State-Controlled Capitalism, New York Edition
/New York may well be the business capital of the world. While most of the other original U.S. states began their existence as religious colonies of one sect or another, New York/Amsterdam was a trading center from day one and today stands as the premier world marketplace in finance and many other areas of business. And yet we overwhelmingly elect politicians who have no comprehension whatsoever of how this works. Our City also serves as the home to dozens of media outlets that define themselves by incessant bashing of our wealth-generation as somehow evil and immoral.
So, instead of relying on the free-wheeling capitalism that has made us so hugely successful, how about trying some of the state-controlled capital allocation that has done so well by places like Russia, Venezuela, Iran, and Argentina? There have been multiple examples of that in New York over the last several days.
On Wednesday a state entity called the Gaming Facility Location Board recommended approval of three large new Las Vegas-style casinos in upstate New York. Here is the report on the approvals from the New York Times. The three approved locations are: one in relatively remote Sullivan County in the Catskills region (actually next to what once was the famous Concord Hotel); one in the Albany area; and one in the northern Finger Lakes between Syracuse and Rochester.
Now you are undoubtedly asking, why does this require a state "facility location board"? Why doesn't anyone who wants to open a casino just open one wherever he wants, as we do with, say, laundromats or card stores? That's a long story that has a lot to do with the unsavory coalition of Baptists and bootleggers, but suffice it to say that once casinos initially got banned, the process of handing out exceptions offers way too many opportunities for graft for the politicians ever to let go. And thus we have come to a situation where to build a casino you must spend years making the right political contributions and cultivating the pols. And the investment capital goes where the pols direct it to go and when they direct it to go there. So after a process of consideration that has extended over decades, we now are getting these three casinos granted to the politically favored.
The timing of these casino approvals couldn't be more ridiculous. Have they even noticed that Atlantic City is imploding right now before our very eyes? This research report from UNLV (the Nevadans are rubbing it in!) shows Atlantic City gaming revenues off about 45% since a peak in 2007. Casinos there are closing left and right. The same New York Post today that has an op-ed by Bob McManus commenting on the ridiculous New York casino approval also has a news article in the business section reporting on the latest in the "Perils of Pauline" tale of the bankrupt Taj Mahal casino, second largest in Atlantic City, just (maybe? temporarily?) rescued from closure through an investment by Carl Icahn.
Casinos were supposed to be the salvation that would rescue Atlantic City from poverty. The first casino opened in 1978. Thirty-six years later, Atlantic City is a one-industry town with the industry collapsing -- remind anyone of Russia? And it's still poor. But don't worry, in upstate New York, casinos built by political favor and at political direction are going to bring you economic development! Here's my favorite line from the Times article reporting on the Location Board approvals:
[The GFLB] rejected six applications in Orange County, the region closest to New York City, in favor of a single resort in neighboring Sullivan County, to the north, citing the need for economic development.
Got that? We won't allow these things where they might actually succeed, and instead we're going to duplicate the Atlantic City model of forcing them into economic backwaters because "economic development."
Meanwhile, the economic decline of upstate New York continues, and the experience of Atlantic City (and state-controlled capitalism in general), combined with the high taxes imposed by the City-and-suburban-centric political culture make it highly likely that the decline will continue. The population declines in upstate New York, and particularly in the triangle defined by these three new casino locations, are really stunning. Syracuse has declined from a peak of 221,000 people in 1950 to 145,000 (35%); Utica from a peak of 102,000 in 1930 to 62,000 (39%); and Binghamton from a peak of 81,000 in 1950 to 47,000 (41%). The last person to leave should turn out the lights.
But there is another industry that very much wants to come into this area and create lots of jobs and wealth. That, of course, would be the industry of "fracking" natural gas out of the shale formation that extends under most of New York's so-called southern tier. This industry would require no government effort at all -- all the government needs to do is get out of the way and let it happen. Oh, yesterday our Governor permanently banned it. A permanent ban on investment in an industry is another example of state-controlled capitalism. Sorry, upstate New York, but you'll just have to take your chances on the casinos.
UPDATE December 23, 2014: The Census Bureau has just announced that, according to new data as of July 1, 2014, New York has slipped another notch in the state population rankings, this time getting passed by Florida. The populations of the four most populous states as of July 1 are now: California 38.8 million, Texas 26.9 million, Florida 19.9 million, New York 19.8 million. In case you're curious, when I first noticed census statistics back in 1960 the populations of those states were: New York 16.8 million, California 15.7 million, Texas 9.6 million, Florida 5.0 million. The consequences of high taxes and crony capitalism: gradual, relative decline.