The pandemic economy could revive one of America’s ugliest fights over local control

New York City had a distinctive kind of social welfare state that was undone by a budget crisis in the 1970s.

Forty-five years ago, New York City stood on the precipice of financial ruin. Facing rapidly rising welfare and social services costs, municipal leaders found they could not rely on their rapidly shrinking tax base, a newly parsimonious federal government, or once-friendly local financiers. 

In 1975, New York’s leaders were forced to radically cut basic services and accept oversight by the state-appointed Emergency Financial Control Board. The city’s basic social contract was abandoned, sending transit fares skyrocketing and imposing tuition on the City University of New York. Not even police and fire protection were spared, despite rising crime rates and a plague of arson that devastated neighbourhoods across Brooklyn and the Bronx.

New York University professor Kim Phillips-Fein tells the story of New York’s fiscal crisis in her book Fear City, which was nominated for the 2018 Pulitzer Prize in History. Her story is framed as a reckoning between an island of social democracy in America and the ascendant conservative movement, backed by a revanchist financial industry. 

Since then, fiscal austerity has been imposed time and again on weakened governments from Greece to Puerto Rico, by bond vigilantes and conservative politicians. Now the Covid-19 pandemic has sent municipal revenues plunging, and Republican leaders in Washington, DC, have largely dismissed calls to lend a helping hand. CityMetric spoke with Phillips-Fein about Fear City and lessons of 1975 for cities facing a nightmarish budget season. 

Your book is about how the fiscal crisis in New York was used to discipline the city and curb it's more social democratic policies. Do you think the current debates in the US over state and local relief could play out the same way? 

Today’s reluctance to extend aid to states or cities reflects a crass sense of where support for Trump, and the Republican Party more broadly, is located. More deeply, there's a tacit argument that the places affected by this are cities, poor people, and people of colour. There seems to be no sense that those people or those localities are part of whatever vision of America the right has. There's a certain way in which they can be written off. 

It’s a theme you see in parts of Trump's rhetoric, where economic growth is being counterposed to public health. The ultimate logic of it is that it doesn't matter if these cities are affected, it won't matter to you if these other people are sick or die. Now, as much as in the 1970s or the AIDS crisis, the question of who deserves healthcare and how the public sector will address the crisis are affected by both short-term political calculations and a larger ideological framework.

In both cases, the fiscal issues facing municipalities are not necessarily their fault. New York in the ’70s was on the losing end of national policies that undercut its budget, as well as policies incentivizing white flight, deindustrialisation, and segregation.

In the 1970s, the right said New York brought its problems on itself. It's the result of the structure and institutions of local governance, it's their fault, and we don't have to do anything to help. In the 1970s, in New York, I think that was wrong. The problems that New York had were not limited to the city. They reflected larger historical and economic forces and also political choices made at the level of the federal government.

But at least then, there was a certain logic to it. New York did have a distinctive kind of social welfare state. Today, the coronavirus is a different type of problem. It obviously is not something that New York brought on itself or that any city brought on themselves. It's even stranger seeing that logic being trotted out here where it so obviously does not make sense. In the 1970s, there was at least a conflict between different ideas about governance that was playing out.

Your book shows how little power local politicians have in the end. They are beat up on by bond markets, the state, and federal authorities. It makes municipal leaders almost seem inconsequential.

By the 1970s, the city had developed a very distinctive set of institutions, ranging from its public transit, tuition-free City University, its parks, its libraries, and its public housing programs. The city government played a critical role in bringing all those into existence. 

Similarly, today, the choices made at the level of the New York government deeply affects the kind of city we live in. The public sector has grown in recent years, for example, with the expansion of pre-kindergarten programs. At the same time, there is much more leeway for public-private partnership models, like Business Improvement Districts, that wind up concentrating wealth in certain parts of the city. But both of these are choices made at the level of city government. With the response to the public health crisis, there are a lot of decisions made at the city level. It's not as though city politicians are completely impotent, or that city politics is totally irrelevant. 

City governments are easier for local actors, local social movements, to influence and put pressure on than higher levels of government. At the same time, the story of New York in the 1970s is that there are also limits to what cities can do. They can be powerful, but there are limits.

Now city governments need help again, and maybe you could see political self-interest at higher levels work against austerity. During the Great Recession, the failure to really bail out state and city governments is a big part of why the economic downturn lasted so long and why the recovery was so weak. But then, Republicans in Congress didn't have the political incentive to make the recovery stronger. Now you might think that they would have that incentive. Do you think that kind of base political motivation could change how this plays out? 

My sense is that ideological considerations will be stronger. There's a way in which the right may feel there's political strength in being punitive. This particular strand of the Republican Party, or at least Trump's version of it, may have the sense that the benefits of not helping the cities are actually politically greater than the political cost of deepening the recession. 

Being able to say “I wasn't supporting the cities, I wasn't supporting public sector workers, I wasn't supporting poor people, or the people of colour who use these services.” That's how some of the forces around Trump would perceive it. That's not totally different than when Gerald Ford took the hard line against New York. It was partly an effort to court the right of the Republican Party, which was gaining strength. 

Ford actually did wind up bailing out in New York, albeit on conditions that were pretty bad for the city. But after he gave the “New York drop dead” speech, he went around and talked to different Republicans audiences on a big fundraising trip about not being bullied or pressured by New York. Clearly that was supposed to be a selling point.

You write that for ordinary citizens on the losing end, "austerity meant not only not only budget cuts but a political mood of bleak hopelessness."  What did the fallout of the fiscal crisis mean for ordinary people, for political engagement, and hope for the future?

In 1970s New York, there was a very visceral sense of seeing these local institutions threatened with closure. It's not just the city budget, but it is your children's school, your park, your local library. Whether or not the street lights are on, what the bridges are like, what the roads feel like. The budget actually creates the social world of the city and, in a very direct and personal way, what it is like to live in a particular place. 

The more money you have, the more you can insulate yourself from that. You can buy a house with a backyard, you can go to private school, you can take a car instead of the train. With money you can separate yourself from the public sphere. But the less money you have, the more that is your world. 

I started working on Fear City right before my daughter was born and I was acutely aware of how much the experience of our family was shaped by the public resources around us. By being able to go to the park, by being able to go to story hour at the library, by being able to go to the public school in our neighbourhood. These are the sinews of our lives.

During the 1970s, what was shocking to people in New York was that this was happening when poverty in the city is rising, when the homicide rate is climbing, in the middle of an arson wave – this is the moment when firehouses are being closed. There was something shocking about the withdrawal of resources in that context  There's a feeling of bewilderment, confusion,and ultimately apathy, that nothing you do matters. We'll see how it plays out today. My fear is that the withdrawal of resources, especially at this moment of political and social crisis, could lead to resignation and rage that doesn't have anywhere to go. 

What lessons would you hope readers today might take from your book?

People really responded to the portrait of social democratic New York in the beginning of my book, the sense of what the city was like in the postwar years. The sense of hope around the vision of a more egalitarian city life, the role of the public sector, and of collective action in bringing that about. 

Once those kinds of institutions are created, they don't just disappear. They're actually very difficult to fully dismantle. Even though there’s tuition at CUNY now, it still does exist and it’s a powerful educational institution and resource for the city. There's a lesson, going back to the beginning of our conversation, that cities and governments can actually create places that are better for people to live in. 

Fear City told part of the story of the rise of the present order, and it may be in some ways that we're now living on the other side of that. Perhaps the crisis can reshape people's ideas and lead to a different kind of future. It’s far too early to say how things will go. You could also imagine really negative outcomes, and imagine the politics of the country taking very scary directions.

Jake Blumgart is a staff writer for CityMetric.


To see how a city embraces remote work, look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”

Katie Bishop is a freelance writer based in Oxford.