February 13, 2020


Austerity and Ideology

Kim Phillips-Fein is a professor of history at New York University and the author of the books Invisible Hands: The Businessmen’s Crusade Against the New Deal and Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics, as well as the editor and co-editor of several collections in political economy, business history, and labor history.

In a conjuncture defined by high ideological tension, in which elite consensus and power structures seem increasingly discredited and the scope of political possibility is wider than in recent memory, Phillips-Fein’s work is particularly topical. She is an historian of social movements and of ideology, and the repercussions of elite politics for the lives of ordinary people. Her two books—which deal, respectively, with the rise of conservative business movement and New York City’s 1970s fiscal crisis—also offer cautionary tales about the severe constraints under which political officials operate, and the ease with which powerful reactionary interests organize, relative to the public interest.

We spoke with Phillips-Fein about Invisible Hands and Fear City, the contingency of the two periods they capture, and how the events of the two books continue to shape the present. A full audio recording of the conversation can be listened to here. The transcript has been edited for length and clarity.

An interview with Kim Phillips-Fein

Marshall Steinbaum: Invisible Hands is about the construction of an ideological movement in opposition to the New Deal, which you trace from the Roosevelt Administration to post-war efforts like the Mont Pelerin Society, the American Enterprise Institute, the weaponization of the proto-Christian-right against the IRS, and so on, up until Reagan’s election in 1980. Fear City might be characterized as the implementation of that ideology and policy in one particular high stakes episode: the New York City fiscal crisis of the mid-1970s. How do you define ideology, and what are the mechanisms by which it exerts its influence on history?

Kim Phillips-Fein: Invisible Hands is a book about the mobilization of a section of the business community in opposition to the New Deal. It suggests that this opposition was a galvanizing force for a group of what I call ‘business conservatives’ from the ‘30s all the way through to the present. The book happens to stop in 1980, but you can also trace the continued role that this network of people has had in building the intellectual and ideological institutions that comprise the modern right.

Part of the reason that I wrote Invisible Hands was that existing research on the conservative movement had been focused on grassroots efforts, and on the backlash politics that emerged in the 60s and 70s against the Civil Rights and Black Liberation movements, feminism, gay rights, the anti-war movement, and so on. The major story was figured in part as a white working class backlash. I thought this failed to capture the elite dimensions of the conservative movement, and the centrality of economic issues, in particular opposition to unions and whatever in the US has passed for a welfare state. In my view, those had been abiding principles of conservatives in a way that social issues hadn’t. The book was an effort to offer a different vision of the conservative movement, and to show how this group of business people mobilized politically.

Fear City grew out of this work because the conservative press in the 1970s had an obsession with New York’s fiscal crisis, which I found really striking. But I was also concerned that the story in Invisible Hands—of a single movement developing over a long period of time—was almost too seamless. I was interested in the impact of the ‘70s and how the material circumstances of the recession affected the way this political mobilization was realized. And while Invisible Hands was really about the right, I was also interested in how liberalism had changed over the decades. And, of course, I am a native New Yorker, and I was compelled to write a story about this particular place at a particular time—to explore what it means when you have a set of social commitments that is suddenly abrogated. What does it feel like to live through that?

To return to the question: ideology works a little differently across these two books. In Invisible Hands, much of the book is about efforts to formulate an ideological and political program centered on a set of ideas about the free market from the position of the elite. The sense of class position of the people creating these organizations is very important, but their intellectual commitments reflect a very romantic view of the free market—derived from Hayek and Von Mises—that they received and internalized from popular sources, but not from an intellectual elite of academics or professional economists.

This is shared in Fear City. Earlier work on New York’s fiscal crisis, including David Harvey’s brief treatment in A Brief History of Neoliberalism, sees it as the application of an ideological program. But one of the things I was struck by in my research is that the ideology seems to come about ex post facto. There aren’t references about what’s happening in Chile, for example, but rather a strong and ad hoc sense that unions, poor people of color, and the irresponsible liberal bureaucrats who were beholden to them, were directly responsible for bankrupting the city. This belief wasn’t the result of a sophisticated intellectual argument or clearly defined program. What happens is that people who have economic and social power in the city come together and try to cut the social welfare programs that had defined New York for much of the post-war period. It’s only afterward that their ideas become formulated.

ms: If ideology can cohere after the fact, it’s not necessary for conservatives to come up with and execute a plan, but rather that other people become convinced that their actions were right. This bears out in that the figures you identify in Fear City, who were at the helm of this austerian program, were not part of the movement you narrate in Invisible Hands. Treasury Secretary under Ford Bill Simon and head of First National City Bank Walter Wriston both played some role in movement conservatism, but other than that you’ve got people all the way up to President Ford who weren’t right wing ideologues in any coherent sense.

How do we get from the backstage maneuvering in Invisible Hands to the action of Fear City, where public officials, unions, and the media are sort of using the fiscal crisis to produce what those backstage actors had wanted in politics?

kpf: Fear City is a chronicle of the fiscal crisis of the 1970s, when New York City almost went bankrupt. Prior to the crisis, New York had a very generous set of social welfare programs, including a large network of public hospitals, public clinics, daycare subsidies, free tuition at City University, investment in public transit, and so on. It’s not that all of this disappeared after the crisis, but the commitment to such programs was fundamentally scaled back.

An adjustment took place on a wide scale during the 1970s, as the suppositions that defined the post-war era no longer seemed to hold. People who thought of themselves as liberal political leaders were compelled to change what they were doing, and what’s so interesting about the fiscal crisis in New York is that the question of who or what was doing the compelling is often very confusing—even to those leaders as they lived through it. The city’s liberal politicians and unions were not able to advocate in any meaningful way for another solution to the problem. I’ve made the case that there was no inherent technical or economic reason that these social provisioning systems couldn’t have been sustained, but politically, the conditions for their sustenance would’ve had to be quite different. On the ground, you see people struggling to come up with feasible alternatives to austerity, as weight was bearing down from the banks, the federal government, and from Albany.

Now there was a group of hardcore free market ideologues, including Simon, in the Ford administration. For them, New York symbolized a radical liberal vision, and its destruction was necessary to teach other cities a lesson about the dangers of excessive spending. They had a kind of gleeful willingness to let the city go bankrupt, which does seem quite divorced from reality and represents a very pure vision of states and the market. These are the people who probably have the most in common with the world of Invisible Hands.

What actually happens, of course, is that the city doesn’t go bankrupt, and Ford comes around to supporting the extension of loans, conditional on balancing the budget.

ms: I want to drill down on a couple of particular episodes from the book that feel particularly relevant to the present. As you alluded to earlier, one of the key demands made by the people advocating for austerity was the elimination of free tuition at the City University of New York, which the critics felt had been reducing standards at what what was once an elite institution—one that used to serve a mostly white student body, but which was transforming to be more reflective of the racial diversity in the city.

The CUNY leadership was taken to task in the public, and the arguments made against it were quite familiar: it’s too generous, the city can’t afford it, the beneficiaries don’t deserve this expensive giveaway, they should be paying for it themselves, and so on. Recently, Hillary Clinton gave an interview with Howard Stern, where she characterized the free college plans as giving chocolate milk to everybody. Infantilizing the would-be beneficiaries of free college seems of a piece with the sort of rhetoric that was swirling around in the case of the CUNY system.

Having researched this period, what do you think of the fact that we’re having that same debate 40 years later?

kpf: It partly reflects conflicting ideas about the purpose of higher education. Caitlin Zaloom has put this well, asking if higher education is a private good in which each individual wants to amass as much human capital as they can in order to be a more productive asset in the future, or if it’s a public good supporting the functioning of democratic politics and therefore worth investing in on a broader social level.

Educational institutions themselves are divided about this, as was CUNY in the early-70s. What happened with CUNY in the years leading up to the fiscal crisis was quite remarkable. It had both adopted an open admissions program so that anyone who graduated from high school in the city was guaranteed attendance at one of the city’s colleges, and it was basically tuition free. Not everyone was thrilled about this. For some people, the purpose of tuition-free college was meritocratic: it was meant to provide higher education to the best and brightest poor and working-class people who would otherwise be unable to afford it. For others, it was a far more democratic sense that higher education could benefit everyone, helping to realize intellectual talents that would otherwise not be developed and to provide social mobility. The tension between those two visions of free higher education was already present.

But for the right, free higher education is problematic precisely because it frames college as a public good. Free tuition was one of the things that the ideologues in the Ford administration picked up on early—and they did so without any fiscal rationale. It was striking. There was a sense that free higher education had to go, but without any sense of how much money that would save. They just didn’t parse out the details. But it seemed to hinge on the question of public goods.

ms: I want to talk about race and its relevance to the events around the fiscal crisis, by way of the decades preceding the crisis. You explain that the tax base of the New Deal-style state had been hollowed out—both because of white flight to the suburbs, as well as the industrial base of the city moving south and then overseas to escape organized labor. There’s a critique of the New Deal that sees this pattern of flight and disinvestment as being built-in to the structure of the New Deal order, so that it contained the seeds of its own destruction, as it were. Does this variety of retrospective critique fit with the historical narrative you present?

kpf: You could say the fiscal crisis reflected some of the problems of the New Deal. On the one hand, the city of the postwar years represents a kind of New Deal liberalism, but at the same time, it was undermined by some of the problems and schisms within that version of political economy, chief among them the ways that the kind of state that comes out of the New Deal subsidized suburban development.

ms: It promised upward mobility to white people, which ended up undermining part of its foundations.

kpf: Right. Public investment came to be figured in terms of things like highway construction, and the regional differences that left the American South as a kind of low-tax, low-union haven for industry to move to before it expanded overseas. In addition to the failure to adopt any version of National Health Insurance, which leads to Medicare and Medicaid as the alternatives in the 60s, and the particular ways that they’re financed—all of these things come to bear heavily on the structure of what we might call New Deal liberalism. One of the policy lessons of Fear City is that it’s very hard for a city to carve out a progressive exception.

ms: Certainly the history of taxation suggests that you can’t do it alone.

kpf: It’s very difficult to have a set of commitments entirely financed on a local level. The things that happened during the New Deal wind up limiting what’s available to New York in the 1970s. An important thing to note is the role of real estate elites in the fiscal crisis. Robert Fitch’s book, The Assassination of New York, discusses the mobilization of real estate around reducing the presence of manufacturing in New York to augment property values, which is another dimension to the flight of industry. It’s partly competition from lower-wage regions, but parts of the city establishment pushed them out to transform the city into a white-collar, tourism destination.

ms: Your reflections on this were striking, and you argue that the race based exceptions to the New Deal that have gotten a lot of attention in the scholarly literature ended up undermining the entire thing for everyone by creating, for example, a whole region of the country where there were very few unions.

kpf: Right. And in New York specifically, institutions like CUNY begin to come under pressure right at the moment when they begin to educate more people of color thanks to open admissions. One question I wondered about was whether there might be a sense in which white New Yorkers became less willing to support an institution that was increasingly representative of the city as a whole.

ms: Speaking of the changing demographics of the city, one of the major threads in the book was the innovation of public sector unionization during the late 50s and the 60s. You refer to the “Little Wagner Act”—the policies of Mayor Robert Wagner, whose father authored the NLRA which enabled industrial unionization nationwide—which recognized public sector unions in city government. There was some sense that the beneficiaries of the public sector weren’t the largely white private sector industrial workers, but the less white and more female workers in public and service sectors. There was conflict over who “counted” as a worker.

kpf: One of the ways to think about this is through the mobilization of the public sector unions during the fiscal crisis. During the first rumblings of the financial crisis, the leaders of District Council 37, which was the largest public sector union representing many kinds of city workers (from architects to zoo employees) tried to mobilize the public sector workforce in opposition to austerity. They targeted the banks, they held a big rally on Wall Street, they rejected the idea that the city was experiencing fiscal problems to begin with, and they demanded that the banks continue to lend.

This was a newly-unionized workforce in the mid-70s, and they tried to tap into the energy of the civil rights and feminist movements. But there was a lot of difficulty forming coalitions at this time: Uniformed Services didn’t want to work with District Council 37, for example. The various unions all had different trajectories. It’s true that the public sector labor movement in New York struggled with defining who was a city worker, and the General Strike announced in 1975 never came to pass. The militancy of the early parts of the crisis dissipated fairly quickly, especially at the top levels. They were afraid of what would happen if they went to bankruptcy court: would contracts be voided altogether? Would they lose the bargaining rights they’d only recently obtained? The question of identity and identification partly comes from people’s own political identifications, but it’s enforced by these structures. In this case, the fear of what bankruptcy court was going to mean for city workers. Was that fear exaggerated? It’s hard to say, but that’s how fear works—it exaggerates itself.

ms: The title of the book, Fear City, refers to a propaganda campaign by police unions that raised the specter of chaos if the city was devoid of police protection. It threw everybody under the bus—both the public at large and the potential other constituents of an anti-austerity movement. Can you talk about the role the police played in New York politics, and its relationship to the rest of the unions and the city?

kpf: “Fear City” refers to these pamphlets that the coalition of police and detective unions produced in the summer of ‘75 in response to a wave of proposed layoffs. They feature this grinning skull that says “Welcome to Fear City,” and they list all the things you couldn’t do in the city any longer: ride the subway; go to the South Bronx; go outside after six o’clock. The intention was to distribute these to tourists coming to New York and to stoke fear of crime. To accompany them the police also took out big ads in the newspapers. They drove around the city with these big sound trucks, blaring messages about the last time that you or someone in your family was mugged. Mayor Beame was obviously very upset by this campaign, and he got an injunction stopping them from handing them out at the airports. They won the right to distribute them, but they never actually did. But by that time, the pamphlets had gotten a huge amount of attention.

I was interested in how the atmosphere of fear came to change the sense of what was possible for many different groups of people. The cover of the book, which is a cityscape from above, was meant to speak to that: fear coming from the upper floors of these skyscrapers and conference rooms—fear of bankruptcy, fear of failure, fear of chaos.

ms: And the fear they themselves were feeling, the idea that they had to do away with the threats to the social order—mobilized and militant multiracial working class, public sector unionization, the civil rights movement—which they perceived to be the result of an out of control welfare state.

In the way you write about the popular resistance to austerity across the city, you point to episodes of solidarity that seem to push back on the notion that people were working with a zero sum frame of mind. The narrative isn’t one of working class people of different races unwilling to work with one another, but rather of elite conceptions of these different constituencies and which communities had to be preserved, versus which were politically expendable.

kpf: The second half of the book tells the story of how austerity politics were implemented in New York, and tries to document the many organizing efforts to preserve public services. I wanted to look at instances of cross-racial organizing, and one example of this was the People’s Firehouse, which was a fire company that was slated for closure in North Williamsburg. At the time, the neighborhood was mostly Polish and Italian. It had wood frame houses, and the community had experienced a lot of fires. Local residents had an acute sense of wanting to keep the fire company open.

They occupied the fire station and physically stopped the fire trucks from being removed from the house. They kept the station open for about 16 months, and eventually service was restored, during a time of otherwise drastic cuts to the fire department across the city. At one point, they were told that they could keep their fire house in exchange for the closure of the fire house in Fort Greene, which at that time was primarily a black neighborhood. But no one went for it. I was interested in cases like that.

A lot of good work has been done on white resistance to desegregation in the early-70s, but I was interested in building another narrative about what was happening during the fiscal crisis, because resistance to austerity involved many instances that didn’t pit one group against another. One thing to note about the fire station example is that people were basically allowed to stay there and have these confrontations with police. The firefighters supported them, and there was a sense that the community was entitled to a fire station. Everyone accepted the basic legitimacy of the situation, which may not have been the case in a primarily black or Latinx neighborhood.

The book ends with the case of Sydenham Hospital, which was a small public hospital in Harlem that, earlier in the century, was one of the first places where black doctors were permitted to practice in New York. There was a sustained community effort to save it under Mayor Koch, and he responded by saying “No, I’m not going to listen to a black mob.” He wouldn’t allow a claim to racial justice keep the hospital open.

ms: I’d like to talk briefly about education. You poignantly list the services that were cut from public schools, like public health facilities. In the crisis, services like police and fire departments were deemed essential, while health clinics and schools were not.

kpf: “Essential” versus “nonessential” rhetoric may have come up first in the set of debates over the fall of 1975, when it looked most like the city would go bankrupt. People understood that when a city declares bankruptcy, it doesn’t just disappear, and they began asking what the most essential public services were that would have to be provided.

In this context it’s interesting to think about the way that the teachers’ unions were talked about, and the sense of hostility and animosity towards the teachers’ union in particular. It was tied to the idea that public schools were uniquely inefficient and problematic. There were various proposals to close schools during the fiscal crisis, and they largely didn’t come to pass—except in Central Harlem, which had the greatest number of schools close. Parents did try to keep the schools open, people were invested in their school communities, but they weren’t able to do it in most cases. So again, the question of essential services: Essential for whom? Essential under what circumstances, and at what level of quality?

ms: You talk about Mike Holloman, the black president of the New York City Public Hospital Commission during the crisis, who was a product of the civil rights movement. He had the phrase “Healthcare is a Right” on a placard in his office, and he fought to keep hospitals open at a time when the city leadership needed someone who would go along with austerity politics. Ultimately, he was forced out and replaced by a white doctor who implemented the hospital closures that the city elites were demanding.

kpf: There was an incredible amount of health care activism in NYC public hospitals in the late 60s and early 1970, Holloman had no capacity to enforce that vision in the context of the crisis. This was one of the innovations of the financial crisis which we haven’t talked much about—the Emergency Financial Control Board, which was a state agency that was specifically set up to shift power away from the city. It included four elected representatives: the Governor, Lieutenant Governor, Comptroller and the mayor, and also three people meant to represent “the public” but who in practice were all business leaders, and representatives of private companies. Community groups argued that they needed a labor representative, a neighborhood representative—but there was no interest in that. The EFCB didn’t actually set budget priorities, but had veto power over them. This was the state agency whose purpose was to shift power upwards to make it less democratically accountable.

Jack Gross: I wonder if you can speak in a little bit more detail about the institutions that emerged out of the crisis period. We normally think of austerity as a process of paring back services, but those measures also generate new institutions. The New York that we live in today is full of, for example, public-private partnerships; the NYPD budget has consistently risen since the 1970s; there are massive incentives for private real estate development—but there’s no public hospitals or tuition-free CUNY.

kpf: Fear City stops at the end of the crisis, but there’s another book to be written about the institutions that come out of it, and in particular public-private partnerships: Business Improvement Districts, Park Conservancies, even the expansion of the PTA in public schools—a whole set of institutions that try to mobilize private wealth into different parts of the city emerged in this period.

Over time the city’s budget does expand again, and the city starts to spend again in the 90s. The type of austerity chronicled in the book doesn’t last, but there is a lasting change in the sense of priorities for public money. The tradition of using public money to appeal to private interests comes out of the crisis. I talk a little in the book about the deal with the Commodore Hotel.

ms: Did you know the importance that was going to have when you wrote it?

kpf: I had no idea! I was finishing the book in 2016 and thought it would be interesting and funny after Trump loses the election. The Commodore Hotel, which became the Grand Hyatt Hotel, was Trump’s major development project in Manhattan, which he was able to get these crazy tax abatements to build. In The Art of the Deal, it’s presented as an example of his genius, but the city was actually very interested in promoting the deal. The deal was enabled by the city’s political will and promoted extensively as a symbol of the way of the future. Benjamin Holtzman, a recent Ph.D. from Brown who worked with me on his dissertation, has a book forthcoming from Oxford University Press which describes these types of institutional arrangements that grow out of this period and into the ‘80s and ‘90s.

ms: To return to Invisible Hands, one audience has read the book as a kind of playbook for elite movement building—that is, that there’d be a way for progressives to model the path that conservatives took over many years to seize back total control after the New Deal. After spending some time in the progressive institutional world, I’ve basically come to the conclusion that there’s an essential asymmetry between the left and right in terms of what’s achievable through top-down methods—and if your aim is to democratize power, you’re not able to just do that through top-down elite approaches. What are your thoughts about what, if any, lessons there are along these lines in Invisible Hands?

kpf: I think that captures where I arrived at the end of the book. The power base of the right is actually quite different than that of any left movement, which means you can’t just take the type of movement I describe in the book and transplant a different set of values onto it. When I was working on the book there was a certain frisson to reading these memos or things from the 40s, from these people who felt marginalized in one way or another, and who had incredible confidence that they were going to be able to change things over the long term. There’s something very exciting about that. But there’s a fundamental difference between this kind of influence, and building a mass movement.

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