Apparently, each generation needs to learn anew that socialism doesn’t work. The latest commentator to illustrate this evergreen truth is New York City council member Brad Lander, whose recent New York Times op-ed argues that public ownership and control of land is the way out of the city’s current economic distress. Devices like community land trusts and land banks, Lander writes, can save the city from the evils of unfettered capitalism that marked the aftermath of its 1970s fiscal crisis.
Lander is wrong, of course. Only a strong private economy can support New York City’s robust array of municipal services.
Lander’s blinkered view of the fiscal crisis era comes from his reading of New York University professor Kim Phillips-Fein’s 2017 book, Fear City, a commendable history of a terrifying time, in which feckless city officials borrowed far more than they could ever repay rather than impose austerity during an economic downturn. As a result, a budget problem that was perhaps manageable in 1971 became catastrophic by 1975. Mayor Abe Beame lost control of the city to Governor Hugh Carey and an unelected control board, which did indeed impose steep budget cuts to secure Federal loan guarantees.
Phillips-Fein’s thesis, however—that all of this was not only avoidable but also the result of a plot by bankers to destroy the city’s benevolent welfare state and make it safe for cutthroat capitalism—is unconvincing. She doesn’t explain who would have provided money to the city under some alternative scenario. Further, she undercuts her own argument in the last few pages when she notes that the city recovered remarkably quickly and that its welfare state survived not only more or less intact, but much stronger fiscally. The capitalists had no interest in killing the welfare state. They wanted to make it sustainable.
Lander’s failure to appreciate that in New York City capitalism and the welfare state are complements, not adversaries, perhaps explains the poor choice of examples he offers to make the case for social control of land. The Brooklyn Navy Yard, acquired by the city from the federal government in 1965, is indeed a success story in fostering business growth. But the U.S. Navy built the yard originally, and since the local takeover, both the city and state have sunk hundreds of millions of dollars into improving it. Where did they get that money? From the ostensibly dreadful post-fiscal crisis economic boom, which stabilized government finances and made possible just such discretionary expenditures.
Lander also cites Penn South, a 36-acre, 2,820-unit housing development in Manhattan’s Chelsea neighborhood. Penn South is a fine and affordable place to live, but it relies on continued public-sector financial support. It was originally a dense residential neighborhood which was largely cleared by the city. In 1959, after a multiyear political battle, the federal government allocated $12 million in Title I urban-renewal funds (more than $100 million in current dollars), and New York State offered additional matching funds. The project relocated 2,646 households from the site. Only 600 households were offered new housing in the future development.
Title I no longer exists, and the idea of clearing neighborhoods of residents and destroying their homes is politically unthinkable today. Moreover, Penn South’s affordability depends on the city’s willingness to support continued favorable property tax treatment: the current abatement, recently extended, lasts until 2052. As with the subsidies for the Navy Yard, the city can abate Penn South’s taxes only because its strong private economy permits it do so.
Lander’s view that social ownership is a route to painless economic recovery is particularly distressing in the current climate. Mayor Bill de Blasio and the city council are once again looking to solve the city’s fiscal problems by borrowing $5 billion, to avoid layoffs and support public spending levels that revenues cannot sustain for at least the next several years. The plan is to push austerity on to the next mayor and council. The governor and state legislature thus far have not been receptive.
The decision makers who took control of the city in 1975 made the best and most responsible decisions they could under the circumstances. In doing so, they set the stage for four decades of economic growth and vast improvements in public services and quality of life for most New Yorkers. The city’s road to recovery now, as then, lies in the hard work of budget balancing and reviving economic growth—not the fantasy of social control of investment and enterprise.
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