City Is Told to Abandon Its 'Doomed' Tactics of Encouraging Growth

By JANNY SCOTT — September 8, 2003

Arguing that the industries upon which New York City has depended for its economic well-being have been losing ground and are unlikely to generate many new jobs in future, a new study suggests that New York's longtime approach to economic development is obsolete and must be reconceived.
 
The study, financed by the Rockefeller Foundation and written by a nonprofit group called the Center for an Urban Future, says the city should abandon the "doomed strategy" of favoring a few industries like finance ? an approach the study says has left the city increasingly vulnerable to economic shifts.

City resources should go instead to improving the climate for small businesses and entrepreneurs, tapping the immigrant population as well as academic and research institutions, and improving basic services so the middle class will not leave the city, according to the study, to be released today.

"Start small," the report urges.  Large firms are decentralizing  operations and adding new jobs elsewhere, and New York's future growth will depend on "whether it can restore its entrepreneurial vitality and create a better environment for smaller firms to grow and prosper."

The recommendations run counter to the city's practice  of using tax abatements and real estate development subsidies to keep big companies in New York. That tactic became common in the 1990's as competition among the city, its suburbs and other places intensified.

Several economists and others who have seen the report said the recommendations were sound. Some said they also seemed consistent with some recent moves by the administration of Mayor Michael R. Bloomberg toward delineating a clear strategy and diversifying the economy.

"The city has never had a clear economic development strategy," said Kathryn S. Wylde, president of the Partnership for New York City, a business group. "The city's strategy has been real-estate-driven and has been reactive to the threat of corporate move-outs and job losses rather than job creation."

David Hochman, a consultant with the Technology Partnership Practice at the Battelle Memorial Institute, who worked on a similar report for the city in 2000, said: "It's really only in times of downturn that people get creative, get thoughtful about what needs to be done next. This would be a great road map to start with."

The deputy mayor for economic development and rebuilding, Daniel L. Doctoroff, said the administration was already doing many things recommended in the new study. For example, it has taken steps to improve the business climate and cultivate business districts far beyond Midtown Manhattan through projects in such places as downtown Flushing, Long Island City, Harlem and the Hub area of the Bronx.

In addition, he said, the administration has  overhauled what is now called the Department of Small Business Services and has  taken steps to give immigrant- and minority-owned businesses better access to contracts. The city is opening small-business satellite centers in each borough, offering advice on such things as financing, negotiating the bureaucracy and other aspects of starting and running businesses.

"We've essentially stopped" the longtime practice of favoring a relatively small number of large companies with tax abatements and subsidies, Mr. Doctoroff said.  "We have basically ended the era of corporate welfare, basically paying people to stay."

The study, based on an analysis of census and economic data and interviews with business leaders, developers, ethnographers, government officials and others, was conducted over the past year by the center, a nonprofit policy institute that examines economic and work force development issues in New York.

Jonathan Bowles, the group's research director and a writer of the report, said the center was told to take "a real hard look at the city's economy in the post-9/11 world." The aim was to explore in a comprehensive way the long-term economic, demographic and political challenges facing New York.