Here’s an except of an interesting article by Victor Davis Hanson titled The Destiny of Cities. In reading his discussion of the events that drove the decline of former great cities like Pompeii or Florence, and events that could lead to the same decline of New York today, it’s clear to me that these factors–capital flight and overly redistributive taxes–are already happening in Johannesburg, and Cape Town is clearly benefiting from this trend. When you look at South Africa as a whole, other major cities like London, New York and Hong Kong are benefiting from what’s going on in South Africa.
What could actually end New York, at least as we know it, is commercial failure. The chief danger would be a massive flight of capital, the sort of fate that doomed Renaissance Florence as a banking center. By the seventeenth century, the riches of the New World, Europe’s bustling Atlantic seaports, and Florence’s internecine tribal feuding finally made irrelevant the Medicis’ traditional role as the financial hub facilitating eastern Mediterranean commerce with Asia’s overland spice and silk routes. When Florence’s commercial income ran out and its bankers left, the Florentine cultural renaissance ended. By the eighteenth-century age of the franc, guilder, peso, and pound, it was hard to remember that between 1300 and 1500, the florin had been Europe’s benchmark gold coin.
Examples abound of capital fleeing cities and taking culture with it. Long before the Reconquista drove Islam out of Iberia, eleventh-century Muslim Córdoba—increasingly ill-governed and burdened with court intrigue—tired of its allegiance to free thought, no longer welcomed freewheeling commerce, and became an intolerant Islamic backwater where books were burned rather than produced. Timbuktu, a sixteenth-century crossroads between northern and western Africa, declined as a center for learning after slave traffic and the gold and salt trade routes shifted. Money drives art and culture, and without the ongoing creation of prosperity, higher pursuits die on the vine.
If New York’s financial class fears that New York is becoming a completely redistributive city, it will likewise begin to leave. Already, the combined state and city income-tax rate is 12.62 percent for the highest earners, and in 2011, if Congress adopts President Obama’s tax policies, the combined federal, state, and local tax bite on each added dollar of income for those earners will exceed 50 percent for the first time in 25 years (see “Empire of Excess,” Winter 2010). New York’s increasingly confiscatory and redistributive policies, then, could drive capital to lower-tax southern or midwestern states eager to have it. There is nothing to prevent Charlotte from taking over New York’s preeminent banking role, or Dallas–Fort Worth—America’s fastest-growing urban center—from becoming the nation’s corporate capital. Atlanta, Denver, and Seattle could just as easily divide up much of New York’s cultural leadership.
Capitalists might also flee America’s climbing tax rates and regulations and re-create New York abroad by outsourcing its financial disciplines to Frankfurt, Zurich, Tokyo, Shanghai, and Singapore. The resulting impoverishment back home, in which spiraling municipal deficits would lead to calls for higher taxes on the fewer remaining high-income earners, would leave New York’s current attractions—musical performances, literature, theater, museums, foundations, and universities—without the high-octane financial fuel that propels them.