This post is written by Andrew Wear, an author and Australian public servant, with degrees in politics, law, economics and public policy. Currently Director of Economic Development and International at the City of Melbourne, he also has extensive experience working for state and national governments. His first book, Solved. How other countries cracked the world’s biggest problems (and we can too), was published in countries across the world. His latest book is Recovery. How we can create a better, brighter future after a crisis.
**The problem: **How can a city’s economy recover following a major recession?
Why it matters: Economic prosperity is the key element underpinning quality of life for a city’s inhabitants
The solution: Support economic diversification by leveraging the city’s economic strengths
The Great Recession of 2007–09 was a global economic downturn that devastated financial markets, along with real estate and banking industries. The crisis caused millions of people to default on their mortgages and led to lost jobs, savings and homes.
Governments around the world responded with enormous fiscal and monetary stimulus measures, designed to rouse national economies and reduce financial risk.
They began to “look about how to grow different sectors that we thought were going to be important to the future of New York City.”
As the world’s top financial centre, New York City was ground zero for the Great Recession and was hit hard. Unemployment rose from 4.4% in February 2008 to 10.3% in September 2009, with 413,000 people out of work. But the city bounced back relatively quickly and – at least until Covid-19 hit – it was booming. Between 2009 and 2017, it added 702,000 jobs – the longest and largest expansion since World War II.
Bouncing back, bigger than ever
To understand how New York City achieved this feat, I spoke with the man who oversaw the city’s economic recovery, first as president of the New York City Economic Development Corporation (NYCEDC) and then as deputy mayor in charge of economic development, when mayor Michael Bloomberg asked him to step into the role.
Robert Lieber was once a Lehman Brothers executive, a Wall Street ‘real estate investment banker’ who, after 25 years, decided he was ready for a career change. The NYCEDC he went on to run is a unique non-profit. Founded in the 1990s, it is geared to promoting economic development in the city. It owns and operates an enormous amount of real estate – 66 million square feet (6.1 million square metres) across 200 city-owned properties – and uses the revenue it generates to invest in strategic development projects.
In assessing the economic landscape during the recession, it became clear to Lieber that the city relied too heavily on the financial services sector. Consequently, in planning the city’s economic recovery, Lieber’s team aimed to “diversify the city’s economy, to create demand to address the excess supply that we had of real estate and no jobs”. So they began to “look about how to grow different sectors that we thought were going to be important to the future of New York City”. They saw opportunities in bioscience, fashion, media, technology and tourism.
A question of fundamentals
But before these industries could grow, the ‘fundamentals’ had to be in place. “We needed to make sure that the streets were safe and people didn’t feel threatened with random crime,” Lieber says. “The biggest issue that all the big cities face today is: how do we make people feel safe to be able to come into the city and intermingle with others? When I moved to New York in the ‘70s, this was not a safe place for people to be able to walk the streets. There were neighbourhoods you just wouldn’t go. But by the time we got to the mid-2000s, crime was way down.” In 1990, New York City was the murder capital of the United States, with 2,245 homicides. By 2005, that number was down to 539. “Providing an environment where people feel safe is critical,” he says.
“To help attract ‘the STEM [science, technology, engineering and math] businesses, which we really didn’t have”, Lieber and his team looked to the city’s universities: Columbia and NYU. Only Columbia was competitive in engineering.
The city needed a top-rated graduate school of engineering on par with Stanford University or the Massachusetts Institute of Technology if it was going to spawn technology-based startups that could go on to become major employers. That insight led Lieber and team to plan for a new engineering-based campus on city-owned land on Roosevelt Island, in the East River. Lieber’s successor as deputy mayor announced that universities around the world were invited to submit proposals. The winning bid came from Cornell and its partner, the Technion–Israel Institute of Technology. They won US$100 million and a spot on the island. “That was one of the hallmark transactions [in] creating the demand generators for jobs,” Lieber says. Roosevelt Island would be “a place where the super smart students, and more importantly the super smart faculty, would come to do their research, and use those as incubators for growth businesses in the New York City area”. While the campus is still being established, startups founded on the island have already raised more than US$100 million and employ 300 people.
Focusing attention elsewhere
Other priority sectors received similar attention. Fashion saw the establishment of an investment fund which made loans to small designers to help them fulfil production orders. The city partnered with a private real estate firm to develop an enormous commercial bioscience centre on land owned by the city.
The Made in NY media centre was established as an “incubator space for storytellers, creative professionals and entrepreneurs across multiple disciplines to collaborate and create new business opportunities”. Neighborhood x Neighborhood was a tourism initiative that supported businesses and encouraged visitors to venture beyond Manhattan.
Have these efforts to transform New York City’s economy been a success? “I honestly don’t think we’re going to know for 20 years,” Lieber says. “But having that as a centre of focus means a lot of the technology companies have now made big inroads in New York.” Google, Facebook, Microsoft and other technology businesses are “making big concentrated efforts in New York City because they recognise that the growth of their business is going to be enhanced by having bicoastal brain centres to help support their businesses”.
Lessons from past economic recoveries
- **Inspire confidence. **Safety – and the perception of it – will underpin economic recovery: governments will need to reassure people that the pandemic is under control and cities are safe.
- **Keep up fiscal stimulus. **Governments will need to borrow large sums of money to stimulate the economy with their spending. Governments should avoid winding back stimulus until economic recovery is entrenched, so as not to stifle economic growth.
- **Allow for adjustment. **The pandemic has permanently changed our economies. Economic settings need to facilitate the movement of workers and capital to sectors and activities with the biggest growth potential, to allow prices to adjust and to make it easy for new businesses to establish or grow.
- **Support growth in the long run. **Successful recovery from recession means sustained economic growth over many years. Measures to improve productivity, such as investment in education and skills, research and development or digital infrastructure, are crucial.
This article is an extract from Andrew Wear’s latest book, Recovery. How we can create a better, brighter future after a crisis (Hero Press, 2021).
(Image Credit: Unsplash)
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