Dark clouds over New York City have a silver lining

"I am responsible for a great deal of suffering and pain," said Bernard L. Madoff to his victims after the largest, longest and most widespread trial for the $50-billion Ponzi scheme fraud.

Madoff's 150-year sentence, handed down by the Lower Manhattan courtroom is just another page in the global financial crisis that now hovers over New York City.

After World War II, the US emerged as the world's dominant financial power and New York City, its metropolitan center. Today, the US is coping with the worst crisis since the Great Depression, and New York City is at its center.

New York City has always been the US' metropolis of great dreams and deep disillusionment. Moderation is not one of its virtues; extravagance is. Until recently, average income in the city grew strongly. But the real income level of the lowest income group has declined for two decades.

Still, New York City is resilient and New Yorkers are tough. Both have always come back.

In the mid-1970s, the city's economy faced the worst fiscal crisis in its history. In the 1980s, mayor Ed Koch was able to achieve a balanced budget. Yet it was only with the strengthening of the US and the global economies that New York City began to rebound.

For two decades, the city outperformed the rest of the US in terms of wage growth. It was finance, insurance and real estate that most boosted the growth of the metropolis.

Starting in the 1990s, Mayor Rudy Giuliani sought to restore prosperity of the city by offering tax incentives to businesses and intensifying the crackdown against crime. Coinciding with it was the Internet revolution, which brought about yet another boom.

Not much time had passed since the dotcom bubble burst, when the World Trade Center was attacked on September 11, 2001, killing more than 2,600 people and casting a shadow on the future of the city. While the White House promised revenge, New Yorkers wanted for reconciliation.

When Michael Bloomberg, a billionaire businessman, was elected mayor just two months after the 9/11 tattack, his most immediate concern was the $6.2-billion budget deficit. "New York City is open for business," Bloomberg told corporate leaders. With a new economic strategy, his administration was able to boost growth.

He sought to provide businesses with space and infrastructure, while trying to attract highly skilled talents with good living conditions. The strategy focused on making New York City more livable and more business-friendly, while diversifying the city economy.

The Bloomberg administration has been relatively successful with its first two objectives. In 2007, even FBI named New York City the safest metropolis in the US.

There are new and emerging industrial sectors, but overall the economy of the city remains dependent on the Wall Street.

The New York metropolitan area has a population of about 19 million. With a population of 8.3 million, New York City is the largest city in the US. At 27,300 people per square mile, it also has the highest density.

It is also a city of extraordinary diversity. Some 3.6 million New Yorkers are white, almost 2.1 million, black and some 1 million, Asians.

Two out of every five New Yorkers were born abroad. Among the city's residents are people from almost 140 countries who speak more than 200 languages and dialects.

Take a walk on Broadway, from the northern tip of Manhattan to Battery Park facing the Statue of Liberty and you will meet the microcosm of the world. It is this peaceful diversity of New York City that has given so much hope to the world.

Many New Yorkers had been refugees. But most of them came to the US with dreams of a better future. Now the city is more subdued, troubled about its present and uncertain about its future.

Like so many other Americans, New Yorkers, too, struggle with mortgage and credit card debts. It is America's "transformative moment", say some retail analysts. "After the recession is over, the US will be different - including spending patterns which New York has often heralded," said one of the analysts.

Deepening unemployment still reflects the recession. In 2007, overall unemployment declined to 4.8 percent. Now it is more than 8 percent - the national unemployment rate is 9.5 percent. About 15 million Americans are unemployed. And New York City is at the center of the storm.

For now, the atmosphere is frustrating and weary. Michael Jackson's memorial service united crowds in the Apollo Theater on Harlem's 125th Street. The further the economy deteriorates, the worse will be the fate of the poorest areas of the city.

When recession hit the US in December 2007, New York City's financial and insurance sector still employed more than 355,000 people. But despite all the stimulus packages announced, the key sectors of the city's economy - securities and banking, professional and business services, as well as retail trade - have suffered significant losses.

Since mid-October 2008, the city's economy has deteriorated substantially. Companies have reported widespread drop in business and employment levels. Tourism and the retail industry have suffered, too.

The most pronounced decline in consumer spending has been in New York City, which not so long ago outperformed the rest of the region. Across Manhattan, many small retailers offer extraordinary discounts - up to 50 percent or more.

The recession was triggered by the sub-prime mortgage crisis, credit squeeze and the collapse of the stock market. Unfortunately, Wall Street and the real estate market both have historically been driven growth in New York City.

The sale of apartments in Manhattan has now slid more than 50 percent and the average price dropped by 21.4 to 24 percent from a year ago. At the same time, the city's financial district is bracing for another possible correction in the coming months.

The unease shows on the faces of ordinary New Yorkers. They know that eventually recovery will come. They know it will take some time. They know this recession - though very severe - will pass, too. They are New Yorkers.

The author is Research Director of International Business at the India, China and America Institute.

(China Daily 07/15/2009 page9)