Like directors of action movies, economic forecasters and pundits love coming up with elaborate scenarios of how New York City will ultimately meet its doom. Today the Atlantic's Megan McArdle presents hers, the crux of which is this: New York City is a giant social-welfare state unto itself that has managed to thrive over the last 25 years only because of the steroidal growth of the financial system, which is doomed to sag and wither. The unsustainably high pay of bankers underwrote the pacification of the masses via subsidized housing and other goodies. And it's all set to go crashing back the other way.
"Presumably they get fewer services, and get angrier, and commit more crimes, which don't get solved as rapidly by the smaller police force. And the families with children start moving back out."
The Downturnaround, whose mission in life is to defy such naysayers, thinks this is about as likely as a giant ape climbing on top of the Empire State Building. Let's start with "they" — the angry poor people who are going to mug, maim, and murder the rest of us.
Presumably, McArdle is aware that most benefits go to the elderly and single mothers, not exactly the folks likely to head for a night of wilding in Central Park. Presumably, she's also aware that a good deal of these benefits, particularly public housing, come from the federal government, which, under the current administration, is unlikely to cut them, especially considering that they add up to a tiny pittance of the financial-industry backstop.
Then there's McArdle's presumption that the financial industry will inevitably contract and result in "a more normal income distribution." In the immediate future, there is little doubt that income will drop, and City Hall is smartly planning for major budget shortfalls. But how much will income fall and how long will it stay down? Everybody and his uncle believes the financial industry is "not going to be like it was" — and of course, we agree. Because, well, nothing ever stays the same for very long. But we're betting a few essential aspects of the financial industry survive, and one of them is, yes, high pay. Massive quantities of money slosh around the globe, and sad as it might be to admit it, the smartest and most talented people tend to devote their energies to diverting as much as possible of it into their own pockets. Don't bet on that coming to a screeching halt. Even young Barack Obama briefly worked in the financial-services industry.
We will also note that the parts of the United States most badly hit by the economy so far are the deep-suburban dead zones of California, Nevada, Arizona, etc. It is the future of these places that we wonder about. They have nothing but ever-cheapening housing. At some price, people will buy it, but we're guessing it won't be young Barack Obamas and Megan McArdles.
Why? Because these people will want to move to New York, which, as lousy as it has felt over the last eight months, is in great physical and cultural condition.The parks are greener and have nicer swing sets than ever. Huge swaths of the city have been renovated and rebuilt. The police force is efficient and not corrupt. New York University has gone from a second-rate commuter institution to one of the hottest schools in the world, and spent a bundle on facilities. Over the last 25 years, the renter culture of New York has been subsumed by a homeowner culture, which only adds to the city's ability to withstand hard times.
It will take a very long fallow indeed to undo this progress, and we don't see it happening. Because no place in the United States can compete with New York for true urban living, built around contiguous, distinct neighborhoods, walkability, excellent mass transit, and world-class culture. Yes, the banks have been good for New York, but they have been suffocating, too. The fact that they'll be busy fixing themselves over the next several years provides an opportunity for other things. New York is where the young and gifted people of the world want to be, and if the financial firms aren't hiring like they used to, we trust that new companies will take advantage of the cheaper office rents and step into the breach. The fact that we can't see exactly what's coming next only makes it more exciting.