Kim Phillips-Fein's Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics

Reviewed by Jacqueline Brandon

Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics  By Kim Phillips-Fein Metropolitan Books (April 2017) 416 pages

Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics
By Kim Phillips-Fein
Metropolitan Books (April 2017)
416 pages

Critics of neoliberalism have well established that disasters, be they economic, ecological, or political, create space for opportunistic restructuring. In post-Allende Chile as in post-Katrina New Orleans, free market ideologues, business interests, and neoconservative political regimes seized the chance to dismantle robust public services and unions, making the death of liberal civil society in the name of corporate oligarchy parading as bootstrap individualism. In mid-1970s New York City, deepening municipal debt and a waning commitment to the liberal politics established by the New Deal and Great Society coalesced in what has gone down in history as the narrowly avoided fiscal collapse of the city. This is the story Kim Phillips-Fein tells in Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics. Here, sandwiched between the sixties’ welfare state expansion and the eighties’ triumph of Reaganism, Phillips-Fein uncovers the complicated process by which once-liberal politicians and policymakers embraced a form of governance hollowed of public services and friendlier than ever to business leaders and the financial industry.

Phillips-Fein devotes great attention to both the prelude to the crisis and the municipal foundations that the crisis eroded. Explicating the process by which city leaders made a political choice to accrue debt (a choice that bankers, as the primary buyers of the city’s municipal bonds, were all too happy to support) in order to fund the city’s extensive welfare state. The City University of New York’s network of tuition-free, open admission public colleges, alongside libraries, clinics, hospitals, daycare centers, parks, the public transit system, and museums supported an upwardly mobile, heavily unionized population of New Yorkers by the 1960s and early 1970s. To support such wide-ranging public services, City Hall first under John Lindsay and later under Abraham Beame made use of short-term municipal bonds that matured quickly and put pressure on the city to choose between cutting services, levying new taxes, or seeking aid from the state or federal governments. The city’s overreliance upon short-term financial tools that the state could not feasibly pay back on time made city leaders’ commitment to the public provisions increasingly tenuous from the mid-1970s onwards.

For Phillips-Fein, the fiscal crisis did not emerge from mere political ill will toward liberalism. At the the heart of Phillips-Fein’s inquiry is the complex interplay between the political and the economic — between local, state, and federal politicians and the financial and corporate leaders that paved the way to austerity. In a departure from much of the literature on neoliberalism, Phillips-Fein does not depict the political figures that ushered in this new era of austerity as rigidly ideological. This was not, in other words, a right-wing plot from on high to dismantle the public sector. Well-meaning politicians, unions leaders, bureaucrats, and even businessmen faced a daunting scenario. With pressing problems — creditors owed debts, payroll deadlines, and default on the horizon — city leaders with Abraham Beame at the helm scrambled for solutions. Phillips-Fein is most adept at untangling the mechanisms of governance that characterized this scrambling. As a political leader, Beame proved ultimately inept at defending New York City’s liberal welfare state to the federal and state government. Criticized from both the left and right, his proclaimed commitment to the city’s public sector waned in the face of bankers given the political power to advise austerity. If Beame’s maneuvering appears frustratingly equivocal, much clearer was that the looming fiscal collapse entailed a surefire rollback of democracy and public oversight in a political equation that prioritized bondholders over citizens.

That the slide into austerity was not inevitable does not let business leaders and conservative politicians off the hook. As Phillips-Fein shows, once appointed to the emergency advisory committees established during the crisis — the Municipal Assistance Corporation (MAC) and the Emergency Finance Control Board (EFCB), investment bankers like Felix Rohatyn played a key role in gutting the local welfare state, casting the urban liberalism itself as profligate if not morally bankrupt. As Phillips-Fein shows, the private sector leaders appointed to MAC and the EFCB were responsible for changing the city’s reputation to sell more bonds — not dealing with the consequences of what it actually meant to make deep cuts in the municipal budget. A burgeoning conservative ideology also made its way to New York in its time of crisis in the form of Gerald Ford, then advised by Donald Rumsfeld and Alan Greenspan, rejecting Beame’s plea for assistance. Even though the federal government did in the end come through for New York, Ford’s public scorn of the liberal city held ideological and symbolic weight.

In addition to grappling with these broad political and economic transformations, Phillips-Fein’s is also deeply interested in the social and cultural. Fear City relates the biographies, views, and actions of both the powerful and the disempowered. Introducing the stories of power brokers and City Hall technocrats in the first two sections of the book, Phillips-Fein tells of people like Steve Clifford, an ivy league-educated, dashiki-wearing hippie and consultant for the city comptroller during Beame’s tenure who played a key part in sounding the alarm on the city’s financial woes. Elsewhere in the book, and particularly in the third section, a different cast of characters comes more sharply into focus: the city’s working-class laborers and residents. Police and firemen, teachers and sanitation workers — all in unionized trades — appeared particularly quick to react to budget cuts that threatened their livelihoods. Eventually, and after much drama, the leadership of their unions would buy into the new austerity regime by agreeing to use pension funds to invest in municipal bonds. But in the chaotic months of the fiscal crisis, these threatened workers exhibited their attachment to the city’ massive municipal payroll by making their discontent known face of firings. In one striking scene that Phillips-Fein narrates, younger laid-off cops faced off in the streets with older, still-employed cops in the area of Lower Manhattan around City Hall.

Fear City is also attuned to the experiences of non-unionized workers and residents of neighborhoods hard-hit by the so-called urban crisis and the austerity measures that compounded it. It is, in other words, as much a history of organized and spontaneous resistance to austerity measures that endangered public institutions as it is an account of behind-the-scenes austerity scheming. Phillips-Fein devotes a whole chapter to the story of neighborhood activists in Greenpoint-Williamsburg who protested the closure of their firehouse, as well as another to students at Hostos Community College students in the South Bronx who defended their institution when CUNY was put on the chopping block. Marginalized New Yorkers appear also in Phillips-Fein’s discussion of labor leader Victor Gotbaum’s attempts to organize the city’s invisibilized low-wage workers in places like hospitals. But in the trajectory that characterized many of the actors present in Fear City, Gotbaum came to embrace labor’s compromise with business and government (allegedly in order stave off more drastic threats to collective bargaining rights).

Focusing in as closely as she does on the political play-by-play of the crisis and its consequences, Phillips-Fein devotes less attention to the structural roots of the fiscal crisis. Why did the mid-1970s prove the pivotal years upon which the fate of liberalism hinged? Though she does tell a prehistory of the crisis through the expanding welfare state, focusing on specific political decisions made under pressure does not necessarily account for the reasons why the so-called “gap” between revenue and debt began to widen. Federal policies that facilitated capital decentralization from urban centers, suburbanization, and the decline of the manufacturing economy linger in the background of Phillips-Fein’s study as explanatory factors for the gap. For Phillips-Fein, New York assumes the burden of federal policies that created the crisis. In certain ways this contained focus on the city flattens the complex and contradictory role of federal policies, which at once supported the city’s large welfare state and enabled the capital flight that would render this local welfare state unsustainable.

In the political system that had taken shape by the time the fiscal ordeal had blown over, the bond market recovered, the anti-welfare populist Ed Koch was elected mayor, and public services were markedly reduced. Gone was the working-class ethos that flourished in the time of Wagner and Lindsay, when CUNY was free, public transportation was affordable, and the city supported a large municipal workforce. To Phillips-Fein, the economic conditions that came to pass were in the end the result of a clash of political visions that had reached a crescendo in New York in the mid-1970s.


Jacqueline Brandon is a PhD candidate at Princeton University.