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When New York City Almost Failed

An Interview with Kim Phillips-Fein

Earlier today, Public Seminar had the privilege of printing an excerpt of historian Kim Phillips-Fein’s recent book, Fear City: New York’s Fiscal Crisis and The Rise of Austerity Politics. Originally published in 2017 by Metropolitan Books, it is now available in paperback from Picador. The book tells a complex story of an iconic moment in the so-called “urban crisis” of the 1970s, in which cities no longer seemed economically sustainable. Phillips-Fein’s keen attention to the interrelation of finance and politics – a preoccupation which was also at the center of her first book, Invisible Hands: the Businessmen’s Crusade Against the New Deal(2009) – helps us understand some of the tensions of our current moment: the privatization of public services; wooing corporations with tax cuts that expand taxation among working citizens and home owners, subsidizing developers like Donald Trump, and financing of public higher education through tuition revenue, are but a few of the outcomes that can be traces back to the 1970s. In Fear City, in a sense a sequel to Invisible Hands, Phillips-Fein describes how liberals in both political parties had to re-orient themselves to a stark new reality in the 1960s and 1970s: that commitments made to unions and citizens could not be kept without accumulating a public debt that soon became unsustainable. New York’s months of teetering on the edge of bankruptcy became both a cautionary tale about financing a public sphere that supported the aspirations of all citizens, and it became a moment when the techniques associate with modern neoliberalism were invented and first implemented.

For today’s Purple Wednesday, I had the opportunity to interview Phillips-Fein about this complex and important  book.

Public Seminar [PS]: You point out that New York City was a kind of laboratory for a proto-socialist urban vision that was consistent with American democracy, and that city services – education, parks, and transportation – enacted a robust vision for public life between the 1930s and the 1960s. But by the late 1960s, that vision was failing. What were the elements of that failure?

Kim Phillips-Fein [KPF]: First of all, I’m not totally sure that it’s right to describe New York as a proto-socialist urban space, even in the postwar years! This is the home of Wall Street, after all. And even during the 1940s, 1950s and 1960s, New York remained a deeply unequal city, both racially and economically.

But what I was struck by in working on the book (and I’ve also been intrigued by the positive response to this among many readers today) is just how extensive and ambitious the city’s public sector was in the years after the New Deal until the 1970s. We often think of the “affluent society” of the postwar years in a very suburban framework – what Lizabeth Cohen calls the “consumers’ republic.” And we also think of New York as a city of private ambitions and entrepreneurial dreams. But in truth, the city’s public sector – its subways, its libraries, its museums, its parks – have always constituted a major part of its appeal. In a way, New York embodies an urban version of the vision of postwar liberalism, in which the “good life” includes upward mobility within an urban community that includes access to culture, art, and higher education.

By the late 1960s this vision is fracturing. The city’s public services are growing strained, as its finances are coming under increased pressure. A serious recession grips the city in the late 1960s, leading to the loss of hundreds of thousands of jobs. The new ones being created tend to be in the service sector, and don’t pay as much (or generate as much income for the city) as the old industrial ones did. New York’s population shrinks by about 10 percent over the 1970s – and most of those leaving are white and middle class. In 1940, the city’s population was overwhelmingly white (more than 90 percent); by 1980, it was only 60 percent white.

At the same time, this is also the moment when there are actually more people seeking access and equality in the city, as the civil rights and black freedom movements lead many people of color in New York to protest inferior services in their neighborhoods. The result is that there is increased demand for city services, at the very moment when the city is losing the ability to pay for them.

With different federal policies – ones that had not subsidized the outflow of people to suburbia, or trade policies that had not made it easy for the garment industry (and others) to relocate to other, low-wage countries – New York might have been in a very different position. As it was, the city was in a serious bind. And New York’s mayors – first John Lindsay, then Abraham Beame – turned to short-term debt instead of attempting to address the underlying inequities.

PS: For almost three decades, you argue, city government insinuated itself into the daily lives of its citizens, and the many services New York provided came to be regarded as rights. What were these rights – and how did they become visible when cut backs were implemented during the fiscal crisis that peaked in 1975?

 KPF: In addition to basic city services – fire protection, police, and sanitation – I think that New Yorkers became accustomed to the idea that the city government had a role to play in public health, the operation of hospitals and clinics, the maintenance of parks, the transit system, education, and higher education. The city also acted in certain ways as an “employer of last resort,” hiring workers as private-sector employment dried up in the recession.

Even before the fiscal crisis, many of these basic services were troubled: the hospitals, parks, subways were all failing to deliver high-quality service as money grew ever tighter. But after the crisis, the city cut back to the bone. The result was a wave of protest through New York.

PS: “Welcome to Fear City” was a leaflet produced by the police and fire fighters’ unions in the summer of 1975, as the budget cuts – and protests against reduction in public services – escalated. It’s probably also worth saying that many of these working-class constituencies were white: what was the longer-term significance of the fears and expectations that these protests incited?

 KPF: A coalition of police unions produced this famous leaflet with the intention of handing it out at the city’s airports, supposedly to warn international tourists about how dangerous the city was. Inside, it warns tourists to stay off the streets after 6 pm, not to ride the subways, and describes the South Bronx as “Fort Apache.” It was part of a broader campaign: they also took out full-page ads in the New York Times and drove around the city with sound trucks, blasting out messages about rampant crime. And when cuts came, and thousands of police officers were laid off, they engaged in chaotic protests – including blocking traffic on the Brooklyn Bridge. (Mayor Beame obtained a court injunction to stop them from handing the flyer out at JFK as they had originally planned; this was overturned, but there was so much public outcry that the unions never did carry out their idea.)

These protests were double-sided. On the one hand, many of the protests against closing college campuses, libraries, and fire stations were in fact successful and did manage to prevent the particular institutions from being shuttered, even as overall budgets dropped. Protests at campuses, fire houses, and libraries did not feature racial imagery; people in black, white and Latino neighborhoods all participated in them, and the target, for all, was a city government that people understood not to be acting in their interests.

But the “Fear City” protests in particular were clearly more ambiguous in their effect. Crime was in fact rising during the 1970s—one of the shocking things about the cuts was that they transpired despite the evident and intense social need. However, by trafficking in racial stereotypes about the dangers of the city, and by portraying New York as lawless and violent, the “Fear City” pamphlet actually helped to underwrite the idea that New York was a chaotic, dangerous and illicit space, one hardly deserving of solidarity. And it contributed to white fears about the city becoming blacker and browner, which in turn helped to fuel white flight.

PS: Fear City caused me to reflect on the struggles between Governor Andrew Cuomo and New York City Mayor Bill de Blasio – in what sense is the fiscal crisis a pre-history of this contemporary clash between contemporary progressive and centrist visions in the Democratic party. You write that “The New York City fiscal crisis was a story of the bankruptcy – economic and moral alike – of liberal politics”, and that “We are still living with the consequences” of that collapse today. What are the consequences?

 KPF: Well, in an immediate sense, while city employment today is at an all-time high in absolute numbers, there are other ways in which the public sector is not as ambitious even today. We’ve never gone back to free tuition at CUNY. The number of public hospitals continued to fall. Private funds continue to make up shortfalls in city services, for example in parks (via the park conservancies) and parent-teacher associations that raise money for many basic programs in public schools—with the attendant, and expected, consequences that parks and schools in wealthier neighborhoods look very different than in poor ones.

Meanwhile, the kinds of institutions used to cope with the crisis in New York City – most notably the Emergency Financial Control Board – have become the norm in many other cities and states experiencing fiscal crises, including, most notably, Puerto Rico. Unelected bodies are chosen to enforce budget cuts as the main way of coping with fiscal crisis.

And in many states and cities across the country, the logic of austerity has gone much farther than in New York. The strikes of public schoolteachers this past spring against poverty wages and crumbling school buildings are testimony to this.

On an ideological level, yes, I think that the crisis highlighted a split that we do see in the Democratic Party today. Cuomo’s version of liberalism really defines itself in terms of fiscal rectitude, in which finding ways to cater to economic elites is seen as a critical aspect of any program to help the poor, and in which public-sector unions are seen as a basic threat. More left-progressive versions of liberalism within the Democratic Party are far more skeptical toward economic inequality, far more willing to take aggressive actions toward elites, far friendlier to labor unions and most of all, much more deeply invested in the importance of public institutions and services—and the importance of having them be public, supported by a broad tax base. I’m not sure I would necessarily frame this in terms of de Blasio versus Cuomo, but it is interesting to think about it that way.

PS: The resolution of the fiscal crisis reveals that the fate of the city is inextricably tied to the fate of the banks, giving corporate leaders – under the direction of banker Felix Rohatyn – an unprecedented say in public finances, a dynamic that will eventually be named “neoliberalism.” How did that play out – and what were the alternative scenarios?

 KPF: The fiscal crisis was resolved when the state government created an agency, the Emergency Financial Control Board, which gained final say over city finances. The voting members of the EFCB were the mayor, the comptroller, the governor, the lieutenant governor, and three members representing “the public”—in reality, corporate executives. There was no spot for labor or community representatives. Generally, the EFCB did not intervene in particular policy issues, but it served as a final check to make sure that the city made cuts that would lead to a balanced budget.

At the same time, the banks and city worker pension funds purchased city debt, and the federal government extended loans. The effect was to remove power from the elected city government and to centralize it at the level of the EFCB.

What were the alternatives? I don’t really think that bankruptcy would have been any more democratic, or that it would have resulted in saving city services, although perhaps it would have been less heroic.  The real alternatives were structural: changing the funding of programs such as Medicaid so that the federal government took more responsibility for them or looking at the entire metropolitan region in terms of tax collection so that people couldn’t work in New York City but effectively sequester their wealth outside city limits. Moving the financing from the local level to higher levels of government better able to tax incomes and wealth would have made a big difference.

Needless to say, these alternatives were not on the table in the 1970s. But that does not mean that they were technically impossible. Fiscal crises have a way of narrowing political vision, making it impossible to see or to react to larger issues. Fear City tries to push back against that.

PS: Perhaps the most famous symbol of the crisis was Ford’s dramatic refusal to support a federal bailout. On October 29 1975, the New York Daily News headline — perhaps one of its most famous —  was: “Ford to City: Drop Dead.”  What does that memory reveal, and what complexities does it conceal? Did Ford ultimately leave New York to solve its own problems?

KPF: Well, Ford did wind up agreeing to support a program of short-term federal loans to New York only about a month after the speech to which that famous headline responded! And in fact, he never said the phrase “drop dead”—he was chagrined, and even confused, by how angry New Yorkers were.

But in a larger sense I think that the “drop dead” headline summed up Ford’s attitude well. He was surrounded by people who were extremely hostile to New York (his treasury secretary, William Simon; the chairman of his Council of Economic Advisers, Alan Greenspan; his chief of staff, Donald Rumsfeld) and who saw the city’s failure in very political and ideological terms. They wanted to deny New York aid to demonstrate the failure of liberalism. And it was only after the city agreed to scrap its local welfare state that Ford consented to the loans, which were conditioned on its continued movement toward a balanced budget.

When Ford said he wouldn’t grant aid, the city had in fact almost defaulted less than two weeks earlier. Many thought bankruptcy was immanent without federal support. It was a stark, extreme position, one at odds with what the city’s elite wanted and one that seemed reckless for bond markets and the national economy. This ideological response and this willingness to flout what seemed like basic norms set Ford’s positon apart.

PS: The other great symbol of urban failure was the blackout in the summer of 1977, and the looting that followed. What kind of policies does this open the door to – who are the winners, and who are then losers?

 KPF: The blackout and the wave of property destruction that followed it helped to legitimate the “war on crime” in New York—the idea that the real criminals in the city, the ones who had robbed and undermined it, were black and brown New Yorkers themselves, rather than the elites who had been the focus of popular protest in the immediate aftermath of the fiscal crisis. More than 3,700 people were arrested in the aftermath of the looting, and Ed Koch went on to build his mayoral campaign around support for the reinstatement of capital punishment. When people in Harlem protested Koch’s plans to close a local hospital, his response was that he would never back down to a mob—even a black mob.

Without going into depth about the complex phenomenon of the looting itself, the entire episode became part of a transformation of the city’s politics—the sense that the future rested on creating safe spaces for white people and for corporate investment, and that unruly people of color were primarily a threat to this larger project.

One question I was interested in about the whole episode is what kind of politics austerity leads to—what it means for a community to lose resources in the way New York did during the crisis years. One thing I think that you see in the debate after the blackout is a certain viciousness, an anger, that surfaces as white New Yorkers blame people of color for destroying the city.

PS: In the Introduction, you write that in Fear City “the budget comes to life as the place where opposing views of the city’s future were contested, fought out, and finally decided.” (5) And actually, the budget does come to life! Can you talk about how you made that decision, as well as your narrative strategy for making a chapter about a city budget a complete page turner?

 KPF: I’m so happy to hear you say that! I wrote Fear City as a narrative history because I thought that it was critical to understanding the importance of the fiscal crisis. To see why it mattered, why it had a deep impact on thinking about government both in the city and around the country.

Although this was an aesthetic choice, it was really also an intellectual one. To understand why the fiscal crisis was so important, I thought readers needed to see how dramatic and intense it really was: how it captured the attention of the country, and how it seemed to encapsulate larger questions about political responsibilities. My hope was to try to recreate this effect in readers, in an effort to help them know why this matters.

It’s great to hear that it worked, at least a little! Although I myself have always been completely fascinated by the fiscal crisis and the specter of a bankrupt city, it turned out to be more difficult than I had thought it might be to craft an exciting narrative out of what is, in a way, a story that just involves a lot of meetings. I think that the key was always trying to think about what the stakes really were. Plus, these questions take us into rooms that most of us are never allowed in, and that’s inherently interesting.

Kim Phillips-Fein  teaches history at New York University’s Gallatin School of Individualized Study, and has written for The Nation, Dissent, The Baffler, The Atlantic, and The New York Times, among other publications. She lives in New York City. Fear City: New York’s Fiscal Crisis And The Rise Of Austerity Politics can be purchased online here, and on Amazon here

Claire Potter is professor of history at The New School, and Executive Editor of Public Seminar. You can follow her on Twitter

 

 

 

 

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