Shipping was the city’s economic anchor, but New Yorkers were more likely to work in the manufacturing industries—sugar refining, garment production, and publishing—that grew up around the harbor. Sugar producers, like the Roosevelt family, operated in a big port city, because urban scale enabled them to cover the fixed costs of big, expensive refineries and to be close enough to consumers so that refined sugar crystals wouldn’t coalesce during a long, hot water voyage. The garment industry similarly owed its concentration in New York to the vast cargoes of cotton and textiles that came through the city and sailors’ need for ready-made clothes. Even New York’s publishing preeminence ultimately reflected the city’s central place on transatlantic trade routes, as the big money in nineteenth-century books came from being the first printer out with pirated copies of English novels. The Harper brothers really arrived as publishers when they beat their Philadelphia competitors by printing the third volume of Walter Scott’s Peveril of the Peak twenty-one hours after it arrived in New York by packet ship.
In the twentieth century, however, the death of distance destroyed the transport-cost advantages that had made New York a manufacturing mammoth. Why sew skirts on Hester Street when labor is so much cheaper in China? Globalization brought fierce competition to the companies and cities that made anything that could be easily shipped across the Pacific. New York’s economic decline in the midtwentieth century reflected the increasing irrelevance of its nineteenth-century advantages.
But of course, as anyone standing on Fifth Avenue today must notice, the story didn’t end there. New York didn’t die. Today, the five zip codes that occupy the mile of Manhattan between Forty-first and Fifty-ninth streets employ six hundred thousand workers (more than New Hampshire or Maine), who earn on average more than $100,000 each, giving that tiny piece of real estate a larger annual payroll than Oregon or Nevada.
Just as globalization killed off New York’s advantages as a manufacturing hub, it increased the city’s edge in producing ideas. While there isn’t much sewing left in New York, there are still plenty of Calvin Kleins and Donna Karans, producing designs that will often be made on the other side of the planet. Honda may have brought heartache to Detroit’s Big Three, but managing the international flow of finance has earned vast sums for New York’s bankers. A more connected world has brought huge returns to the ideaproducing entrepreneurs who can now scour the earth in search of profits.
New York reinvented itself during the bleak years of the 1970s when a cluster of financial innovators learned from each other and produced a chain of interconnected ideas. Academic knowledge about trading off risk and return made it easier to evaluate and sell riskier assets, like Michael Milken’s highyield (junk) bonds, which made it possible for Henry Kravis to use those bonds to get value out of underperforming companies through leveraged buyouts. Many of the biggest innovators acquired their knowledge not through formal training but by being close to the action, like mortgage-backed security magnate Lewis Ranieri of Liar’s Poker fame, who started in the Salomon Brothers mailroom. Today, 40 percent of Manhattan’s payroll is in the financial services industry, the bulwark of a dense and still-thriving city. And even though some of these financial wizards helped give us the Great Recession, the city that housed them has weathered that storm, too. Between 2009 and 2010, as the American economy largely stagnated, wages in Manhattan increased by 11.9 percent, more than any other large county. In 2010, the average weekly wage in Manhattan was $2,404, which is 170 percent more than the U.S. average, and 45 percent more than in Santa Clara County, home of Silicon Valley, which pays the highest wages outside of Greater New York.