribution, Hewitt, one of the fathers of both the subway system and the consolidation of the five boroughs into greater New York in 1898, proposed to increase opportunity by rebuilding the city’s crumbling docks, streets and transit facilities. As Mayor, he began to do just that, and it laid the foundation for the city’s economic future.

New York: An Illustrated History is a bit better in that it acknowledges that Hewitt was a moderate and a supporter of the Brooklyn Bridge. The video ends in 1931, but the book, which continues through to the Giuliani years, gets worse as the story moves closer to the present. In the closing chapters, we learn nothing about what happened when Mr. Burns’ wish came true and John Lindsay created a social welfare state by doubling the welfare rolls in the midst of one of the greatest economic booms in American history. Welfare gets one nondescript paragraph. The destruction of the immigrant city’s great asset, its school and university system in the late 1960’s and 1970’s, gets similarly short shrift. However, what we do learn in chapters that seem to have been written by members of the committee to re-elect David Dinkins in 1993, is that John Lindsay was “exciting,” that Robert Moses was a bad man and that the automobile was the devil’s spawn. The diminuendo comes in Philip Lopate’s closing chapter, where we learn that Mr. Dinkins was “unlucky” and that crime was curtailed because of unknown causes, or perhaps the national economic boom, or whatever. The dramatic drop in welfare goes unmentioned, though if Mr. Lopate had looked around he could have seen that the new face of poverty is not that of welfare dependency but of the working immigrant poor struggling to get a toehold on the mobility ladder.

The choice for the future is not between Mr. O’Connor’s libertarianism and Mr. Shaw’s social-service paternalism. Although the former is welcome as a counterbalance, it can never and should never be a governing philosophy for New York. The latter might help assuage the conscience of would-be limousine liberals, but it has already done untold harm. If government is going to help incorporate the vast new tide of immigration to our shores, it’s going to have to walk and chew gum at the same time. The cost of the public sector has to be held in check because if it isn’t, we will push away high-tech start-ups. But government also has to worry about “diminishing industrial space,” explains “The Big Squeeze,” a new report from the Center for the Urban Future that describes how printing and garment, furniture, jewelry and mattress making, which employ unskilled immigrants, have been priced out of Manhattan.

This is the second time a wave of economic development has driven businesses that employ the unskilled out of New York, at great social cost. From the 1920’s to the 1950’s, the regional planners promoted white-collar work for Manhattan without making much of an effort to move manufacturers from Manhattan to the outer boroughs. Nor did the regional planners give much thought to the great harbor that created New York and employed a vast blue-collar work force.

Listen to this story of a young Puerto Rican man in the 1950’s as he told it to journalist Robert Suro: “I started after school hauling ice, and then as soon as I was 16, I dropped out of school and went down to the Fulton Street docks to become a stevedore. When there was no work on the docks, you could always go to the garment district and just look for signs … and I never spent a day on relief.” Since 1960, the Puerto Rican labor-force participation rate has dropped from 85 to 50 percent, and the city’s 900,000 Puerto Ricans have become not only downwardly mobile but also perhaps the poorest group in the country. Today they are joined in their downward mobility by the city’s fastest growing ethnic group, its roughly 750,000 Dominicans.

This time, the city has to hold on to older blue-collar jobs even as it allows new work to expand. There has been some effort to relocate garment manufacturers to the Brooklyn Army Terminal. But city government has never, notes executive editor Steve Malanga of Crain’s , made the kind of effort in the boroughs that was put into reviving lower Manhattan with the Downtown Plan. Resuscitating the economy of the outer boroughs requires the same kind of high-profile mayoral campaign, combined with rebuilding and expanding the city’s long-neglected infrastructure. We can learn something from Boston, where the Federally funded “Big Dig” has literally remade the city by rerouting and rebuilding highways while reconnecting the city to its waterfront. For New York, the long-hoped-for tunnel connecting the deep-water Brooklyn docks to the mainland would be an economic tonic, but in the interim, repairing and rebuilding the perpetually traffic-jammed Gowanus Expressway is an immediate necessity. And while the next Mayor is at it, he or she ought to look to bridging the gap between lower Manhattan and Brooklyn’s Red Hook by turning part of Governors Island into a high-tech research center-our own little nerdistan-that could enhance our high-end industries. (Full disclosure here: I’m on the board of an organization dedicated to just these ends.)

This is probably a pipe dream. The Ric Burns video, however provincial, reflects the prevailing political ethos of the city: Mayor Giuliani pushed New York’s dysfunctional political culture beyond where it was willing to go, and now, in incident after incident-from the Amadou Diallo shooting to the current dust-up over the problems of drug- and alcohol-addicted people wandering the streets-it’s pushing back. In a city where the Rev. Al Sharpton is on the right side of history because he supports the social welfare industry, the next Mayor is likely to spend the surplus on pent-up demands from the city’s near-permanent public-sector political majority, rather than on the infrastructure projects that create economic opportunity for the working immigrant poor. The squeaky wheels are likely to be greased while enterprising companies and immigrants quietly leave for greener pastures. Not that the Ric Burnses of the world will notice; they’ll never have a clue.