The coming death spiral of New York City
Interesting perspectives – However, we think the timeline is probably not in any of our lifetimes. Just a momentary “dip.” Unless, of course, things really start getting much crazier…
The coming death spiral of New York City
The “death spiral” is an ill-defined term, but it’s generally applied to situations where, when things get worse, this causes things to get even more worse than before.
The NY Times recently published an article about a coming public transit death spiral. In other words, loss of revenue from lower ridership means that, in order to balance their budget (absent a massive infusion of outside monetary support), they need to cut service, increase fares, reduce capital improvement, all things which make the transit system even worse thus causing even lower ridership with corresponding lower revenue.
New York City as a whole is in the same unavoidable death spiral. Rich people are fleeing to the Hamptons, and businesses are abandoning their expensive Manhattan office buildings and telling everyone to work from home. This resulting loss of tax revenue means that NYC will have to slash spending and/or raise taxes (if it’s even possible to raise taxes any higher given that NYC already has the highest taxes of anywhere in the United States), making the city even less desirable than it was before, which would encourage even more people and businesses to move out.
In addition to normal downward-spiral economics, we have two other factors working against New York City:
(1) The memory of the pandemic. Those who remember it won’t want to go back to living in apartment buildings where you have to ride the elevator with people who could be contagious with something. Now yes, it’s a proven fact that many people, probably most people, especially young people, will just forget about the pandemic as soon as they can, even when the pandemic isn’t over yet. But the people who will permanently change their living preferences because of it are likely to be older and wealthier, the people who pay a disproportionate share of NYC taxes.
(2) Rising crime because of liberal policing. Now unlike the factors above which I am certain about, this is more speculative. When DeBlasio took over years ago I predicted rising crime, which never happened. At least it never happened until this summer. There has been a big increase in shootings since the beginning of June. So although we should cautious about saying “this time it’s different,” the post-BLM-protests political environment truly feels different to me, and I think we could be entering an era of soft-on-crime policing that will lead to an explosion of crime that will make New York City that much less desirable.
What about the people who say something like “New York City is the most desirable place to live because all of the culture is here.” Well, culture can move pretty easily. According to the Hamptons article above, expensive restaurants, stores, and art galleries that used to be in Manhattan are moving to the Hamptons. It’s pretty clear to me that the Hamptons will replace New York City as the most desirable place to live because of all the culture. Certain big institutions like the Metropolitan Museum of Art won’t be able to move to the Hamptons, but that’s mostly a tourist attraction and not something that the average rich New Yorker goes to on a regular basis.
Yes, New York City (and others like it) is really doomed
Why did Detroit decline from being one of the country’s major cities to being a crime-ridden dump? Because its main industry that it total relied upon, automobile manufacturing, left. The same thing happened, though not quite as dramatically, across the region known now as the “Rust Belt.” Manufacturing left, the factories were left empty, the cities died.
What is New York City’s main industry? Some people will insist that New York City has many industries like Finance, business services, media, etc. But that’s the wrong way to look at it. New York City is actually totally dependent on a single industry: people working in office buildings. If that industry moves away, in this case to people’s homes, then New York City no longer has much of an economic purpose.
But what about all the great “culture,” the New York apologists keep saying. People will stay for the “culture!” Well, Detroit once had a lot of culture. Maybe not as much as New York City, but for a city in the Midwest there was a lot of culture there. The culture left when the consumers of culture left. I hear that some big-name (and surely overpriced) restaurants and art galleries have already moved to the Hamptons. In fact, I would bet on the Hamptons as being the place that supplants Manhattan as the playground for the richest of the rich after New York City collapses. Eventually, even big museums can move out. If MOMA and the Whitney could both move to new buildings in Manhattan, then they can move to a new building outside of Manhattan.
New York City won’t survive as a tourist city, like Rome. Tourists won’t go there when New York City becomes crime-ridden like Detroit. New York may be the oldest and most important city in the New World, but it ain’t Rome. Rome was never full of NAMs. (In case you don’t understand the comparison, once upon a time, Rome was the most important commercial city in the world. But today, it’s not even the most important metropolitan area in Italy, that’s Milan. And Italy itself has become a minor country. Rome survives mostly as a tourist attraction.)