Remaking the Rust Belt. Tracy Neumann
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as the New York Daily News famously rendered Ford’s message to Mayor Abe Beame and Governor Hugh Carey that the federal government would not bail out the insolvent city. New York, like most other major U.S. cities, had worked through a redevelopment partnership to facilitate urban renewal projects in the 1950s and 1960s. New York’s partnership differed substantially from those in other cities which undertook large-scale urban renewal programs. In most places, renewal activities were directed by civic organizations modeled after the Allegheny Conference, such as the Greater Milwaukee Committee, the Chicago Central Area Committee, the Greater Baltimore Committee, Central Atlanta Progress, the Cleveland Development Foundation, and St. Louis’s Civic Progress. Instead, New York’s “master builder,” Robert Moses, remade the urban landscape through a series of public authorities. When Manhattan’s business elites decided in 1975 to work with the city and state government to solve urban problems, their focus was on the city’s looming bankruptcy rather than physical redevelopment through urban renewal.51 They set out to create a different set of institutions through which to confront a different set of circumstances.
After Ford rejected Beame and Carey’s bid for federal aid, Carey turned to the city’s corporate leaders for advice. The city’s bankers had long warned that Beame needed to cut spending and balance the budget if he hoped to keep New York City credit-worthy. In spring 1975, banks refused to issue new bonds to cover Beame’s budget shortfalls, and Carey loaned the city money to remain solvent; by June, New York City could not honor nearly $8 million in maturing securities. Carey asked investment banker Felix Rohatyn, managing director of Lazard Frères, to head an advisory committee composed of financiers, CEOs, and realtors to determine a course of action. Instead of creating a civic organization to work with city and state officials, the committee advised Carey to create a state-chartered independent corporation through which bankers could oversee the bailout. As a result, Carey created the Municipal Assistance Corporation for the City of New York (MAC) in June and appointed Rohatyn as chair of the nine-member board. MAC gained authority through the state legislature to issue bonds and use the money to restore the city to solvency. To support MAC’s activities, the state legislature converted New York City’s sales and stock transfer taxes into state taxes and used them to secure MAC bonds, mandated that the city balance its budget in three years, and established an Emergency Financial Control Board to monitor the city’s finances and ensure that MAC’s directives were met. If Rohatyn and his board thought that city officials were making poor budgeting decisions, MAC could suspend loans to the city and hold back tax revenue. Carey and Rohatyn’s efforts were not enough to resolve New York’s fiscal crisis; it took more than $2 billion in short-term federal loans and an agreement from public sector unions to buy $2.5 billion in city bonds to stabilize the city’s finances.52
The financial details of New York’s bailout were only part of the story. With MAC, Carey transferred unprecedented control over public finances to private actors, some of whom were the same bankers who refused to extend additional credit to the city. In exchange for bond financing, Rohatyn and MAC demanded that New York City implement austerity measures as part of “best-practice” budgeting. These included tax hikes, wage freezes at levels below inflation, public-sector layoffs, cuts to public services, higher subway fares and, for the first time, tuition at City College. The social costs were immense: day-care centers and firehouses closed down. Six thousand teachers were laid off. Public sector unions lost power as their memberships declined; the same unions found themselves in the uncomfortable position of becoming creditors to their employer, which made strikes a difficult prospect.53 Compared to many other U.S. cities, in the 1950s and 1960s New York had been a social-democratic stronghold, with an expansive welfare state, strong unions, and a liberal political culture.54 MAC’s austerity measures tore apart the city’s social safety net, increased income inequality, and undermined organized labor. These were not, as Rohatyn claimed, unavoidable consequences of MAC’s efforts to forestall a bankruptcy that would have been worse for working- and middle-class families.55 Instead, New York’s corporate elites seized leadership in a moment of crisis and pushed through a series of neoliberal reforms to reduce the size and power of what they had for decades considered a bloated welfare state.56 Their activities marked the emergence of the growth partnerships that would proliferate in North Atlantic cities in coming decades, which had more flexible arrangements between their public and private members than did redevelopment partnerships rooted in federal urban renewal legislation.
The growth partnership that managed New York City’s bail-out represented what Timothy Weaver has called “neoliberalism by design”—an example of political and business elites using state power to implement a neoliberal political project—but not all such partnerships reflected the discernible influence of neoliberal ideology. Cities like Pittsburgh and Hamilton (in Weaver’s taxonomy) instead turned to “neoliberalism by default.” Members of their growth coalitions increasingly abandoned redistributive programs and pursued free-market solutions to urban problems because they did not perceive other politically viable options.57 Caliguiri, for instance, was undoubtedly influenced by events in New York, but he and his allies in the Allegheny Conference did not set out to use Pittsburgh’s revived partnership to break unions, gut pensions, or roll back the welfare state as MAC had. Instead, the city’s redevelopment partnership retooled to contend with the changing political and fiscal conditions that accompanied industrial restructuring and federal retrenchment. If New York City and Pittsburgh’s growth partnerships’ intentions were different, the outcomes were similar. Pittsburgh’s postindustrial redevelopment under Renaissance II, like New York’s rebirth in the same period, produced hollowed-out manufacturing zones, gentrification of blue-collar neighborhoods, university expansions and new medical complexes, and the perpetual rebuilding of downtown as its role shifted from managing production to managing services and finance.
In Pittsburgh’s growth partnership, partners coordinated different aspects of redevelopment that had been centralized through the Allegheny Conference in the first Renaissance, and each shared or adopted Caliguiri’s postindustrial vision as a means to further its own institutional interests. “In Renaissance I the government got its ideas from the private sector, and commitment from the private sector was very important,” Robin remembered. “In Renaissance II, I think the government had learned how to sell the projects, which it originated, to the private investors. That was a major change.”58 The imprimatur of junior partners in voluntary organizations, universities, and local foundations legitimated particular aspects of the postindustrial transformation envisioned by the primary partnership of local government officials and corporate elites. The growth partnership also reflected the mix of institutions the Carter administration hoped to see engaged with urban development. Yet only the Commonwealth of Pennsylvania, which like most U.S. states became increasingly involved in economic development in the 1970s, achieved a level of influence over development decisions commensurate to the role of the city government and local corporate elites.
Caliguiri’s redevelopment plans remained heavily dependent on corporate participation, and the Allegheny Conference, as it had been during the first Renaissance, was the city’s most important partner. After R. K. Mellon’s 1970 death, Pease shaped both the vision and the programmatic activities of the Allegheny Conference. For much of that period, Pease ran the organization’s day-to-day operations from a corner office on the forty-fourth floor of the U.S. Steel Building, a position that hinted at the real power behind the Allegheny Conference. Pease was not a Pennsylvania native; raised in Nebraska, he arrived in Pittsburgh after World War II to attend Carnegie Mellon University (then the Carnegie Institute of Technology). After graduating with a civil engineering degree, Pease initially worked for the university on its postwar physical expansion, and in 1953 he went to work for the URA, where he oversaw a controversial urban renewal program in the city’s African American Hill District. Five years later, thirty-three-year-old Pease was named URA executive director, and in 1968 Mellon tapped him to helm the Allegheny Conference.59
Until Pease’s 1991 retirement, the Allegheny Conference Executive Committee, composed of the city’s most powerful corporate and financial leaders, set the organization’s agenda based on his recommendations. The organization’s structure reflected a dense web of interrelationships between local and regional development organizations and Pittsburgh’s corporate elite. “I think that we have