Richard Florida
by Richard Florida
Wed May 27th 2009 at 11:30am UTC

How the Crisis Will Reshape the World’s Cities

Michael Lind argues New York and London are in for the biggest fall:

New York, London, and other financial centers were heavily dependent on financial-sector profits. Throw in the technology-driven collapse of the publishing and broadcast industries headquartered in such places, and those cities are likely to suffer devastating blows. Capitals of both politics and commerce, such as Paris and Tokyo, will adjust the best in the new state-capitalist world. Purely commercial centers such as New York and Frankfurt will suffer the most. Without the obscenely rich investment bankers and the legions of well-paid retainers who supported their lifestyles, formerly flourishing parts of these former financial capitals may become as derelict as Detroit or the crumbling industrial towns of northern Britain and Germany’s Ruhr region.

Not so fast.

NYC and London are much more than financial centers – and always have been. Sure, finance generated a lot of income, especially in the top ranks, but the data show that greater NY is not overly dependent on finance and has significant capabilities across a broad range of creative industries. Ed Glaeser has advanced several compelling explanations for why NYC’s unemployment has remained relatively low in the face of what was supposed to be devastating losses from the financial crisis, With Washington, D.C. in its mega-region gambit, New York will do just fine even if you believe Lind about the coming era of “state capitalism.”

London is admittedly more finance-dependent, but it too has considerable capabilities in media, entertainment, fashion, and as a draw for global talent. How many other cities around the world can say that? And both NYC and London have withstood far more serious blows and and emerged stronger and more resilient, as Youssef Cassis’ landmark study of global financial centers shows.

Paris and Tokyo are much more likely to lose as the global city system consolidates. This year’s edition of the Global Financial Centres Index shows NYC and London consolidating their hold on global finance in the heat of the crisis, while Paris and Tokyo are getting clobbered.

The winners in the new era of capitalism are more likely than not to share the same fundamental characteristics that have defined leading-edge global cities in previous capitalist epochs – the economic benefits of diversity and openness in attracting talent, and of density and speed in mixing to create new innovations, new firms, and new industries. Those advantages will only compound in the future.

4 Responses to “How the Crisis Will Reshape the World’s Cities”

  1. Buzzcut Says:

    The problem in NYC is the extent to which the government is dependent on those high financial incomes for income tax revenue.

    Without those high earners paying confiscatory tax rates, there is going to be a huge drop in tax revenues.

    Like California, there is going to have to be a reckoning with the public employee unions. Layoffs and salary cuts are in order. And just like California, the air of crisis may discourage people from coming in the first place.

  2. Rockfish Says:

    You can count on the bankers finding another way to make themselves rich – they always do.

  3. tpk-nyc Says:

    It’s absurd to compare New York with Detroit. New York is far more diverse economically and, unlike Detroit, people actually WANT to live there. If it becomes more affordable, I see that as a good thing.

  4. deborah Says:

    What part does tourism play in the economic life of New York and London? I know people visit both places for more than shopping–although that happens at the same time. Even if numbers of tourist are down, New York is in the United States for Americans who don’t want to travel abroad.