How New York City is writing a fairer economic playbook

This article is written by Carol Tan, assistant vice president, New York City Economic Development Corporation. This article is one of the entrants in Apolitical's 2020 American public servant writing competition.

On 14 February 2019, Amazon broke up with New York City.

An hour before press, Amazon unceremoniously dumped NYC via a phone call to the New York City Economic Development Corporation (NYCEDC). The call put an end to the dream of 25,000 jobs, the prize for winning Amazon’s competition for its second headquarters — HQ2. As a member of the team who had been working on that project, I felt the blow when Amazon pulled the plug.

NYCEDC is a government-linked not-for-profit tasked with the economic development of the city. Its purpose has evolved based on what brings prosperity to New Yorkers. In the 1960s, as NYC’s economy faltered, a precursor to NYCEDC was created to sell or lease city-owned property in order to help create jobs, which we continue to do today. In the 1970s, it helped finance businesses and development with money raised by issuing tax-exempt bonds. This function also persists.

NYCEDC’s mission centres around fostering inclusive growth and investing in communities, including building schools, community centres and healthcare locations for New Yorkers. But our approach changed with lessons from HQ2. On the heels of the failed relationship, NYCEDC pivoted once again to meet one of the most pressing issues of our time — economic inequality. It has evolved over the last year from an organisation that worked largely with real estate and companies, to one where innovation is oriented around people.

We believe that economic development corporations (EDCs) can galvanise stakeholders to rewrite the economic development playbook and realise more equitable economies. EDCs can be a formidable force when propelled by a strong ambition for all people, regardless of background, to have the opportunity to succeed in 21st century industries.

What drove this change?

Radical progress

Our plans for HQ2 involved engaging New Yorkers to ensure that regular people would also benefit from the deal.

When the plans fell through, several of our employees tried to piece back fragments of a vision that revolved around companies and trickle-down economics; others longed for radical progress. "Economic development is no longer just about attracting new companies or big development,” they cried.

They pointed to the uneven accumulation of wealth and environmental exploitation that resulted in vast imbalances in American society. They called attention to changing public opinion on the place of business in society as well as their effects on ordinary people’s lives. Through this dialogue, employees came to realise that New Yorkers wanted an evolved model of economic development — one of inclusive growth as measured by economic mobility. And NYCEDC’s role, especially now, was to ensure that the rewards of growth belong to those who truly create value.

Around then, I attended a book talk at the Open Society Foundations, where Professor Mariana Mazzucato introduced her book, The Value of Everything. Her research turned a widely held assumption on its head — that investors bear residual risk, and hence should profit most from ‘risky’ investments. For example, she found that pharmaceutical companies charged the public high prices despite their reliance on R&D funded by the National Institutes of Health. Mazzucato found this trend across industries — finance, healthcare, technology, etc.

The future of work is already here, and millions of Americans need reskilling.

In biotechnology, public investments began 15 years before venture capital entered in the 1980s. In other words, the government, not venture capitalists, had taken the big and early risks. Yet, these risks borne by the public sector, and the value created, have rarely translated into shared prosperity or community re-investment. Instead, low and middle-skilled American workers have seen their wages fall in real dollar terms, and the public today continues to pay high prices.

But things could be different, and the public should rightly share in the value created by the public sector. The role that EDCs play in mediating companies’ interactions with communities means that we have opportunities to drive meaningful local participation and economic mobility.

Every decade or so, NYCEDC has had to remake itself. We knew we could do it again. Surprised by a vocal public’s rejection of HQ2, we pondered a new world. These days, economic development must go far beyond attracting or creating jobs. It is about shaping an environment, not only where businesses want to grow but also where workers can get ahead. Economic mobility — measured by income gains — had to be one of our key measures of success.

Promoting equitable economies relies on galvanising stakeholders to fight inequality. From mid-2019, EDC’s president’s office convened working groups, set new policy goals, and nudged departments to adapt their mindsets and processes. We offer the following from our experience:

• Balance mission with public sentiment. Although HQ2 had a clear economic benefit for NYC as a whole, both public opinion and professional beliefs were valid.
• Your team is your greatest resource. Calling out inequality sharpened our focus on workforce development and other efforts to boost the social mobility of New Yorkers. It turned out that many of our frontline staff felt strongly about these issues and had great ideas as they tended to be closer to the grievances as well as the solutions.
• Understand who is being served by a project. We primarily focus on working adults and aim to consistently ask who benefits when considering any new initiative or potential partnership.
• Know your strengths. We realised that our role is at the intersection of the public and private sectors, given our relationships with employers and ability to work with the rest of the public sector. And our programmatic, innovative finance and public-private partnership tools could be used for an even more people-centred purpose.

The last point really helped NYCEDC make what was initially a change in philosophy into a change in organisational practice.

A legacy of radical pragmatism

To realise the vision of a more equitable economy, many feared we would have to entirely retool. The ice broke when working groups started and the question of how we could use our existing toolkit to address a new problem was posed.

Staff realised that we could redeploy our tools for purposes that many personally identified with even more. This appealed greatly to the radical pragmatism ingrained in the organisation’s DNA.

For economic development corporations, certainly for NYCEDC, radical pragmatism meant continuing to work productively with private sector partners. Even as New Yorkers and many around the world grew outraged with how corporate greed has upended the social contract, every relationship we had with industry had to be managed with nuance. Even social justice warrior and president of the Ford Foundation Darren Walker argues that perfect should not be the enemy of progress in In Defense of Nuance. He writes, “We can see how our capitalist systems have broken down, while also appreciating that markets have helped reduce the number of people around the globe who live in poverty.”

NYCEDC’s experience taught us that we had to be at least willing to find common ground with a variety of stakeholders in order to create lasting change that improves lives not only for today, but also for tomorrow. As such, a hallmark of NYCEDC is the forging of public-private partnerships (PPPs).

For example, NYCEDC played a critical role in the inception of the cybersecurity and life sciences industries in NYC, based on partnerships built around a shared vision cultivated during tough negotiations with employers, funders and developers, the City University of New York, community organisations, etc. Some partners brought opportunities to life; others connected New Yorkers to them.

By early April, 127,000 face shields were delivered to New York hospitals.

Those strong relationships have proven important in 2020 as the world navigates the impact of COVID-19. Because of the city’s support for manufacturing and the life sciences sector, NYCEDC could work quickly with local businesses and the fashion industry to produce face shields and hospital gowns for healthcare workers. By early April, 127,000 face shields were delivered to New York hospitals. By the end of the month, 300,000 gowns are expected.

We also now use the PPP tool to achieve social mobility. One area where public and philanthropic efforts alone cannot meet the scale of the challenge is workforce development. The future of work is already here, and millions of Americans need reskilling. Those who need it also tend to be those least able to afford it. Amongst the many benefits of working with the private sector is its ability to develop operating models with a sustainable source of capital. For the appropriate issues, this can be another powerful driver of lasting change.

Hence, EDC and other city partners have been designing the Talent Financing Fund, a PPP to ensure that underprivileged New Yorkers can access and succeed in quality training for in-demand jobs. Now that we face the threat of COVID-19 and a recession, this is even more important as the literature shows that early and targeted investments in sectoral training for middle-skill jobs are vital for driving an equitable recovery. This initiative is an example of how EDC now plays at the intersection of radical progress and radical pragmatism.

The way forward

Aaron Dignan, author of Brave New Work, said: “Teams need to do radical things at a non-radical scale, rather than doing non-radical things at a radical scale.” I have been heartened by NYCEDC’s commitment over the last year to ensure that our investments going forward are radical enough to help shape an equitable and environmentally responsible economy.

For NYCEDC, 14 February 2020 marked a new path. Proposals to the Talent Financing Fund were received from aspiring partners seeking to upskill and support New Yorkers from low-income backgrounds toward stability and opportunity. A radical thing at a pilot scale to start, with aspirations for more radical things at a more radical scale in our near future. — Carol Tan

(Picture Credit: Unsplash)