Mamdani's Socialism Threatens NYC

Industries often gather in central locations - health care in Minneapolis, energy in Houston, insurance in Hartford, and finance in New York. Despite several spells of bad management which made New York City a difficult place to live - including the 1960s 1970s, and late 1980s - the financial industry still remains. The largest banks and the biggest hedge funds are all located in New York. However, 158 firms with $1 trillion in assets have left NYC in the last five years due to several factors.

Times just aren’t what they used to be. For example, the New York Stock Exchange market share of stock trading has dropped to just 10% in today’s digital world. Most financial exchanges are electronic and can be conducted from almost anywhere. During the pandemic, most of the big banks' trading floors operated virtually.

Some fear that avowed socialist, and mayoral candidate, Zohran Mamdani, might make NYC a bad place to live once again if elected. Some even speculate that New York's profitable financial industry could relocate to places such as Nashville, Austin, Miami, or Atlanta should he be put in charge.

There were once endless beneficial networking effects from joining in groups. However, when business can be conducted online with few, if any issues, the clustering benefits begin to disappear. The enormous hedge fund, Citadel, is in the process of setting up an office in Miami. Even Goldman Sachs is setting up a large presence in Dallas and Miami – cities located in mostly conservative and tax friendlier states. (Though not financial, In-and-Out Burger CEO recently announced a second headquarters to be built in conservative Tennessee. She is moving her family away from liberal California. Might the CA headquarters close in the near future?)

Mamdani threatens to raise taxes in NYC, which is the most heavily taxed jurisdiction in the country already, with a top marginal rate of 14.775 percent. He also wants to impose rent control. Mamdani was not alive during New York City's last big experiment with the concept, which resulted in "urban decay." He pledges to freeze the rent, which will lead to a further shortage of apartments and destroy any incentive for landlords to keep maintaining existing ones. History has shown, time and again, that the fastest way to destroy a city is through rent control. Yet socialists keep coming back to it because it sounds like a kind thing to do for those less fortunate or less successful.

In addition, Mamdani has let it be known that billionaire contributions are not appreciated, though apparently, not unwelcome. Should additional companies - with trillions of dollars in combined assets - continue to leave, they would also take a significant portion of the tax base with them. Destroying the tax base is a good path to bankruptcy, which NYC has come close to previously. Socialists fail to recognize the most basic fact – eventually you run out of other people’s money.