Now That They've Fixed Miss Liberty, Who Will Fix New York?

The gateway to the "American dream" may have become the worst place to start a company.

Tweet

POOR MISS LIBERTY. WHAT WITH all the hoopla over her 100th birthday, it will be tough to stand still for all the sanctimonious talk about New York City as the gateway to opportunity, the port of entry of the American dream. It was true once, of course -- but no more. Now it's the real estate developers who are moving in on Ellis Island. The tired, the poor, the huddled masses? For the most part, they're doing their yearning somewhere else these days.

My family is from New York. Grandfather Max Kotkin left his native Latvia in the years before the First World War, a step or two ahead of the czarist police. Like tens of thousands of other Russian Jews of his generation, he booked passage to a better future by way of America. He landed in New York.

Max was one of the lucky ones in those days. He arrived with a little money from his father's furniture business. And he brought with him, too, the instincts of an entrepreneur. Before long, he had opened up a small grocery store in the then remote region of the East New York section of Brooklyn. A few years later, two cousins convinced him to give up groceries for the garment trade, just then making its transition from custom tailoring to mass manufacturing. By the mid-1920s, the family's Grand Dress Co., located on Manhattan's Lower East Side, was enjoying sales in excess of $3 million -- in those days, a sizable enterprise.

Not everything turned out so well for Max. He and his cousins also dabbled in vaudeville and movie theaters, where they lost much of what they made in schmattas. Still, when Max left this world in 1948, he left behind a comfortable inheritance to my grandmother and a family firmly entrenched in the great American middle class.

However inspiring you might find the story of Max Kotkin and millions others like him, there is one thing you should know: it is a lot less likely to happen today -- in New York, anyway. New York may now be one of the worst big American cities for starting a small retail or manufacturing business. If my grandfather had to contend with modern-day New York, he'd probably catch the next plane to L.A.

New York is no longer an entrepreneurial city. It is proudly -- even arrogantly -- the supreme bastion of corporate giantism. Sixty-one corporations of the Fortune 500 call New York City their home -- that's more than double the number of the next largest contender, Chicago. Compare that with the 1985 INC. 500, where Los Angeles County boasts 22 entries. New York, with about the same population, has 10.

"Manhattan has become the playground of the very large corporation," explains Kurt Barnard, economist for New York's Federation of Apparel Manufacturers, an organization of garment makers in the tradition of Max Kotkin. "The environment in New York for small business is dismal." Statistics give him reason for concern. While the rest of the nation has seen an entrepreneurial explosion, with the number of small businesses jumping by 17% since 1978, New York's growth, according to the Bureau of Labor Statistics, has been less than 5%.

To be fair about it, New York was also a center for big corporations and financial institutions back in my grandfather's time.But where once the giants coexisted with a vibrant economy of independent businesses, today the giants are crowding the little guy out. And nothing so reveals the growing conflict as the escalating commercial rents.

Take the case of Herbert Pobiner, who has owned Newton Pharmacy at Madison near 61st since 1961. Pobiner is accustomed to doing business in a high-rent district -- until recently, he paid his landlord $62,000 a year. But with $1 million in annual sales, that still left Pobiner with enough to pay himself a decent salary and make a tidy profit.

This year, however, Pobiner's landlord decided to up his rent just a bit -- to $185,000 annually. And it's no surprise that the numbers no longer add up. If he were in another business, Pobiner might be able to move elsewhere, but neighborhood pharmacies don't travel well. "If we lose our location, we lose our trade," says the white-haired druggist now facing an early and unwanted retirement. "We've got nowhere to go."

Nor is trendy midtown the only place small firms are being squeezed out. According to Steve Null, Manhattan coordinator for the Coalition for Fair Business Rent, increases at lease renewals averaged 117% outside the Wall Street financial district. And there are scores of Herb Pobiner stories of hikes in the hundreds of percent. All over the city, family-owned shops, many of them in existence for generations, are being wiped out. In their place come national franchises and high-priced boutiques to cater to the affluent professionals and corporate executives and the city's booming tourist trade.

In a 15-block area of working-class Washington Heights, at the northern tip of Manhattan, Ralph Nelson reports that 40 businesses have been driven out by high rents since the first of the year. Nelson's own Melody Lounge has been part of Washington Heights for 18 years. But now, faced with a rent hike from $1,800 to $9,000 a month, Nelson figures he's the next to go.

 1 | 2 | 3  NEXT