What seems to most people to be a general economic and cultural crisis often seems to me no more or less than the rigors of the obsolescence of New York’s economic and cultural sway.
Consider hedge funds. The crisis has raised a populist anger against hedge funds in general. But hedge funds were not the cause; they did not need to be bailed out. They rode out the shock and recovered on their own. The institutions that had to be bailed out were the titans of New York, which tried to play hedge fund and broke the economy. Strategies that work for the decentralized and lightly staffed institutions that hedge funds are – these strategies were poison to the titans of New York.
Let me repeat: New York saw a set of brilliant strategies for making money; New York tried to adopt these strategies; but New York could not keep up. (High-frequency trading seems to be going in the same direction.)
The reason these titans were permitted to exist was to compete with the comparable titans of other countries. Surely if everyone else is doing it, we are only being realistic when we do it too – whatever the abstract dangers?
American modesty is that foolish. Ours is a very powerful country; and powerful countries must expect to be imitated, for no other reason than that they are powerful. When Great Britain was ascendant the world broke out in parliaments and the businessmen of the tropics sweated in black wool.
We have our New York, so other countries want New Yorks of their own – and they get them, new New Yorks more New York than New York. (What are Canary Wharf and La Défense but the cargo cults of the Atlantic?) Count one remove from reality. Then, of course, we scale up the real New York to match. Count two removes from reality. (This is the level of the junk-bond era, I think.) The rest of the world scales up their New Yorks to keep up with the American example. The world’s tallest skyscraper keeps turning up somewhere in East Asia. Count three removes from reality. So the real New York scales up yet again, mortgages the country and securitizes its mortgages. Count four removes from reality. This isn’t economics; this is pataphysics.
Worse, it is a game that New York cannot win. New York had to get that way; it is burdened with history – with the awareness that things could have been otherwise. The new New Yorks can take New York as a revelation, build it dogmatically. Hong Kong will always be a better New York than New York can ever be.
All finance is capital allocation – discerning where money obtains its best return and transferring it there from other, less profitable uses. Once, for this to be done at a national scale, it was necessary that all the financiers of the nation be in one place, have all their seats on one exchange, so all the nation could come to them. Because New York was where information could be had, New York was where decisions had to be made.
But not only is this no longer true – a Bloomberg terminal in New York knows nothing that a Bloomberg terminal in Shanghai does not know. Indeed the opposite is the case; New York impedes capitalism. By being the center of both finance and the economy it simply removes many industries from rational analysis. Look at publishing or music, for example. Suppose you are an investor with a thesis about the future of books or music. What instrument allows you to express it? There is no such instrument, because publishing and music as businesses have been absorbed into New York conglomerates (perhaps headquartered elsewhere, but possible only in a world that includes New York) – conglomerates whose bottom lines would not tremble if tomorrow some rapid plague killed off every author and musician on the planet.
There are, of course, the indies – indie labels, small presses – but even if they were publicly traded – even if there were some exchange where they could afford to be listed, with regulations they could afford to comply with – still they are individually too small to absorb enough capital to make a return meaningful to an investor.
The cavernous empty middle between conglomerate and indie is New York’s path – New York sweeps it clean the way Jupiter’s gravity clears out the asteroid belt.
For culture I think the case is stronger and more straightforward than it is for finance. In almost anything written about the crisis the words publishing, journalism, music, art, can be qualified with “New York” without loss of meaning – with gain in clarity.
I admit that this perspective explains nothing new. My intention is Copernican, not Newtonian. I do not attempt to resolve mysteries, only to provide a more parsimonious formulation of the mechanism behind certain appearances known to everyone. The sky would look the same if the earth were the center of the universe. The crisis would look the same if were were universal or had New York at its center. I find the latter formulation more plausible and more interesting. If the crisis is general, then there is nothing to do but ride it out, suspend our minds and abilities, wait for some vision to reveal what comes next. But if the crisis is New York’s, then there is work for all in imagining and effecting a great devolution.