The ever-insightful urbanist Joel Kotkin has a must-read piece out on the limitations of the Blue Social Model in New York City. The Big Apple has been touted as the archetypal new Blue city and has experienced a revival of sorts as a “luxury city.” But the luxury city model is rapidly approaching its demise, says Kotkin:
For a decade, the Bloomberg paradigm has held the city together: Wall Street riches fund an expanding bureaucracy that promotes social liberalism and nanny-state green politics. Indeed, Wall Street’s fortune — guaranteed by federal bailouts and monetary policy under both Presidents George W. Bush and Barack Obama — has been the key to the mayor’s largely self-funded political success. Under Bloomberg, Wall Street’s profits allowed city expenditures to grow 40% faster than the rate of inflation. Bloomberg was also able to buy political peace by bestowing raises two to three times the rate of inflation on the city’s unionized workers.
Now this calculus is falling apart. Layoffs are mounting on Wall Street, while bonuses — the red meat that fuels everything from high-end condos to expensive boutiques and restaurants — are expected to drop 30% from last year.
The past decade’s NYC revival was almost wholly based on an unsustainable reliance on the financial sector. Growth in the government-Wall Street partnership fueled a luxury boom in trendy Manhattan – and masked a hollowing out of the city’s core — middle class families have fled the boroughs in droves. High rents, high taxes, lousy schools, and restrictive regulations have driven the middle class away.
Ultimately, the basic truth is this: Bloomberg’s luxury city has failed most of its citizens. Despite its self-celebrated “progressive” image, New York has the most unequal distribution of income in the nation. The bulk of the job growth has not been on Wall Street, where employment has declined over the decade, but in hospitality and restaurants, which pay salaries 60% below the city average. In fact, restaurants are now the largest single private employers in Manhattan, with more people serving tables than trading equities. As the New York Post quipped: “If you can make it here, you can make it anywhere — as a waiter.” […]
Ultimately, suggests Jonathan Bowles, president of the Center for an Urban Future, the future of New York’s middle class depends on reducing dependence on Wall Street. The city needs to focus on industries and niches outside finance, including education, health, design, high-tech services, media and smaller businesses, many of them owned by immigrants.
If the financial sector’s growth continues to slow as it loses its cozy relationship with big government – as it looks like it might – the revival of the city will be over. Look for low cost suburbs and less hip cities to be on the cutting edge of innovation as they drive the 21st century economy.
Glamorous Queens, of course, will weather the storm.