NEW YORK CITY, ECONOMIC BACKWATER

New York’s decline in wealth has been particularly notable. “Where Have All the Rich People Gone?” asked New York magazine in a tongue-in-cheek evaluation that suggested the trend wasn’t really such a big deal. In 1997, only 36 New Yorkers made the Forbes list — own from 74 in 1982. In fact, barely over a quarter of the 400 now come from the entire Northeast, from Maine to Washington. When Forbes first published the list, in 1982, one third did. And the numbers tell only half the story. Those who remain in the Northeast tend to be the “old rich” — people who made their fortunes a generation ago. David and Laurance Rockefeller, Robert and Laurence Tisch, the Newhouse brothers, Donald Trump, Sam LeFrak — all have fortunes tied to inheritance, real estate, or older technologies. Others, like George Soros and Rupert Murdoch, use New York City only as an address. “New York is simply no longer a place where people are becoming wealthy,” says David Birch of Cognetics, a Cambridge, Mass., firm that tracks economic growth. “There is a lot of old money there, and most of it will probably stay put. But no new fortunes are arising. All that is happening elsewhere.”

With the arrival of the Information Age a few years ago, pundits began predicting that business and industry would decentralize and spread out across the countryside. It would now be possible to run a stock brokerage out of a converted barn in Vermont. That prediction has largely proven true. Of Inc. magazine’s “500 Fastest Growing Companies in America,” only 178 are located in the nation’s 100 largest cities. Overland Park, Kan., is better represented than Boston, Philadelphia, or Washington. The Bureau of the Census announced recently that, since 1992, for the first time in the nation’s history, job growth in the suburbs has outpaced growth in either urban or rural areas.

Modern industrial progress no longer requires large pools of relatively unskilled labor. Companies can set up in the remotest parts of the country. In fact, there is a positive payoff in escaping regulation and other costs of doing business in older urban areas. Businesses can be located in ” greenfields” blissfully free of environmental problems. Silicon Valley is the best example. Lying in the long peninsular corridor between San Francisco and San Jose, it is only marginally connected to either city. Its spiritual center, if anywhere, is on the Stanford campus in Palo Alto. Its employment centers are Mountain View and Cupertino, quiet suburban communities that just happen to contain the largest aggregation of technological might ever assembled.

Ted Waitt was a 22-year-old Iowan when he moved to more remote South Dakota to set up Gateway 2000 in 1985. Last year the company netted $ 250 million. Michael Dell chose his hometown, the sleepy Texas capital of Austin, in setting up a mail-order computer business. Far from the major routes of transportation or any retailing hub, he grossed $ 7.8 billion in fiscal 1997, selling $ 2 million worth of computers a day on the Internet. “Many of these successes in the Midwest and Mountain states are tied to one individual,” says Birch of Cognetics. “The question is, where is that individual?”

The pattern was graphic in Forbes ASAP’s “Technology 100,” announced last fall. Of the 100 richest people in Information Age companies, an astonishing 66 were from California or Washington state. None was from New York City, Boston, or Washington, D.C. Only three were from New York state (one being Lou Gerstner of IBM). Four were from the suburbs of Boston and three from the suburbs of Washington. Huntsville, Ala., Grand Forks, N.D., and Rochester, N.H., were better represented than any northeastern metropolis.

The creation of new wealth is beginning to show up in investment figures as well. The Fortune 500 list measures firms by their gross revenues. Thus, long- standing giants such as General Motors ($ 168 billion), Ford ($ 146 billion), and Exxon ($ 119 billion) still dominate the list. But when corporations are measured by their market capitalization (the value of their outstanding stock) — which reflects flows of investment and thus indicates likely future growth — the information companies are already dominant. Microsoft (172nd on the Fortune 500, with revenues of $ 8 billion) now has a market capitalization of $ 116 billion. This makes it larger than General Motors ($ 49 billion), Ford ($ 38 billion), and Chrysler ($ 21 billion) combined. Cisco Systems (332nd, with revenues of $ 4 billion), the San Jose firm that makes switching systems for the Internet, has a market value of $ 33 billion, almost as large as Ford’s.

“What people in New York and Washington don’t seem to grasp is the scale of things happening beyond their horizon,” says Joel Kotkin, an urban analyst and Brooklyn native who followed the Dodgers to Los Angeles. “The whole economy is growing out from underneath them.” Kotkin points to the quarterly figures for new industrial construction compiled by Grubb & Ellis. The Pacific Southwest regularly averages about 10 million square feet, the Pacific Northwest 7 million, the Mountain states 15 million, the Midwest 13 million, the Southeast 10 million. The whole Northeast averages only 2 million square feet a quarter. “People on the East Coast think all the smart people in the world are assembled in Manhattan, Boston, and Washington,” says Kotkin. “There are a lot of smart people in those cities, don’t get me wrong. But what they don’t realize is that there are smart people almost everywhere you go in this country today.”

City enthusiasts have always argued that thinly populated settings can’t provide the “face-to-face” contact that stimulates creativity and nurtures new ideas. Yet the techno-suburbs seem to be doing very well in that respect, too. The Internet, of course, shortens all distances and provides virtual face-to-face contact in any setting. But Silicon Valley seems to be generating its own informal contacts as well. Business Week’s special issue on Silicon Valley last August described business deals struck at coffee shops and important scientific collaborations born at school-board meetings.

One of the saddest chapters in the tale of the East’s decline is the sputtering of “Silicon Alley,” which was supposed to represent New York City’s challenge to California in the Information Age.

Around 1993, a group of Web-oriented start-ups began to appear in lower Manhattan. New York’s abandoned industrial districts in TriBeCa and SoHo proved perfectly suited for the Information Age. While heavy manufacturing had left the city because of space limitations, the old 19th-century industrial buildings were ideal for high-tech firms. Soon companies such as Musical Pen (producer of “The Magic Schoolbus” CD-ROM) and Razorfish were functioning out of converted manufacturing space. Real-estate magnate Lew Rudin turned the abandoned headquarters of Drexel Burnham at 55 Broad Street into a high-tech center.

In January 1995, Peter Huber wrote an enthusiastic article for the City Journal entitled “New York, Capital of the Information Age.” “Without question,” he enthused, “New York remains the unrivaled telecom hub of the planet. In electromagnetic terms, the city is both a huge, quivering antenna – – a giant receptor of telephone, radio, and photonics — and also the brightest beacon on the planet, a cyber-quasar pumping out vast amounts of energy in the form of radio waves and glass-encapsulated light.” Eleven months later, New York magazine picked up the story with a special issue: “High Tech Boom Town: It’s 1995, and Suddenly New York is Cyber City.”

“Content is King” became the Silicon Alley rallying cry. Once the hardware was in place, it was argued, New York’s greater ability to produce intellectual content would overcome Silicon Valley’s ability to produce hardware. “California makes boxes,” proclaimed Mark Stahlman, a one-time soldier of Lyndon LaRouche who is now Silicon Alley’s unofficial press officer. “New York produces culture.”

Three years later, the euphoria has waned. Lower Manhattan has produced some interesting start-ups, and Silicon Alley now employs about 125,000 people, according to a Coopers & Lybrand study. But the same study noted that Silicon Valley’s Big Five — Intel, 3Com, Cisco, Netscape, and Sun — annually produce more than 22 times as much as all of New York’s New Media companies. While there are 200 initial public offerings across the country each year, raising $ 12 billion for new businesses, Silicon Alley has yet to float its first IPO. “It’s nice for New York to pretend it has a booming high- tech industry,” says Omar Wasow, president of New York Online and an MSNBC commentator. “But until the environment changes — the taxes, the regulation, the crappy public-education system — it’s going to be a struggle.”

As technological success moves west, banking resources are sure to follow. New York commercial banks still have $ 1 trillion in assets — more than double California’s and 22.5 percent of the national total. But venture capital is rapidly congregating around San Francisco and Silicon Valley’s Sand Hill Road. This March, AlleyCat News, a New York technology newsletter, plans to take the CEOs of 24 Silicon Alley start-ups to San Francisco looking for financing. “We want to show the California investors what’s going on back here,” says Anna Copeland Wheatley, editor-in-chief of AlleyCat. Nonetheless, it will probably mark the first time in history that New York firms have crossed the country en masse looking for venture capital.

One thing that critics unanimously point to is the lack of technical understanding in East Coast cultural circles. “The folks here didn’t seem to understand the ‘Browser Wars’ and were befuddled at how Microsoft can put buggy software on the market,” wrote Gary Andrew Poole in Forbes ASAP after spending a few evenings among New York’s techno-elite. “[It] quickly becomes clear that this could be any town in America with a few multimedia startups.”

Some months back, the New York Times Sunday Magazine ran a special edition entitled “What Technology Is Doing to Us.” The cover featured Michael Richards, of Seinfeld, helplessly trying to operate his TV’s remote control. Staff writer John Tierney’s opening piece made a game effort to promote the technological revolution, but the rest of the issue quickly degenerated, with an account of Laurie Anderson’s first LSD trip, a meditation on the politics of the sixties, and a story about people who use food supplements to try to live forever. In New York, they still seem not to get it.

Boston’s Route 128 complex gets better reviews. “The only place on the East Coast that is really surviving the Information Age is Boston,” says Kotkin, who is based at Pepperdine University. MIT, of course, is a center of technological discovery, but even most of its graduates quickly head west. A recent study by Bank of Boston found that MIT graduates had created 732,000 jobs around the country over the past ten years. Although 125,000 of these were in MIT’s home state, far more — 162,000 — were in California. Only 15, 100 were in New York, one fifth as many as in Texas (84,000) and fewer than in Virginia (15,300). In the midst of a national high-tech boom, New York City still has 9 percent unemployment.

What will this widening job-creation gap mean to e nation’s politics? Plenty. The likely scenario is that the entrepreneurial portion of the country (which really begins south of the Potomac) will forge ahead while the envious Northeast watches. “New York and Washington are like the British in 1770 looking across the Atlantic and wondering how their American possessions ever got so wealthy,” says George Gilder, who has become a prophet of the Information Age while living in Tyringham, Mass. “What they don’t realize is that they are about to lose their political hegemony as well.”

In retrospect, the Republican takeover of Congress in 1994 appears to be very much a result of this cultural and economic shift. “Democrats may be winning a few seats in the Northeast, but whatever gains they make will be quickly erased by population growth in the South and West,” says Stephen Moore of the Cato Institute. State Policy Reports, which issues quarterly figures tracking “economic momentum,” finds that all the population and economic growth is concentrated in the South and West. The only exception to the trend is New Hampshire, a longtime Republican, free-market stronghold. Bringing up the rear for the nation are New York, Rhode Island, West Virginia, and Vermont — all longtime Democratic strongholds. Given their waning economic power, Eastern elites are likely to play a rear-guard game, harassing and obstructing economic development with environmental and antitrust concerns. The Clinton administration’s current harassment of Microsoft, along with its attempt to lop $ 350 billion a year off the nation’s economic growth over chiliastic fears about global warming, perfectly embodies this strategy.

“The East Coast really has two choices,” says Kotkin. “They can become either England or France. Both countries realize they are no longer world- class powers, but they have reacted differently. The British have said, ‘We’ve got a lot of history, a lot of culture, let’s play a mediating role on the world stage.’ The French, on the other hand, have chosen to ignore reality and retreat into a hallucinatory world.” The third way, of course, would be to sweep away government regimes and embrace the future. “What we’re seeing is not so much a geographic migration or even a migration away from urban populations, but a migration away from excessive government regulation and taxation,” says Cognetics’ David Birch.

How does Birch feel watching all this unfold from his desk in Cambridge? ” Heck,” he says, “we’ve already opened another office in Atlanta. I’m thinking of moving out of here myself.”

William Tucker is a weekly columnist for the New York Press.