E.B. White once wrote that New York is "by all odds the loftiest of cities. It even managed to reach the highest point in the sky at the lowest moment of the depression."
Those words are worth remembering today.
In its many incarnations over the past 400 years - from Dutch colony to global financial capital - New York City has always been a place of possibility, innovation, and imagination. That's why, in the wake of the Great Recession, our sustained economic crisis calls for an audacious economic vision.
For most of its history, New York's economy was literally powered by the energy and efforts of thousands upon thousands of shopkeepers and small business owners. Entrepreneurship was the means for New Yorkers to not only make a living, but to lift their families into the middle class. The national retailer Macy's started in 1858 as a modest dry goods store on 6th Ave. and 14th Street. MetLife, one of the nation's largest insurers, began as a downtown startup during Reconstruction. Decade after decade, and throughout much of the 20th century, entrepreneurs were the economic engine of New York City. They created the world's most vibrant and diverse city, and also the world's most vibrant and diverse economy.
We need to return to that era.
Since the 1970s, New York City's economy has been dominated by the financial services sector. In a mere three decades, the city grew into the center of global finance, making New York the 2nd largest city economy in the world. In 2007, an astounding 38 percent of the New York City's total payroll came from the financial sector.
What the current economic crisis has taught us, among many things, is that our economy is far too reliant on financial services. Make no mistake; New York must and will remain an epicenter for global finance. But we must also diversify our economy.
Today, unemployment is higher in New York City than anytime since 1993, and underemployment nationwide is at a staggering 17 percent. Economists predict that it will take years before the financial services industry returns to its 2007 employment levels. At the same time, thousands of people continue to flock to New York City each year because of the opportunity it represents.
This presents us with a serious problem and also a once-in-a-century opportunity, both of which require us to take two critical actions.
First, we must seize the resources at our disposal to encourage entrepreneurship and small business growth. To this point, government has failed to adequately assist and empower small businesses and entrepreneurs during this unprecedented downturn. Bailouts have targeted mega-banks, and stimulus dollars have gone to construction contractors. These are necessary measures, but they're not sufficient to spark the kind of innovation we need to jumpstart economic growth in New York City. The Bloomberg Administration has certainly demonstrated progress in this area, doing what it can on a tight city budget - but there's a long way to go, and federal funding can help.
Currently, there is a glaring deficit in the amount of federal funding received by New York City to spur innovation in new technology and growth industries. The city receives a fraction of SBIR and STRR grants as compared to other large cities across the country. In fact, New York City's research institutions receive the smallest share of R&D funding as compared to other parts of New York State. We don't need special treatment. All we need is parity.
The second critical action is to take bold new risks that nurture entrepreneurship and small businesses once again. One promising idea is to encourage the private sector, including venture capital firms and large financial institutions, to employ patient capital to spur job creation. According to ChubbyBrain, some 47 New York venture capital firms funded startups to the tune of more than $2 billion in the first half of 2009. But only 10 percent of those funds went to New York City-based businesses, while the biggest chunk went to companies in California. New York's leaders in Congress should work with state and local lawmakers to create incentives that stimulate local entrepreneurship.
There are infinite assets we can bring to this effort - from our world class universities, to our top finance firms, to our incredibly industrious workforce - in order to create intelligent partnerships around growth industries such as clean-tech, high-speed rail, and broadband. And one asset we certainly can't ignore are the young people who continue to flock to New York City - young people who are struggling in today's difficult economy.
The unemployment rate for young Americans ages 20-24 was 16.4 percent in November 2009. This represents a very real crisis, and also an invaluable, untapped resource of talent and promise. Any new jobs bill should offer incentives for start-ups and new business to hire recent graduates in engineering or the sciences - incentives that will jumpstart new careers and our new economy.
New York has always been a city of innovation - from the art, music, and culture inspired by our streets, to the incredible architecture of our skyline. Now is the time to regain our historic identity as an economy of innovation, by investing in the dreamers and doers of tomorrow.