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.
Cities have long been hamstrung by their place in the US political economy. For most of the country’s history, they’ve won favor in state capitols only when they can deliver economic growth beyond their boundaries, and outside a short 40-or-so-year period between the New Deal and the Great Society, they have been largely neglected by the federal government. City governments have always needed to find a way to make property pay—primarily through taxes and fees—in order to keep the lights on and deliver the social infrastructure necessary to meet the demands of a complex industrial order. Caught between the need to bring in revenue and the absolute command to keep private property developers and homeowners happy, urban officials face a perpetual double bind.
Balancing those interests has long been the name of the game—and the ultimate challenge urban liberals and municipal socialists have faced since they came to power back at the turn of the 20th century, during the Progressive Era. It was then that they saw that to afford the big public infrastructure projects necessary for urban living, they would have to turn elsewhere—to bankers, who would buy municipal bonds as loans and charge low interest rates on long-term payment schedules. (Cities had issued debt earlier in the 19th century, but for several decades many had chafed under a political culture that favored a “pay as you go” model for city services that relied on taxes alone, thereby constraining development and putting politically hazardous burdens on individual property owners.) Cities still depended on taxes and fees to repay debt obligations—but in a hazy future, when it was assumed that urban growth would swell city accounts and fulfill the bills.