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How the Rich Seized Control of New York

Today's stark inequality is a consequence of the city's crisis in the 1970s.

Spencer Platt / Getty Images

Early in 1982, President Ronald Reagan arrived in New York City to speak with an audience of business leaders gathered at the Waldorf-Astoria Hotel. A year into Reagan’s first term, the country had fallen into a deep recession. In his speech to the enthusiastic crowd, though, the president found reason to hope.

Wearing a scarf decorated with an “I ♥ NY” logo, a gift from Mayor Koch, Reagan praised the way that New York had pulled together when it faced bankruptcy in the 1970s. “When New York was in trouble, groups which had quarreled for years joined together for the greater good of saving the city,” he insisted. “Labor, business, voluntary associations all pitched in.” What had saved the city was “private initiative”—and this, Reagan was sure, would save the nation as a whole. “I think we’ve made our choice and turned a historic corner. We’re not going back to the glory days of big government.”

The notion that fiscal rectitude meant opposing organized labor and cutting back on services would resonate throughout the early 1980s, both in the United States and internationally. Only five months before his appearance in New York, Reagan had fired more than 11,000 striking federal employees—the nation’s air traffic controllers—breaking their labor union. Seven months after Reagan’s Waldorf-Astoria speech, the Mexican government defaulted on its debts and was pressed by the International Monetary Fund into a program of austerity, privatization, and structural reform. A few years later, Margaret Thatcher broke a year-long strike of coal miners in Great Britain, insisting that she did so in order to demonstrate that labor unions could not dictate the public policy of the nation.

In the United States, as Reagan’s speech suggested, New York’s story would be held up time and again as a cautionary tale of the dangers of Great Society liberalism and the virtues of the free market and private enterprise. Reflecting on the crisis ten years afterwards, Felix Rohatyn observed that it had “redefined the political dialogue” in New York City. The crisis had underlined “in the most brutal way possible the limits of any unit of government to create money itself and to promise all things to all citizens without a very solid private sector base.” In the future, he said, there would be an understanding that “business has to be supported and not just tolerated.”

Rohatyn was right: The nature of political life changed markedly after the crisis. There was no premeditated plan to seize and transform New York’s government, nor were the actors who gained power during the crisis acting upon an ideology constructed in the abstract. But the scare of the near-bankruptcy brought together the elite groups within the city, and enabled them to act in concert in ways that otherwise would have proved difficult to attain. The framework of “crisis” generated a sense of inevitability, making it seem that there were no alternatives. Across the Atlantic, “there is no alternative” would soon become one of Thatcher’s favorite slogans.

Upending common wisdom about the proper role of city government, the crisis marked the beginning of a new age. A corporate and financial elite, along with technocratic politicians responsive to that group, gained control over New York. They could be counted on to prioritize the interests of business and the wealthy; indeed, they often regarded that as the only way to help the city. This new perspective closed off an older vision of New York, shutting down debate over whether city government should seek to guarantee a set of social rights for all. New York City still has not transcended this constriction of its politics. Neither has the nation as a whole.

Forty years after the fiscal crisis, New York appears in many ways radically different from its 1970s self. The crime rate has fallen, as it has throughout the nation. Once-decrepit Bryant Park now hosts corporate-sponsored ice skating in the winter and classic films on the lawn in the summer. The junkies who used to linger in the infamous “Needle Park” at the corner of 72nd Street and Broadway have vanished, the square itself turned into a pleasant plaza. The downtown waterfronts that once ended in rotting wooden piers have become a network of lawns, water parks for kids, smooth paths for joggers and bikers, and plazas for sun-bathing that stretch out into the Hudson. The subways have been cleaned of graffiti, gleaming instead with advertisements that stretch the length of entire cars. The scrubby East Village apartments and Soho lofts that formerly housed artists and no-wave bands now rent to boutique chains. The abandoned piles of brick on the Lower East Side have morphed into charming pieds-à-terre. The neighborhoods that burned forty years ago are filled with hot properties. Luxury condos boasting indoor pools, screening rooms, children’s playrooms, and a perfectly packaged Brooklyn experience have sprouted on the Williamsburg waterfront, only blocks from where the People’s Firehouse once stood.

But the contemporary wealth of the city exists alongside staggering poverty. Twenty-one percent of New Yorkers—about 1.7 million people—lived below the poverty line in 2013. The average household in the top 5 percent earned eighty-eight times as much as a household in the poorest 20 percent. The fabric of everyday life in the city is shot through with that reality. The schools are more racially segregated now than they have been in a generation; parents in wealthy neighborhoods raise hundreds of thousands of dollars for basic classroom supplies and enrichment classes that the Board of Education no longer provides, but only for their own children in their own schools. Parks in the outer boroughs lie decrepit and crumbling; libraries constantly scramble for the funding they need. The working-class and poor people who most vigorously fought the changes of the fiscal crisis era were right about what these transformations would mean for them.

Meanwhile, as New York has been transformed into the model of post-industrial urban triumph, the 1970s have become the object of acute nostalgia. The recent successes of Patti Smith’s memoir Just Kids, focusing on her relationship with photographer Robert Mapplethorpe in a broken-down city, and of Garth Risk Hallberg’s novel City on Fire suggest an idealization of New York at the moment of collapse. They paint an image of 1970s New York as more authentic and free than the contemporary city, a place more accessible to everyone—especially artists—than the wealth-bound metropolis of today. The seventies marked the moment before the rise of neoliberal New York, the emergence of Donald Trump, the stock market’s climb—a time when New York (and America) still felt open, when one could dream of a different future in a way that no longer seems possible.

Such evocations of a gritty and exciting New York are often accompanied by embarrassed disavowals, by a sense that the 1970s city was a violent wasteland with nothing worth recovering or going back to, best left behind and remembered only as a vivid curiosity. In law-and-order rhetoric, 1970s New York continues to figure as a bogeyman: “Do we want to go back to the bad old days?”

But recalling what the political stakes of the fiscal crisis era really were can make us reevaluate both the nostalgia and the sense of superiority. The social and political tumult of the city back then was not only a reaction to bankruptcy, disinvestment, chaos, and general disorder. Those passions also grew out of a fierce and intense contest over the future of the city, a mobilization of its poor and working classes that was met by a sharp rebuke from the political and economic elites.

What is more, thinking of the seventies solely in terms of cultural nostalgia or violent crime can make us overlook how many of the policies that were dismantled during the fiscal crisis seem highly relevant to the social problems of the city even now. From rent regulation to tuition-free universities, from local health clinics to social services in public schools, from expanded library hours to free museum admissions and inexpensive mass transit, those policies and institutions embody the aspiration for a more egalitarian New York. By supporting a greater level of economic equality, they once helped create a more open city.

During the four decades that have passed since the fiscal crisis, critics on the right and left alike have interpreted it as an object lesson in the fragility of the public sector. From the vantage point of the present day, however, it is remarkable that the city did not lose more of its public sector than it did. The New York public school system remains viable despite its flaws, in far better shape than the school systems in cities such as Philadelphia, New Orleans, or Detroit. The subways remain public, a vast network unparalleled elsewhere in the nation. Despite the expanded role of private philanthropy, no one has privatized the parks or the libraries. CUNY continues to exist and to be fairly affordable. Eleven public hospitals and a network of community health centers and school-based clinics continue to provide health care to millions of New Yorkers. The city’s labor unions remain a powerful force; there were no efforts to break them altogether, as we have seen in states such as Wisconsin and Illinois in recent years.

Even today, some of the most valuable real estate in the entire country has remained completely off limits to developers: There are still whole blocks of Chelsea, the Lower East Side, and the Upper West Side occupied by public housing projects, poor people living in the midst of astounding wealth. All the clout of the city’s economic elites—who are by some measures the richest and most powerful people in the world—has not been able to dislodge these impoverished tenants. For all the pain of the cutbacks, one can imagine much worse outcomes.

Once public institutions have been created, they possess a curious resilience and stability. For a few years in the mid-1970s, it seemed possible for a newly energized group of elites to completely sweep aside the city’s history, to create a new set of norms for city government that would exclusively serve their needs. They did achieve much, gaining a new level of control over the city’s finances and bringing about a program of cuts that under normal circumstances would have been impossible to implement. But there were too many people too committed to the old public institutions for this to be a frictionless change. The vocal protests against the cutbacks showed how difficult it would be to entirely transform New York. As a result, many of the social democratic institutions of the postwar years managed to endure in the city to some extent—just as at the national level, the gains of the 1930s and 1940s (Social Security, the minimum wage, the right to organize) have proved far more difficult to eliminate than insurgent conservative movements might have hoped.

History rarely moves in one direction only. Amid the prosperity that now dominates New York, there is also desperate poverty and an acute sense that a different, older metropolis full of possibility has been lost. Even those who celebrate without ambivalence the city as it exists today should not overlook the real suffering that followed the crisis in the 1970s and 1980s. Nor should we forget that the policy choices that brought us to this point were often made without the full participation of the people of the city itself. At the same time, it’s worth noting that to this day, few other places in the United States offer as many possibilities for common, public life. No matter how much the wealthy might seek to retreat into high-rises from which the people below look small and insignificant, eventually they too must descend into the city streets, the life that we all share here together.

This piece is excerpted from Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics (Metropolitan Books) by Kimberly Phillips-Fein, out April 18.