In the horrible days following the death of 5,500 New Yorkers and the destruction of the World Trade Center, businesses and citizens alike have been quick to reaffirm their commitment to the city. From American Express Co. (AXP) CEO Kenneth I. Chenault's vow to keep his headquarters in the city to developer Larry A. Silverstein's promise to rebuild the World Trade Center--which experts estimate could take five to seven years and cost $10 billion--civic pride was everywhere. But as New Yorkers resume the familiar routines of city living, from boarding the subway to boarding high-rise elevators, big questions remain about how well New York will survive this crisis.
As the terrorists intended, the attacks dealt a body blow to the financial-services industry. Now, as firms scramble for space, there is even some question whether New York will remain the country's financial center. If it does not, can New York still thrive? Already, many of those displaced companies are seeking temporary quarters in New Jersey, Connecticut, and elsewhere--while city officials scramble to prevent those moves from becoming permanent.
And it's not just the future of one business sector in one city. The disaster raises larger questions about the function and future of all cities. As New York's recovery grinds on, urban scholars, architects, and sociologists expect a new debate on the very viability of cities. Are the benefits of concentrating so many people in a narrow space worth the risks--particularly now when the Internet and other technologies are providing new ways to work? The debate could shape up as the latest challenge to the '90s comeback of the cities.
"FIRST MAGNITUDE." It seems unlikely that this attack could lead to another middle-class exodus like that of the 1970s--which left New York crime-ridden, with its cultural landmarks in jeopardy and its government one step from bankruptcy. But all agree that the New York that emerges will be fundamentally different in spirit and structure from the one that people bustled through on their way to work that morning. "This is a tragedy of the first magnitude, and we can't step back," says Kenneth T. Jackson, professor of history at Columbia University and a director of the New-York Historical Society. "But New York has a diversity of experiences that energizes people, and I don't think we're going to lose that."
Even if, over time, New York is bound to recover, in the shorter term the disaster is sure to batter the city. For one thing, Jackson points out, the events challenge the revival that U.S. cities enjoyed in the 1990s. New York and other metropolises thrived as the idea took hold that they were safe again. In the past decade, as crime declined, a century-long trek to the suburbs began to slow. Boosted by immigration, some cities, including New York, even showed surges in population in the 2000 census. Now, says psychiatrist Robert Jay Lifton, author of Destroying the World to Save It and an expert on the effects of the atomic bomb on Hiroshima, "there is a new and painful sense of vulnerability" here.
For many companies, the attack has added to the arguments for moving some or all of their operations out of the city. The securities industry, which accounts for 5% of the city's jobs but 19% of its salary base, was hardest hit in the attack. These companies had already begun to shift jobs out of the city, in part to get away from high rents. Banking giant J.P. Morgan Chase & Co. (JPM), for example, had opened operations in Delaware, Florida, and Texas. Now, with the sudden loss of 30 million square feet of prime New York real estate, many more firms have moved across the river to New Jersey, and elsewhere, fueling worries that they won't be returning.
That would be a great blow to New York, which relies heavily on taxes from the industry. According to New York State Comptroller H. Carl McCall, the city has become increasingly dependent on the securities industry over the past eight years. Between 1992, when the last recession ended, and 2001, the securities industry climbed from 13% of total city wages to 19%, notes McCall, even while the number of jobs grew only modestly. McCall calculates that the industry has been responsible for nearly one-quarter of the increase in all of the city's tax revenues since 1992, excluding real estate taxes.
TOP TALENT. Still, many argue that New York will remain the epicenter of world finance. The believers say that the city will continue to be a mecca for the hard-working and ambitious and that firms wanting to attract the top talent will need to be here. Take the New York Board of Trade. The group, which trades $60 billion worth of cocoa, orange juice, and other commodities each year, had been housed in the now-collapsed 4 World Trade Center. Now, it's temporarily ensconced in a disaster-relief facility in Long Island City, in Queens, but is negotiating for permanent space in the New York Mercantile Exchange. Others maintain that, while certain functions may in time migrate out of the city, New York will remain a financial hub. "There's a logic to having [people in close] proximity," says Morgan Stanley President Robert G. Scott. "Modern-day communications make that less necessary--but I think you'll still have a financial district."
That belief--that in a wired world, human interaction with the best and brightest still matters--is what the future of New York and other urban centers will hinge on. Even though computer and telecommunications technology have made remote work possible for a decade or more, urbanists note that cities with their concentrated populations have continued to prosper. At a time of labor scarcity, businesses want to be where their workers want to live, and younger workers crave the excitement and variety of cities. Tech companies benefit from proximity to universities and research hospitals. The economy has continued its shift to more and more knowledge-based activities--and the contacts fostered by cities are a great stimulus for new ideas.
Some see New York's future downtown as a somewhat contracted financial district populated by companies that need to be near one another and their specialized work force, complemented by a mix of other industries, residential buildings, and retail. University of Chicago historian Neil Harris sees parallels with the 1871 Chicago Fire, in which one-third of the city was destroyed. In the aftermath, a new school of architecture sprang up, which created steel-frame skyscrapers and later gave opportunities to young architects such as Frank Lloyd Wright. And for vitality and creativity, it's hard to beat a great city like New York. "Historically, awful things have always happened in cities, which you would have thought would discourage people from living there," says Witold Rybczynski, Meyerson Professor of Urbanism at the University of Pennsylvania. "What's so striking is that it doesn't really stop anybody. They come back and rebuild." By Nanette Byrnes with Michelle Conlin and Gerry Khermouch in New York and bureau reports