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The rise to power of a new urban progressive politics has been a hallmark of the Trump era. From the City Council of Los Angeles and the Board of Alderman of Chicago to the State Legislatures in Sacramento, Springfield, and Albany, the basic assumptions about what cities do and who they serve are undergoing a historic revision. Nowhere is this clearer than in New York City, where the two-term assemblymember and self-described democratic socialist Zohran Mamdani defeated former Governor Andrew Cuomo in securing the Democratic Party nomination for the city’s mayoral election. Having organized a whirlwind primary campaign of 40,000 volunteers on the promise of freezing rents for the city’s 1 million rent-stabilized apartments, Mamdani now confronts a nearly united power structure of real-estate developers, corporate landlords, and hedge-fund and private equity financiers who have already raised over $30 million for the former governor. This patently ruling-class opposition argues that raising local revenues and strengthening tenant protections will provoke an exodus of capital and entrepreneurs from the Big Apple. “If we fail to mobilize,” read a recent invitation to an emergency donors meeting, “the financial capital of the world risks being handed over to a socialist this November. We cannot—and will not—let that happen.”
Underlying this debate about the future of American cities is the assumption that what city government can do is limited by what private enterprise is willing to tolerate in terms of regulation and taxation. Yet as Daniel Wortel-London, an historian of New York City, argues, this conception of the source of profits and revenues for public services underestimates the expansive potentialities for a kind of urban growth not hostage to the preferences of the largest private owners. Currently visiting assistant professor at Bard College, Wortel-London recently published The Menace of Prosperity, a history of development politics in New York City from the Civil War period to the 1980s that shows how the growth of America’s largest metropolis forced a broadening of debate about where city revenues should originate and what services the city should provide.
By allowing city governments to participate in profitable activities, and using the earnings of public enterprise to subsidize money-losing services, urban reformers at the turn of the last century saw a path for reducing tax burdens on working people and fostering an inclusive form of growth. But as racial and class-based segregation began to undermine the self-sufficiency of public enterprise, and as the public sector became dependent on taxing corporations and the wealthy, a new kind of urban politics emerged in the post-World War II era, coming to a head in the financial crisis of the 1970s. Today, those who warn of capital flight in response to a potential Mamdani administration continue to invoke the so-called “urban crisis” of that decade. Interviewing Daniel Wortel-London is Kim Phillips-Fein, the Robert Gardiner-Kenneth T. Jackson Professor of History at Columbia University, and author of Fear City, a history of New York City’s post-war financial crisis.—A.Y. Elrod
An interview with Daniel Wortel-London
Kim Phillips-Fein: The title of your book, The Menace of Prosperity, may be surprising to some readers. How would prosperity be a menace for New York, or for any city?
Daniel Wortel-London: The title refers to the fact that every economic activity comes with costs. What appears like growth and prosperity can hide costs that ultimately undermine economies. If we think of economic activity as depending on a deeper layer of resources, any activity which depletes those resources is uneconomic. This is what the economist Herman Daly referred to as “uneconomic growth.”
This creates costs for governments that need to both subsidize industry while cleaning up its mess. What this suggests is that fiscal crises and underdevelopment derive not only from the absence of growth, but also from its presence. Industry is fiscally dependent on policies meant to reduce the costs it imposes on the public, like welfare spending, or provide services for labor that households are unable to provide, such as childcare or public education or healthcare. This creates a cycle of mutual dependence and underdevelopment.
Kim Phillips-Fein: The people from whom cities receive their revenue can come to exercise a disproportionate amount of power. That’s one of the menaces of prosperity that you point to—certain forms of growth not only have economic costs, but political ones too.
The opening of your book discusses the fiscal crisis of the seventies. The city was on the edge of bankruptcy, and there were protests and fear about what the future would hold. But then you reveal that this was not in fact the 1970s, but the 1870s, when New York also had a fiscal crisis. What was the cause of this budget crisis, and was it similar to the fiscal crisis a hundred years later? Why do fiscal crises so often plague cities?
Daniel Wortel-London: I structured the book around fiscal crises so as to give a sense of New Yorkers’ “fiscal imagination”—the way groups understand the costs and benefits of different development strategies. In the 1870s, one out of five American cities went bankrupt. This was partly a national issue: the market in railroad and municipal securities had collapsed. But at the city level, many local development decisions went awry. New York depended on property revenue, and it had tried to raise property tax revenue through the early nineteenth century by raising property values. The city sold public land, spent money on street improvements, and went into debt to finance grand infrastructure projects.
After the stock market collapse, banks asked for their money back and New York couldn’t pay up. This led to a large revolt against debt-financed improvements during the 1870s, both from “good government” folks (who felt that a lot of that earlier spending had been corrupt) and worker activists in groups like the Knights of Labor, who felt that cities were subsidizing speculative industries at the expense of workers.
This dynamic occurred again in the 1930s, when both the city and financial interests went into debt promoting real estate. Banks invested in real-estate speculation, and when the real-estate market collapsed the speculators couldn’t pay back their loans. The result was that the banks called in their loans and the cities cried default, setting in motion a new crisis. So again, New York’s fiscal crisis of the thirties was in part the result of these flawed development strategies. The 1970s are somewhat similar. In the years following the Second World War, New York changed policy tack, promoting white-collar industries and corporate headquarters at the expense of working-class manufacturing jobs, a strategy that arguably deepened the city’s fiscal crisis, making it more difficult to survive the broader economic downturn of the 1970s.
Kim Phillips-Fein: You refer to the economist Henry George as one of the key advocates for a different fiscal imaginary for the city, especially in his 1886 mayoral campaign—one of the great working-class populist moments in the city’s history (and certainly a predecessor to Zohran Mamdani’s current campaign). What was Henry George’s fiscal imaginary?
Daniel Wortel-London: Henry George emerged as a major figure during the golden age of American antitrust, roughly the forty years spanning the 1880s to the 1910s. This was also the period of the rebirth of labor republicanism—when the question of workers and producers’ equal citizenship was a driving force in national politics. It was during this time that American workers sought to reorganize the economy around productive enterprises and away from speculative investment and its manipulation of prices and values.
George applied these ideas to the urban setting, arguing that the way cities were trying to raise land values was in fact costing them enormously. His logic was that raising the value of land makes it harder for employers to erect factories and for workers to build homes. Taken from households and producers, rents on land were already burdensome. Any municipal effort to raise land values would only increase this burden—a self-defeating strategy for encouraging enterprise. High land values also encouraged industrial depressions because it meant that landlords were drawing money away from the real economy of production, and from the pockets of productive workers. This money tended to be poured into speculative investments, which led to economic calamity as the 1870s had shown. In this way, as George’s 1879 book title made famous, “progress and poverty” were coterminous.
Henry George argued that by taxing its full value, land—the ultimate requirement for enterprise—would be liberated from control by speculators and therefore cheaper for use as housing or for building the factories that would generate employment. With underlying values largely an accident of location, the rent on land was in effect the earnings of a natural monopoly, received irrespective of the efforts of the owner. This logic of natural monopoly motivated much of city politics during the Gilded Age and Progressive Era, with Georgists forming groups like the New York Tax Reform Association and the Municipal Ownership League devoted to fulfilling this project. Without speculatively inflated land values, and with public control of municipal franchises like buses and ferries, city life would be free to grow without industrial depressions caused by excessive debt burdens and high rents.
George sought to unite workers, small businesses, and productive capitalists against speculative financiers and parasitic landlords. He earned support not only from a small fraction of homeowners and capitalists, who felt they were being taxed too much, but also from what we can name as early-progressive city officials who saw the city’s reliance on high land values a detriment for city planning. This kind of broad coalition almost propelled George to the mayoralty in 1886, and serves as a precursor to the coalition behind La Guardia and even Mamdani today.
Kim Phillips-Fein: This is a reminder of the heterogeneous nature of economic thinking in the late nineteenth century, prior to the left’s consolidation around Marxism later in the twentieth century. What are the possibilities today for different ways of thinking about political economy? What are the alternative development strategies?
Daniel Wortel-London: Another model would be expansive public ownership. Many reformers in the late-nineteenth century provided economic arguments for such ownership. Owning profitable enterprises in transit and power, they argued, could help the city earn some profits while providing better services than those provided by the private sector. And by generating its own profits, the city would have less need to tax the worker or homeowner. American progressives often looked to European cities like Frankfurt, which generated huge profits through public ownership with low tax rates of not only sewage and transportation but of museums, baths, and employment agencies. They argued that American cities should be run as businesses—as publicly-owned enterprises in which each citizen would be a shareholder, and which directed the collectively-generated wealth of the metropolis towards the economic development of the whole. This was a direct challenge to the liberal model of economic development, by which the private sector earns profits and the public sector provides public services. For municipal ownership advocates, you could lower taxes if the public sector did both.
Kim Phillips-Fein: Let’s move to the 1930s and the next major fiscal crisis—the Great Depression. The New York City Housing Authority, the first public housing authority in the country, was founded at this time. Federal funding for public housing only began later. At the beginning, it was totally free of federal financing.
I had always imagined that it was Mayor Fiorello H. La Guardia, the populist reformer who governed New York during the New Deal, who pressured the federal government to invest in the city’s housing. But you show that actually there was a constituency that wanted the housing authority to operate independent of the federal government.
Daniel Wortel-London: Public housing was another area where profitable public ownership was promoted as a development strategy for cities. New York had been promoting private housing development for the wealthy and some small homeowners all through the 1920s. This didn’t save the city from a fiscal crisis—it led to vacant lots, empty apartments, and, when values fell, closed banks.
Public housing, advocates argued, represented a superior development strategy. Not only would construction jobs and lower rent aid the economy but, thanks to high demand, banks could invest in building housing and rely on repayment by way of the rents charged to tenants without the danger of vacancies. This was, remember, a moment that saw both the failure of the private housing market alongside the success of public authorities, most famously the initial Port Authority of New York and New Jersey. The Holland Tunnel had been built and partly paid for itself, just through toll revenues. And there were people saying that we could pay for housing the same way, with rent revenues.
The original housing advocates wanted a mix of incomes in public housing. This way, the earnings on the higher rents paid by the better-off would help cross-subsidize the lower rents paid by the poor. A lot was riding on whether or not there would be enough rent to collect in total for self-sufficient public housing, and mixed income was a solution to that problem. But as so often happens, mainstream liberals insisted that the private sector provide for middle-income residents, leaving public housing as a money-losing operation restricted only for the poor.
After the crash, the suburban real-estate sector was begging the federal government for bailouts to help build housing for middle-income owners, which it eventually did receive via FHA-insured loans. They didn’t want to have to deal with any competition from public housing—and soon they didn’t need to. Something similar happened in cities themselves. During the ’30s, some economists and later policymakers made the argument that real-estate values weren’t enough for fiscal solvencies. They argued that cities needed to attract income generating firms and individuals to the city. This required reducing some land values to make it more affordable for development—just as Henry George had argued. But the city wound up purchasing land from bankrupt owners at high values and then selling it at a pittance to developers for “urban renewal.” So once again, private developers were allowed to pocket profits, while the city hoped that tax revenues would be generated from their developments.
Kim Phillips-Fein: By the late ’20s, all five boroughs were developing, albeit unevenly. By the postwar years, the basic questions of construction, growth, infrastructure, and expansion had been addressed. Where does Robert Moses—the “power broker,” as biographer Robert Caro dubbed him, whose name is synonymous with urban renewal in postwar New York—come into the picture?
Daniel Wortel-London: Robert Moses comes out of an older understanding of urban economic development. He drew from ideas that were common sense in the 1920s, if not earlier, which is that if you promote infrastructure development—bridges, subways, or highways—city land will become more accessible. Moses gained power in the ’30s to act on this, but there were already people advocating for a more fine-grained approach, targeted toward specific firms and sectors and not just relying on infrastructure. Moses was able to adapt to this strategy while maintaining his older obsessions with highway and bridge construction.
Kim Phillips-Fein: Moses is a bridge between the earlier paradigm of investing in infrastructure and the postwar move to attracting white-collar corporate tourism, rather than industry. The Lincoln Center on the Upper West Side is an example of the kind of land development for the purposes of gaining revenue—attracting high-income people, bringing tourists into the city, and the like. What other white-collar visions of the city existed? And what changed in terms of the city’s tax structure in the ’60s?
Daniel Wortel-London: Both John Lindsay, who was mayor between 1966 and ’73, and his predecessor Robert Wagner, mayor from 1954 to ’65, were advocates of the welfare state and tireless advocates of the city’s corporate transformation. Today we’re used to these things as being contradictory, but postwar liberals didn’t think so.
During the postwar period bodies like the Regional Plan Association of New York, along with realty groups like the Real Estate Board of New York, worked with these mayors to promote the city as a corporate headquarters. The city combined this development strategy with an expanded welfare state by taxing firms in order to pay for social services. In the eyes of liberal policymakers, promoting corporate headquarters alongside a larger welfare state was not a contradictory position. The wealthy would pay for welfare. Progress would pay for poverty.
In the 1960s, some neighborhood activists did lead efforts to remodel the city’s economy around its neighborhoods, rather than its central business district. Jane Jacobs made the case for a radically decentralized urban economy and railed against what she called “catastrophic money.” Black activists in Harlem and Bed-Stuy argued that their communities were akin to colonies in the sense that all local industries were white-owened, and that the money made in those neighborhoods flowed out. For his part, Lindsay did little to promote local ownership, as these activists had advocated for. He provided some aid for Black businesses but ignored the more radical elements of these demands.
It’s not the case that the city’s white-collar transformation emerged from the conservatism of the 1970s; it dates back as far as Wagner and Lindsay. The balancing act between corporate growth and welfare-state expansion was fiscally fragile and politically unsustainable, as it remains today.
Kim Phillips-Fein: How did corporate reconstruction and welfare-state expansion eventually come to a head during the financial crisis of the 1970s, and how do we draw a line of continuity from earlier crises to that of the ’70s?
Daniel Wortel-London: We’re used to thinking of the fiscal crisis as the outcome of either an over-generous welfare state or of larger economic issues beyond the city’s control. But the city’s flawed development strategies certainly had a part to play.
Corporate firms’ commitment to profit rather than place, together with their orientation toward national rather than local markets, made them liable to move from the city at the first opportunity —which they did in large numbers in the early 1970s. Those corporations that did stay were vulnerable to recession by virtue of their involvement and exposure to global financial fluctuations—and this, by extension, made city finances more vulnerable.
New York’s massive debts largely took the form of corporate welfare: New York’s “capital budget debt,” economist William K. Tabb complained, “owes far more to the banker-real estate developer agencies—the Housing Finance Administration, the Urban Development Corporation—than it does to helping the poor, more to subsidizing commuters than to helping the unemployed get jobs.”
The city’s costly welfare services were not so much a driver of the fiscal crisis as they were a downstream product of the private sector’s irresponsibility and their power to pay low wages, charge high rents, and deny investment to needy communities. In all these ways, the city’s obsession with attracting and retaining corporations and raising realty values had backfired.
Kim Phillips-Fein: Your book captures the constriction of the fiscal imagination at this moment of austerity and defeat. The cuts of the ’70s inspired many protests, such as the occupation of the North Williamsburg fire station, Engine 212, in a campaign to keep it open, or the demonstrations at Hostos Community College in the South Bronx.
But there was also a world of alternative economic thinking at this moment, from public banks to worker cooperatives, that just lacked a popular movement to back it. The popular mobilizations at the time were very defensive and localized, focused on preserving the welfare state—saving a specific hospital, program, or school. In some ways, one might say they became a trope for liberalism as a response to Reaganism: a call to maintain institutions but not to change, improve, or expand them.
Daniel Wortel-London: Exactly. I argue that the scope of alternatives and responses in the 1970s was more limited than it had been in previous crises. The politics and costs of private growth were better understood in the 1870s than they were a century later. The sheer inertia of New York’s postwar developmental policies, weighing the city down with sunk costs in the form of repair bills and interest charges, had made dramatic shifts in economic development policy more difficult than in the past. Most liberal policymakers focused on expanding their city’s welfare state rather than questioning the economic development strategies that helped finance it—a gap which echoed what Judith Stein called the broader “poverty of liberal economics” during the 1970s. There’s also more of a focus on restricting growth in the name of quality-of-life among many professional-class liberals—except for white-collar growth, of course—which has contributed to some of our current dilemmas as Derek Thompson and Ezra Klein discuss in their book “Abundance.”
There were other factors, too, contributing to the narrowness of the era’s fiscal imagination. Many white homeowners had been subsidized through Federal aid, low tax assessments, and municipal support for local infrastructure. Their subsidies often didn’t appear on the city’s budget, but welfare spending did. The changing demographics of the city also played into things. The Black population of New York counted for less than 5 percent in the 1930s; by 1970, it was 21 percent. Many white homeowners assumed that the welfare payments to racial minorities was responsible for the city’s bankruptcy, and businesses were quite happy to go along with such a view that deflected blame from themselves for the city’s fiscal crisis.
After the fiscal crisis, some things changed and others didn’t. The welfare state got slashed and the idea of responsive government committed to public welfare was stigmatized. The city’s older commitments to corporate reconstruction, on the other hand, continued. And that’s roughly where we are now.
So rather than seeing our era of “neoliberalism” as marking a novel turn towards economic logic, we should see it as a continuation of an older, very narrow fiscal imaginary established under liberal auspices—the assumption that only by attracting and taxing wealthy firms and individuals can we develop our economy and pay for social goods.
Kim Phillips-Fein: Let’s talk about Zohran Mamdani, the Democratic nominee for New York City’s mayor who won the primary on a democratic-socialist agenda. How could Mamdani propose a new fiscal imaginary to realize his program?
You’ve argued that where the city gets its revenue influences who the government is answerable to. Today, New York’s personal income tax has placed a disproportionate weight of the city’s budget on the high incomes of a very small number of people. While it’s not as vast as some suggest, it’s still significant. What does this mean?
Daniel Wortel-London: I think Mamdani’s fiscal imaginary echoes some threads of alternative economic thinking today—he talks about monopoly, the need for public ownership, municipal grocery stores, and efforts to build more housing under nonprofit and public models. He talks about “abundance” in the form of public excellence: the state should take a lead role in providing for citizens in a way that is professional, efficient, and effective.
At the same time, he’s not trying to displace finance as the city’s economic base or reindustrialize the city. He’s not talking about public ownership of profitable utilities. Rather, he’s largely trying to make the city more affordable. Nonetheless, there are a few economic strategies which can help him to do this.
A big example here is public banking, which he already supported as a state assemblyman. The City of New York deposits billions of dollars in Wall Street banks that invest in polluting and militaristic enterprises while extracting wealth from low income neighborhoods, which in turn leads to economic underdevelopment. Public banking could allow taxpayer money to be reinvested in the city in the form of affordable housing and aid for employers offering well-paying jobs.
The city also has an enormous power of procurement: it spends billions on contracts with private enterprises, and this money could be shifted towards different sectors. Cooperatives, for example, typically offer longer-term jobs with higher pay for workers, while providing higher-quality goods at lower prices for consumers than their conventional counterparts. And they do so, moreover, under far more democratic and equitable conditions than conventional privately owned firms. In this way, as Ethan Miller has written, cooperatives demonstrate that “it is possible to build real livelihoods while also building another paradigm of social values.” And by using his administration to help build these livelihoods, Zohran can provide the material grounding for expanding his political constituency.
Kim Phillips-Fein: I love your point about the excellence of city services; one of Mamdani’s central slogans is that buses will not only be free, but also fast.
It’s a truism in city policy that cities are creatures of the state. They are fundamentally different from state governments, let alone the federal government, in that they are responsible for providing a range of services—from fire, police, primary and secondary education, basic infrastructural maintenance (streets, lights), libraries, parks, cultural life, and even healthcare. Cities are expected to provide all this while wielding very little fiscal power. They almost always need permission from a higher level of government, usually the state, to raise or impose taxes.
Cities are also thought to be weaker because people often don’t belong to them in the way that they do states and, especially, nations. It’s not difficult for someone to move out of city limits while keeping their job in that city. People are mobile and this constrains cities in the taxes they can impose and the services they can provide. It’s also clear that massive spending programs need to be taken on by higher levels of government who can impose taxes required for long-term financing. New York can’t pay for Medicaid alone.
At the same time, one of the major themes of your book is that cities are not entirely creatures of the state. They’re not as dependent on the state and the federal government, as is often assumed, and there’s a lot they can do independently, especially when it comes to public ownership. Cities are also not as dependent on economic elites in building political movements.
Daniel Wortel-London: Cities have more economic agency than they’re often given credit for and progressives like Mamdani, if he comes to office, have power to wield it.
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