Regular readers of The Main Street Journal understand that economic development, as practiced today, is grotesquely counterproductive. Cities continue to waste tens of billions of dollars to attract global companies like data centers and Amazon warehouses. Most of these pursuits produce bupkus. But even “winning” cities discover that far fewer jobs were created than promised, that almost none of the new jobs go to residents, that the multiplier benefits are lost because the company’s headquarters is a thousand miles away, and that whatever gains the city might have enjoyed were given away up front in a huge incentive package. More importantly, there is a mountain of evidence that locally owned businesses, if given a fraction of the incentives, could generate 10 to 100 times more jobs and tax benefits.
What few of us have appreciated until now is that this professional malpractice has been happening for more than a century. Daniel Wortel-London’s new book, The Menace of Prosperity, details the history of economic development in New York City from 1865 to 1981, and shows—again and again—how the city has tried to attract wealthy individuals and companies into the city through tax breaks and other benefits. In every historical epoch, it was a Devil’s Bargain. The sacrifice of public resources for private gain never led to the promised benefits. Instead—again and again—it spawned disastrous fiscal crises.
Our featured interview is with Daniel, who is cautiously optimistic that maybe Mayor Mamdani will practice economic development differently. Please forward this discussion to your local economic developers and require them to read Daniel’s book. We actually know a lot about how to do economic development well—by providing local entrepreneurs and other small businesses with finance, technical assistance, mentoring, and public markets. But a critical condition for success is learning from New York City’s history and not throwing away scarce municipal dollars on what doesn’t work.
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MS: The title of your book is The Menace of Prosperity. What you mean is that economic development focused on supporting the wealthiest people in the community is fundamentally misguided. Why?
DWL: We’re usually told that the only way to keep a city solvent is to attract and retain wealthy enterprises and individuals—that without them, cities fall into fiscal crisis. My book traces 150 years of New York City economic policy, and what that history actually shows is the opposite: that every time the city has bet its fiscal health on wealthy actors—real estate speculators in the 1870s, debt-financed
development for big banks in the 1930s, the corporate headquarters chase of the 1970s—it has ended in crisis.
Part of the explanation is structural: it’s dangerous to hang a city’s future on a handful of “too big to fail” firms, or wealthy individuals, rather than a broad base of local enterprises and residents. Part of it is cost: these firms generate expensive social costs—displacement, degraded infrastructure, pollution-driven healthcare burdens—that the public sector must absorb. And a large part, as you well know, is that enterprises that prioritize global profits have little incentive to invest and develop their communities and the governments that serve them.
MS: Your book discusses the history of economic development in New York City between 1865 and 1981. To what extent does this history mirror today’s practices?
DWL: Today’s playbook mirrors the past more than we’d like to admit. There are differences: In the late 19th century, cities chased real estate growth almost purely to juice tax revenue, which reflected their “boomtown” mentality. We see less of that pure boom logic today. A lot of urban planning now is designed as much to secure as accelerate land-value growth. But the underlying logic, to court whoever looks like the biggest and most profitable economic player at the moment, has stayed the same. Where 19th-century cities used land grants and rail subsidies, today we use Tax Increment Financing, clawback agreements, and community benefits agreements. The vocabulary has modernized, but the basic wager—that concentrating public support on a few large, well-connected actors will trickle down to everyone else—hasn’t.
MS: You say both the left and the right have it wrong on economic development. Does this mean you’re against taxes on high-earners that New York and other states are currently considering?
DWL: Not at all—I support taxing the wealthy more. But taxation alone isn’t a full strategy. Right now, our cities are structurally dependent on wealthy taxpayers and firms, and that dependency hands them enormous economic and political leverage. As I put it in the book, the power to be taxed is also the power to destroy, since elites can translate their fiscal leverage into the political leverage needed to sideline other policies. Simply raising rates on elites is necessary but not sufficient, particularly when those elites are responsible for weakening the economic health of our communities in the first place. Instead, we need to both tax the wealthy and use some of that money to make the wealthy less necessary to our economies. We need to seed enterprises that have deeper and wider economic benefits to their communities—small businesses, public banks, cooperative enterprises, land trusts, and other locally rooted institutions. Ultimately, you can’t rely on a regressive economy to deliver progressive outcomes, no matter how well it’s taxed.
MS: Your “Communitas” chapter discusses decentralization advocates like Lewis Mumford, Leopold Kohr, and Henry George. Are these insights relevant for big cities like New York today?
DWL: Very much so—though I’d widen the lens from cities to regions. Just as it isn’t economically or politically safe for a city to rely on a handful of dominant industries, a country can’t rely on a handful of super-charged city-regions to secure both justice and development. Right now, we’re watching two afflictions at once: small towns hollowed out by decline, and big cities like New York crushed by housing shortages and the looming collapse of AI-driven office demand. These look like opposite problems, but they’re symptoms of the same underlying crisis—a concentration of economic activity, and the capital that drives it, in too few hands and too few places. The fix has to treat both sides together: deconcentrating economic opportunity geographically is the necessary companion to deconcentrating economic power, which has to remain the core political goal.
MS: One important writer who supported grassroots development was Jane Jacobs. You write, though, that Jacobs’s voluntarism would be “largely insufficient” for preserving the economic diversity she cherished. Can you elaborate?
DWL: Jacobs was rightly suspicious of top-down economic decisions imposed by people outside the community affected by them, and she believed that restricting the power of those outside forces—city agencies and well-connected developers like Robert Moses—would let bottom-up diversity flourish on its own. But preserving diversity and a free market within cities can’t just be a matter of restricting the power of government, especially as corporate monopolies and what Jacobs called “cataclysmic money” can be equally destructive of true bottom-up development. To rein in these forces requires either absolute laissez-faire government (rather than crony capitalism), or a countervailing power—and both require public oversight and public action. Without that active piece, Jacobs’s emphasis on voluntary, organic resistance leaves her vision exposed to co-optation by groups who admired her aesthetic principles but ignored her deeper economic vision —and the egalitarian potential it still has.
MS: You’re most positive about the work of Black visionaries like Robert Allen and William Tabb, who argued for community-owned enterprises in neighborhoods like Harlem. But why didn’t these visions take hold and last?
DWL: Public or community ownership of enterprise has always been a fairly marginal position in American economic thought. It’s much easier to argue that the benefits of private entrepreneurship should be opened to more people than to argue that the underlying model of ownership itself should change. Institutions like the Small Business Administration and conventional financial institutions can mobilize resources quickly (though far from sufficiently!) for small business formats, but there’s no equivalent infrastructure for cooperative or community ownership. And it’s not just conservatives who under-invest here—the broader left hasn’t treated building alternative enterprises as a political priority either, preferring to focus energy on elections and protest rather than promoting economic development on their own terms. More recently, however, we’ve seen movements from the Solidarity Economy space for organizations like the Bronx Economic Development Corporation to take on the task of economic reconstruction as a matter of both racial and economic justice.
MS: I see this as well. In the local economy movement, there is a tension between just strengthening local businesses and transforming them into worker-owned enterprises. What’s your view?
DWL: I don’t think the answer is picking one model. The more important task is not letting communities get divided, and staying focused on the common threat: displacement and extraction from outside. Some research suggests that cooperatives are more resilient and responsive to community needs than conventional small businesses, but the question of what ownership models should be promoted is ultimately one a community has to make for itself. What cities and movements should do is build up the support infrastructure—financing, technical assistance, legal frameworks—for whichever model the community chooses. Right now, that support is lopsided: the corporate retention model has decades of institutional backing, while the small business and cooperative sides are largely starving for support.
MS: So, based on this history of what works and what doesn’t, how might you reinvent the principles and practices of economic development for a city like New York?
DWL: I’d start by expanding what I call the “fiscal imagination” of policymakers: that economic health isn’t delivered by subsidizing large, mobile firms and hoping benefits trickle down, but by seeding economies that grow from the bottom up. This means that cities need to divorce from financial entities that don’t abide by these principles, and instead embrace entities more responsive to localities and their residents, like public banks and community development financial institutions (CDFIs).
I’d also suggest active support and anchor institution arrangements for small businesses and cooperative enterprises, promoting community stewardship of land assets, and new accounting mechanisms that trace economic “leakages” and costs/benefits of development decisions under different ownership structures. It’s less a single silver-bullet policy than a shift in what the public sector treats as its job in the first place.
MS: Is Mayor Mamdani moving in this direction? How would you grade his economic development plans?
DWL: There are real, meaningful differences. Mamdani is willing to use the public sector aggressively and directly—municipal grocery stores, going after junk fees in a way that echoes Lina Khan’s FTC playbook. His deputy mayor, Julie Su, has explicitly said she wants decisions evaluated by their impact on workers—who clean the C-suite, not just who occupies it. That’s a real shift in orientation. But the core machinery of economic development hasn’t fundamentally changed yet: there’s no comprehensive alternative strategy on the table, and the EDC chair has sat empty for months. Right now, this looks more like the social-democratic playbook—pursue conventional growth, then redistribute to offset its harms—rather than a genuinely different model. The more exciting movement is happening at the grassroots, like the Bronx EDC’s community wealth-building work.
MS: Our focus at The Main Street Journal is local investment, and I’m struck by how little of your history contains coherent proposals for moving capital from Wall Street into neighborhoods. Do you think local investment can improve the success of your alternative economic development strategies going forward?
DWL: Fair catch. I do think local investment is essential; every argument I make against relying on the wealthy 1% for economic growth applies just as much to relying on them for financing that growth. The history does offer some real building blocks, even if no one assembled them into a coherent movement: the Amalgamated Bank‘s century-old model of union-rooted banking, a wave of public development bank proposals from the 1970s that never got fully built out, and the more recent growth of CDFIs. The task now is less inventing something new than reviving and scaling what’s already been tried in fragments.
MS: Finally, I’m curious how you invest locally?
DWL: Not as well as I’d like—my money is still sitting in Chase, which feels a little absurd given everything I just argued, though I’ve started conversations about moving it after reading your book Put Your Money Where Your Life Is. In the meantime, I’ve been trying to build the civic infrastructure alongside the financial piece: we’re forming a block association where I live, my kid goes to the public school a block from our house, I have cookouts with my neighbors, and I’ve gotten more involved in a few local civic institutions. It’s just a start, and I’m looking forward to learning more as I deepen my roots here.
Follow Daniel on Substack here and here.
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