When his plan for a publicly subsidized stadium on Manhattan’s Far West Side failed, New York mayor Michael Bloomberg bitterly complained that the city had let down the rest of America because now the country probably wouldn’t get to host the 2012 Olympics. But the mayor and his ally in the stadium fight, Governor Pataki, don’t understand that it is they who have let down the nation by letting their focus on the stadium help undermine the redevelopment of the World Trade Center site—symbolically a far more important mission to most Americans.

The two pols are failing on both sites because they seem to have lost faith in the private sector and to believe that only government can produce new development in New York. While they obsessed over their effort to jump-start Far West Side redevelopment with a publicly financed stadium, investment bank Goldman Sachs, which wanted to house 12,000 Wall Street jobs in a projected new tower across the street from the WTC site, became so alienated by government’s failure to address its concerns that it decided to leave downtown. Instead of pressing for a robust rebuilding on the World Trade Center site that puts its faith in a private-sector revival of the city, the city and state have concentrated on pouring hundreds of millions of dollars into cultural amenities, parks, and playgrounds. Meanwhile, several billion crucial federal transportation dollars are in danger of slipping away because of the stalled rebuilding.

This failure is quite a turnabout from the last time New York pols hatched a plan to revive lower Manhattan, and it says much about how attitudes among city and state officials have changed for the worse. Back in the mid-1990s, downtown was suffering from a long decline, as major investment houses had either moved jobs out of the city or relocated their headquarters to midtown’s newer buildings. By 1995, the commercial vacancy rate in lower Manhattan, the nation’s third-largest business district behind midtown Manhattan and downtown Chicago, was a staggering 30 percent, compared with just 12 percent in midtown. Few experts thought downtown had much of a future.

But then-mayor Giuliani believed that his agenda of restraining taxes and fighting crime would spark an economic revival and that lower Manhattan could be part of it. Giuliani pushed through the state legislature a revival plan that involved minimal government expenditures, giving tax abatements to landlords who updated older buildings with new wiring and other technologies to create a downtown district attractive to the high-tech firms that New York was starting to incubate. The revival plan also provided incentives for owners to convert the oldest buildings—which might have no future as office towers—to housing. The goal was to transform downtown into a 24-hour community on the assumption that jobs would follow residents downtown.

The plan succeeded magnificently. High-tech firms flew to the area, forming a technology district centered on 55 Broad Street, the former home of scandal-ridden investment bank Drexel Burnham Lambert, which had collapsed in the late 1980s but whose old headquarters now symbolized downtown’s new direction. Other firms looking for reasonably priced space abandoned midtown and headed to lower Manhattan instead of to New Jersey or beyond, attracted by what suddenly seemed like a hip new office region. Guardian Life and accounting firm Grant Thornton were among the big movers. Meanwhile, major downtown employers like Goldman Sachs solidified their operations in lower Manhattan with new leases. By 2000, not only were thousands of new residents living in some 50 former office buildings, but the area’s commercial vacancy rate had shrunk to 5 percent. Restaurants, hotels, and other services proliferated.

Behind this revival was a broader local economic boom, driven by a robust private sector. Between 1994 and 2000, New York businesses created 440,000 new jobs, even though there were no significant taxpayer-financed megaprojects under way. New York didn’t need them. Disproving Mayor Bloomberg’s assertion that the stadium defeat sent the message that you can’t get anything done in New York, during the late 1990s construction boomed throughout the city, as private investors poured tens of billions into building skyscrapers in midtown; renovating outdated buildings into new office space in places like Chelsea and Williamsburg, Brooklyn; constructing hotels in districts like downtown Brooklyn that hadn’t seen such development in generations; building shopping centers on abandoned manufacturing facilities throughout the boroughs; and rolling out new residential construction in abundance. As proof positive that you could, indeed, get things done in New York, employment in the city’s construction industry expanded by 44 percent—or 37,000 new jobs—during the 1990s boom.

It was this robust expansion that originally inspired the thought of rezoning Manhattan’s Far West Side to absorb the city’s further development—before stadium advocates hijacked the plan. The plan envisioned government investment in infrastructure, especially to improve access to the area by extending the Number 7 subway, but no extensive taxpayer-financed building projects. As an expanding economy created demand for new space, private developers would build the new residential and commercial towers that the plan permitted. Even after 9/11, the idea of freeing up the Far West Side for potential new development made sense as a safety valve, in case the revival of lower Manhattan became sidetracked. This was seen as a very real possibility even then: megaprojects undertaken by the three entities controlling the World Trade Center site—the city, the state, and the Port Authority of New York and New Jersey—had repeatedly failed.

It didn’t take long after the terrorist bombing on September 11, 2001, for government and elite opinion to forget the lessons of the 1990s revival. That became clear soon after 9/11, when two New Yorks emerged. One was the tough and defiant New York epitomized by the brave rescuers and dogged workers who rolled up their sleeves to clear the WTC site in remarkably short order and get the city back to work again. Echoing their spirit and resilience were calls from ordinary citizens to rebuild immediately—if not the towers themselves, then something even grander that reflected New York’s position as the country’s economic capital, the center of what the terrorists hated most about America’s ebullient democratic capitalist system. (See the Autumn 2001 issue of City Journal.)

But another New York also emerged—a city of victims wallowing in grief over the attacks and urging that we should turn lower Manhattan into a gigantic permanent memorial or cultural wonderland, an idea supported even by Mayor Giuliani in one of his few wrongheaded moments. Anti-development groups seized on this emerging culture of grief to press a case against a dynamic rebuilding program, suggesting that it was not only undesirable but probably not feasible, since the attack had permanently crippled the city’s economy. Brushing aside the vibrant, private-sector revival that had just taken place downtown, they advocated a raft of government-managed and -financed non-building alternatives for the World Trade Center and downtown in general.

Officials might have short-circuited these defeatist approaches by commissioning a vigorous rebuilding plan at once. The governor’s handpicked committee to oversee the revival, the Lower Manhattan Development Corporation, started auspiciously enough when it planned for a vital commercial reconstruction, envisioning a series of office towers as the heart of the project. Although the initial effort was clumsy and unattractive, it put the emphasis in the right place.

But nothing illustrates how the LMDC has fumbled the rebuilding effort more than what happened next. With its early plans subject to intense criticism as uninspiring, the LMDC made common cause with the antibusiness slow-growth types and allowed them to redirect the discussion about how the rebuilding should proceed. The rebuilding committee even agreed to participate in a series of planning events organized by an ad hoc group of environmental organizations like the National Resources Defense Council, left-leaning foundations like the Ford Foundation, and think tanks aligned with unions dominated by public-sector interests. The group, not surprisingly, put forth rebuilding plans that favored reducing commercial space on the WTC site, in favor of parkland and government-subsidized housing. It commissioned trendy economic-development guru Richard Florida—whose theories, disproved by all the available evidence, hold that the number of bohemians, gays, and creative types a city draws are a predictor of its economic vitality—to fashion a New Age–tinged redevelopment agenda for lower Manhattan based on cultural amenities.

Eventually, the LMDC went back to square one, soliciting designs from around the world based on site specifications that grafted some of the slow-growth ideas onto the big commercial development that most New Yorkers favored. Even a good architect would have had trouble harmonizing these disparate goals, but the plan formulated by winning architect Daniel Libeskind—an America-bashing postmodernist—has repeatedly had to be redesigned because it wasn’t workable. Crammed into the site are several large towers—including the so-called Freedom Tower, which would top out at 1,776 feet and has been reshaped several times because of the Police Department’s security concerns—a memorial 30 feet below ground, a three-acre plaza, a performing-arts space of 500,000 square feet, and a 300,000-square-foot Museum of Tolerance being programmed by leftish professors and human rights advocates who see America in general—and the global capitalists killed when the towers fell—as morally no better than the 9/11 terrorists.

While the city and state have endlessly tinkered with the site plan, officials have been unresponsive to concerns from one of downtown’s major employers, Goldman Sachs, which worried about the future of the so-called Freedom Tower and about security plans for the area, including the security implications of an underground tunnel that would have emptied right at the new tower that the bank planned to build downtown. Faced with city and state officials who seemed more interested in the Far West Side than in addressing those concerns, Goldman decided to leave lower Manhattan—a tremendous blow to the area’s redevelopment.

The mayor and governor have responded to criticism of their downtown efforts not with substance but with political maneuvers. They announced a new package of goodies to spread around lower Manhattan in order to win the vote of State Assembly Speaker Sheldon Silver for the Far West Side stadium—an effort that failed to win Silver’s support anyway. While the WTC site sits empty, the mayor and governor earmarked $90 million for parks and playgrounds around downtown, $45 million for grants to local cultural facilities, another $45 million for unspecified “community enhancements,” and $50 million for subsidized housing. Whereas the 1995 downtown revival plan had relied modestly on tax credits and a marketing effort to lure companies downtown, the city and state have now transformed the rebuilding of the WTC site into just another game in the New York state-capitalist racket, in which economic-development tax dollars are spread around to advocacy groups, politically connected nonprofits, and privileged developers to win political favor.

It’s a mark of their misplaced priorities that while the mayor and governor fiddle with hundreds of millions of dollars in trivial amenities, billions in essential federal transportation aid are at risk of going up in smoke. The primary role of government in economic development is to build the infrastructure that can accommodate new growth—like the proposed subway extension to the Far West Side—and inadequate public transportation has long been one of lower Manhattan’s biggest drawbacks. But the slow pace of planning at Ground Zero has jeopardized $2 billion designated to help connect the area to Kennedy Airport, a plan that businesses have hailed as a major boost to the area’s attractiveness.

The mayor and governor forget that New York is not the product of a centrally planned vision and that its economy is not the creation of government but of the private sector. They apparently don’t understand that government did not even create the famous cultural institutions that draw visitors to New York; they are instead largely the product of the enormous private-sector wealth Gotham has generated over the ages. They don’t seem to understand that New York has grown neighborhood by neighborhood, street by street, in unpredictable eruptions, giving Gotham the genuine feel of a spontaneously evolving capitalist, democratic city—not the creation of a single autocrat’s or central planner’s mind.

New York needs a vibrant economy, not to finance public megaprojects but to provide opportunity for its citizens—something that is not happening now, as New York, with an anemic job-creation rate (see “Gotham Stalls Out,” page 50), falls into an all-too-familiar pattern of lagging national growth. The way out of that underperformance is not, as the businessman mayor strangely believes, to tax people ever more heavily to finance huge public projects of dubious economic value but rather to create conditions that allow the private sector to invest and thrive. The mayor should be heartened that even as his stadium plan went down in defeat, developers were closing deals on Far West Side properties to take advantage of the zoning changes that would let them build new office and residential projects there. Those projects will create far more jobs than a vast, blank-walled, government-subsidized stadium, more likely to impede commercial and residential development than to spur it.

For the revival of lower Manhattan and the Far West Side to take place, New York must unleash its private economy. The city needs to create 40,000 new office jobs just to fill up the space proposed for the new World Trade Center site, and the Far West Side rezoning could yield space to house some 100,000 more jobs. New York is eminently capable of generating the new employment to fill those buildings—as it did during the 1990s expansion. You would not know it, however, from the economic-development strategy of New York’s own public officials, shaped around public, not private, investment.


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