neoliberalism

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The ‘unaffordable’ NHS…

Published by Anonymous (not verified) on Fri, 07/06/2024 - 7:11am in

This is from tax lawyer Dan Neidle: I’m not talking much about the general election tax debate. Because it’s irrelevant. The few £bn being discussed is dwarfed by the actual UK tax increases over the last few years, and the further tax increases we’ll almost certainly see in the future. Perhaps tax increases will be... Read more

Make Britain a Clean Energy Super Power ?

Published by Anonymous (not verified) on Fri, 07/06/2024 - 4:49am in

A further article from Mike Parr in which he is not too impressed with Labour’s suggestions of how Britain becomes a Clean Energy Superpower… His critique follows: The first part of Labour’s energy document is a combination of aspiration and attacks on the Tories. What follows deals with some of the detail in the document.... Read more

The Green & Pyloned Land of East Anglia

Published by Anonymous (not verified) on Wed, 05/06/2024 - 8:45pm in

Mike Parr (after a seven year gap!) has been kind enough to contribute this piece on the problems of getting windfarm electricity from the coast to inland users, which turns out to be yet another problem that is made much worse by the failure to understand the government’s power of money creation…. If LINO (The... Read more

A Nation of Shopkeepers – review

Published by Anonymous (not verified) on Tue, 28/05/2024 - 9:39pm in

Dan Evans’s A Nation of Shopkeepers explores the growth of the “petty bourgeoisie” in the UK following Thatcherism, as the rise of home ownership, small landlordism and changes to the world of work instilled individualist tendencies among this section of the middle class. According to Vladimir Bortun, the book is an intellectual tour de force, though he questions aspects of how Evans analyses Britain’s class structure.

A Nation of Shopkeepers: The Unstoppable Rise of the Petty Bourgeoisie. Dan Evans. Repeater Books. 2023.

A Nation of Shopkeepers by Dan Evans book coverA Nation of Shopkeepers is not your typical sociology book. Rather, it feels like a long letter written by Evans to his fellow leftists about how they’re not “getting” the petty bourgeoisie. It was not always like that. As he shows in Chapter One, Marxist classics – from Marx himself to Trotsky to Poulantzas – paid close attention to the socio-economic and political characteristics of the petty bourgeoisie. Unlike the working class, it owned its means of production (shopkeepers, artisans, small landlords, farmers) but, unlike the bourgeoisie, was always at risk of being pushed into the ranks of the proletariat by capitalism’s inherent tendency towards monopoly and proneness to crisis. As a result of that, the petty bourgeoisie would eventually wither as a distinct class.

Over the past century, [the petty bourgeoisie] expanded and diversified, as key developments such as the growth of the (welfare) state, the massification of education or the rise of cultural industries have added new layers to the proverbial ‘shopkeeper’.

However, as Evans points out, the opposite has happened: over the past century, this class expanded and diversified, as key developments such as the growth of the (welfare) state, the massification of education or the rise of cultural industries have added new layers to the proverbial “shopkeeper” – this is what Evans calls the “new petty bourgeoisie”’. This class fraction is, despite some similarities, distinct from the so-called “professional-managerial class”, which sits below the capitalist class and is defined by its role in managing the affairs of the latter (executives, lawyers, accountants, journalists).

Thus, due to its unprecedented expansion, the ideology and values of the petty bourgeoisie have spread throughout society, including within the contemporary left. As Evans notes, “this is why it is so important to understand the petty bourgeoisie itself” (300). What are these values, then, and what are they rooted in?

Evans contrasts the stability that has historically characterised both the working class and the bourgeoisie with the inherently precarious condition of the petty bourgeoisie. This class is perpetually faced with uncertainty, striving to climb the social ladder or at least avoid falling down it. In turn, this breeds an individualist outlook which consolidated and spread during the neoliberal era and is today often translated – particularly among the “old” fraction of this class – into voting for right-wing populist parties. Countering that would require the left to build an alliance between the working class and the petty bourgeoisie, as both have interests that objectively clash with those of the capitalist class.

But there is something problematic in how Evans justifies the existence of petty bourgeoisie’s two fractions. If shopkeepers and farmers are part of the (old) petty bourgeoisie because they own their means of production, then with public servants or academics (the new petty bourgeoisie) it is their supposed individualism that places them in this same social class (150). In other words, the former is part of the petty bourgeoisie due to its objective class location, but the latter is so due to its subjective class outlook. Making the latter the top criterion of class is not just analytically inconsistent but also inconsistent with the Marxist tradition that Evans seems to align himself to.

Perhaps more problematic is Evans’ relative lack of evidence of said individualism. Indeed, he does not explain how that claim squares up with the increased levels of unionisation and left-wing affinities observable in recent years among some of these new layers of the petty bourgeoisie. As Evans himself acknowledges, “it is the declassed, downwardly mobile graduates who march, who have placards, who have adopted the accoutrements and iconography of socialism, the working class and collectivism” (141).

Only in the concluding chapter does the author attempt to makes sense of this apparent contradiction: the left-wing orientation of the layers of graduates in non-graduate jobs – who in Britain, as he correctly points out, have formed the main social base of Corbynism – would still be down to their individualist outlook, a by-product of their frustration at being denied the upward social mobility that their university degrees once bore the promise of. Yet again, the author hardly provides any evidence for this conjecture. Instead, he invites us to consider a hypothetical situation:

“The fundamental difference between the graduate call centre worker and the non-graduate call centre worker is that the proletarianized graduate did not expect to be in a low-paid, deskilled job. … It is unlikely that the proletarian colleague with no degree has a LinkedIn profile, for example, or is continually applying for other jobs. While they are sharing the same experience now, their experiences and ideology are not the same as the static life experience of the working class” (281).

Even if this difference was true, though, would it be enough to designate to different social classes people working in the same job? Are people’s career aspirations or educational backgrounds more defining of their class status than their objective location in the economic system? Also, as Evans points out, the “proletarianized graduate” is proletarianised because they face job insecurity, relatively low wages and restricted access to the housing market. Is bemoaning these things rooted in upwardly mobile aspirations? Or is it rather about simply wanting basic living standards that an advanced capitalist country like Britain accustomed most of its citizens to in previous eras?

Are people’s career aspirations or educational backgrounds more defining of their class status than their objective location in the economic system?

Moreover, Evans often seems to operate with a rather essentialist analysis of the working class, portrayed as inherently collectivist and content in its lack of upward mobility. Not only does this ignore the rich sociological literature on the (complex) process of social mobility among the working class, it seems to assume that the “non-graduate worker” is content with working in a call centre, which is at odds with the body of research documenting the alienation of workers (graduates or not) in this specific sector and its impact on their class consciousness. Equally important, it sidelines how the neoliberal transformations over the past few decades, which Evans aptly documents with regards to work (Chapters Two and Three), education (Chapter Four) and housing (Chapter Five), have impacted the outlook of the working class in Britain (as illustrated by its disengagement with, and exclusion from, the political process).

The only significant and demonstrable difference between the working class and what Evans calls the ‘proletarianized new petty bourgeoisie’ is a university degree, which inadvertently lends support to the very ‘Blairite’ narrative about social-mobility-through-higher-education that the book otherwise sharply criticises.

In the end, the only significant and demonstrable difference between the working class and what Evans calls the “proletarianized new petty bourgeoisie” is a university degree, which inadvertently lends support to the very “Blairite” narrative about social-mobility-through-higher-education that the book otherwise sharply criticises. Perhaps, given the shared objective location of both the working class and the new petty bourgeoisie in the capitalist mode of production (ie, the need to sell their labour in order to pay the bills), the similar material conditions they face, their broad orientation towards the trade unions and the political left, these groups might be different fractions of the same class. Perhaps making that analytic move – rather than artificially separating these groups in a way that arguably reflects (and reinforces) neoliberal hegemony – would render even more feasible the kind of political unity that Evans forcefully calls for in his conclusion. Perhaps the new petty bourgeoisie is, after all, the new working class.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics and Political Science.

Image credit: OlgaUA on Shutterstock.

 

Which potential party of government knows that it owns a bank?

Published by Anonymous (not verified) on Fri, 24/05/2024 - 1:06am in

I heard Labour Party election strategy supremo Pat Mcfadden say that Labour had to “generate the funds” to do all the things it wanted to do, so not much would be possible immediately. ‘Generate the funds’ is a trope closely related to ‘finding the money’ and straight out of the Thatcher playbook that government has... Read more

Debt cycles and the long term crisis of neoliberalism

Published by Anonymous (not verified) on Tue, 21/05/2024 - 5:44am in

Tags 

neoliberalism

My talk at the IDEAS/PERI conference a few weeks ago. As I said there, I hate to be the optimist in the room, but I'm a bit more skeptical about the risks of a generalized sovereign debt crisis in the Global South. The two papers I cite are these (in their PERI Working Paper versions) two (one and two).

Conservatives have made the UK world beating again

Published by Anonymous (not verified) on Mon, 20/05/2024 - 10:15pm in

A quite remarkable chart from the ever industrious John Burn Murdoch from the FT shows that Britain has the highest rate of homelessness in the developed world: Now there seems to me to be a bar chart explanation required because it seems that some countries’ bars appear twice which, I think, means that they display... Read more

A very useful crisis

Published by Anonymous (not verified) on Thu, 16/05/2024 - 5:38am in

This is the text of a talk I gave at New York City DSA’s night school, Socialists of NYC series, May 14, 2024

As the 1960s were turning into the 1970s, New York City was coming off a long economic boom. Sure, we’d lost 151,000 manufacturing jobs between 1950 and the 1969 peak, but that was almost exactly offset by a gain in finance, and overall employment in the city was up 391,000. There were signs of budgetary trouble starting in the mid-1960s, but those issues were patched over with a combination of tax increases, fiscal trickery, and wishful thinking.

There was a recession in 1970, which was felt here, but by 1971 the rest of the country was recovering. Not New York City, though; we continued to lose jobs. During the 1971–1973 economic expansion, the US increased employment by 15%, but in New York City, it fell 4%. Half that loss was in manufacturing—one in ten factory jobs disappeared in just those three years—even though national manufacturing employment rose briskly. The city’s manufacturing firms were mostly small, and squeezed by high rents, taxes, and wages.

01 NYC employment early

And then the deep recession of 1974–1975 hit—then the worst since the 1930s. We lost another 6% of our jobs, three times the national rate, again with about half coming from manufacturing. Between 1965 and 1974, 200,000 housing units were abandoned and tax delinquencies rose sharply. The number of people on some form of public assistance had nearly tripled from 1960, from just over 300,000 to 1.3 million, an eighth of the population. Containerization helped doom the city’s ports, as maritime activity moved over to New Jersey, killing port jobs and industrial jobs dependent on the port. On top of tax receipts being driven lower by economic decay, Nixon was hacking away at the revenue sharing programs that financed a lot of the growth in social spending in the 1960s. A hefty set of troubles, but the city borrowed its way through them.

And then in May 1975, the banks cut us off. What had been a medium-slow bleed turned into a hemorrhagic crisis.

portents of crisis

There were plenty of early portents of what was to come. In December 1973, a big chunk of the West Side Highway fell down, a visible symbol of creeping rot. In April 1974, Con Ed skipped its dividend for the first time since it began paying one in 1885; the money just wasn’t flowing in from a troubled economy like it used to.

02 West Side Highway collapse

And there were hints of where it all would go. On taking office as governor of New York in January 1975, months before the formal onset of the fiscal crisis, Hugh Carey declared “the days of wine and roses are over…we must all live by a rule of austerity for as far ahead as we can see.” A month later, the Urban Development Corporation, an entity created by the grandiose brain of a Carey predecessor, Nelson Rockefeller, to promote urban renewal and high-rise housing—Roosevelt Island was its masterpiece—defaulted on its debt.

Fiscal crises were fairly common in the city’s history. A decade before the big one, the new Lindsay administration, threatened by a serious flow of red ink, appointed a Temporary Commission on City Finances in 1966. In a sharp contrast with what would emerge a decade later, the commission recommended tax increases and more federal aid. “Doubtless there is…some waste. But the basic fact is that civilization has to be paid for,” it concluded. A personal income tax was introduced, business taxes were increased, and the city began charging its own sales tax.

As Michael Reagan points out in his dissertation on the 1975 crisis, Wall Street responded to this mini-crisis in a surprisingly mellow way. For example, in a research note, the predecessor of Citibank wrote “Local government, for its part, needs to concentrate on maintaining, and even increasing, services required by the people….” Over the next few years, though, Citi’s tone changed, and by the end of the decade, it expressed increasing worry about welfare and the various moral and occupational deficits among the poor. The broader discourse shifted from structural problems generating poverty to embracing the culture of poverty theory that the poor suffered profound defects of character and mental acuity.

Bankers had consented to the fiscal trickery for years and made lots of money from it. Whenever there’s a debt crisis, capital’s pundits blame the irresponsibility of the borrowers; the irresponsibility of the lenders always gets a pass. But nothing is forever. The bankers had enough, and as soon came clear, they held all the cards.

how’d we get there?

It was nice while it lasted. Though it’s probably an exaggeration to say New Yorkers enjoyed a kind of social democracy in one city, it’s not completely wrong.

It’s tempting to think of the mayoralty of Robert Wagner, which ran for three terms, 1954–1965, the period of the city’s ambitious extension of the New Deal, as something of a Golden Age. Though things started showing signs of wear, for most of Wagner’s term the city was prosperous and spent freely. The housing stock increased by 18%, over 40% of it from the public sector, including public housing for the poor and the Mitchell-Lama program for middle-income households. Overcrowding fell by half. Wagner recognized city unions and instituted collective bargaining. Money looked plentiful—though Wagner started borrowing to pay expenses toward the end of his term.

Borrowing was encouraged by fiscal pressures coming from the changing city population. Better-off whites, terrified by the arrival of poor black migrants from the South and Puerto Ricans from the island, moved to the tax-sheltered suburbs. Manufacturing’s decline, which would grind on for decades, was already underway. Both these developments hammered revenues. At the same time, with the increase in poverty, there was unrelenting pressure for increased social spending.

The relative peace of the Golden Age came to an end as well, as black and brown New Yorkers, tired of segregation, poverty, and bad housing, got more militant, and some white people weren’t happy about that. Anger at the police rose too. In July 1964, in response to a cop killing a 15-year-old, people in Harlem and Bed-Stuy rioted for nearly a week. Starting around 1960, crime began its decade long rise. Divisions of all kinds sharpened.

In 1966, the uber-WASPy John Lindsay took over from Wagner. Curiously, both went to elite private schools and Yale, where they were members of the same secret society (Scroll & Key).

03 Scroll and Key

But, in contrast to the un-slick hereditary pol, Lindsay came off as a patrician, a symbol of a new social order. As Kim Phillips-Fein puts it in her book Fear City, “he was a leader for the postindustial town to come,” a break with the working-class past. (I saw him in a bathing suit on a beach in the Hamptons in the mid-1970s throwing around a football. He was well into his 50s and he looked fabulous.) Alas, plans for the postindustrial city were complicated by an exodus of corporate headquarters to the suburbs and beyond.

Lindsay was supposed to calm racial tensions and mitigate black and brown poverty—he was even seen as having run against the police. Things didn’t work out as planned. Five hours into Lindsay’s mayoralty, the Transport Workers, led by the fierce class warrior Mike Quill, went out on strike. (Quill died three days after the strike was settled.) That set the tone for Lindsay’s reign, one of frank social conflict across classes and races and constant pressure on the city budget to calm the tensions with new programs. The welfare rights movement was founded just months after his inauguration, was very active in the city, and it was quite effective in its early years. The Black Panthers and the Young Lords were at their peak during the Lindsay era, greatly upsetting the bourgeoisie and white middle class.

Fiscal problems haunted Lindsay. On taking office, he was so alarmed by the state of the city’s finances that he pronounced himself a “receiver in bankruptcy.” The tax increases recommended by the Temporary Commission on City Finances, which I mentioned above, plus a stronger economy, and a shower of Great Society money from Washington, righted the budget for a few years. But by 1970 the red ink was back.

(A curious class footnote: the patrician Lindsay never liked unions much. During a garbage strike, he suggested to Gov. Rockefeller that the National Guard break the strike; Rockefeller said no, that would look too 19th century, meaning, one assumes, the sort of thing done by his ancestors.)

Lindsay was succeeded in 1974 by Abraham Beame, who’d served previously as city comptroller. He ran on his budget expertise, which consisted mainly, sad to say, of knowing how to borrow his way out of the deficits he couldn’t hide with creative accounting.

The city did lots of short-term borrowing. With 3% of the population, it accounted for nearly half the short-term municipal debt in the US. As comptroller, Beame had shortened the average maturity of the city’s debt, something he inexplicably bragged about. Much of that short-term borrowing went to finance long-term obligations like the mortgages that funded the Mitchell-Lama housing program. At the state level, you could say the same about the Urban Development Corporation.

It’s a rule of orthodox finance, and a largely correct one, that you should borrow over a period of time that’s relevant to the project. If you, the city, need to pay some bills now but you won’t be getting paid for a few months, it makes sense to borrow short; you can pay off the debt when the money comes in. If you’re financing a mortgage, which will be paid off over decades, you should borrow long-term. The reason is that the interest rate on the mortgage is fixed, say at 7%. If you borrow long-term at 5%, you’re guaranteed a profit. Short-term rates are generally lower than long-term, which makes them tempting. So instead of borrowing at 5%, you borrow at 4% maybe—which is nice unless interest rates rise to 8%, turning the mortgage into a loss-maker—which is what happened as interest rates rose from the mid-60s into the mid-70s. That, and when you borrow short-term, you have to go back to your lenders constantly, and they can get whimsical in their demands.

As James O’Connor put it in The Fiscal Crisis of the State, debt tightens capital’s grip on the state. When capitalists borrow to expand, he argued, they can invest the proceeds and make a higher return than they have to pay in interest. The public sector, however, mostly spends on projects that don’t pay direct returns. The bond market had the state in its grip, and New York City’s bankers soon tigthened it.

Fitch: planned deindustrialization

This is a good time to file a dissent with my earlier comments about how manufacturing was driven out of town because of high wages and taxes. My late friend Robert Fitch, author of The Assassination of New York (which Verso sadly let go out of print), argued that the exodus was engineered by the planning cabal, a consortium made up of big real estate, their think tanks (like the Regional Plan Association, the RPA), foundations (like the Rockefeller Brothers Fund—Rockefellers are all over this), and their servants in city government. Here’s a look at its cover, which shows David Rockefeller bulldozing his way across Manhattan, in a vehicle adorned with the logo of what was then the family bank, Chase.

04 Fitch coverThe reign of the planning cabal dated at least as far back as the city’s first zoning scheme in 1916, but it really got going with the RPA’s 1929 blueprint, which Bob wrote up in an essay called “Planning New York.” As Fitch put it, the essence of the 1929 plan was the division of the region into Slab City—the high-rises of Manhattan—and Spread City, the suburbs that surround the city center. The guiding idea was to concentrate high-end activities in the city center—finance and other fancy service businesses that could afford high rents—and move the noxious, low-rent stuff out to Jersey.

Their vision, with some bumps along the way (like the Great Depression, to start with) has largely been realized. I should say that Bob’s analysis has plenty of critics, who prefer “natural” economic forces as an explanation for the loss of manufacturing (and the port, which big real estate saw as a waste of a waterfront development opportunity). I’ll concede that Bob sometimes went too far when questioning the conventional wisdom. But there’s a lot to his argument, something we can see in the evolution of Long Island City over the last 20 years, as little industrial operations got replaced by high rises.

In any case, whether driven out by costs or David Rockefeller, the loss of manufacturing jobs was a blow both to the city’s working class and to its finances.

budget math

Some on the left point to the fact that New York City’s spending wasn’t out of line with other big cities. For basic functions—cops, fire, garbage, parks—it wasn’t. But that’s not the whole story. New York also spent wads on things other cities didn’t: hospitals and CUNY, notably. And while welfare spending, contrary to myth, wasn’t out of line with other cities. What was unusual was the state required the city to pay for lots of it (and for Medicaid); most other cities had their states pick up the tab.

Indulge me a moment of budget geekery here. First revenues and expenditures. On the current account, day-to-day spending on things like salaries, social spending, and office supplies, was pretty much in line with revenues until around 1970, when the budget went into serious deficit. But, like the TV ads used to say, that’s not all. The capital budget, which is supposedly where you account for spending on long-lived projects like roads and housing, was huge and growing. It makes sense to borrow for those things, given their longevity and economic returns, but the city was also hiding a lot of day-to-day spending in the capital budget.

05 NYC revenues and expenditures

The city’s short-term debt exploded. And since much of it was short-term, it had to be refinanced constantly. Unlike the federal government, which has near-limitless access to the credit markets, and which can, in a pinch, print money to cover any shortfall, a city or state has to balance its budget over the long term. What New York City was doing was unsustainable, and sooner or later things were going to break.

06 NYC short-term debt

Yes, a lot of what the city was doing with that spending was good, but under our federal system, there are severe constraints on what a local jurisdiction can do. We can’t solve problems of structural poverty, deindustrialization—or now climate collapse—on our own. That requires federal policy, and in the 1970s, our political system was getting increasingly hostile to doing anything constructive.

the crisis

As 1974 turned into 1975, the banks made increasingly ominous noises about rolling over the city’s short-term debt. In April, the banks finally pulled the plug. The state forwarded the city some cash to get through the immediate crunch, but when the city tried to find some fresh money to borrow, the banks said no.

A commission appointed by Gov. Hugh Carey, who was nervous about the state’s own creditworthiness, recommended the creation of the Municipal Assistance Corporation, MAC, which would buy the city’s short-term paper by floating long-term bonds. But investors refused to buy the bonds. So, MAC, led by investment banker Felix Rohatyn, who was the proconsul of New York City in the second half of the 1970s, demanded and got wage freezes, layoffs, tuition at CUNY (which Felix admitted was of little fiscal impact, but necessary for the “shock value”), and a transit fare increase.

But the markets wanted more. So, in September Carey created an Emergency Financial Control Board (EFCB) to take over the city’s finances. Major revenue streams were diverted from the city to the EFCB, and it would release the money only if tight spending targets were met. All contracts, including with labor unions, would have to be approved by the EFCB.

That wasn’t quite enough either; in October the unions were persuaded to put hundreds of millions from their pension funds into MAC bonds. What’s sometimes fancifully called labor’s capital provided essential funding to the regime of austerity that would squeeze the city’s poor and working class for years to come.

07 Ford to City

That still wasn’t enough though. The Ford administration, advised by austerity partisans like William Simon, Donald Rumsfeld, and Alan Greenspan, refused the city any aid, prompting the Daily News’s famous headline. (While I was searching for a nice pic of the News’s front page, I discovered an earnest New York Times article helpfully pointing out that Ford never actual spoke those words.) They wanted outright class war on the labor unions and the city’s poor. Finally, in November, the feds agreed to make short-term loans to the city (at an interest rate a point above its own cost of funds—Washington likes to make money on bailouts). MAC finally realized its dream policy of selling long-term bonds to buy up the city’s short-term debt. The city’s elected government was largely set aside in favor of the bankers’ junta.

08 Beame holding DN cover

Between July 1974, when the city first started layoffs (almost a year before the crisis broke out) and November 1975 (when the first stage of the austerity program was completed), over a quarter of the city workforce was fired. Half the Latino workers lost their jobs, as did more than third of black workers. Over the next few years, one in six of the beds in municipal hospitals disappeared, and the welfare rolls were slashed. There was remarkably little organized opposition, unless you count the Spartacist League.

The unions complained at first. In one sensational incident, cop unions circulated an ominous flyer to tourists, warning them of the dangers posed by the shrinkage of the NYPD. They wanted their jobs back, but they weren’t showing much solidarity with other fired workers.

09 Fear City

But the unions soon came around and even made common cause with the bankers through an organization called The Municipal Unions Financial Leadership Group, nicknamed MUFL (pronounced, appropriately enough, “muffle”). Crucial to organizing this effort was Jack Bigel (of whom more in a bit). The group produced research—prepared by the banker contingent but approved of by the unions—urging the city to turn away from poverty programs and focus instead on the needs of the better off. Rohatyn was impressed by the transformation in the labor leadership into a “totally realistic, responsible and cooperative” force. He and DC 37 leader Victor Gotbaum, who in his early days did a lot to organize some of the city’s most exploited—clerks, guards, cooks, cleaners, laundry workers—became the best of friends.

The unions’ dismal response to the austerity offensive is further proof of Sam Gindin’s argument that by their very nature they’re sectoral organizations with their own interests and not a force one should look to for political leadership. For that, you need a left party, half in and half out of organized labor, to provide historical, theoretical, and political perspective.

10 Rohatyn et al

Obviously the bankers have the advantage in a debt crisis; they hold the key to the release of the next post-crisis round of finance. Anyone who wants to borrow again, and that includes nearly everyone, must go along. But that’s not their only advantage. The sources of their power were cited by Jac Friedgut of Citibank:

We [the banks] had two advantages [over the unions]…. One is that since we were dealing on our home turf in terms of finances, we knew basically what we were talking about, and we knew and had a better idea what it takes to reopen the market or sell this bond or that bond…. The second advantage is that we do have a…tight and firm discipline… [W]hen we spoke to the city or the unions we could speak as one voice…. Once a certain basic process has been established that’s an environment in which our intellectual leadership…can be tolerated or recognized…we’re able to get things effected.

It’s plain from Friedgut’s candid language that to counter this, one needs expertise, discipline, and the nerve and organization to challenge the “intellectual leadership” of such supremely self-interested parties. According to Gotbaum (in an interview with Bob Fitch, which Fitch relayed to me), the unions’ main expert at the time, Jack Bigel, didn’t understand the budgetary issues at all, and deferred to Rohatyn, whom he trusted to do the right thing. For the services rendered to municipal labor, the once-Communist Bigel was paid some $750,000 a year, enough to buy himself a posh Fifth Avenue duplex. Politically, the unions were weak, divided, self-protective, unimaginative, and with no political ties to ordinary New Yorkers. It’s easy to see why the bankers won.

There were aftershocks not worth going into, but the upshot was that over the next few years the city would balance its books in strictly orthodox terms. As its reward, the city returned to the bond market in March 1982, just as the national economy was about to shift from the punishing phase of neoliberalism, the high interest-rate austerity regime imposed by Federal Reserve chair Paul Volcker, to the capitalist bacchanal of the Roaring Eighties. The stock market took off in August 1982, and the discourse shifted from urban decay to gentrification and, eventually, yuppie excess.

MAC would dissolve itself in 1985, but the EFCB lives on, though the Emergency was dropped from its name in 1978. It could reactivate itself if certain standards of financial orthodoxy were violated.

Felix

A little detour on Felix Rohatyn, a figure I was obsessed with for many years. He was quite the character. He’d later achieve some fame in liberal literary circles for writing soulful critiques of greed in the Reagan era, but in fact he and his mentor Andre Meyer pioneered a lot of the financial engineering schemes that the leading buyout artists of the 1980s would make famous.

As chair of MAC, Rohatyn would pioneer a lot of the austerity moves that would later be adopted nationwide—and, through the resolution of the Third World debt crisis of the 1980s, worldwide. Somehow he coasted above it all. As the late novelist/polemicist Michael Thomas told me at the time, Felix pounded the pulpit with one hand and endorsed checks with the other.

politics

What was at stake in New York was no mere bond market concern. The combination of political insurgency and rising spending to try to narcotize it alarmed the bourgeoisie, which generally felt it was losing control. This was a few years after the famous Powell memorandum, the 1971 call to arms for a besieged business class to organize in its own defense. And it was also a few years after the 1972 founding of the Business Roundtable, corporate America’s institutionalization of becoming a class for itself. As Felix Rohatyn said in a MAC meeting (a quote that Kim Phillips-Fein found in the archives), investors were avoiding New York paper because “the city’s way of life was disliked nationwide.”

To an increasingly politicized business class, its intellectuals, and its politicians, New York City was a perfect place to draw the line. In a 1976 New York Times op-ed, L.D. Solomon, then publisher of New York Affairs, wrote:

Whether or not the promises…of the 1960’s can be rolled back…without violent social upheaval is being tested in New York City…. If New York is able to offer reduced social services without civil disorder, it will prove that it can be done in the most difficult environment in the nation.

Thankfully, Solomon concluded, “the poor have a great capacity for hardship.”

Some planners viewed the crisis as a great opportunity, none more fervently and odiously than Roger Starr. Emerging out of the Yale/OSS aristocracy of World War II, Starr was first involved in the nonprofit branch of the real estate planning machinery. In the 1960s, Starr guided the Rockefeller-aligned Pratt Institute into what Forrest Hylton called “a new, post-liberal phase that would not only deny the extension of the New Deal and postwar achievements of New York’s white working class to blacks and Puerto Ricans, but roll it back altogether.” Northeast Brooklyn was their site for experimental urban renewal.

11 Roger Starr

Beame then appointed Starr as his housing director. While director, Starr gave a speech outlining a strategy of planned shrinkage—cut services to the poor in the hope they’d move away. Of course, many planners thought that, but Starr’s indiscretion was say it openly. Here’s a sample at its bluntest:

Stop Puerto Ricans and the rural blacks from living in the city…. Our urban system is based on the theory of taking the peasant and turning him into an industrial worker. Now there are no industrial jobs. Why not keep him a peasant? Better a thriving city of five million than a Calcutta of seven million.

Those words got him fired from his city job, but then hired as an opinion writer for the Times, where he toiled for 15 years. An editor there recalled him as “exceptionally well tailored and always courtly.”

aftermath

Beame ran for re-election in 1977, but the fiscal crisis and a brutal SEC report on his role in it doomed his candidacy. Ed Koch, Greenwich Village reformer turned austerity partisan won. His mayoralty, though characterized by some stupendous episodes of corruption, consolidated the new austerity regime. In place of Beame, who found that regime deeply painful (though that regime had rendered him largely vestigial as a political force), came an enthusiastic partisan of the fiscal crackdown. He was happy to play the game of race-baiting. Poverty, which had been rising into the crisis, rose further in the Koch years, and homelessness became a mass phenomenon.

A transit strike in 1980, the first since Quill’s in 1966, was crushed. Attempts by plucky New Yorkers to walk to work were celebrated by the mayor and the media. Public opinion had moved heavily against the workers, and austerity consciousness had become hegemonic.

Austerity passed L.D. Solomon’s political test. There was no social explosion in the most difficult environment in the US, and the experiment was repeated in much of the rest of the world in the 1980s.

12 Koch & commuters

This was also the time, God save us, when Donald Trump became a celebrity. Trump’s rise to riches was lubricated by his father’s intimacy with the Brooklyn Democratic machine, notably future mayor Abe Beame and future governor Hugh Carey. These connections helped him get a 40-year tax break on his first major project, the renovation of the old Commodore Hotel next to Grand Central, that, in the words of Charles Bagli in the New York Times, “cost New York City $360 million to date [2016] in forgiven, or uncollected, taxes, with four years still to run, on a property that cost only $120 million to build in 1980.” Here are some of the principals celebrating this deal.

13 Trump Hyatt

That would set the tone for economic development policy for decades to come: subsidies to luxury development given to capitalists who didn’t need them.

For many in the city, the fiscal crisis was a time of ruin and trash-lined streets. But one must acknowledge that while the crisis days were a time of misery for many, low rents were good for cultural production. Punk and hip-hop emerged out of it, and poets and painters could almost afford to live in Manhattan. It would be nice if we could get the low rents back without everything else going to shit.

14 Fiscal crisis cityscapes

But at the top of the ladder things started getting nice. After a decade of miserable performances, the financial markets were sparkling again by 1982. The shower of financier money began transforming the city’s physical and social infrastructure. The day of the yuppie was dawning.

15 The yuppie

principal sources

Charles Brecher and Raymond Horton, Power Failure (Oxford University Press, 1993)

Edward Gramlich, “The New York City Fiscal Crisis: What Happened and What is to be Done?” (American Economic Review, May 1976)

Eric Lichten, Class, Power, and Austerity (Praeger, 1986)

Kim Moody, From Welfare State to Real Estate (New Press, 2007)

Charles Morris, The Cost of Good Intentions (W.W. Norton, 1980)

Kim Phillips-Fein, Fear City (Metropolitan Books, 2018)

Michael Reagan, Capital City: New York in Fiscal Crisis, 1966-1978 (dissertation)

William Tabb, “The NYC Fiscal Crisis

Economic stats from Bureau of Labor Statistics (employment), Gramlich (budget), and Morris (debt)

Extravagances of Neoliberalism

Published by Anonymous (not verified) on Tue, 14/05/2024 - 12:55am in

A conversation with Melinda Cooper.

Fresh audio product: nativist neoliberalism, the Alabama ruling class

Published by Anonymous (not verified) on Fri, 10/05/2024 - 7:11am in

Just added to my radio archive (click on date for link):

May 9, 2024 Derek Seidman looks into the Alabama corporate elite and its terror at the incursion of the UAW (articles here and here) • Quinn Slobodian on Peter Brimelow and the white supremacist wing of neoliberalism (paywalled article here)

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