Capital City: New York in Fiscal Crisis, 1966-1978

Abstract

This dissertation is a history of the 1975 New York City fiscal crisis. It explores the cultural and material causes and consequences of the city’s near bankruptcy and subsequent social and fiscal restructuring. It argues that the cause of the crisis was a combination of a severe economic depression in the city’s real economy, and a market failure, the worst in the nation’s history, in the municipal bond market. The combination of these factors meant that the city was forced into deficit spending, and simultaneously frozen out of the credit markets. With the federal government taking no action, the city was forced to make severe, historic, cuts on its social programs, a move to austerity that has come to define our own era. This shift requires more than a fiscal explanation, as previous crises, when deficits were twice as large as those of the 1970s, were successfully navigated without the resort to the kinds of austerity seen in 1975. Instead, we have to look to a cultural turn on the part of the city’s elites. Where in the 1960s, bankers, state planners, and academics were willing to manage deficits as part of a larger social contract that included a commitment to the city’s poor, by 1975 that commitment was largely undone. The rejection was a reaction to the victories of the social movements of 1960s, specifically those for civil rights and black liberation. City elites sought mechanisms to check the costs, and more, the power and the politics, of the movements. This was achieved through fiscal measures, which profoundly reshaped social life in New York. The result for working people, women, and people of color was a pervasive sense of hopelessness and despair, evident even decades later, the artistic work of figures like Notorious B.I.G. His 1994 album of lost opportunity and personal “everyday struggle” spoke for the generation born to austerity; Big and his generation were “Ready To Die.”