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ISR Issue 55, November–December 2007


REVIEWS

Neoliberalism in New York City

Regime Change in New York City
From Welfare State to Real Estate, 1974 to the Present

Kim Moody
The New Press, 2007
340 pages • $27

Review by SAMUEL FARBER

THE AMERICAN welfare state never reached Western European levels of comprehensiveness and generosity even at its highest point in the late sixties. The absence of strong left parties and politicized unions were the principal factors accounting for U.S. weakness in this regard.

New York City has historically been different from the rest of the country. It has had a long tradition of leftist unionism and among the highest levels of union density in the United States. Assorted left political groups and parties have had their strongest presence in the city. For many decades, the political culture of New York used to reflect the values of the organized working class. Even middle-class people would not cross a picket line—it just wasn’t done. In the 1945 elections, under the system of proportional representation, two communists were elected to the twenty-three person city council, along with a third person belonging to the American Labor Party friendly to the Communist Party (CP), and two union-backed Liberal Party candidates hostile to communism. No wonder that the welfare state reached its highest American level in New York City. The five-cent subway fare remained in force from 1904 until 1948 and, after that year, fare increases were modest and infrequent until 1970. The growing city university system remained tuition-free until 1976, and rent control was, for many years, the strongest in the country, as were the extensive systems of public housing and public hospitals.

Kim Moody, veteran socialist and founding editor of Labor Notes, gives us an excellent and thoroughly documented account of how these New York social and political traditions were seriously set back by social and economic developments that were not unique to New York but which had a particularly devastating impact on that city. By the late sixties, the city’s tax base—essential to the financing of New York’s welfare state—began to be seriously eroded by the disappearance of industrial jobs (600,000 industrial jobs were lost between 1968 and 1977). The white flight to the suburbs further contributed to this tax loss (half a million people left the city between 1970 and 1975). Meanwhile, the relentless pressure from the business class kept real estate assessments low and tax abatements high. The anti-tax push of the real estate interests was part of a larger offensive by the local ruling class exasperated by the cost of the welfare state. These people were also very upset by what they saw as the capitulation of the politicians to the social movements and to the new public sector unions (the UFT and AFSCME), that had dramatically grown in size and political influence in the sixties.

The global recession of 1974 to 1975 provided the golden opportunity that New York’s capitalists had long been waiting for. This recession hit hard a city that was particularly vulnerable to fiscal and financial crises. By May 1975, New York edged close to a default as it was unable to honor its short-term debt. Met Life, a powerful corporation, and banking firms Lazard Frères and Morgan Stanley took the initiative in proposing the creation of what became the Municipal Assistance Corporation and the Emergency Financial Control Board. By combining the city and state political leadership with broad sections of New York’s business elite, these agencies took over the city’s finances. The City University of New York (CUNY) was promptly shut down and then reopened on condition that students pay tuition. As a result, my own Brooklyn College typified CUNY’s situation when it lost half of its student body within a few years. Severe cuts were implemented in New York City’s public housing, hospitals, schools, and transit systems. These were the fundamental forces behind the infamous New York decay of the late seventies and early eighties, not some sudden and unexplainable decline in public morality decried by many conservative pundits.

Municipal workers were placed under a regime of severe austerity with zero wage and benefit increases for years to come, with cost of living increases to be financed exclusively by productivity savings. Far from resisting this war on workers’ rights and their previous gains, the municipal unions, under the leadership of AFSCME District 37’s Victor Gotbaum (who became a close friend and tennis partner of Lazard Frères banker Felix Rohatyn), became complicit in implementing these austerity measures while allowing the union pension funds to become the city’s banker. As Moody points out, this forced municipal workers to internalize the limits externally imposed on them by the state: Workers could not push too hard for wage increases—otherwise, they imperiled the city’s finances and, consequently, their own pensions.

Moody provides an excellent overview of the various politicians, who as successive mayors of New York City, became the enforcers of austerity. Former liberal congressman Edward Koch, supported by a coalition based on the real estate, finance, and media interests combined with the recipients of city contracts and the decayed but still active Democratic machine, served three terms from 1977 to 1989. He did not hesitate to use racist appeals to cement his rule, and sponsored a veritable festival of tax exemptions for the benefit of the rich and specifically for the gentry taking over poor and working-class neighborhoods. Homelessness increased as single room occupancy hotels quickly disappeared from areas such as the Upper West Side of Manhattan to make way for the yuppie invasion. During Giuliani’s two terms (1994 to 2002), the repression and systematic hostility to the Black community significantly increased in an administration that was characterized by the reduction of taxes to affluent people and the elimination of city jobs and services to the poor.

The current Mayor Bloomberg has been a more refined conservative. A former liberal Democrat, he has occasionally sounded liberal notes, not least with the development of a more conciliatory approach to the Black community, helped along by substantial charitable donations from his billionaire fortune. But he has been the quintessential neoliberal mayor of privatization and an education policy that is focused on testing and conceives of the administration of the school system as if it were just another corporation. He helped to administer a $15 billion federal bailout for the corporations affected by 9/11, without having gotten a penny for the thousands of workers and their families affected by this catastrophe. Bloomberg has also been the mayor of real estate development, making sure to remove these matters from city control, as in the case of the Lower Manhattan Development Corporation, charged with reconstruction in the areas destroyed on 9/11. These types of development, beside the quite obvious use of tax money to benefit the rich, have serious traffic and other noxious environmental consequences. In this context, Moody makes the opportune observation that how urban space is used is a class issue.

But what about David Dinkins, the first African American to become mayor of New York City from 1989 to 1993? As Moody relates it, Dinkins had promised to stop the massive tax breaks that developers and corporations had been getting, and to tackle the problem of housing for low- and moderate-income families. He kept almost none of his promises. A product of the African American Democratic machine in Harlem, Dinkins was not any different from the other politicians when it came to supporting the business elite’s development agenda, particularly in granting tax reductions to real estate developers. Dinkins’ administration typified the limits of Democratic Party liberalism when confronted with capitalist imperatives. Moody shows that when the recession created a fiscal crisis and the mayor’s budget for 1991 showed a shortfall of $1.8 billion, the Municipal Assistance Corporation and the state’s Financial Control Board demanded cuts in housing and other social programs to balance the budget, and that Dinkins submitted without a fight.

However, according to Moody, the neoliberal triumph in New York City has not been complete. Among other things, union density has remained higher than in the rest of the country (26 to 29 percent of the labor force). The city maintains a huge public transit system that is probably still the best in the country. And yet, the fact remains that, in terms of the poverty rate and income inequality, New York City is considerably worse off than the rest of the country.

As a socialist scholar and activist, Moody does not just lament the setbacks suffered by New York’s working class and minorities. He identifies elements of resistance to employer attacks and governmental neoliberalism, notwithstanding what I would call the “counterrevolution of lowered expectations” that has been going on for the last thirty years. Workers in New York have been willing to fight back. There was, for example, the Daily News strike of October 1990, which showed that the selective use of violence is often a necessary ingredient of struggle in this country, and at a minimum it forced the owners to sell the paper. The subway and bus workers went out on a three-day strike in December of 2005. More recently, the great immigrant rights mobilizations surpassed in numbers all previous movements in the U.S., whether labor, women, gays, civil rights, or antiwar.
Of course, there are obstacles. There are the entrenched union bureaucracies and a working class that is internally divided, particularly along racial lines. As Moody put it so well in his discussion of the role of race in the 1993 elections, “the city was overwhelmingly working class, but did not see itself that way.” Nevertheless, we can already see very clear signs that neoliberalism has begun to decline—witness the shifting terms of the debates on topics ranging from health care to the growing inequality in the United States. As one Bush debacle follows another in rapid succession, and Democratic Party spinelessness and fundamental loyalty to the business class fail to offer a meaningful alternative, new possibilities for struggle will be opening up. Working-class and left-wing New York is in a specially favored position to take advantage of these new opportunities.

Samuel Farber has lived in the New York area since 1976 and just retired from the Political Science Department at Brooklyn College. He is the author of The Origins of the Cuban Revolution Reconsidered (Chapel Hill, 2006).

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