Kim Moody From Welfare State to Real Estate: Regime Change in New York City, 1974 to the Present (New Press, 2007)
Much of official New York’s present-day confidence rests on a tidy but triumphant narrative of its recent political past. It goes like this:
In the 60s, the city began to live beyond its means, offering generous wage and benefit packages to unionized workers, and spending too much on welfare and other public services. Its coffers drained, the city by the early 70s had turned to the short-term bond market to cover everyday expenses. Sensing trouble, Wall Street cut the city off. The Feds’ reaction to the city’s pleas for help produced the now iconic Daily News headline, “Ford to City: Drop Dead.” The banker Felix Rohatyn and other civic-minded business leaders stepped to help the city put out the fire now known as the Fiscal Crisis of ’75. Working through independent, state-sanctioned bodies like the Municipal Assistance Corporation (MAC) and the Emergency Financial Control Board (EFCB), Rohatyn and company dramatically cut social spending and reined in the unions. As a result, the city started to get back on its feet.
And what better figure to oversee city’s convalescence than Ed Koch, who, unlike his hapless predecessor Abe Beame, was not a machine Democrat but a known Reformer? From 1977 through 1989, “Ethnic” Ed resuscitated a dying city with combination of tough talk, further belt-tightening, and market-driven development. After the one-term reign of David Dinkins, whose irresoluteness in the face of race riots in Crown Heights symbolized an outdated, weak-kneed liberalism, Brooklyn-born Rudy Giuliani restored order in the city. Concentrating on our “quality of life,” he made it easier for law-abiding New Yorkers to enjoy their revitalized city. In the aftermath of 9/11, self-made man and independent Republican Michael Bloomberg won over the many voters who were alarmed by Rudy’s tough and sometimes divisive tactics but nonetheless pleased with the overall renaissance. Now, with PlaNYC, Bloomberg’s far-sighted blueprint for green development, the city will become larger, yet more economically dynamic and environmentally efficient, over the next 25 years.
So goes the official history. But isn’t this tale of a “revitalized” city, this bandwagon narrative which has made saints out of three out of last four mayors, a selective version of events? What about the devastation caused by the cutbacks, a devastation that in 1976 led Jack Newfield to proclaim, from the pages of the still spunky Village Voice, that a collection of corporate leaders, real estate developers, lobbyists, and government officials—what he and Paul Du Brul dubbed the “permanent government”—had seized power, “made a desert, and called it New York?” Doesn’t this triumphant tale provide a veneer of public-spiritedness as cover for a process of privately dictated economic re-development that has been terribly uneven and unequal?
This new book by Kim Moody, a co-founder of Labor Notes, a publication committed to rank-and-file led union organization and reform, is one that very much needed to be written and that very much needs to be read. What is it that makes New York City truly exceptional these days, asks Moody at the start of his analysis? Not its leading position in the parade of global cities, but rather its poverty rate, which at 22% is twice that of the nation. In Manhattan, the top 20% of earners make more than 52 times what the bottom 20% makes, more than five times the national rate. How often do we hear that New York is home to the poorest urban county in the United States, the Bronx? Now is a good time, given the announcement of PlaNYC, to emphasize these grim statistics. In Bloomberg’s vision for a “sustainable” New York, is there any indication that poverty will be seriously confronted? Not really, and Moody’s engaging survey of the last 30 or so years in New York helps us understand why.
Moody rightly puts New York’s Fiscal Crisis in the context of the much deeper post-WWII urban crisis, wherein manufacturing cities like New York lost jobs just as black migrants, Puerto Ricans, and others came looking for them. Ghettoes roiling, whites sped off to federally subsidized suburbs in Long Island and New Jersey, tax dollars in hand. In the meantime, the city’s business elite was fast at work connecting to new, increasingly global circuits of commodity production and exchange. A big part of this re-jiggering was a massive build-up of office space in the Central Business District (CBD) of Manhattan. 66.7 million square feet of it was put up between 1967 and 1973, most between 1970 and 1972. Ten million came in the form of the World Trade Center towers. Moody points out that this “highly vertical sunk capital,” much of it tax-exempt, made the city vulnerable to global downturns. When such a slump occurred in 1974-75, vacancies shot up, construction slowed, and jobs and tax revenue were lost. Add the fact that New York banks, well before they stopped buying city paper, were overexposed at home and abroad, and one begins to hear the cluck of chickens coming home to roost.
Moody also raises real doubt as to the strain city expenses actually represented. While it’s true that city public employment rose significantly through the 60s, it did so at practically half the nationwide rate, and came to crawl between 1971 and 1975. It also turns out that welfare spending growth, while indeed substantial, was relatively slow in the first half of the 70s. Public hospitals were funded in large part by the state and the feds, and, yes, CUNY costs were rising. But in 1975, such costs comprised just 4.6 percent of the city budget. So much for the great sucking sounds of liberal extravagance.
It was the revenue side that really mattered. Industrial flight had caused the city to lose a good chunk of its tax base. An increasingly conservative mood in Washington also meant a significant drop in federal aid. While these trends are well-documented (particularly by Joshua Freeman in Working Class New York), Moody adds another crucial component to the story. He expertly details the costs of the city’s commercial tax system, including its emerging program of developer subsidies. By 1976, 40 percent of all real estate was tax-exempt, up from 28 percent in the 1950s. The property tax levy itself, it seems, actually shrunk as a portion of total tax revenue from the mid 60s to the mid 70s, despite all that office construction. Why? Because big business went to the tax commission every year to get lowered assessments and was much too often obliged, despite state law. A “modest increase” in assessments, says Moody, “could have averted the Fiscal Crisis.” Again, so much for the usual suspects.
After reading Moody’s account, one is tempted to say that if a crisis such as the one of 1975 didn’t actually happen, the economic elites of New York would have had to invent one. As Moody demonstrates, liberal “profligacy” did not come close, on its own, to “causing” the Fiscal Crisis. But business leaders made it seem so by focusing relentlessly on budget expenses, even before the Crisis hit. And the hemming and hawing was not just over budgets out-of-whack, but over the out-of-whack political priorities embodied by an entrenched welfare state, which in some measure was dedicated to the re-distribution of the city’s wealth from its upper classes to its masses. On this nettlesome tendency towards social democracy, Moody offers a telling comment by leading CBD booster David Rockefeller. “It’s clear to me,” said Rockefeller in a report issued by his family bank, Chase Manhattan, “that the entire structure of our society is being challenged.”
During the first two decades after World War II, organized industrial and municipal labor had a seat at the table of power. The city had also invested in its working class by building low-cost, if not free, public institutions and services: hospitals; CUNY; public and rent-controlled housing; a vast and efficient subway system; and capable schools. By the end of the 60s, federally sponsored programs, from Medicaid and Medicare to the community-centered initiatives of the War on Poverty, added to the sense that New York was indeed a social-democratic city. However overblown Rockefeller’s words, the post-WWII arrangements did represent effective working class power.
To call the Fiscal Crisis a bankers’ coup is tempting, although not sufficient. Moody stresses that it wasn’t just bankers like Rohatyn but capitalists more generally who seized the apparatus of city government. And while it’s true that a kind of financial martial law was declared, the program of the EFCB—wage freezes, the imposition of CUNY tuition, hospital cutbacks—was not imposed by fiat, but won through complex bargaining between state and city agencies, the city and the feds, and, of course, the city and its leading unions. Fearing the all-out chaos that municipal bankruptcy entailed, key unions had agreed in early September 1975—before the EFCB legislation was actually passed—to use pension money to help stave off default on city debts in exchange for less draconian cuts in wages and hiring. The power of organized labor still mattered; but in the long-term, this decision tied the unions’ hands, for their own investments now depended on the success of the EFCB. And despite their hardball stance, the feds also worried that default would be a bad thing all around. Not long after New York was told to drop dead, $2.3 billion was on its way.
Still, there’s no doubt that a coterie of elites ultimately gained control, in order to insure that the city’s creditors wouldn’t be left hanging. Even before Koch took office, wages were frozen, hospitals choked, clinics closed, cops laid off, parks abandoned, subway fares hiked, service and maintenance cut, free secondary public education abolished, and neighborhoods abandoned based on the premise of the “planned shrinkage” theory of a ghoulish housing commissioner named Roger Starr. Moreover, under Koch, the development program of CBD, real estate, and corporate lobbies largely became the city’s own. In 1989, the last year of Koch’s reign, the difference between taxable and assessed market value of commercial and industrial real estate amounted to a 1.8 billion dollar gift to “the corporate headquarters complex and real estate interests.”
Through the 80s and 90s a new, but very lopsided, New York steadily emerged. The CBD and the city’s mostly white, upper and middle classes got office buildings with imposing glass façades—including post-modern gems like Phillip Johnson’s AT&T (now Sony) Building—as well as consumer playgrounds, co-ops in the sky, and the pioneer chic of gentrifying districts like Tribeca and the Lower East Side. The working classes, now mostly in the boroughs, were left with defensive unions, depleted public services, fewer well-paying jobs, and over-priced ramshackle housing. For a moment in the late 90s, the national income gap closed some. So did New York’s, in typical laggard fashion, before the widening resumed. Intensifying competition amongst cities to attract business, especially finance, has exacerbated the unevenness of the whole process. At present, says Moody, “Poverty is embedded in the City’s economy.”
A side benefit to Moody’s account is that it exhumes dissident views that came out hard on the heels of the Fiscal Crisis itself, views that have since been buried under the narrative of the city’s triage, convalescence, and revival. There was, of course, the investigative work of Newfield, who suggested at the time that the private takeover of public power put truth in the old saw about life under capitalism: the rich get richer and the poor get poorer. More academic interventions, coming as early as 1975, raised the possibility that events in New York presaged a much broader reactionary shift. Once the dust had settled in New York, and new alignments had emerged in Washington, other accounts gave credence to the notion that New York City was indeed a trial run for a right turn in national and international politics. This movement now has a name: neoliberalism.
If New York is such a trendsetter, might Bloomberg’s embrace of “sustainability” suggest that something bigger is coming? Possibly. If so, it’s a new shrewdness on the right. Why not take the lead in tackling global warming, the problem most people—not just New Yorkers—think needs attention? Call it the politics of low-hanging fruit, the greening of neoliberalism, or whatever. Come 2008, it could be in play, and with all the attention Bloomberg has been getting, he maybe the one that brings it to a grander stage.
We thus need to be clear about PlaNYC. For all the talk about its bolder elements, like the call for congestion pricing, this is for the most part a plan for market-based environmentalism. Its energy initiatives, for example, depend heavily on incentives and government backed long-term contracts to sweeten the pot for the private construction of new “clean” plants and the retro-fitting of old ones. Mandated emission standards are proposed, but only down the road, when it is assumed that a market for “clean” energy will be established. There is encouraging talk of revising building codes to create new efficiencies, but not much about enforcement, an important omission, since present day codes are easy enough to get around. PlaNYC also proposes a citywide consolidation of efforts to identify, remediate, and develop brownfields. There is the stock language regarding community consultation, which any planning document these days can’t be without. However, the proposals are again light on mandates and heavy on various strategies designed to facilitate private development: speed up the certification process; lower remediation costs; limit liability if contamination is found after the initial clean-up. Newly tree-lined streets sound great, but what about a cross harbor tunnel, linking Brooklyn to New Jersey, which many think would go a long way to reduce diesel pollution? PlaNYC is mum.
Few people disagree that there’s a housing crunch, and who can argue against “affordability?” As Moody points out, the city uses median annual income for the metropolitan region, which exceeds that of the city, to measure “affordability.” For whom, then, will all of PlaNYC’s new housing be affordable? And to actually produce this housing, the administration will rely on voluntary inclusionary zoning, which gives incentives to developers in exchange for affordable units. According to Brad Lander and others from the Pratt Center for Community Development, evidence from around the country shows that mandatory inclusion works better. And what about beefing up and extending rent control regulations already in place? As for the “Open Spaces” portion of PlaNYC, what predominates are slivers of green areas, sometimes along the water, walled off by the towers that usually come with them.
The fact of the matter is that PlaNYC says as much about the power of the city’s leading developers and corporate interests to control urban planning as anything else. Dan Doctoroff, the mayor’s economic development czar, has said the big plan is sound because it represents good economics. But why not put in place what Lander, et al., call “a bold living wage and workforce development initiative that makes sure working class New Yorkers get good jobs creating the green city of tomorrow?” Bad economics seems the likely reply. In Bloomberg’s version of a sustainable city, cleaner air can co-exist all too easily with economic inequality. The climate that really matters, in other words, is still the business climate.
This is a depressing but realistic picture. What this city, and the world, really needs is environmental and economic justice. Moody reminds us that the rates of unionization in New York are still higher than the rest of the country and that worker centers, independent agencies which advocate for low-wage immigrant workers, are thriving in the boroughs. And let’s not forget that there’s at least some resistance to Bloomberg’s current mega-projects, from Atlantic Yards to Gowanus to Willets Point in Queens. Plus there’s lively and informed criticism from a policy perspective, much of it pointing to more equitable kinds of development in the 21st century. So there is the potential for change. What’s needed in order to realize it, says Moody, “is the sort of mass movement that we haven’t seen for some time.”