The Death and Resurrection of Wall Street

Among the initiatives launched to jumpstart economic activity in New York, one stands out: a series of “business developers,” seemingly lifted from the pages of Opinión Sur. We celebrate this happy coincidence at a portentous juncture in the history of the city-center of the world economy. Walking around Wall Street during these difficult times for the city of New York, it is hard for me not to hear the echo of Federico García Lorca. The Andalusian poet came to New York many years ago to sing of – and to insult in passing – the great city, where, as he put it, “the Hudson gets drunk on oil.” i In New York’s financial district – the belly button of the capitalist world – 65,000 jobs in the banking and investment services sector have been lost at the beginning of 2009 –and more losses are coming.

The mayor of New York, Mr. Michael Bloomberg – a man of finance himself – has predicted that it will take a long time for the sector to recover and, in any case, it will never be the same. I see fit, therefore, to offer a paraphrase of “Lament for Ignacio Sanchez Mejia,” the bullfighter mourned by García Lorca.

In this version, the mayor’s lament is over the disappearance, or the exodus, of the prototypical young MBA graduate who worked in financial services, reaping fat profits from an early age.

“It will be a long time, if ever, before there is born

another trader, so adventurous,

so full of arrogance,

so well paid with easy profits.”

“Because you have died for ever,

like all the dead of the Earth,

like all the dead who are forgotten

in a heap of lifeless dogs.”

To ease the pain, and slow the exodus of talent, the mayor launched a rather modest program by today’s standards – costing only $45 million in public funds – to reeducate bankers, stock traders and others who have lost their jobs on Wall Street and, at the same time, to supply the start-up capital to motivate the once rich and now jobless to create new industries.

The program is intended to slow the banking industry brain drain which will ensue during the restructuring of the financial services industry, the engine behind New York’s economic growth in recent decades. The program aims to not only accelerate the recovery of the sector – “It will be a long time, if ever . . .” before it regains its former vigor – but also to change the economic profile of the city.

First, city authorities want to attract big banks and foreign companies – in particular from Asia – to fill the void left by the bankruptcy of the big U.S. firms (Lehman Brothers, Bear Stearns, etc). They are hoping that the federal government will lend millions more to the city to help in enticing these companies to come to Wall Street. In spite of all this, Mr. Bloomberg remains doubtful about the finance sector’s prospects of recovery. One thing is certain: New York will have to compete with other “global” cities for the formerly uncontested position of financial capital that it shared with London. This competition will only take place when, several years from now, the economic system – hopefully – reawakens.

It is easy but not entirely unfair to critique this focus, so characteristic of a man who made billions by modernizing the stock information system. The program represents an aid package for those sectors that earned the most during the phase of accelerated growth and that are, in turn, responsible for the current crisis, whether directly or indirectly. Bloomberg’s program, in essence, is an adrenalin injection for a wealthy heart attack victim.

Nonetheless, it is important to recall that Bloomberg himself is a self-made man. The company founded by the mayor – Bloomberg LP – is a model of the type of business that Bloomberg hopes others will develop in the immediate future. It was established with Bloomberg’s $10 million severance package from Salomon Brothers. He started his business in a room measuring only ninety-seven square feet. He did not receive any help from the city then, but he insists that times have changed and the moment has come to invest public funds in business developers.

Standing out among the 11 initiatives announced by Mayor Bloomberg is the formation of a network of angel investors and the creation of a private loan fund for new businesses, which will be eligible for up to $250,000 in start-up loans.

The mayor’s plans face the same quandary as those of the federal government and the Obama administration, with its team of ace economists. Do we try to salvage the current system or do we switch gears and focus on a different, and more equitable, type of growth? It is not easy to do both things: The risk is that neither approach will be properly executed. We can also formulate the dilemma in these terms: Do we bet on the recovery of the current system or do we retrain our human capital to develop new types of businesses?

I do not imagine that Mr. Bloomberg reads the pages of Opinión Sur. Nonetheless, some of his ideas show striking similarities with our own proposals on business developers. To illustrate this by way of anecdote, let me point out that the mayor announced his economic recovery program in a building located on 160 Varick Street, the future home of a business developer or – in New York parlance – small and medium-sized business incubator run by unemployed professionals. A real estate company is lending the city the building without charge for three years, and new businesses will rent offices for the tiny sum of $200 a month. The Polytechnic Institute at my own university, New York University, will handle the selection of these businesses. The program will begin in April. Another space for an additional business developer will open in the financial district at the beginning of next year, sponsored by the city’s Corporation of Economic Development.

As the reader can see, New York is in the process of adopting the South/North model of business development, bringing the public, private and third sectors together.

The Development Corporation – a mixed public and private institution – will put $3 million in an investment fund for new small businesses. The corporation hopes to attract twice that amount in venture capital, bringing the total to $9 million, an amount sufficient to launch several hundred small businesses. For its part, the city will contribute $15 million to the program. The federal government will provide another $30 million. According to estimates, these kinds of initiatives will generate 25,000 new jobs over the next 10 years, with new businesses contributing some $750 million to the local economy.

Clearly Mr. Bloomberg has come to the realization that in the future the city of New York will depend much less on the financial activities of Wall Street (until recently, up to a third of all economic activity in New York was rooted in the financial sector). “It will be a long time, if ever” before the financial sector rises again. But perhaps this lament will prove a blessing in disguise, if we succeed in finding a healthy transition out of this crisis and in keeping the cancer of the old system in remission, i.e. a shamelessly “adventurous” gambling economy, with super-concentrated earnings.

The new and true adventure is not merely economic but social: greater productivity, more innovative businesses, greater income equality and more bottom-up opportunities. It will not be easy, but the change is welcome. The world’s financial capital will have to take a big step backward, but the hope is that the economic system as a whole will recover, grow healthier and not simply be forgotten “in a heap of lifeless dogs.”

——————————————————————————————

i. Here, as an endnote – separated from the main text to avoid scandalizing the reader – is the poem that Garcia Lorca wrote in 1930, at the height of the economic crisis: “New York, Office and Denunciation.”

Under the multiplications,

a drop of duck’s blood;

under the divisions,

a drop of sailor’s blood;

under the additions, a river of tender blood.

A river that sings and flows

past bedrooms in the boroughs –

and it’s money, cement, or wind

in New York’s counterfeit dawn.

I know the mountains exist.

And wisdom’s eyeglasses,

too. But I didn’t come to see the sky.

I’m here to see the clouded blood,

the blood that sweeps machines over waterfalls

and the soul toward the cobra’s tongue.

Every day in New York, they slaughter

four million ducks,

five million hogs,

two thousand pigeons to accommodate the tastes of the dying,

one million cows,

one million lambs,

and two million roosters

that smash the sky to pieces.

It’s better to sob while honing a blade

or kill dogs on the delirious hunts

than to resist at dawn

the endless milk trains,

the endless blood trains

and the trains of roses, manacled

by the dealers in perfume.

The ducks and the pigeons,

and the hogs and the lambs

lay their drops of blood

under the multiplications,

and the terrified bellowing of the cows wrung dry

fills the valley with sorrow

where the Hudson gets drunk on oil.

I denounce everyone

who ignores the other half,

the half that can’t be redeemed,

who lift their mountains of cement

where the hearts beat

inside forgotten little animals

and where all of us will fall

in the last feast of pneumatic drills.

I spit in all your faces.

The other half hears me,

devouring, pissing, flying in their purity,

like the supers’ children in lobbies

who carry fragile twigs

to the emptied spaces where

the insect antennae are rusting.

This is not hell, but the street.

Not death, but the fruit stand.

There is a world of tamed rivers and distances just beyond our grasp

in the cat’s paw smashed by a car,
and I hear the earthworm’s song

in the hearts of many girls.

Rust, fermentation, earth tremor.

You yourself are the earth as you drift in office numbers.

What shall I do now? Set the landscapes in order?

Order the loves that soon become photographs,

that soon become pieces of wood and mouthfuls of blood?

No, no: I denounce it all.

I denounce the conspiracy

of these deserted offices

that radiate no agony,

that erase the forest’s plans,

and I offer myself as food for the cows wrung dry

when their bellowing fills the valley

where the Hudson gets drunk on oil.

– Federico Garcia Lorca, 1930, from Poet in New York, translated by Greg Simon & Steven F White.

Leave a comment

Your email address will not be published. Required fields are marked *