THE BONDS OF INEQUALITY: DEBT AND THE MAKING OF THE AMERICAN CITY

By Destin Jenkins

Credit and debt, two sides of the same proverbial coin, place a bet on time. Credit makes money mobile and funds the future. Soon enough, however, it becomes debt, with the lender demanding from the borrower returns with interest that threaten to constrict the possibility of further credit. Personal debt masquerades as moral obligation, a contract freely chosen, yet at the heart of the promise debt creates is not social reciprocity, as the late David Graeber wrote in Debt: The First 5000 Years, but a “simple, cold, and impersonal” market transaction. As nothing more than a “matter of impersonal arithmetic,” debt requires shame and ultimately the threat of force to fulfill its terms and realize the returns for creditors it promises. It lodges coercion at the heart of the supposedly “free” market.

The squeeze is only intensified in the seemingly impersonal world of institutional finance. If debt ensures stability and solvency for some, the economic growth it propels fuels dependency and inequality for others, not only between creditor and debtor but also further down the line, as the borrower passes on the costs of debt to those with less power to control the terms of the deal. This devil’s bargain is particularly true when it comes to municipal debt, argues the Stanford University historian Destin Jenkins in The Bonds of Inequality, his new book on the power the bond market has leveraged over San Francisco and other US cities. The debt-financed spending that cities have long used to spur growth, Jenkins contends, has also underwritten the racial and income inequality of the post–World War II metropolis, while funneling profits to bankers and reinforcing city dependency on finance capitalism. This unequal compact hid in plain sight until the 1970s, when the urban fiscal crises of the era revealed that cities were deeply in hock to financial institutions. But debt was just the way business was done, and banks and other lenders saw no reason to ease the terms of this deal, preferring instead to underwrite the continued hollowing-out of the American metropolitan landscape.

The Bonds of Inequality jumps off from 40 years or so of work by urban historians exposing the platitudes conservatives and liberals used to explain the “urban crisis” that began in the 1960s. Not long ago, the conventional wisdom about urban life in the years after World War II unfurled in a series of overdetermined catchphrases. Cities, peaceful and prosperous through the 1950s and early ’60s, “went downhill” after the riotous “long hot summers” and “white flight” of the late ’60s. The cause of this urban collapse, conservative and liberal piety of the ’80s and ’90s assured us, was not a lack of money in cities but too much: Overeager liberals, looking to usher in Lyndon Johnson’s Great Society with War on Poverty programs, welfare payments, and other instruments of social engineering, supposedly created a permanent “underclass” living in a “culture of poverty.” The only way to end these so-called cycles of “dependency” was, as Bill Clinton did in the ’90s, to “end welfare as we know it” and “get tough on crime.”

Urban historians have long shown these easy judgments to be disconnected from life on the ground. Taking their cues from neighborhood and labor organizers, civil rights lawyers and fair housing campaigners, as well as many in the Black and Latinx community who have resisted the ill effects of this consensus all along, these historians have unearthed the fact that white Americans, working- and middle-class alike, were the primary recipients of postwar government dollars. They followed federal subsidies to the suburbs, while government policy neglected Black and Latinx neighborhoods. Far more important than government welfare was government support for urban deindustrialization, urban renewal and “slum” clearance, highway building, and segregated and underfunded public housing. Less the beneficiaries of federal largesse, Black and Latinx urban dwellers were simply left behind by a postwar welfare state that systematically overdeveloped suburbs and underdeveloped cities, leaving behind the racialized and bifurcated metropolitan landscape of George Floyd’s America.

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The real story of postwar metropolitan inequality has gradually made its way into the public eye, displacing the older conservative and liberal accounts of urban decline. Along the way, however, a new kind of simplification has begun to take hold. Even as we learned to understand the continuing power of race in shaping America’s unequal democracy, the culprit in the popular story of metropolitan inequality has too often been winnowed down to one malign malefactor: the federal government. The “forgotten history” of postwar cities, as the subtitle of Richard Rothstein’s The Color of Law tells us, can be summed up as the story of “how our government segregated America.” What was once a simple tale of federal government overreach threatens to become a simple one of federal government corruption.

Jenkins’s new book lays the groundwork for a third story. By following the money, he turns our attention away from federal malfeasance alone and toward the capital markets and financial instruments that floated 20th-century city-building in the first place. The true source of urban and racial inequality, he argues, can be found in the cities’ “structural dependence on the municipal bond market.” Once they became markets for investment and commercial banking, Jenkins argues, cities were little more than supplicants to capital, relying on a system of debt-fueled finance that would, in time, come to require urban officials to put the needs of bankers above the well-being of their most vulnerable constituents. Government, Jenkins contends in his innovative book, only made urban inequality with the help of capital markets.