In an op-ed in the New York Post, Nicole Gelinas, City Journal's contributing editor, writes that New York City--and State--needs Wall Street these days far more than Wall Street needs New York:

For most of its 213-year history, the NYSE didn't have to worry about the competition. Much like the city itself, it drew strength from its role as a central meeting place for the exchange of information. But today information is everywhere — and much that was once done on an exchange floor is now done faster and cheaper over computer networks.

New competitors to the NYSE spent the 1990s and early 2000s investing in technology that puts intense pressure on traditional markets. The NYSE had much to lose if it failed to adjust radically.

But it had one option available to it that's not available to New York City or the state: buying a piece of the competition. Its members have approved a merger with one of those upstart electronic trading firms, Chicago-based Archipelago.

What will happen to the 1,000 NYSE employees and the 3,000 people who work on the exchange floor for other firms? NYSE evolution means more cost-cutting automation — and that means fewer middle-class jobs in New York. Indeed, the NYSE recently announced a layoff of 60 middle-income staffers.

The NYSE's merger isn't the beginning of a trend — just another milepost in an ongoing one. Over more than two decades, a diverse array of business lines on Wall Street, from stock brokerage to stock trading to debt and equity underwriting, have had their profits ground down to razor-thin margins by technology, competition and regulation. What's left are just a few spectacularly profitable lines and many low-margin businesses — and an industry that can no longer afford armies of mid-level employees in Gotham.

Wall Street's first cost-cutting target, back in the '80s, was the back office. Today, it's moving higher-end jobs out of town. Investment banks now headquarter some sophisticated trading operations in northern New Jersey — staffed by employees who earn mid-six figures and more.

Worse, more of these jobs are moving farther away. Where Wall Street created thousands of jobs in Jersey in the '90s, now investment firms are moving further afield in their bid to keep costs down.

JPMorgan Chase announced in early December that it would create 4,500 new securities-industry jobs in Bangalore, India, by 2007, joining UBS (with 500 jobs there) and Goldman Sachs (750). Twenty-five years ago, most of those jobs would have been created in New York; 15 years ago, perhaps half, with the rest going to places like New Jersey and Florida.

What's left on Wall Street? Mainly the highest-level, highest-paid industry stars. In Manhattan, the securities industry has fewer workers, each of whom earns more money — because ones left are mostly those whose productivity can justify the high cost of being here.

This evolution is in part good for New York. The city is a perpetual magnet for top global talent, and the securities industry is increasingly dependent on that talent as it jockeys to create and trade exotic new products.

But even when profits are up spectacularly in New York, middle-class jobs won't be — meaning fewer openings for New Yorkers in an industry that once offered vast opportunities to those who wanted to work their way up from the bottom.

New York City and the state, like the NYSE, must work harder to keep much of the business they once took for granted — and attract new business.

Gelinas has some suggestions for Mayor Bloomberg and Gov. Pataki in this regard that are well worth reading. As her article hints, as the years progress, technology and telecommuting could become an increasingly powerful tool for businesses wishing to keep local governments somewhat more at bay. I did a piece for TCS Daily on the first anniversary of 9/11 about how quickly Moody's, the bond ratings firm, was able to leverage technology to get back to work after 9/11, when their headquarters building, located just a few blocks from the WTC, became uninhabitable. If such a business can change gears so quickly under those kinds of conditions, imagine what they could do if they wanted to relocate during a non-emergency.

Last fall, Nissan announced they were leaving Los Angeles for a more hospitable business climate in Nashville, Tennessee. Technology now allows almost any business to relocate pretty much anywhere its executives wish. This will begin to create new opportunities for those regions wishing to spur growth through low taxes and favorable business environments--and provide additional incentives for confiscatory cities and states to rethink their strategies, lest they risk additional loses.