Like politics, I guess we can say that, “All economics is local.”
Take Greene Street.
Walking down Greene Street in NYC’s SoHo during the 1850s, you would have passed 14 brothels. Now, a similar Google Maps stroll would include Ralph Lauren, Tiffany, other luxury retailers and pricey residential co-ops.
Where are we going? To how economic development is about the street where you live.
From Farms to Brothels to Ralph Lauren
In a recent paper, along 486 feet on Greene Street, several scholars looked at 375 years of economic development. Calling the process creative destruction, they took us from “half-slaves” to today’s posh retailers:
- Agriculture (pre-1800s): As part of the Dutch colony New Amsterdam, Greene Street was the home of “half-free” slaves (free for their lifetimes but then children reverted to bondage) who were given land to farm in return for grain and livestock taxes. Then, the British arrived, the land became more valuable and the laws more oppressive. While the half-free slaves were pushed out, the street remained agricultural.
- Residential (1800-1850): Next, located near the heart of city life, the area attracted a residential population of doctors, lawyers, other professionals, craftsmen and merchants. Upper middle class, the block’s value rose.
- Prostitution (1850-1880): All changed when the hotels and a theater that were built nearby attracted prostitution. As the brothels proliferated, the residents departed, leaving homes with lots of bedrooms. Run by women with names that included Miss Daily, Miss Williams, Miss Whalen and Mrs. Bars, the brothels were joined on Greene Street by some immigrants, African Americans and the first manufacturing establishments.
- Manufacturing (1880-1920): Again we have a drastic change. The nightlife moves uptown and the city’s hat makers select Greene Street as a new home. Made possible by Jewish immigration, freight elevator technology and cheaper building construction, and the nearby piers, retailers, and a railroad terminus, the block regains value. By 1886 it was the home of 54 businesses. Then, as firms moved uptown after 1910, again the street declined.
- Planning Battles (1920-1960): For the 40 years after 1920, city planners debated how to develop the area. Even considering the merits of a highway, they reached no consensus.
- Artists (1960-1990): With the neighborhood deteriorating, values sinking and empty high ceilinged loft-like factories remaining, artists illegally moved in. They were followed by art galleries.
- Posh (1990s-now): And you know what happened next.
You can see how the value of real estate changed during Greene Street’s history.
Our Bottom Line: Economic Development
Looking from the top down, GDP is a pile of data displaying the value of goods and services a country produces in one year. Adding the value of consumption expenditures, government spending, gross investment (from business and residential housing) and exports minus imports, you can gauge economic development by monitoring quarterly GDP changes.
However, when we flip our focus and look local, we can see what growth is really happening. We can encourage comparative advantage among local communities through which each one is focusing on what it does best and we can applaud Joseph Schumpeter’s creative destruction as economic activities are continually replaced by the next wave of development.