Tuesday, June 20, 2017

Commentary
Photo by Pat Arnow
Photo by Pat Arnow

Cuomo’s Choice

266
by   / Apr. 5, 2017 12am EST
Governor Andrew Cuomo, like his predecessors, faced a Hobson’s choice: Either stand back and abandon Upstate New York, thus allowing the immense forces of globalized capital to dictate outcomes, or devise a plan to adjust to those forces. Cuomo gambled on a new paradigm—the Buffalo Billion, focused on renewable energy and on enterprise-creation rather than on the old paradigm of make-work infrastructure projects and on buttering the bread of real-estate developers. Not surprisingly, Cuomo is coming under fire by real-estate developers, including Carl Paladino, who gripe that New York State’s treasure is being spent with little to show for it.
Over the past few years in these pages, you’ve seen the data on Upstate’s challenges: population decline, manufacturing’s collapse, shares of income from real-estate rising while shares of income from goods-producing have fallen, ongoing sprawl, the seemingly permanent alienation of almost 40 percent of African-American men from participation in the workforce. Upstate New York shares these characteristics with other Rust Belt urban regions. Using our datasets going back just to 1990 reveals that the patterns in Syracuse, Rochester, and Buffalo are just about identical to the patterns in Cleveland, Akron, Dayton, Toledo, and Milwaukee, with Pittsburgh being the sole exception of the big Rust Belt metros because of some sturdy and enduring state policy, some unparalleled local political leadership, and the good fortune to have three downtown universities and several downtown multi-billion-dollar foundations all willing to coordinate over the long term.
Cuomo doesn’t have Pittsburgh’s tools at hand in Buffalo. Instead of the Carnegie, the Mellon, the Heinz, PNC, and other foundations (with combined 2015 assets of $13 billion), the combined assets of Buffalo-area foundations top out at only about $1 billion, with the biggest ones here (the Community Foundation, the Oishei Foundation, the Foundations for Jewish Philanthropies, and the brand-new WIlson Foundation) having but little to invest in what Pittsburgh’s have invested in: enterprise-creation, long-term community visioning, and economic readjustment for the region. Downtown Pittsburgh has three universities, a medical center, a long-established culture of coordination between philanthropies, universities, the business community, and the political class, and the results have been measurable in successful new firms spawned, population growth, old buildings saved, and income gain. The Pennsylvania state economic development program (whose tried-and-true techniques look a lot like what Empire State Development Corporation under Howard Zemsky is trying) has helped, but it was Pittsburgh’s local leadership that led the way.
Until Cuomo created the Regional Economic Development Councils, breaking the hegemony of the real-estate developers and their favorite banker here, there was distinctive and distinctively non-functional paradigm here. Now, there’s a new paradigm—which has given us the Elon Musk shop at the Riverbend site.
Andrew Cuomo’s massive investment in the Solar City/Panasonic plant is moving quickly ahead, notwithstanding the criminal indictments of Louis P. Ciminelli and two of his senior executives for allegedly conspiring with Alex Kalyeros, the Nanotechnology guru, for rigging the bids on constructing the building that everybody on earth knew Ciminelli was going to build because that’s how Buffalo rolls.
Why endorse Cuomo’s investment? Why suspend a rational skepticism about economic development programs that have generally failed this region for a generation?
The answer is simple and quite stark: capitalism no longer has much use for the Rust Belt. It is only through a massive, intentional, some might say arrogant assertion that the waves can be commanded not to crash on the shore that Buffalo has much chance of experiencing an economic revival.
Job growth in Buffalo and in places like Buffalo is going to be elusive because of the headwinds that Robert Gordon wrote about in his 2016 study The Rise and Fall of American Growth. Kent Klitgaard has shown how recovery from recessions has been slower and slower since the Reagan Recession of 1982. There are some economists who think that it’s irrational to think that the new wave of automation, the Amazon restructuring of retailing that’s already creating empty malls and storefronts, and the just-about-to-occur drop in oil prices will create more employment rather than less. These are bigger structural changes that even the most patriotic of economic nationalists have ever had to contemplate. President Trump’s crew may believe that they can bring back manufacturing employment, coal-mining jobs, and pipeline-construction jobs using American-made components—but lots of analysts look at those sectors and shake their heads.
Green-energy for use in cars and buildings, plus electrical storage, plus energy-efficient light-emitting diodes are being manufactured elsewhere. Thanks to Andrew Cuomo’s Buffalo Billion, they will also be manufactured in Buffalo starting later this year.
Without Cuomo’s intervention, the ongoing erosion of manufacturing here would simply continue, as it has since 1990, when there were over 90,000 manufacturing jobs out of a total workforce of about 565,000. Without Cuomo’s intervention, we could expect manufacturing employment to shrink back to what it was in 2007, before the Great Recession of the last year before the Bush Presidency ended: under 50,000.
But there’s more to the story than just Cuomo’s inability to single-handedly reverse 40 years of globalization, financialization, and off-shoring of Buffalo jobs.
Cuomo is up against the self-destruction of an urbanized region that once was so vibrant that, before globalization set in in the late 1970s, it had its own distinctive styles of business dress, music, theatre, and cuisine.
Could those days come back?
As always, it’ll be up to the innovators here. There’s good reason to hope that the entrepreneurship/startup ecology here will bear fruit the way that 43 North founder Jordan Levy and his successor Bill Maggio have succeeded so far. The folks who manage the Buffalo Billion carved out a few million for the business-plan competition that 43 North runs, which has now scored 3 years of operation and 29 successful startups. (Pittsburgh’s TEC Council has been running such a competition for almost twenty years now; it has 1,300 members, and these days several sibling organizations also run business-plan competitions, with a record last year of $235 million in venture capital coming in to help Pittsburgh startups—before Ford Motor Corporation put $1 billion into a new driverless-car technology company. Pittsburgh is where UBER has been trying out driverless cabs.) 
The late Governor Nelson Rockefeller tried to get ahead of the curve 60 years ago by creating a statewide university system to rival the statewide systems in California, and in Michigan, Ohio, Illinois, and the other Big 10 states where Nobel Prize-winners people the faculties of these public institutions. It was very clear, even in the 1950s, that public investment in creating human capital was a sensible policy for the soon-to-come post-industrial economy.
Then globalization happened. 
The cant since the 1980s, at least, has been that New York has a bad “business climate” because Democrats insist on having a robust social safety net, decently-paid public employees, teachers’ unions, environmental regulation, and a progressive income tax. Buffalo’s leading banker gleefully admitted once that he loves the way local politicians jump up whenever the Buffalo Niagara Partnership pushes its “Unshackle Upstate” agenda of tax cuts for investors, deregulation, union-busting, and privatization, allegedly the correct recipe for a new, robust capitalism that will reward employees as well as real-estate speculators.
But capitalism isn’t actually so simple. The Bureau of Economic Analysis reports that overall economic growth keeps chugging along in the Buffalo-Niagara Falls metro, year after year, getting us to around $50 billion in inflation-adjusted dollars in gross domestic product here by 2014, up from $47.1 billion in 2009. We’ve had a growth rate, since the Great Recession, of about 1.4 percent a year—lower than the 2.3 percent overall growth rate for metropolitan areas, but a whole lot better than a sharp stick in the eye, or another Great Recession. Compare that to Cleveland, which has had a lower growth rate—sprawling, depopulating Cleveland, with its two big pro-sports championships, with its statewide tax cuts and regulatory relief, managed only 1.2 percent growth in 2014. Pittsburgh, by contrast, achieved 2.9 percent growth in 2014. It was a long time in coming—and now, a more robust regional economy there may actually be sustainable through the next recession.
Andrew Cuomo’s late father tried technology investments to jump-start economic activity in the shrinking Upstate New York city centers. So did George Pataki, and, during his brief tenure, so did Eliot Spitzer. But if you’ve followed this column over the past decade, you’ve read data about population decline, ongoing suburban sprawl, the shift away from high-paying jobs in production to low-paying jobs in hospitality and retail. You’ve read about the disgusting but legal looting of our public resources by politically-connected real-estate developers, and you’ve read data about the left-behind—especially African-American men, who in Buffalo (and throughout the Rust Belt) endure the highest levels of disengagement from the workforce. We’ve presented the data at academic conferences, and told the sorry story of how Upstate New York is fiscally dependent on Downstate New York. We’ve described the issues minutely, and have a reputation for telling uncomfortable truths.
That’s why the paradigm shift under Andrew Cuomo’s governorship has been so compelling. Flawed by the alleged corruption of the Ciminelli construction firm, flawed by the continued reliance upon a university system that underinvests in honors students and in faculty who actually bring the elusive competitive research grants home, and flawed in not having been magically capable of transforming local leadership institutions into the collaborative, visionary, patient institutions that have repositioned Pittsburgh—but Cuomo’s gambles are sensible. He’s putting big money into new-energy technology, small but smart money into sponsoring entrepreneurs, and political capital into pushing local governments to get busy with restructuring.
Will it work? Let’s hope. Should we whine and moan about it not having delivered nirvana? Sure, go ahead, if you want to keep company with Carl Paladino.

Bruce Fisher is visiting professor at SUNY Buffalo State and director of the Center for Economic and Policy Studies.

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