As Beege wrote yesterday, New York City’s Democrats had several options for their next mayoral nominee, and few of them optimal. Somehow, though, the race came down to a “Globalize the Intifada” socialist and a predatory creep of an ex-governor, for reasons that mystify the rest of the country … except perhaps Chicago. And even in that binary choice, Democrats chose a jihadi-cheering Marxist to sit atop the world’s bastion of capitalism, just a couple of years after 9/11.
David will have more on this particular nominee in our next post. For now, let’s reflect on this choice in terms of what it says about progressive zones generally, and how it fits into social changes that have accelerated since the pandemic. Because this is all about choices and consequences — and if Zohran Mamdani winds up winning the general election, New Yorkers will likely get plenty of experience with both.
For the last five years, Americans have realigned themselves politically by relocation. The outward migration from blue states to red states by those tired of high taxes and heavy regulations probably had been occurring for some time, but the pandemic certainly accelerated it significantly. Harsh pandemic measures endured in the blue states, especially in places like Minnesota and California, while red states opted to curtail such impositions early and allow people to return to normal life. That opened the floodgates that have yet to close even now, as fed-up voters with capital and flexibility came storming to the South especially, mainly Texas and Florida, where taxes are low and government intrusions relatively minimal.
Incentives matter, especially when alternatives exist. And that brings us to Y’All Street.
I first wrote about Y’All Street in February, while Texas prepared to open its first national stock exchange. The Lone Star State has become much more friendly to corporate activity over the years than more traditional locations such as Delaware, New York, and Illinois. Four months ago, the New York Stock Exchange and NASDAQ decided to leave the Land of Lincoln and the heavy hand of progressives by shifting Chicago branches to Dallas:
The New York Stock Exchange will reincorporate its Chicago branch in Texas, it announced on Wednesday, rebranding it as NYSE Texas and moving to Dallas.
With the upstart Texas Stock Exchange taking shape and the Nasdaq expanding its reach in the Lone Star State, the Dallas region is about to find out if “Y’all Street “ is big enough for three players.
Timing of the Big Board’s “fully electronic” Texas equity market will depend on regulatory filings, the NYSE said. The announcement comes as a number of big companies flock to Texas as a whole, drawn in by its low taxes and business-friendly regulation.
Dallas had already quietly made its financial-services sector the second-largest in the US, trailing only NYC. The move of the NYSE and NASDAQ branches will accelerate that from the capital flight from Chicago, as well as the more organic growth experienced over the last 20 years or so in Texas. The incentives for capital in Texas are much better than they are in Illinois, and capital can move to where the incentives are.
More of those incentives will be in play now that Y’All Street opened ‘officially’ three months ago. The NYSE beat the upcoming TXSE and NASDAQ to the punch, with Donald Trump himself ringing the opening bell on the first day. The progressive-oriented Texas Monthly gave a pretty good look at the incentives in play:
Still, NYSE Texas beat its rival to setting up a marketplace for traders in the Lone Star State. When the Texas Stock Exchange was announced last summer, its backers promised to Texas-ify its trading. Gone would be compliance costs and mandates that companies have diverse boards. The TXSE has since been bogged down in the federal bureaucracy of getting a new exchange approved.
Not willing to be outdone by a newcomer, the New York Stock Exchange put on its cowboy hat and boots. Specifically, the Intercontinental Exchange, which owns and operates the New York Stock Exchange, announced last month that it would move its NYSE Chicago to Dallas and rebrand it as NYSE Texas. Since the electronic exchange already existed, there were many fewer approvals required. Basically it just closed up shop in Chicago and put a “Gone to Texas” sign in the window.
The establishment of Texas-based stock exchanges makes plenty of sense. The term “Y’all Street” started spreading in recent years as major financial firms, such as Goldman Sachs and Wells Fargo, noticeably expanded their operations in Texas, particularly moving employees to, and building offices in, the Dallas–Fort Worth area. Our state is also home to a considerable number of major publicly traded companies, including AT&T, Chevron, ExxonMobil, Tesla, and McKesson. And new data from the U.S. Bureau of Economic Analysis shows that the Texas economy is growing faster than all but seven other states. (And those faster-growing states are significantly smaller.)
TXSE plans to open later this year, pending the necessary regulatory approvals. They expect to cater to small- and mid-cap corporations, fitting neatly into the markets with NYSE and NASDAQ as competitors, at least at first. In other words, Dallas will have sufficient trading capacity to serve the broader capital markets soon, if not immediately, with economic and social incentives that clearly will compete with the disincentives now in place in Chicago and New York.
That brings us back to the likely Mamdani mayoralty. Mamdani made broad promises to expand socialist policies in the Big Apple, including taxation and redistribution, that will increase the disincentives for capital to remain in New York City. Those aren’t the only disincentives Mamdani will amplify, either. The new leader of the Democrat Party wants to defund the police, especially in high-crime areas, in a city where crime is already creating pressure to relocate. David will have more on this in the next post, but that’s just a taste of the bitter herbs that capital holders will be tasting if they remain in NYC during its Mamdani phase.
In previous generations, capital remained in NYC even through tough times — the bankruptcy in the 1970s, the David Dinkins era, and so forth. However, that’s mainly because sufficient alternatives did not exist, and the one alternative location that might have worked — Chicago — was just as bad as New York City. That is not the case any longer. Both the NYSE and NASDAQ already have one foot out of New York and into Texas, and the new TXSE will provide even more opportunities for smaller-cap investors.
New Yorkers may have just voted for another Great Realignment — this time of its capital as well as its populace. Elections have consequences. If they suddenly watch a drain of wealth out of the Empire State to the Lone Star State, they should not be surprised … although they will be, of course, because socialism requires one to be shocked, shocked that actions have consequences and that people respond to incentives. That’s why socialism also required ever-more-brutal authoritarian regimes to survive, as F.A. Hayek explained so well in his seminal analysis The Road to Serfdom. Maybe Big Apple voters should read it before making choices like these.
