Abstract: Building the Bankers' Metropolis: The Politics of Labor, Capital, and Space in New York City, 1977-1981

Joseph Arena


In 1975, a combination of structural economic decline and a shaky credit market pushed New York City to the brink of municipal bankruptcy—a collapse that was averted only through aid from the federal government. The city's leaders, operating under conditions of fiscal austerity and mounting public disorder, faced difficult choices. One option was the embrace of what Housing and Development administrator Roger Starr termed "planned shrinkage" and a permanently smaller city. Given the political firestorm raised by Starr's suggestion, Edward Koch, who was elected mayor in 1977, along with other municipal leaders instead sought to capitalize on the city's remaining strengths in real estate and finance. The paper follows New York's political elites, the leaders of the city's major banking and real estate firms, and its labor unions as they searched for a development policy that could serve both private self-interest and preserve a modicum of social peace. The result of this settlement, I argue, was not the removal of the state from the marketplace, but rather a drive for growth based on the public-private mechanism of speculative "risk." The resulting policies of tax-subsidized development, in one of America's most liberal and unionized cities, were remarkably similar to those of its Sun Belt competitors.