Could New York City be losing its place as the world’s foremost art emporium? The Art Newspaper thinks it may. The paper, which tracks these things, says that both customers and works of art themselves are turning up more frequently and more lucratively in London.
Hard-pressed New Yorkers of the non-hedge-fund/trust-fund variety may find it a stretch, but London is a more expensive city than Gotham. The Art Newspaper reports “the world’s most expensive flats, four penthouses overlooking Hyde Park,” were put on the market with an asking price of $165.5 million.
Thus, you might think that New York would have an advantage in attracting rich people (most of whom are notoriously stingy) over London—but rich people are not so stingy when it comes to spending on themselves. For the new millionaires and billionaires of China, India, Russia and the Middle East, London is closer, and hang the expenses. For those who linger, London offers another competitive plus: no income tax on moneys made outside of the U.K.
The slang for such persons is “non-dom,” or a not-domiciled-in-the-U.K. individual. We don’t have that here, so non-American rich persons residing in the U.S. run a slight risk of having to pay taxes—although one would suppose that their rich American friends and business associates would steer them to lawyers and accountants who know how to minimize the risk of inadvertently and—need it be said?—reluctantly becoming a taxpayer.
Other than making New York a tax-free haven for persons with incomes over, shall we say, $30 million per annum, there’s not much that can be done. It would help if the dollar were to rally in relation to the pound and euro, but Washington, although it says it wants a strong dollar, is quietly hoping for a yet weaker one, under the misguided belief that currency manipulations can take the place of underlying economic vitality.
From an artistic point of view, the decline probably makes little difference. Except for celebrity artists, the place is too expensive for creative people, who, as we have already seen with theater and music, have begun to cluster elsewhere. Surely the younger painters have little choice but to do the same. Bohemia, always the nurturing place of the arts, must have low rents and inexpensive food as its material base. Count New York City out on that score.
The big-money people, whose only interest in the arts is how fast their paintings are appreciating, are beginning to worry that New York will be counted out on another score: They are worried that Wall Street is starting to lose out to London. Mayor Bloomberg and Charles Schumer, Wall Street’s personal Senator, issued a joint statement saying: “Unless we improve our corporate climate, we risk allowing New York to lose its pre-eminence in the global financial-services sector.”
The high cost of doing business in New York is drawing the big money away from here, if the Bloomberg-Schumer analysis is correct. For instance, they argue, “there are more than 10 federal, state and industry regulatory bodies in the U.S. The British have only one such body. Industry experts estimate that the gross financial regulatory costs to U.S. companies are 15 times higher than in Britain. Beyond cost savings, the British enjoy another advantage: While our regulatory bodies are often competing to be the toughest cop on the street, the British regulatory body seems to be more collaborative and solutions-oriented.”
Let’s break that down. The multiplicity of supervisory entities arises out of the federalism that is the center of American political theory and the Constitution. So contrary is it to our traditions that when the federal government pre-empts a field of activity to make it exclusively Washington’s, it cuts across the grain here and often sparks anger. The British unitary system is somewhat held in check by a Parliament that can, in theory at least, chuck out any government at any time with a vote of no confidence. In place of such an arrangement, we have our much-boasted-of checks and balances, of which the multitude of federal and state regulatory entities is an example. We can argue that if the system costs more, such is the price we may, in this instance, have to pay for our brand of liberty.
New York’s competitive disadvantage, according to the Mayor and the Senator, also arises from our legal system. “It may be time to revisit the best way to reduce frivolous lawsuits without eliminating meritorious ones,” they write.
Who is to say what is frivolous and what is meritorious? Big business is driven wild by class-action lawsuits—and while there are plenty of crooked lawyers who use them unethically, not to say illegally, the only thing which bursts business people’s blood vessels faster than class-action lawsuits are unions.
Another alleged cause of New York’s decreasing dominance in world finance is the Sarbanes-Oxley Act, passed after Enron and related scandals. SOX, as the law is called, contains provisions calculated to make cooking the books harder, while making the C.E.O. and board members personally responsible for stealing from the stockholders. Wall Street and the New York Stock Exchange have been crying ever since SOX’s enactment that it imposes unfair costs on American public corporations—costs that corporations listed on the London and other stock exchanges don’t have to bear.
Maybe so, but Warren Buffet, whose companies must comply with SOX, has said that it is no such drag. It may be that the rules obtaining in London make it easier to go hog wild—or even moose wild. A few weeks ago, U.S. Securities and Exchange Commissioner Roel Campos caused a minor dustup when he said that certain parts of the London security exchange were more like a “casino” than a well-regulated stock exchange.
New York’s slipping position as the unopposed center of world money may also be owing to things that get less attention when Wall Streeters meet to complain. Some say that the decreasing competency of American students in mathematics has resulted in a shortage of the skilled labor needed to keep stock exchanges and brokerage houses efficient. It is also said that foreign nationals experience so much delay, red tape, bad manners and arrogance when trying to get into New York that they take their business where people welcome them.
Lastly, people say that New York cannot continue to be the biggest froggie in the world financial puddle because investment capital is being generated in other places by other people, as has not happened before. If so, Wall Street may have fallen victim to the globalization it has preached with such zeal and success.
For the city itself, the long-held policy of making New York a one-industry town (finance, accountants and lawyers) leaves it naked to the woes that usually come in the wake of over-specialization. In the past half-century, New York has changed from a large and varied economic base to a narrow one, dependent on the prosperity of a few thousand financial wheeler-dealers. If they get it into their heads to take off in their private jets for wherever, what will happen to New York? Where will the area be with a scaled-down Wall Street? What happens then?