The Case for Optimism August 13, 2009, 5:00PM EST

The Vibrant Promise of Cities

New York's mayor says urban revival has America better positioned to bounce back

By Michael Bloomberg

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Mario Hugo

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What a disaster the past year has been. Fannie Mae (FNM), Freddie Mac (FRE), Lehman Brothers, Bear Stearns, AIG (AIG), Merrill Lynch (BAC), Chrysler, General Motors (GM), and other major enterprises—along with Washington Mutual (WAMUQ)) and more than 70 other banks—all collapsed. The stock market plunged, with many Americans losing much of their retirement savings. Housing foreclosures hit record highs, threatening the health of many neighborhoods. Unemployment soared to its highest level in 26 years.

The pain is spread wide. Here in New York City, I hear it on the subways and in neighborhood diners—jarring stories of struggle and hardship. And we may not have hit bottom yet.

So what is there to be optimistic about? Plenty, actually. This recession may well prove to be longer and deeper than the 1981-82 downturn. But the nation is better positioned to rebound than it was back then. One reason for this: America's urban revival. In the early '80s the future of American cities—historically the engines of economic growth—looked bleak. Violent crime was out of control. Factories were closing. Housing abandonment was common. The transportation infrastructure was crumbling.

THE ADVENTUROUS YOUNG

Today, though, many cities, including mine, have succeeded in cutting crime. (Far be it from me to boast—a New Yorker would never do that—but when you see people lounging on beach chairs in a traffic-free Times Square with no fear of being mugged, you know things have changed.) Safer streets have helped attract creative, entrepreneurial, ambitious people—especially the young—to once-blighted neighborhoods.

Even in the area of domestic manufacturing, where cities have experienced a steady decline as the economy has gone global, there is reason for optimism. New York was once the garment-making capital of the world. Today our production is a fraction of what it used to be, as factories have moved overseas. But a crucial sector of the industry—design—has remained. It's the sector that relies on ideas. And to paraphrase Harvard University economist Edward Glaeser, the demand for ideas isn't going away. That's why even though the financial services industry has contracted around the world, other innovative and high-tech industries are stepping in, working to strengthen and stabilize cities like New York.

Then there's our nation's entrepreneurial edge. Technology has stretched the bounds of entrepreneurialism. If you can dream it, you can build it, and the U.S. has always been a nation of dreamers, even in the toughest times. Indeed, a recent report by the Kauffman Foundation, which studies entrepreneurialism, points out that half of today's Fortune 500 companies were founded during a recession or a bear market. Consider this partial list: Procter & Gamble (PG) (1837), Hewlett-Packard (HPQ) (1939), FedEx (FDX) (1973), CNN (TWX)(1980), and one close to my heart, Bloomberg (1981).