Tuesday, November 12th, 2013

The Mayor As Entrepreneur-in-Chief by Ramsin Canon

[ Ramsin Canon is one of the most keen left political observers I know in Chicago. Among other things he’s been the politics editor at Gapers Blocks, a union organizer, and is now a law student I believe. Needless to say, he’s no fan of “neoliberalism”, even when practiced by those on the left. Here he provides his frame and critique of the current reigning governance model in our various levels of government re:cities. I may revisit this topic with my own thoughts in the future, but I’d like to make a couple of observations here. 1) Canon sees the locus of the problems facing cities as being at the federal level or otherwise beyond their control such that the response he decries is at least somewhat rational (if not the right one in his view). I take this as similar to my view that “gentry liberalism” has a certain sort of logic to it. 2) His articulation of the background is one that even many with diametrically opposite policy views could endorse. They just might take different lessons away (e.g., that federal intervention in cities actually caused many of the problems, see:urban renewal, downtown freeways, war on poverty, etc). This provides potential touchpoints for debate. In any case, this definitely makes you think about where we are, how we got here, and what to do about it. – Aaron. ]

Jamelle Bouie, a moderate liberal writer for The American Prospect, tweeted this:

around the same time that Mick Dumke, a left-leaning Chicago Reader reporter, wrote this:

Desperate for money, state and local governments around the country have explored all sorts of privatization deals, or public-private partnerships, as advocates prefer to call them. Florida, Arizona, and other states have sent inmates to private prisons. Detroit has considered outsourcing management of its street lighting system…Chicago isn’t just part of the trend. For more than two decades, it’s been one of the privatization leaders. “You could say they’re at the head of the pack,” says Leonard Gilroy, director of government reform at the libertarian Reason Foundation. “Chicago is reflective of the outsourcing that’s been going on for years.”

Not long after, we read about this:

Beginning January 1, Chicago’s parking meters will be the most expensive in North America. It’ll cost drivers $6.50 per hour to park in the Loop. Near downtown the rate will be $4 per hour. Other metered areas throughout the city will be $2 per hour.

and this:

For Skyway drivers, tolls are going up from $3.50 to $4.

and this:

Mayor Rahm Emanuel’s administration will explore the possibility of privatizing Midway Airport but will take a shorter-term, more tightly controlled approach than was employed by former Mayor Richard Daley’s team on the city’s first go-round.

All the while, Mayor Rahm Emanuel continues to be lauded by left-neoliberals and fellow travelers for his aggressively pro-business economic development policies, including mass privatization. Meanwhile labor unions and community organizations scrambled to find a critique of these policies that will resonate with a public increasingly incensed with a policy atmosphere that regressively taxes them while slashing jobs and services.

With the election over and no longer sucking all the air out of the room, and with President Obama comfortable ensconced in his second term but before the 2016 jockeying starts in earnest, now may be the time to step back and think about the big picture. What is this amorphous policy regime to which Mayor Emanuel, and mayors across the country hew? A policy regime that is comfortable enough for the wealthiest and most powerful Americans that they can comfortably donate both to Mayor Emanuel and Mitt Romney?

What we’re feeling viscerally, but seeing from too close to appreciate, is the logical end of decades of neoliberalization of government, which has transformed a managerial state into an entrepreneurial one. Our Mayors are now “entrepreneurs-in-chief,” and the result is that governance has been transformed from a participatory process of pooling resources and regulating behavior for the public good into one of government by private negotiation and enticement of capital through competition between states, cities, and even neighborhoods.

The neoliberalization process, broadly speaking, began in the 1970s. Neoliberalization impacted local governments in various ways, but the most directly relevant are, first, the shift in federal policy from direct spending to “pro-growth” policies and, second, the liberalization of trade and regulatory regimes that introduced international competitive pressures on localities, particularly cities. The abandonment of federal and state commitments to infrastructure and social welfare programs required localities to resort to debt (in the form of bonds) and the active pursuit of capital investment to make up attendant budgetary shortfalls. The introduction of international competitive pressures made this need more acute.

In the pre-neoliberal Keynesian context, cities behaved more managerially, responsible for administering programs like public housing and developing regimes like Euclidean zoning, as well as encouraging business development and protecting labor interests. When cities were “disciplined” by a loss of federal and state funds, they were expected to either shrink in size or find private sources for revenue–the antithesis of the Keynesian principles of recession response. Both to avoid capital flight and to attract new capital, therefore, cities must act entrepreneurially, engaging businesses and enticing them to develop new projects.

Enticing investment can take many forms, of course. Among these are tax incentives like tax-increment financing (“TIF”) overlay districts or sales tax rebates, direct subsidies, and “particularized” regulations that permit the government to be more flexible to the needs of development parties. Particularized regulations (for example, development agreements with developers that exempt them from the controls in a zoning statute) counter the unpredictability and vicissitudes of the administrative and legislative process and thus have inherent value to businesses; it reduces risk by vesting contractual rights, and thus ensuring predictability. The parking meter “lease” deal is a perfect example.

The story of the parking meter lease deal is the perfect neoliberal story. Throughout the late 90s and early 2000s, Chicago’s budget survived in large part on a particular tax, the real estate transfer tax. In the housing bubble years, there was no problem relying on this revenue to fund transportation, mental health clinics, and living wage city jobs. But as with the neoliberal bubbles of the past, it couldn’t last; between 2006 and 2009, revenues from the transfer tax cratered, from $242 million to $63 million. Between 2007 and 2008, the drop was over $80 million–representing nearly 40% of the budget deficit in the year the parking meter lease deal was made. It’s no secret now that Mayor Daley entered the deal to make up for a huge deficit without raising taxes.

Bubble that made some people very rich bursts. Revenues disappear. Working class families pay the price (see above, “most expensive parking.”) Only two options are available to the government of the New Model Entrepreneurial City: race to the bottom in terms of taxes and regulations to encourage “growth,” and thus boost revenues, and start selling off assets.

Why not raise property or luxury taxes, or institute a city income tax, to make up the deficit? Why not divert money from the TIF districts?

See above; Chicago is no longer a political community, it is an economic entity that is in competition with other cities in the region, in the state, across the world. In that mental framework, tax is cost, or price. You raise prices, you drive away your clients. In the case of the neoliberal city, the client is the developer, the investor, the employer. The federal government and the state are not going to give the city any real money; they are not investing in infrastructure, or education, or social welfare in any real way, the way they did up through the late 1970s and 1980s. The name of the game is “growth” through enticement of capital.

And capital plays the game perfectly. They condition “jobs” they’re supposedly creating on tax rebates, regulatory relief (i.e., from zoning codes), and more and more say in how the city is run–World Business Chicago being an example of that. Big business can always periodically threaten to leave the city, setting off the competition between cities and states that drive down standards, that abrogates regulations, that eliminates taxes.

This is our challenge in the coming era. Breaking this backward idea that the purpose of the city is to prostrate itself in pursuit of investment that is never really satisfied. Part of this will be a political solution: we need a Mayor unsatisfied with his pathetic role as an entrepreneur begging for investment, and willing to work politically to change the status quo. The other answer is a social one: alternative models to big business investment. Whether that means large-scale cooperatives, developing local sources of investment that can be pooled to provide employment, or some other method doesn’t matter. What matters is that cities begin to show that they can remove themselves from the uneven geographic development of capitalism that forces cities to regressively tax working class families and immiserate workers through wage depression and service elimination.

This post originally appeared in Same Subject, Continued on January 4, 2013.

Topics: Economic Development, Globalization, Public Policy, Strategic Planning, Urban Culture
Cities: Chicago

5 Responses to “The Mayor As Entrepreneur-in-Chief by Ramsin Canon”

  1. Daniel Hertz says:

    I agree with most of this, but I think the question is to what extent a single city can break out of this dynamic. It seems like the power of the neoliberal market is so overwhelming specifically because, faced with the economic and policy environment we have, there are a lot of reasons for city leadership to fear unilaterally creating policies that disfavor the elite. Just like an individual worker in a nonunionized workplace is being perfectly rational about their self-interest if they’re afraid to stick their neck out and protest terrible working conditions. That doesn’t mean they have to go after it with the relish of a Bloomberg, of course, but even with the best of motivations, the incentives seem pretty tough.

    It seems like just like an individual worker needs a union to create an environment where protesting working conditions isn’t risky, cities need the states and federal government to create conditions where they don’t feel pressure to compete in self-destructive ways for capital.

  2. Ian Rae says:

    > When cities were “disciplined” by a loss of federal and state funds, they were expected to either shrink in size or find private sources for revenue–the antithesis of the Keynesian principles of recession response.

    This makes no sense. Keynesian principles are about business cycles and macro-economics. They don’t apply to permanent changes in inter-governmental funding.

    Another view of the situation is that governments in the post-war years got used to a steadily rising tax base, and planned their spending accordingly. The recessions of the 70s, 80s, and 90s ended the rising worker productivity but cities (and governments) kept spending. This caused (a) government debt to rise, and (b) new sources of funding to be sought, as described in the article.

  3. Derek Rutherford says:

    I agree with the sentiment that many (not necessarily all) of these “privatizations” and tax games were misguided, but I think attributing them to any coherent ideology is pointing the finger the wrong way. Big city mayors have to be the political group least influenced by “neoliberalism” in all of American politics.

    I think the drivers for these actions are much simpler and old-fashioned: political greed and short-sightedness. the cost of city government kept going up, up, up, and revenue didn’t. When a local pol wanted to spend more money, but the money wasn’t there, they were willing to do any combination of borrowing, privatizations and TIF-type structures that brought them money to spend right away. Raising taxes was politically dangerous; mortgaging city revenue was hard for the citizenry to monitor. Wall Street and the banks were always happy to make it happen, for a fee of course.

    This is really a cousin of the underfunded pension problems that are currently eating up local government budgets. Pols could buy support from public worker unions with generous pensions; shortchanging the funding of them let them keep taxes steady. The pols figured that they would be retired before the bills came sue, and many of them were right.

    Now that baby boomers are retiring, we are seeing the arithmetic turn sour on these deals. Cities and states are raising taxes to pay for unfunded promises made decades ago, and some are going bankrupt.

  4. myb6 says:

    Some of the impetus for the privatization (certainly not all) stems from necessary-but-impolitic reform:

    -Parking downtown was crazy underpriced
    -Our interstates are crazy underpriced
    -*Some* of our teachers are over-priced for their level of competency

    (all the above is relative to market-clearing equilibrium)

    A little realism on the part of the city’s left about providing the best services with the least taxation would help recruit a broader coalition.

    On the author’s proposals:
    -Seems extremely difficult to implement luxury taxes without hurting the city’s competititive position and/or triggering some absurd debates on “luxury”. Does anyone have examples of a city generating meaningful revenue this way? It’d be interesting to learn more.
    -Income taxes: disastrous for the competitive position.
    -Long run, the portion of property tax that falls on buildings just raises rents. If you’re going for the gated-city effect, great, but that’s not the case here. But YES we absolutely should be taxing land; that really should be the primary revenue source for metro and local governance.
    -I agree that the TIF funds need to be eliminated- they’re a recipe for waste and abuse.

    On alternative models, I read CPL’s copy of “Reconstructing City Politics” (Imbroscio); Imbroscio is coming from the left viewpoint and actually talked about Chicago, especially the Washington admin, a great deal. However, my unfortunate takeaway from the book was that the alternative models just don’t have a track-record at any kind of impactful scale. It’d be irresponsible to contemplate any abandonment of the traditional land-development and biz-attraction model any time soon. Small shift, though? Sure.

  5. Gerhard Ehresmann says:

    Speaking of ways to address this ‘dark age’ (re: Jane Jacob’s book ‘Dark Age Ahead’ [2004])…

    Neoliberalism is insidious because it’s arguments parade themselves as invincible–they are like the air. Ever more economization, privatization, deregulation (though monopoly interests are usually protected) and speculative schemes are held to be the answer. ANYTHING else is too costly, not profitable enough, not growth-friendly enough, etc. It’s Margarette Thatcher’s ‘there is no alternative’ all over again. It’s Fukuyama’s ‘end of history’. We all become economists.

    Yes, businesses–and everyone else–try to find loopholes around regulations, laws, etc. but that doesn’t mean we deregulate or strike laws off the books. We make the regulations & laws stronger, smarter, and adapt them constantly to the changing dynamic.

    The answers may partially be in new types of cooperatives, currencies, etc, but if we don’t have the POLITICAL WILL to tame the multi-national beasts/banks they will take your cooperative, for instance, in their fists and crush it…to destroy it or to squeeze some extra profit from it (while they smile at/with you). The answer is not to build alternative ‘resistive’ models, the task is to significantly transform the existing model into something more socially responsible, more humane. In the current model we might as well cede our place on this earth to robots, as we’re rapidly splitting into three categories: the uber-rich, slaves and robots.

    There are PLENTY of precedents throughout history regarding methods of taxation, regulation and legislation that DON’T grovel at the feet of business. Perhaps in this globalized world, though, these methods need to be internationally-coordinated.

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