Location: Where is New York headed now that its main economic engine, financial services, is on the rocks? Do cities normally survive when the main employer, job generator, income generator, goes belly up?
Mr. Kotkin: Well, in the case of financial services, it’s less a job generator than an income generator just because the jobs are such huge providers of income. Basically, New York has been on what you could call the ‘plutonomy wagon.’ Plutonomy is a term used to describe the intersection of plutocracy and economy. So New York has been the ultimate trickle-down economy—it’s been a relatively small group of people driving the economy. The skills of New York are still here; the roots of some of the industries are still here. But, unless many things are grown to replace this plutonomy, the city’s going to continue to go through this spiral where it becomes more and more bifurcated—there are no middle-class jobs, except in the plutonomy.
Manufacturing and industry are largely gone from the city. What pops up in financial services’ place?
I think there’s a high-end business services [industry]; there’s media; I think some artisanal industries still do reasonably well. I think there’s a much greater opportunity, frankly, for manufacturing to come back because of the costs from energy. Like, in Los Angeles, we’re talking a great deal about the return of our garment industry back home.
Because of the shipping costs?
The shipping costs … So there are opportunities in the design sector; there are opportunities in the media sector; there are opportunities in all forms of business services, including those on the Internet. And New York is in a very strong position there. The question is: Are those industries going to be nurtured? In some senses, I could write a scenario in which I say, ‘The best thing that can happen to New York is the housing prices drop 40 percent.’ Now, The New York Times would kill itself; Bloomberg would have to be hospitalized—because they live for high real estate prices. You know, I was walking around the corner [in the Flatiron district], the two-bedroom apartments were still $3,000, $4,000 [monthly]. I mean, who’s got that kind of money?
So, if the prices were allowed to drop, what would happen? More of the young people who are now leaving New York in their 30s might stay; the immigrants who are now leaving New York once they get their feet on the ground, they might stay. You could see a similar scenario as to what happened in L.A. in the ’90s and Houston in the ’80s—which is, the drop in property prices allowed people an opportunity to get into a market that became very affordable. … In L.A. after the ’90s, after the riots and earthquakes and everything, what happened? The middle-class people were finally able to afford nice houses that they could never afford before; and immigrants went and bought everything that wasn’t nailed down.
I read your recent column in NewGeography.com where you refer to ‘cognitive elites in places like Manhattan.’ What’d you mean by that?
That’s sort of the media, the academics, the nonprofits—who are very well taken care of, and they all kind of talk to each other; they have similar class backgrounds; they have similar educational backgrounds. …
In the same column, you talk up San Francisco as a model for a post-boom New York to follow. Seriously?
That’s a model you could follow. Let me put it this way: I’ve been familiar with the Bay Area for quite a long time, had family that lived in the Bay Area since the ’40s; so I’m pretty familiar with it. It would seem to me that one model that New York could follow—or one pattern or one scenario—is say, ‘O.K., we’re going to lose a little of our financial-services base and, you know what, we’re such a nice city, there’s so many nice things to do that there’ll be a population of the rich who will have a home or their home.’ … And, second thing you have, which is a huge change for New York, I thought, is that it’s become a huge college town. You’ve got all these kids, who from, let’s say, the ages of 20 to 30—because we’re looking at an era of prolonged adolescence—so that becomes a second large portion of the population.
So, you’ve got the nomadic rich and these students who are essentially nomadic. And then you have the servant class that takes care of them. And that’s really San Francisco. San Francisco is a city where a relatively small—I mean, down to 5 percent—[portion] of the population could afford a median-price house.
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