One of the ironies of America is that we were founded on lofty principles of man’s right for self-determination and a bevy of personal freedoms, but as soon as the country got rolling, one freedom never explicitly stated took hold of our imagination and we have never let it go since – the freedom to make money. When James Carville, Bill Clinton’s political strategist, coined the phrase “It’s the economy, stupid.” During the 1992 presidential election, he captured the elemental reality of American life; money drives all. The United States is probably the most money mad country in the world, if not the history of the world, and New York, the capital of money, is where money talks like nowhere else.
I entered New York in Ripley, about as far from Wall Street as a person can get in New York State. There is something audacious about the ‘Welcome to New York– The Empire State’ sign standing along the quiet two lane road. How can a state be an empire within a country that itself has never been comfortable wearing tha label? The emblem of New York is featured on the sign, liberty and justice flanking a pastoral scene with the motto ‘Excelsior’ bannered beneath. Ever higher, always upward, Excelsior is as lofty a motto as a state can claim. Confronted with terms like Empire and Excelsior, I considered the gauntlet drawn. During my week pedaling through New York I would observe how the state lived up to its claims. Is it truly an empire, reaching ever higher, and is money the barometer of those claims?
By most measures New York is not what it used to be. It is no longer the most populous state, or even the second; California and Texas make those claims. Nor does it have the highest average personal income. New York City is no longer the largest city in the world, or even in the top ten. Even Wall Street does not call all the economic shots anymore, though it still eclipses any other market. The glory days of New York mirror those of the United States as a whole almost perfectly. The sensibilities of the American Century are the sensibilities of New York, snappy sophistication, money, and power delivered up with a can-do attitude, judging people by what they’ve done more than how they were born, yet judging them nonetheless.
My plan was to continue along Lake Erie on the western edge of the state, pedal along the Erie Canal and Mohawk Valley, through the Capital District and into the Berkshires. Even though I would cycle through Buffalo, Rochester, Syracuse and Albany, New York’s second, third, fifth and sixth largest cities (Yonkers is fourth), by New York standards I was wading through the provinces. Upstate contains 95% of New York’s land area but only 40% of its population; 60% of New Yorkers are scrunched into the ten counties that comprise the New York Metropolitan area. Still, seven million New Yorkers live Upstate, enough to make it the 13th most populous state if it stood independent of the Big Apple. And they all live under the banner of the Empire State.
The first day I cycled through New York I kept an eye out for appropriate measures of empire. Wealth is one measure for sure, but empire also implies influence; a society that exerts itself beyond its borders. Cycling through Dunkirk and into Fredonia gave me no reason to think that New York had advantage over other places. But on my second day, as I approached Buffalo rising in the grey distance beyond the bluffs of Lake Erie, I felt the power of the place. Perhaps I was just lucky in my route, but meandering through Buffalo, as I had done in other cities, revealed a solid place, brick and granite and well-tended. If I did not know about Buffalo’s statistical decline in population, I would not have surmised the city was shrinking. Downtown was clean and busy, the Olmstead Parkways beautifully groomed, and though there were ample for sale signs on houses in working class areas, I did not ride through any neighborhoods with the desperation of boarded houses and the ‘$0 Down and $398 per month’ signs that littered Ohio. When Buffalo hosted the Pan American Exhibition in 1901 it had 350,000 people, was a major railroad, seaport and industrial center and had every reason to expect that it would continue as a leading American city. But the Saint Lawrence Seaway ended the commercial viability of the Erie Canal forever, Rust Belt industries tumbled and people found reasons to escape the harsh winters. Today the population is dropping fast from a 1950 peak of 580,000 to under half that, 261,000. Despite the tumble, it has lower unemployment than the national average and Forbes magazine recently listed it as one of the top ten cities to raise a family. While no city would choose to deflate, I was impressed by how Buffalo is managing such a soft landing. It has shifted its economy to stress education and healthcare over industry, extolls the virtues of easy commutes and minimal traffic. While Cleveland’s idle infrastructure makes the place feel alien, Buffalo’s excess capacity provides elbow room. During Buffalo’s prime, the city invested in institutions and planning that reflect grand ambition. This pride of place has weathered downsizing well, which left me wondering if perhaps a measure of empire, like a wealthy dowager, might be its ability to age with grace.
The role of money in empire can be distilled into two numbers, $1,700,000 versus $289,000. One point seven million dollars was the average price for aManhattan condo in October 2010, 1700 square feet or so with two bedrooms in a respectable neighborhood. This is down from the peak of 2008, but is still a stratospheric number for most of us. $289,000 is the asking price for a 4,000 square foot, five bedroom Italianate mansion on Center Street in Medina, NY, compete with swimming pool, separate garage and mature landscaping; a grand house with beautiful period detail and a charming widow’s walk in a prime location of an elegant town. These two numbers tell a deeper story than the real estate adage of location, location, location. They represent our complicated relationship with money. A person who buys a Manhattan condo is investing in it; she may live there but the purchase price has more to do with expectations of market rises and falls than the actual cost of providing shelter. On the other hand, whoever buys the mansion in Medina will buy it because they want to live there. A quick Internet survey indicates that the Italianate masterpiece is the most expensive house on the market in Medina, and there is no reason to expect prices in this Snowbelt town to climb anytime soon. From another perspective it is a great deal because unlike the Manhattan Condo, no one could recreate this incredible house for the asking price.
Money is one of man’s greatest inventions. We have created a medium of exchange with no inherent worth that represents whatever value we assign to any good or service. This is a sophisticated concept. In the past money actually represented something, most recently gold bullion in Fort Knox. When a dollar represented a specific amount of gold and that gold was secured away in a vault, there was a clear connection between a dollar bill and a tangible asset. But that quaint relationship died for good in 1973 when we went off the gold standard, then priced at $42 per ounce. Now, with gold selling for over $1500 per ounce, the relationship between a dollar and the price of gold is as speculative as the cost of a Manhattan condo. These days money is abstract, free to float in value. Yet the more abstract money becomes, the more central it is in our lives.
The amount we pay for anything today has more to do with perception than any fixed value. The cost of production of any good or service is just one component in determining its price. Traditional economic principles like supply and demand can affect price, but so can social policy. Cigarettes cost more than their production warrants because we tax them high to discourage their use; hybrid cars are relatively cheaper than their production cost because we provide tax rebates to encourage their use. But as money becomes less fixed to anything tangible, the more price is determined by psychological factors, often resulting in wild extremes. That is why I can buy a hamburger for one dollar at McDonald’s (according to personal observation) or for $175 at the Wall Street Burger Shoppe (according to Gothamist.com). Once external forces determine that something is desirable, whether it be a fashionable accessory, a watering hole or a tony address, the price of it rises. If something happens to be both desirable and unique, the price rises even more. The mansion in Medina is unique, but Medina is not considered desirable, while the average Manhattan condo is desirable, though not unique. Unique condos in Manhattan can sell for ten times the $1.7 million average.
The psychological importance of money reaches its zenith as we realize that even the money itself, the paper and coins, is disappearing. Most of us carry incidental cash in our pockets, but the majority of money in our lives is nothing but numbers on spreadsheets. Some of us have positive numbers on brokerage accounts or bank statements, most of us have negative numbers on credit card bills. Forget worrying that there is no gold that corresponds to our dollars; in the twenty-first century there are no dollars that correspond to our dollars. In an overheated economy more people buy and sell more goods, money changes hands rapidly, and there is more money. When a recession hits people buy less, there are fewer transactions on our respective spreadsheets and there is less money. Taken to the extreme there really isn’t any money at all – all we have are numbers on spreadsheets that tally our collective deposits and withdrawals in the consumer world. Conventional wisdom says you can’t buy anything if you have no money. The fuzzy math of floating currency leads to the exact opposite conclusion. If no one buys anything, then there isn’t any money.
Given our predilection to consume, we don’t have to worry too much about people not buying anything, so money is here to stay. In fact, we buy so much that most of us are in debt. The average household has over $15,000 in credit card debt alone; load the car loans and mortgages on top of that. Debt has become a way of life for many Americans, with the result being that debt is more socially acceptable; even bankruptcy has lost its sting.
There was a time when being free of debt was considered a virtue, now we value the trait that someone is ‘good with money’. Guys who know how to buy low and sell high, negotiate a great deal, and otherwise ‘make’ money without actually creating any value are highly rewarded. One look at Wall Street salaries will shatter any lingering doubt about that. Money has become its own form of goods and service, spun free of actually creating a good or service. There is so much money to be made these days simply manipulating money that Financial Services is now the most profitable sector of our economy.
What are the implications of money being a relative concept rather than fixed commodity and is it beneficial that it permeates our lives so deeply? Let’s return to the recent Great National Debt Ceiling Debate. By the summer of 2011 a furor rose over the United State srunning out of money. Actually, the government has been out of money since the 1940’s when we borrowed to finance World War II. In the past seventy years there have been a few times when the debt level has been flat or even decreased, but it has never been fully paid. It climbed at a modest pace through the 50’s and 60’s, but since 1969 we have spent more every year than we take in. The debt ticked up in the early 1970’s, rose quickly in the 1980’s, had a brief period of leveling in the 1990’s and has rocketed in the 2000’s. Right now our gross public debt is close to $14.7 trillion, which translates to almost $50,000 per person. These are incomprehensible numbers such that now money is not only abstracted to digits on spreadsheets; it is abstracted to amounts we can’t comprehend in any meaningful way. The national debt has a life of its own, spinning up at dizzying speed. Yet it seems to have very little to do with our daily lives, the reason being that the debt never comes due. Whenever we want more money than we have, we simply borrow it. We have managed to all get in hoc to each other and are collectively poorer as a result.
Americans are not alone in our penchant to borrow whenever we want. Every industrialized nation has a sizable national debt. The United States is at the high end in terms of total debt but we are in the middle as a measure of GDP (we owe about 60% of GDP) since our total economy is so large. There are those who say we owe this to ourselves so the debt does not matter, but we now owe more than 25% of our debt to foreigners and at some point the debt will matter as the increasing cost of bearing this debt drags our economy down.
If we step back and view the debt situation of all Western nations over the past fifty years, one thing seems clear. We are all fueling our economies on debt, we are consuming more than we produce and nobody knows at what level of debt the entire system spins out of control.
The trouble with the Great National Debt Ceiling Debate was not that is occurred, it is a debate that we need to have, but that it occurred with such rancor and discord and produced such paltry results. Our national debt is a real and growing problem and anyone who pretends the situation can continue on, business as usual, only needs to look at the chaos in Greece to see what the future holds. However, stopping our ability borrow cold turkey and shutting off ongoing government services is a kneejerk response to a problem that took decades to fester and will take decades of thoughtful action to resolve. We have all had a hand in contributing to the national debt, Republicans and Democrats, business and unions, public and private employees, retirees, unemployed, tycoons and welfare queens. Every time we receive a government benefit that is not paid for by tax revenue, we contribute to the debt. Every time we wage a war or repair a bridge or start a social program that is not funded, we contribute to the national debt. The national debt is nothing more than all of things that we said we wanted but were unwilling to pony up the money to buy.
If one of our guiding principles is to ‘form a more perfect Union’ we need to recognize that carrying this tremendous debt is a burden on our union. We must each accept our role in the situation, roll up our sleeves and address this problem before we become Greece. We do not have to turn it around overnight, but we do have to acknowledge the problem and set timetables to implement change. As long as we feel free to borrow money whenever we want, we can propel the illusion that the life we are leading can continue indefinitely. But if we want to create a country, and a world, where we actually live within our means, we are going to have to reevaluate basic assumptions. This will require significant shifts in our economic perspectives. The results do not have to be draconian but they do have to be bold and they will require a broad economic vision. Our habit of shuffling around a few programs when we give lip service to our debt is not going to cut it.
We have to move away from a consumer driven economy because frankly, it is an unsustainable model of existence that has reached its limits in terms of promoting well-being. There comes a point where, the more stuff we have the more burdensome it becomes, and many of us have surpassed that point. Unwinding the consumer economy will not be easy in a society premised on the idea that whatever ails us can be rectified by more stuff, but eventually we will get to a point where people understand that every aspect of life has a balance, and there is a point of having ‘enough’ is actually preferable to having ‘more’.
In a post-consumer economy ‘stuff’ will disappear. Just as money went from gold bullion to bills to computer digits, we will have less need of actual objects. One small example is the evolution of home movies. First we had videos, then DVD’s then Netflix in the mail and now movies on-demand to our screen. There are some people who like the collector aspect of having shelves of DVD’s on display, just as some folks like to display home libraries of books, but most of us want the experience of watching the movie, not the movie itself. We don’t need or want the actual object associated with it, and now, the object has disappeared while the experience is still available.
Coupled with the evolution of a post-consumer economy will be the ability to generate economic growth out of renewable resources. Consider how radically communication has changed in the past twenty years. With laptops and the Internet and cellular phones we have completely decentralized yet fully integrated communication systems. We can do that with energy as well. Let’s use solar and wind and hydrogen to develop a decentralized system of producing power that is fully integrated so we can keep our American love of the private automobile and our amazing infrastructure of roads, but develop vehicles that don’t need gas to drive on them. Like our communication systems, decentralized energy will take innovation and expense to get started, but once it is up and running it will result in lower energy costs for all and lead us to much needed energy self-sufficiency.
The same drive for decentralized development should be pursued for every social and economic endeavor; integrated systems of manufacturing, construction, education, and healthcare. The world will be a completely fluid place, we will have the capability to do things just about anywhere we want, yet be connected to everyone else as well.
These changes will be hard to come by, people will cling to what they already know, negotiating will be difficult with those who want to cut the economic pie a particular way instead of understanding that the pie is not a fixed size; it is expandable. When the economy is measured in possibility rather than in limits, limits are eliminated. The United States will be tussling with every other country for a stake in this evolving economy, but if we recognize our long term objective of creating a fiscally sound Union, we can find solutions where everyone who is invested in the process can win. It will take an educated populace with curious minds and disciplined work habits for us to lead this effort. Fortunately, these happen to be the very same characteristics that fueled the growth of Upstate New York over a hundred years ago, before the term consumer economy even existed, back when money was a good as gold.
The money that inspired New York to call itself the Empire State, the hard currency used to build the Erie Canal and railroads and Wall Street has morphed into money that expands and contracts in tune with economic cycles, that has a tangential relationship to actual costs of production, that is valued differently by each of our psyches, and that has an economic life all its own. It has no intrinsic value yet is deeply valued by all. How does the Empire State stack up against today’s money? Let’s go back to our two pieces of real estate to test.
The average Manhattan condo, $1.7 million, sits comfortably in an empire of floating money. Despite competition from London and Tokyo, the NYSE and NASDAQ are still the lions of the financial world. The exorbitant salaries and bonuses we bestow upon the money gurus of Wall Street, and the outsized influence the island of Manhattan plays on the entire world in terms of finance, fashion, and culture make New York City, still, a center worthy of claiming the title Empire. In this era where mass communications shrink the world while the specialization of the Internet creates myriad niche influences, the sort of mass culture that New York exported during the 1940’s and 1950’s has receded. Now New York City is an empire as opposed to the empire, but anyone mapping the centers of money and influence on the planet would still have to place their first pushpin on The Big Apple.
But how about Buffalo, or her sister city in navigating downscale with style, Rochester; how about Medina, or her sister towns in bucking deterioration and extinction like Lockport or Oneida; or how about the cities I passed through that have fallen into disrepair, Dunkirk and Amsterdam and Schenectady; cities that will need a strong extended hand to yank themselves back to any reflection of their former selves. How do these places fare as representatives of empire? These are the places founded on the hard currency, places whose worth was measured in the sweat of the men who worked the canals and the factories, farmed the fertile soil and developed the industrial innovations that made nineteenth century Upstate New York a mecca of agricultural, industrial, transportation and innovation can-do unlike the world had ever seen before. Upstate was the Silicon Valley of its day, and it will never be that again, if for no better reason than these days incubation can occur anywhere, and most people won’t do it where the climate is so unappealing.
If the sign of true empire, like that of true civilization, is how well we take care of the least among us,New York has serious cracks in its empire. Riding through Amsterdam was like spooling through a documentary of urban American gone wrong, and cycling up State Street in Schenectady I passed too many people wandering aimlessly along an avenue of inopportunity. But cracks can be repaired and the larger portrait of New York’s empire is promising, especially when compared to how other states challenged by post-industrial cities in adverse climates have fared. Upstate New York is a remarkably beautiful place, at least in late summer, and most of it has adapted to the declining opportunities of the late twentieth century with the same resourcefulness that brought wealth and influence in earlier times. Upstate’s days of undisputed power are behind, yet the people, resources, history, culture and ethics that remain are resilient. They are adapting to the changing world rather than capitulating to it. Our country as a whole can learn much from their resilience.
There is still the matter of that grand house in Medina. For anyone thinking it is a good buy, consider the following. Medina, NY has 5,900 people, down 8% since 2000. The average house costs $69,200. The unemployment rate is a shade under the national average at 9.8%, and overall jobs are declining, but the Brunner Industries brake components plant had a banner ad up for employment and was running a full shift when I rode by on a Saturday morning. Sterling Best Places to Live ranks Medina in the top ten places in terms of security and for celebrating Thanksgiving. I can believe that, the leafy town must be breathtaking on a crisp autumn day. The cost of living is 16.6% lower than the US average, yet Medina spends over $8,000 per student in their public schools, a third higher than the national average. I can’t find anything in those statistics to warrant moving to Medin aif I am looking for an investment in the world of floating money. Yet my hope is that someone buys that house, lives in it, keeps it well and in doing so enhances the stability of the town. They don’t buy it because it is a good investment, they don’t buy to make money, they buy it to live in it with the understanding that there are dreams that deserve to come true even if they cannot be tabulated in money.