Austerity in the City: Economic Crisis and Urban Service Decline?

Cambridge Journal of Regions, Economy and Society 2014, 7, 3–15 doi:10.1093/cjres/rst040

Austerity in the city: economic crisis and urban service decline?

a b c d

Betsy Donald , Amy Glasmeier , Mia Gray and Linda Lobao Downloaded from aDepartment of Geography, Queen’s University, Mackintosh-Corry Hall, Room D201, Kingston, Ontario K7L 3N6, Canada, [email protected] bDepartment of Economic Geography and Regional Planning, Massachusetts Institute of Technology, 9–523 Floor, Cambridge, Massachusetts 02139, USA, [email protected] http://cjres.oxfordjournals.org/ cDepartment of Geography, University of Cambridge, Downing Place, Cambridge CB2 3EN, UK, [email protected] dDepartment of Rural Sociology, Sociology and Geography, The Ohio State University, 2120 Fyffe Road, Columbus, Ohio 43210, USA, [email protected]

Received on November 25, 2013; accepted on December 10, 2013 at University of Crete on September 30, 2015

The city is a significant level of geography at which to examine the economic, political and social implications of austerity. We consider how the financial crisis originated in the urban and became part of a broader state crisis with consequences for cities. We then explore political implications that include the undermining of democratic processes and the rise of new ‘austerity’ regimes. We also consider implications for key social groups. Arguments are illustrated with evidence from North American and European cities. Finally, we explain how scholars have theorised the situation, which in turn sets the stage for policy and political solutions to the present crisis.

Keywords: austerity, city, urban, financial crisis JEL Classifications: G01, R51, R58

Introduction stressed the crucial role of cities as sites of col- We often think of austerity in terms of national lective consumption—where state provision of state crisis, as we contrast the fate of coun- public transport, housing, education water is a tries such as Greece, Ireland or Italy that have central process of urbanisation (Castells, 1977; undergone severe economic and political Dunleavy, 1980). Cities are spaces and places restructuring. However, scholars writing about where most of the world’s populations now earlier rounds of restructuring of state ser- live; they are the centers of economic power vice provision, after the recession of the 1970s, and wealth, but they also are where the most

© The Author 2014. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved. For permissions, please email: [email protected] Donald, Glasmeier, Gray and Lobao vulnerable in society, particularly the young, the its infancy, what does seem clear is that theoris- old and the poor are concentrated. In this issue, ing the consequences of austerity is setting the we return to a concern with the urban implica- stage for determining policy and political solutions of the contemporary fiscal and state crisis. tions that might address the present crisis. We argue that the city is a significant scale of geography at which to examine the economic, political and social implications of austerity. Economic implications of austerity: From an economic perspective, we consider the urban origins and consequences how the Wall Street crisis of 2007 originated in of the financial crisis urban and suburban spaces, but then became The importance of scale in understanding the Downloaded from a state crisis with consequences for cities and consequences of austerity is seen through the subnational scales. We then explore the politi- linkages between the urban origins of the Wall cal implications both in terms of how formal Street crisis, how that translated into a state cri- democratic processes are being undermined sis, and how that in turn affected cities and their in the name of financial expediency but also in ability to provide the infrastructure of collective http://cjres.oxfordjournals.org/ terms of how new informal ‘austerity’ regimes consumption. As Aalbers (2009, 34) notes, “an (Donald and Gray, 2013) of influence are oper- understanding of the financial crisis is ultimately ating outside the formal mechanisms of public a spatialised understanding of the linkages service provision to challenge the interests of between local and global”. The origins of the cri- the local population. We pay particular atten- sis are complex and historically contingent, but tion to the spatial organisation and internal two key geographical dynamics stand out. The structure of urban government in the UK and first has to do with the ways in which mortgage

USA and the economic constraints derived markets shifted over time from a locally origi- at University of Crete on September 30, 2015 from a variety of sources (for example, decline nated and locally held arrangement to one that in central grant equalisation in Europe versus although still locally originated, is now globally property-tax constraints in the USA). distributed (Martin, 2011). This shift was funda- Finally, we consider the social implications mental because without strong global financial of austerity policies on particular groups and regulations to prevent excessive risk taking, the classes in society. In this section, we consider new global model enabled actors to pass off the both the inter-and intra-urban geographi- risk of an asset to others, which led to the ero- cal consequences of austerity. At the national sion of lending standards (Aalbers, 2008). level, we explore how broader national policies The second main geographical feature of have been translated into a diverse landscape the financial crisis is the fundamental link of austerity with some cities and regions more between the local lending practice in certain affected than others. At the intra-urban level, US cities (for example, Buffalo, Las Vegas we show how austerity measures are dispropor- and Baltimore) and the growth of the globally tionately impacting the poor, the young, racial- distributed subprime mortgage market. Low- ised communities and the elderly leading to the income, high-risk borrowers were targets of intensification of social–spatial segregation at highly leveraged financial institutions making the neighbourhood, city and inter-city levels. To risky loans on unfavourable terms. In previous illustrate our arguments, we primarily use evi- eras, these same people and their neighbour- dence from North America and Europe, with hoods had been shut out of mortgage pro- particular focus on the UK and US cities and grammes through discriminatory practices such regions. We conclude the paper with a discussion as redlining and blockbusting. Now, through on how some of these processes are currently ‘reversed red lining’ (Brescia, 2009) these same being theorised. While this literature is still in neighbourhoods became targets for globally

4 Austerity in the city distributed subprime mortgages with profound had accumulated $46 million in debt with lit- impact on their urban communities (Clapham tle in the bank to make all their payments. et al., 2012; Wyly et al., 2009). Other Californian cities such as Vallejo and When the credit crisis hit in 2007, risk was San Bernadino succumbed to the same debt- heavily concentrated among leveraged financial induced pyramid scheme leveraging future institutions at the heart of the financial system flows of funds anticipated to accompany addi- in New York City and London. The first casualty tional revitalisation projects. The unanticipated was the financial institutions themselves, which recession accompanied high rates of home were forced to contract employment leading to foreclosures linked to the subprime mortgage the loss of thousands of jobs in the financial sec- crisis, combined with bad bets on municipal Downloaded from tor. Nevertheless, the largest impact was quickly bond sales, and employee salaries and pension registered through the wider crisis-induced obligations outpacing falling tax revenues. recession. The depth of the recession and pro- The home foreclosure crisis has indeed longed nature of the recovery was exacerbated affected cities and communities unevenly across by governments’ struggle to manage their the USA as particular neighbourhoods are http://cjres.oxfordjournals.org/ indebtedness (itself in part the result of bail- forced to address large numbers of foreclosed ing out the banking sectors and re-capitalising properties—abandoned and neglected. Many credit markets). In turn, cities in many Western of these communities are communities of col- countries were forced to adopt austerity policies our, as reports from Cleveland and Jacksonville to address high levels of public indebtedness attest (Lewis, 2010). But this is not easy in cities absorbed during the heady days of the subprime with an already long history of racial discrimi- lending spree (Donald et al., 2013). nation, deindustrialisation, weak economic

In economics, austerity refers to government growth and further fiscal restraint and public at University of Crete on September 30, 2015 policies that seek to reduce budget deficits and expenditure cutbacks (see, for example, work spending cuts by reducing or freezing labour on cities like Detroit in this issue by Hall and costs, tax increases, privatisation, a reconfigur- Jonas, 2014 and Reese et al., 2014). ing of public services and the welfare state or In the political economy literature, cur- a combination (Whitfield, 2013). In real time, rent retrenchment by the state is interpreted austerity policies have played out at multiple as the broader manifestations of neo-liberal scales, but it seems that this current round of development and the demise of the Fordist– austerity is peculiarly local in nature. Cities and Keynesian system (Harvey, 2005; Peck, 2014). their municipal governments have become both As Peck (2014) points out “[w]hat remains of victims and instigators of new forms of urban the Keynesian commitment to public services austerity with implications for how austerity in the United States (including education, measures are realised in and across particular unemployment, and disability insurance, aid spaces (Christopherson et al., 2013). and healthcare for the poor, and corrections) is Cities are the resulting victims of economic basically delivered at the state and local level”. restructuring as processes of globalisation State-rescaling is localities’ response to the make their fiscal tax base particularly vulner- need for austerity (Brenner, 2004; Lobao and able to the effects of financial instability. In Adua, 2011). State-rescaling reflects the ten- the USA, for example, California municipali- dency of functions of the central–state to be ties were ground zero for the subprime mort- rescaled territorially with subnational gov- gage housing market collapse (Bardhan and ernments assuming greater roles both in eco- Walker, 2011; Davidson and Ward, 2014). With nomic growth and redistribution. This has put a population of 292,000, the city of Stockton municipalities in the EU, USA and elsewhere went bankrupt after city leaders realised they in increasingly vulnerable positions due to

5 Donald, Glasmeier, Gray and Lobao global market vagaries and because central– assumed control of municipal finances pushing state funding tends to decline while munici- through packages of austerity measures that pal responsibilities for such expenses as social severely reduced the size of the public sector. welfare often increase (Lobao et al., 2009). Indeed, under the pressure of crisis, public sec- Municipalities are forced to become entrepre- tor benefits and pensions are deemed ‘sacred neurial in order to promote economic develop- cows’—unaffordable, undeserved and therefore ment, often resulting in service cuts to balance expendable. Public pensions, and particularly, the budgets. Faddish economic development poli- ‘gold-plated’ pubic pensions which remain gen- cies induced municipal governments to com- erous in relation to those offered by the private pete through infrastructure spending for trendy sector, have become symbols of public excess. Downloaded from bohemian neighbourhoods, design centres and The second development involves the rise of arts districts (Rantisi and Leslie, 2006). New new informal political networks recognised as urbanism unleashed another round of city-level ‘austerity machines’ (Donald and Gray, 2013). competitions to be ‘cool’ spending scarce pub- There is a long tradition in urban politics of local lic funds on flashy public art projects, often at coalitions of land-based elites forming in order to http://cjres.oxfordjournals.org/ the expense of basic cultural investments like structure urban development agendas and legiti- public libraries (Donald and Morrow, 2003). mate political projects that function primarily in In a period of slow growth, basic infrastructure their interest (Cox and Mair, 1988; Logan and investments, deferred during the boom years, Molotch, 1987). Crucially, Logan and Molotch are now being pushed further back in the line as argue that this ‘growth machine’ represents an municipalities struggle to pay off the debt taken ideological project promoted by local elites as on during the heady days of the early 2000s. value free, thus de-emphasising the links between

growth and private profit and instead presenting at University of Crete on September 30, 2015 all forms of capital investment as a public good to Political implications of austerity: the be celebrated (Boyle, 1999). Growth is assumed giving away of democracy and the to expand the local tax base, create jobs, and to rise new ‘austerity regimes’ improve the general standard of living. There is no question that the city scale has The explicitly spatial rescaling involved in become important in understanding the politi- many cities’ pursuit of austerity measures raises cal consequences of austerity. Two compelling important questions of place, space and the developments warrant our attention. The first politics of contraction. In contrast to the growth concerns the abandonment of the democratic machine politics of the 1980s that dominated US process due to financial exigencies accompany- and European municipal governments, this time ing austerity policies. For example, in Athens there are different multiscalar coalitions forming and Rome, the elected heads of state were around austerity which affect the level of public replaced by unelected ‘technocrats’ charged infrastructure and service provision, or collective with pushing through politically unpopular consumption, as well as the role of the munici- reductions in state spending, in addition to rais- pal government as employer. This coalition is ing the age of retirement (King et al., 2012). In often dominated by local actors, some of which the case of Athens, adoption of austerity meas- have been part of previous growth machines, ures was a requirement of further financial while other local actors are excluded from these aid. This displacement of democratic practices newer coalitions. As Peck (2014) shows in the was approved and encouraged by political and case of ALEC (American Legislative Exchange financial elites of the European Union and the Council), such local partners are often in coali- European Central Bank. Similarly, in cities like tion with actors at state or national scales. An Detroit and Stockton, unelected ‘administrators’ example is reflected in the local nature of much

6 Austerity in the city of the politics of the Tea Party in the USA that But how is this crisis actually experienced occurs as part of numerous, local scale, anti- in cities? First, we have seen growing levels government austerity machines. The Tea Party of income inequality in cities across Europe has embraced municipal austerity measures as and the USA. Increasing income inequality is part of their ideological commitment to small certainly not a new phenomenon, but the cri- government and libertarianism. Once seen as sis has hit certain communities particularly a politics constrained to the US context, these hard. The uneven distribution of poverty can anti-government ideas have migrated into both be seen between cities and within cities. Canadian municipal politics. The most notewor- Certainly, the inter-urban levels of inequality thy example is the continued popularity of the are clear in both Europe and the USA. Beatty Downloaded from ideas of Toronto Mayor Rob Ford, who despite and Fothergill’s (2014) article details the une- his notorious personal life, remains popular with ven nature of the welfare cuts that comprise many working class and poor voters who are in the UK governments’ attempts to roll back the fact most affected by his austerity policies. In state’s support of the poor and unemployed. the UK too, research on the political discourses They show that the effects are most acute in the http://cjres.oxfordjournals.org/ of the elderly has shown how they have been re- same places that have undergone the worst of casted from the ‘deserving’ to the ‘undeserving the economic restructuring of the past 25 years. poor’ in debates over recent increases in pen- Britain’s older industrial towns and seaside sion age eligibility (Walker, 2012). This suggests towns such as Blackpool and more unequal that austerity machines, as much as the growth London boroughs are hit hardest. Not surpris- machines which preceded them, naturalise the ingly, much of south and east England outside contraction of the state as value free and without London escapes relatively lightly. alternative. Like the growth machine (Molotch, The same phenomena can be seen in the at University of Crete on September 30, 2015 1999), austerity machines can also put localities USA. In addition to structural changes in the in chronic competition with each other and can economy, over the past 25 years income ine- harm the vast majority of their citizens (Donald quality in the USA has risen in tandem with and Gray, 2013). declining welfare benefits, regressive tax cuts, cuts to education and health programmes and the steady erosion of workers’ collective Social consequences of austerity: bargaining power. However, many of these growing inter- and intra-urban changes are multiscalar, with active agents inequality making funding decisions at the federal, state It has since become clear that the impact of and municipal levels. Thus, levels of inequal- the credit crisis on financial services employ- ity vary between cities throughout the country ment has not been nearly as severe as many but have been increasing all over the USA. We first thought, nor has it impacted severely the can see this in Figure 1 where our measure of relatively prosperous cities and regions in inequality, the Gini coefficient, can be seen to which those who work in this sector tend to live. increase nationally between 1990 and 2010 and Rather, the effect in the USA and Europe has is reflected in selected cities, which change their been felt most directly by workers in traditional rank over time, if only marginally. Although sectors such as manufacturing as well as govern- complicated by the subnational state structure ment, and often most profoundly for those on in USA, examining cities allows us to see the relatively lower incomes and who were already uneven nature of inequality in the USA. living in economically weaker areas (Bardhan Studies by the Brookings Institute show that and Walker, 2011; Donald et al., 2013; Glasmeier not only did absolute levels of poverty increase and Lee-Chuvala, 2011; Kitson et al., 2011). from 2000 to 2010 but that the population

7 Donald, Glasmeier, Gray and Lobao Downloaded from

Figure 1. Gini coefficient 1990–2010. Source: San Francisco Human Services Agency (2012).

which live in ‘extreme-poverty neighbour- which includes the neighbourhoods of South http://cjres.oxfordjournals.org/ hoods’, which they define as neighbourhoods of Market and the Tenderloin, to $105,509 in where at least 40% of individuals live below the the Sunset District of the City (San Francisco poverty line, rose by one third to 10.5% of the Board of Supervisors, 2013). Thus, citywide population from 2000 to 2005–2009 (Kneebone poverty rates averaged 12%, but this ranged et al., 2011). In other words, poverty is becom- from 22% in the poorest neighbourhoods to ing more concentrated in particular neigh- 6% in the most well off communities. Crucially, bourhoods. The report also highlights the role income disparities between racial groups are

of cities in this and shows that poor people in closely related. While the median household at University of Crete on September 30, 2015 cities remain more than four times as likely to income for White residents in the City was live in concentrated poverty as their suburban $83,796 in 2010, the median average fell to only counterparts. $30,840 for Blacks/African American house- San Francisco is often seen as having weath- holds. Blacks/African Americans, again who ered the economic crisis relatively well. Its are more concentrated in particular neighbour- concentration of high tech firms have con- hoods, also experienced the highest rates of tinued to expand throughout the recession, poverty, of over 25% in 2010 (San Francisco and its measures of concentrated poverty are Board of Supervisors, 2013). lower than many other cities in California. In many respects, the data presented above However, there is significant income inequality still fail to capture the concentration of pov- among San Francisco residents. The Bay Area, erty and vulnerability in the City, as all of the and San Francisco County in particular, have 12 districts combine poor and wealthy neigh- some of the highest income disparities in the bourhoods, reflecting the enormous amount of state of California. The Gini coefficient for San gentrification and neighbourhood change that Francisco between 2006 and 2010 was 0.51, up the city has experienced over the last few dec- from 0.44 ten years earlier (San Francisco Board ades. Looking at the neighbourhoods with more of Supervisors, 2013). Another way to view this fine-grained data allows us to see not only the is to examine income disparity between the extent of inequality in the city but also the ways City’s twelve Supervisorial Districts. A report in which income and racial inequality are inter- to the City and County’s Board of Supervisors woven and reinforced with poor schooling, less uses census data to show that median house- healthy environments and less well-being on the hold income in 2010 in the city was $71,416, neighbourhood scale. Thus, in the poorer, South but ranged from $37,431 in the poorest district, of Market, area we find high rates of poverty and

8 Austerity in the city diversity in a neighbourhood with schools, which and stands between 16 and 20% of those liv- perform below the city average, little open space, ing in poverty (Aud et al., 2013). According to poor air quality and high levels of liquor stores federal statistics, as many as half of children in and bars. While in the Outer Sunset, one of the the nation’s state-funded school systems are wealthier areas of the city, we see that a com- from low-income families (Aud et al., 2013— munity with fewer poor families and lower levels National Center for Educational Statistics of diversity also has much better schools, more [NCES] 2013). This becomes a particularly open space, high air quality and much lower important urban issue because the majority density of alcohol outlets (see Table 1). of funding for public education in the USA is

This data show the ways in which racially obtained through local taxation, so a decline in Downloaded from segregated neighbourhoods with concen- local tax revenue increases the already uneven trated poverty typically have fewer assets and funding of education in the USA. resources such as good schools, and open spaces; There is also a vicious cycle between meagre host unwanted land uses such as contaminated and uneven funding for education and child brownfield sites, are overpopulated with fast poverty. Analysis by the National Center for http://cjres.oxfordjournals.org/ food and alcohol outlets, and have major roads Educational Statistics indicates that lower edu- running through them resulting in dispropor- cational performance is correlated with higher tionately higher exposure to pollution. All rates of poverty. In the USA, the fiscal crisis these measures could be considered attributes has had serious consequences for state-funded of social and physical environments that are education, particularly in school districts where most important to health and well-being. revenues are low by national standards. The The City of San Francisco is far from a typical lingering effects of the recession can be seen city, but its patterns of social–spatial polarisation in the reduction in expenditures despite some at University of Crete on September 30, 2015 are not atypical. When austerity measures are modest improvement in many states’ budg- pushed through to the municipal level, it is not sur- ets. More than half of the states indicate that prising that certain social groups in our cities bear expenditures were lower in 2013–2014 than the cost. Whether looking at the USA or Europe, they were prior to the recession (Olif and that hardship is the daily experience of the most Johnson, 2010—Center for Budget and Policy vulnerable: poor children and the elderly. Priorities 2013). The growth in public educa- Since 2007, the number of children in pov- tion, also an important source of good paying erty in the USA has increased substantially and stable jobs for women over the mid-1990s

Table 1. San Francisco Sustainable Communities Index.

Neighbourhood indicator South of Market Outer Sunset Citywide

Low-income households (population living below 200% of the census 44% 20% 26% poverty threshold) Ethnic diversity index (High, 100; Low, 0) 71.2 57.5 63.1 School academic performance 749 839 792 Open space (%) 1.3% 8.9% 22.8 Contaminated sites (brownfield/sq. mile) 12.3 0.4 2.6 Air quality (cancer cases/million) 27.8% 0.0% 3.3% Density of alcohol outlets/sq. mile 28.4 11.1 1 7. 4 % of total ‘unhealthy food retail’ accepting state food vouchers 45% 35% 36%

Source: Sustainable Communities Index (2013). Data from 2010 to 2012.

9 Donald, Glasmeier, Gray and Lobao to mid-2000s, has been reset as states and local will go up, especially in places like the city of governments attempt to pare back growth in London where estimates indicate 30% of chil- public expenditures, which took place over the dren live in poverty (Lambert Council, 2013). latter part of the 1990s. Some states continue According to the Lambert Council, a group of to cut while others have yet to return to levels 14 local authorities that make up a large por- preceding the cuts from the previous 5 years. tion of inner-city London, fiscal austerity will It is not only the uneven and declining nature make it difficult to achieve child poverty targets of local revenue that affects US state-funded and tackle economic insecurity in the city. schools, however. The changes in local revenue Aside from reductions in funding for local are exacerbated by the removal of supports government, policy shifts include significant Downloaded from derived from the Federal stimulus package, reductions in welfare benefits and a shifting which expired in 2013. National-level political of responsibility for certain social services to posturing, such as the recent reductions associ- the local level, both of which will have major ated with federal sequestration, brought further impacts on the poor and economically vul- cuts, especially in programmes targeted to poor nerable, especially children. With cuts in both http://cjres.oxfordjournals.org/ children and poor communities (Leachman services and the national health service, these and Mai, 2013). changes may add up to 7 billion pounds in Fiscal austerity is projected to have a seri- reductions combined with changes in disability ously negative impact on families and children housing and tax benefits (Joseph Roundtree in the UK as well. In 2000, the UK pledged to Foundation, 2013). As many as 1.4 million end child poverty by 2020. Until 2007, the UK families may be made poorer by these changes, was making progress toward reducing child experiencing serious hardship experienced in poverty. Since the crisis, starting in 2007, the unquestionably the most expense place to live at University of Crete on September 30, 2015 UK progress on reducing child poverty has in the UK. fallen back, in part in response to austerity cut- Older people, particularly older women, are backs in programmes designed to help poor another vulnerable group in the USA and the families and children access goods including UK hit hard by austerity measures. As in the heating, food, decent housing and the basics USA, resources in old age in the UK are largely (Beatty and Fothergill, 2014; Lambert Council, determined by lifetime conditions and labour 2011). According to UNICEF, two of three chil- force participation established prior to retire- dren in the UK now live in a poor household ment age. Thus, older women’s pension levels (UNICEF, 2011) reflect the gender pay gap during their work- Schools and post-16 educational programmes ing lives as well as any interruptions in their in the UK’s poor communities are also suffer- working histories due to caring responsibilities ing as budgets are cut to reduce the presumed and are lower than their male counterparts. future burden implied in benefit streams in While this gap is narrowing, by 2011, 13% of the form of the cost of higher social benefits male pensioners were in poverty, while 15% of to the poor. A UNICEF UK report warns that women were in the same position (ONS, 2012). young people’s position in Britain will worsen The UK has made progress in poverty reduc- as a result of government austerity policies tion among older people. Although there was and highlights that the ‘downgrading of youth never a specific national target, as there was in policy and cuts to local government services the case of children, poverty among pensioners are having a profound negative effect on young decreased by 8% points between 1998/1999 and people’. These changes are sweeping and will be 2009/2010 to 18% (Walker, 2012). However, experienced by both individuals and families. while many pensioners have experienced ris- If carried out, predictions are that poverty rates ing average incomes, Walker also points to

10 Austerity in the city the vulnerability of many pensioners since money. Now it seems that we are in a period three out of five are either in or close to pov- of extended austerity with extensive impact on erty. Walker examines the uneven nature of certain individuals, groups, neighbourhoods, increased life expectancy between classes and cities and landscapes. argues that recent increases in pension age eligibility particularly negatively affects working class men and women. Conclusions and implications for In the USA, many older people have also theory faced increased levels of vulnerability. The Indeed, the return of austerity, as a policy and

National Bureau of Economic Research argues as a discourse, is now widespread and pervasive. Downloaded from that poverty reduction among older people Austerity is not new (Clark, 2000) but is often ended in the early 1980 and that income inequal- evoked as a policy frame to financial crises. ity has increased markedly since then among Since these crises are inherent in the cyclical the elderly (National Bureau of Economic nature of advanced capitalism, we have wit-

Research (NBER), 2004). Estes (1986) high- nessed a series of them over the last 100 years. http://cjres.oxfordjournals.org/ lights how austerity has justified renewed forms We have seen how these crises have played out of Federalism, or extreme decentralisation at multiple scales over the years, but the length of welfare programmes, which challenges the and severity of this current round of austerity idea that there is a national responsibility for measures seem to have a peculiarly local nature. meeting basic human needs in health, income, A review of the literature on urban auster- housing or welfare for pensioners. He argues ity raises several issues. First, it seems clear that that in the USA, the neo-liberal push of the the 2008 Wall Street made subprime mortgage current round of austerity has coincided with crisis translated into a state crisis with implica- at University of Crete on September 30, 2015 the strength of the medical–industrial complex tions for subnational and city-region scales. At to minimise direct national involvement. As we least since the 1990s, cities under neo-liberalism see increasingly in the UK, the USA has a long have been undergoing radical restructuring of history of income, health and social service pol- their economies and governance structures. icies reflecting different classes of ‘deserving- The forces of globalisation and subsequent ness’ in old age (Estes, 1986). Estes argues that state-rescaling have left many municipal the US policies that deal with the ‘undeserving’ authorities with increasing responsibilities but aged are ‘discretionary policies’ carried out by without the fiscal capacity to deliver essential individual states with programme eligibility public services. The property boom of the early and benefits largely dependent upon the states’ 2000s appeared at first to revive urban fortunes, variable political willingness and fiscal capacity. but even during relatively good times, munici- This has only intensified under conditions of palities deferred important physical and social austerity. infrastructure investments to engage in riskier Despite more than 10 years of increasing economic development projects and keep taxes vulnerability of members of our society, there and/or fees low. Now with a prolonged period is no evidence of abatement of conditions of of slow growth, declining revenues and a new austerity. The motion forward towards reduc- round of central–state austerity measures, many tion of poverty at the beginning of the 2000s municipalities are in a downward spiral from has stalled out, and in countries like the USA which there seems little prospect of emerging. and the UK, the direction has been reversed. The second and related issue appears to be Only 9 years ago, many citizens had a chance the giving away of the democratic process as at some level of economic stability, admittedly cities and their regions are steered towards an allusion, fuelled by the availability of cheap austerity. In the USA and Europe, a growing

11 Donald, Glasmeier, Gray and Lobao number of cities are replacing their elected emerge broadly across municipalities (Peck, bodies with unelected managers to modify, 2014). Hacker and Loewentheil (2012) outline reject, terminate and renegotiate contracts, the steps needed to shift away from the present including their own public sector union con- ‘vicious cycle’ of development, where unequal tracts. Fiscal managers and unelected officials growth has led to populations’ increasing eco- are amending budgets, determining staffing and nomic insecurity and unbalanced and grid- in some cases overruling mayors, city councils locked democracy, to a ‘virtuous cycle’, where and other elected officials all in the name of the benefits of growth are more equally dis- financial expediency. Indeed, austerity is a par- tributed, increasing security and participatory ticularly urban phenomenon as it can be used democracy. Downloaded from to rewrite the social contract under the cover Second, continued local variation in response of budget constraints. We have seen how these is suggested from the state-rescaling and criti- budget constraints can be achieved in part by cal urban political economy frameworks, rein- the rise of new austerity regimes that operate forced further from empirical studies of past outside the formal mechanisms of government approaches to municipal austerity. In this issue, http://cjres.oxfordjournals.org/ to challenge the interests of particular groups Meegan et al. (2014), Enright (2014) and Ion in society to policymakers. (2014) provide empirically rich accounts of dif- The third issue is the disproportionate fering post-crisis responses in Paris, Romanian impact these austerity measures are having on cities and second-tier UK cities, respectively. the poor, the young, and indeed the most vul- Even though economic and fiscal problems will nerable in our societies. This impact is visible in continue to buffet municipalities, stronger insti- our cities with the intensification of social–spa- tutional infrastructure, governance coalitions tial segregation at the neighbourhood, city and and community solidarity can position munici- at University of Crete on September 30, 2015 inter-city levels. The question now is whether pal governments to better cope. Exceptional we are in a period of long and unending auster- cases also occur on both ends—cities (like ity with broad impact and a further deepening Detroit) that appear to have exhausted the of social–spatial inequities both within our cit- municipal qualities above to some cities thriv- ies and between them. ing under prolonged adversity, such as modern All these changes point to the urgent need day Berlin (Färber, 2014). for scholars to engage with the impacts of aus- Finally, some positive expectations have terity across a wide range of spatial scales, but been put forth. Warner and Clifton (2014) see particularly at the subnational and urban level. the potential for countermovements against While various theoretical perspectives can be the market, drawing from Polanyi’s framework. evoked to explain cities’ austerity responses, The optimistic route is portrayed forcefully by it is clear that the way scholars theorise the Katz and Bradely (2013) who see cities (in the situation in turn sets the stage for determining face of central–state deficiencies) as taking on policy and political solutions that might address the needed mantle of governance globally. The the present crisis. city is celebrated: much of the rescuing from There appears to be several conceptual ways austerity is being accomplished by the familiar forward to interpreting the crisis and in turn elite actors that have long populated the urban setting the stage for political debate. The first literature, political leaders, local businesses, the approach starts from the general critical politi- philanthropic community and more recently cal economy standpoint. From this perspec- academic institutions. tive, without fundamental changes to nations’ Yet not surprisingly there are pushbacks paths of neo-liberal development, limited if too against the optimistic accounts. Burawoy any progressive change should be expected to (2010) levels a series of critiques against

12 Austerity in the city

Polanyi’s framework that include overlooking issues in litigation regarding the subprime mort- the strength of the grasp of market fundamen- gage crisis, Albany Government Law Review, 2: talism. In terms of celebrating the city as a pan- 164–216. Burawoy, M. (2010) From Polanyi to Pollyanna: the acea to counter austerity, Dean (2013) outlines false optimism of global labour studies, Global the shortcomings, seeing this as a pull-yourself- Labor Journal, 1: 301–313. up-by-the bootstrap approach that tends to Castells, M. (1977) The Urban Question: A Marxist leave non-elite interests and labour and com- Approach. London: Edward Arnold. munity coalitions out of the picture. Christopherson, S., Martin, R., Pollard, J. (2013) Financialisation: roots and repercussions In summary, long-standing as well as newer Cambridge Journal of Regions Economy and theoretical approaches inform municipal Society, 6: 351–357 Downloaded from responses to austerity, demonstrated also by the Clapham, D. F., Clark, W. A., Gibb, K. (eds) (2012) articles in this special issue. Explanations for The Sage Handbook of Housing Studies. London: cities’ responses alternatively implicate broader Sage. Clark, T. N. (2000) Old and new paradigms for urban political economic structural forces stemming research: globalization and the Fiscal Austerity from neo-liberal development and state-resca- and Urban Innovation Project, Urban Affairs http://cjres.oxfordjournals.org/ ling to more institutionally oriented, empirically Review, 36: 3–45. diverse factors. Overlap and contestation cut Cox, K. R. and Mair, A. (1988) Locality and com- across present theoretical approaches, in turn, munity in the politics of local economic development, Annals of the Association of American influencing the manner by which the future of Geographers, 78: 307–325. the city is conceptualised and remains in play. Davidson, M. and Ward, K. (2014) ‘Picking up the pieces’: austerity urbanism, California and fiscal Cambridge Journal of Regions, Economy References crisis, and Society, 7: 81–97. Aalbers, M. (2008) The financialization of home Dean, A. (2013) A top-down urban revolution: will at University of Crete on September 30, 2015 and the mortgage market crisis, Competition and working people have any say in the new neoliberal Change, 12: 148–166. city? In these Times, 37: 28–30. Aalbers, M. (2009) Geographies of the financial cri- Donald, B., Gertler, M. S., Tyler, P. (2013) Creatives sis, Area, 41: 34–42. after the crash, Cambridge Journal of Regions, Aud, S., Rathburn, A.,Flicker-Wilkinson, S., Economy and Society, 6: 3–21. Kristapovich, P., Xiaolei, W., Zhang, J.,Notter, Donald, B. and Gray, M. (2013) “The Rise of the L. (2013) The Condition of Education 2013. Austerity Regime”. Working Paper No 20-5-13, Washington DC: National Center for Educational Departments of Geography, Queen’s University Statistics. U.S. Department of Education. and Cambridge, 2013. Bardhan, A. and Walker, R. (2011) California Donald, B. and Morrow, D. (2003) Competing for shrugged: fountainhead of the Great Recession, Talent: Implications for Social and Cultural Policy Cambridge Journal of Regions Economy and in Canadian City-Regions. A Report Prepared for Society, 4: 303–322. Strategic Research and Analysis (SRA) Strategic Beatty, C. and Fothergill, S. (2014) The local and Planning and Policy Coordination. Department of regional impact of the UK’s welfare reforms, Canadian Heritage, May 14, 2003. Cambridge Journal of Regions, Economy and Dunleavy, P. (1980) Urban political analysis: the Society, 7: 63–79. politics of collective consumption. London: Boyle, M. (1999) Growth machine and propaganda Macmillan. projects. In A. Jonas and D. Wilson (eds.) The Enright, T. (2014) The great wager: crisis and mega- Urban Growth Machine: Critical Perspectives, Two project reform in 21st century Paris, Cambridge Decades Later. Albany: State University of New Journal of Regions, Economy and Society, 7: 155–170. York Press. Estes, C. (1986) The politics of aging in America, Brenner, N. (2004) New State Spaces: Urban Aging and Society, 6: 121–134. Governance and the Rescaling of Statehood. Färber, A. (2014) Low budget Berlin: towards an Oxford: Oxford University Press. understanding of low-budget urbanity as assem- Brescia, R. H. (2009) Subprime communities: reverse blage, Cambridge Journal of Regions, Economy redlining, the Fair Housing Act and emerging and Society, 7: 119–136.

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