The Manhattan Contrarian wrote an interesting piece chronicling the creative destruction that has continually transformed the New York City economy. He points out that New York lost nearly all of the million manufacturing-related and 400,000 seaports-related jobs it had after WWII. He adds that jobs in its once thriving retail and wholesale sector have largely moved offshore; that about 80 of 125 Fortune 500 headquarters have moved out of the city; and that Dodd Frank and the financial crisis are now downsizing Wall Street. But despite those losses, he notes that New York City employment has reach 3,720,600—a record high.
What struck me was how much of the job destruction suffered by NYC was caused, not from innovation engineered from within, but from exogenous forces that demanded adaptation in response. I was also intrigued by how much more successfully NYC had responded than Heartland cities devastated by the loss of manufacturing according to a recent study by David Autor et al.
In my upcoming book, The Upside of Inequality: How Good Intentions Undermine the Middle Class, I argue that NYC is teaming with properly trained talent and that this asset restricts the economy’s ability to find and commercialize new sources of employment. In contrast, a significant share of that talent has left the Heartland for better opportunities elsewhere. And that this has had a profound effect on their ability to recover relative to NYC.
Economists insist communities need not to worry about trade and immigration because entrepreneurialism together with an abundance of capital will replace lost high-wage jobs. In truth, properly trained talent and the economy’s capacity and willingness to take risk—the cornerstones of business success— and not risk-averse savings, are now the binding constraints to growth.