In August, with his state looking at a $13 billion budget hole and residents fleeing in droves, New York Gov. Andrew Cuomo issued a plea for New Yorkers to return to the Big Apple.
“They are in their Hamptons homes, or Hudson Valley or Connecticut,” Cuomo said at a press conference. “I talk to them literally every day. I say, ‘When are you coming back? I’ll buy you a drink. I’ll cook.”
Cuomo’s generous offer to buy cocktails and cook doesn’t appear to be solving New York’s economic woes.
On Sunday, news broke that the multinational financial services company Goldman Sachs, one of the largest companies in the US, is considering a plan to move its headquarters to the South.
“Goldman Sachs Group Inc. is weighing plans for a new Florida hub to house one of its key divisions, in another potential blow to New York’s stature as the de facto home of the U.S. financial industry,” Bloomberg reported. “Executives have been scouting office locations in South Florida, speaking with local officials and exploring tax advantages as they consider creating a base there for its asset management arm, according to people with knowledge of the matter.”
According to The Street, the Fort Lauderdale area and Palm Beach County are the most likely destinations, though Goldman is also considering Dallas as a possible alternative.
The news comes on the heels of several other investment firms—Elliott Management, Blackstone, and Citadel—that have boosted their presence in Florida. The Sunshine State is attracting companies because of its low costs, warm weather, and friendly tax climate. (Florida has no income tax).
Goldman’s announcement could not come at a worse time for New York City, which currently “has the most office space available since the aftermath of the Sept. 11 attack,” according to Bloomberg.
Goldman Sachs has an estimated market value of $71 billion and employs more than 38,000 people worldwide. So, its departure would further erode New York City’s standing as the financial capital of the world even as the state struggles with the broader challenges of the COVID-19 pandemic and the economic damage wrought by lockdowns.
Business Climate Matters
Some may point to the coronavirus as the culprit for Goldman Sachs’s pending exodus. A November CNBC report showed that some 300,000 New Yorkers have bailed on the Big Apple since the lockdowns began, despite the largest decline in rental rates in almost a decade.
While it’s certainly true that New York City, which has had one of the strictest lockdowns in America, has seen some of its most attractive draws neutralized by COVID-19—its top notch dining, entertainment, fashion, and networking—a closer look shows the exodus predates the pandemic.
As Hannah Cox pointed out last month on FEE.org, about a million people said goodbye to New York City and the tri-state area over the last decade. Similarly, other financial companies, such as AllianceBernstein Holding LP fled New York long before lockdowns and social distancing arrived.
The reality is the coronavirus exacerbated New York’s economic plight, but it’s not the source of it. The city’s fundamental problem is an open hostility to markets and freedom.
From policies such as universal pre-K and mandated paid sick leave to the city’s $15 minimum wage, rent-controlled housing, and oppressive tax climate, New York’s political class has shown a disdain for capitalism, private property, and business concerns, and a troubling affinity for central planning.
You don’t have to take my word for it. Listen to New York City Mayor Bill de Blasio, who told New York Magazine this in 2017.
“What’s been hardest is the way our legal system is structured to favor private property. I think people all over this city, of every background, would like to have the city government be able to determine which building goes where, how high it will be, who gets to live in it, what the rent will be.
I think there’s a socialistic impulse, which I hear every day, in every kind of community, that they would like things to be planned in accordance to their needs. And I would, too.
Unfortunately, what stands in the way of that is hundreds of years of history that have elevated property rights and wealth to the point that that’s the reality that calls the tune on a lot of development….
Look, if I had my druthers, the city government would determine every single plot of land, how development would proceed. And there would be very stringent requirements around income levels and rents. That’s a world I’d love to see…”
Did you catch that? The mayor of the world’s financial capital believes the primary obstacle to prosperity is private property. He thinks city officials should get to determine where buildings go and “who gets to live in [them].”
As one observer noted at the time, de Blasio is not the first political leader to thirst for such power.
“Other leaders have had such power, in the Soviet Union and China and Venezuela, and those systems did not produce progress. Or even toilet paper,” David Boaz wryly observed in USA Today.
Unfortunately, neither Cuomo nor de Blasio seem aware of this history. Prior to and throughout the COVID-19 pandemic, the pair have embraced the heavy hand of big government instead of free markets. New York’s oppressive climate has yielded a batch of bad fruit—surging violence (shootings were up 112 percent in November), injustice, economic depression, joblessness, and general despair.
Voting With Feet
Considering the current troubling state of New York and de Blasio’s open hostility to private property, one has to wonder what any financial services company or investment bank is still doing business in the Big Apple.
Fortunately, the American system of federalism means neither individuals nor businesses have to put up with it. New Yorkers feeling trapped can easily move to South Carolina or Utah, where they can actually have a social life and make a living. And financial companies can hit the road for Fort Lauderdale, Nashville, Dallas, Las Vegas or wherever their fancy takes them.
Should individuals or companies feel guilty over leaving? Quite the contrary.
As legal scholar Ilya Somin observed, “voting with your feet” is one of the best ways to help a struggling community and historically has been a key tool for upward mobility in America.
“Those who have been fortunate enough to achieve a measure of success thanks to mobility should not feel guilty about it,” Somin wrote in the Washington Post. “We can help society best by being productive citizens and–where possible–working to ensure that the foot voting opportunities that benefited us become more available to others.”
As someone who has personally benefited from this mobility—I bounced around a lot in my 20s—I wholeheartedly endorse this message. It’s one of the underappreciated glories of the American system. But one need not have experienced the benefits of mobility to understand what Somin is getting at: individuals and companies alike should make sure their talents and resources are best utilized.
Sadly, New York increasingly is no longer that place, for many.
A departure from Goldman Sachs would signal that New York City’s days as the financial capital of the world are over. In some ways, the only surprise is that it took so long.