(Unedited) Podcast Transcript 547: The Menace of Prosperity

This week on the Talking Headways podcast we’re joined by professor Daniel Wortel-London to discuss his new book The Menace of Prosperity: New York City and the Struggle for Economic Development, 1875–1981.  We talk about urban growth and missed opportunities by reformers to allow cities to capture more of their value. We discuss Henry George and the land tax movement, what running a city like a business should really mean, and the origins of “highest and best use”. There are also cameos by Lewis Mumford and Jane Jacobs.

Listen to this episode at Streetsblog USA or find it in our archive.

Below is a full and unedited AI generated transcript of the episode:

Jeff Wood: Daniel Wortel-London, welcome to the Talking Headways podcast.

Daniel Wortel-London: I’m so glad to be here. Thanks for having me.

Jeff Wood: Thanks for being here. Before we get started, can you tell us a little bit about yourself?

Daniel Wortel-London: Sure. So I am a visiting assistant professor of history at Bard College. Before that, I was working at the Wellbeing Economy Alliance and the Center for the Advancement of a Steady State economy, and I’ve lived around the New York City area basically my whole life from Hoboken, New Jersey originally, and now in West Orange.

Jeff Wood: Awesome. Where did you get your interest in cities?

Daniel Wortel-London: Well, I grew up right across the river from New York City, and on the one hand I had that [00:03:00] kind of pull towards this big fantastic place across the river. On the other hand, I went to a school in the suburbs for most of my life, and I was just struck by this difference between one way of life, which seemed very horizontal and flat and maybe a bit boring and this other way of life in the city.

And I just. Got interested in how places can be so different. What’s the politics behind why different places look the way they are? And I think that was sort of the primal thing that got me interested in cities. I think also growing up I was a little more introverted and in the city there’s a nice thing about being able to be lost in the crowd and go to museums and culture and not be under the social microscope of high school, which I guess is as close as you get to like.

A suffocating sense of small town mm-hmm. That maybe you get in other places. So yeah, the city was a great escape and my parents moved to Hoboken in the seventies and [00:04:00] it became pretty gentrified after that. And I sort of became interested later on. And, you know, what was my family’s role in helping change, uh, the city, which was formerly a kind of rust belt sort of industrial working class town.

And you know, I became a sort of on an autobiographical way, what was my family’s journey like moving from New York to a city and helping change it and what were the cost and benefits of that. So yeah, I’d say all that stuff was my early infatuation drew me to cities as an interest in, as an escape too.

Jeff Wood: So then what started you on this path to write this book? The Menace of Prosperity in New York and the Struggle for Economic Development, 1865 to 1981.

Daniel Wortel-London: Yeah, so I had been an activist for a while after I moved to New York in 2008. I joined Occupy Wall Street. I was on the town planning committee on Zuccotti Park, which is a whole other thing.

But I think it really became an area of interest around the Amazon HQ two [00:05:00] debates when Amazon was thinking about moving into, uh, Astoria Queens. And there was lots of debates over, the cost and benefits of that. And I was in a history program at the time and I was just thinking, well, is there anything we can learn from the past in terms of what economic development decisions did?

Were the costs and benefits of those? Can we learn from them today? So I think that was really the inciting incident, was that debate over Amazon HQ two and thinking, are there any alternatives in the past and are there alternatives now on how cities can grow?

Jeff Wood: Yeah, the whole focus of the book on economic development and what has happened and what could happen is really fascinating, especially through the lens of the HQ two kind of debacle or success, I guess if you’re Amazon, of pitting every city against each other to fight for the scraps of this one company.

But I just thought that was fascinating, and so I’m curious about your thoughts on generally what economic development is and maybe what it could be.

Daniel Wortel-London: Yeah, so I think we can [00:06:00] distinguish between economic growth and economic development. I think economic growth is generally a quantitative thing. It’s how much is produced or consumed.

It’s often measured in terms of GDP. Economic development is, I think, more qualitative. It’s. You know how much education there is in a community, but also how the quality of life in a community could relate to the way we feel about a place or how secure we’re feeling There. Often, growth does not necessarily lead to development.

If you look at the correlation after a certain point, GDP keeps going up, but people’s happiness, people’s sense of security or belongingness that can flatline or go down. And I think a lot of the times, cities choose to promote strategies that seem to bring in a lot of revenue, but that don’t necessarily trickle down to benefit people’s quality of life.

And often that doesn’t mean we [00:07:00] need to throw out economic growth as a goal. It just means what are the different strategies for doing that, that will leave us feeling more resilient and cities more sustainable rather than, wealthy and fragile.

Jeff Wood: The book kind of goes back in time to look at the ways that New York has tried to look at economic development or economic growth, and I found it really fascinating to go through kind of these three eras that you describe and the threads that connect these economic downturns.

And so I’m wondering why those are useful to talk about in terms of economic growth, development and people’s wellbeing.

Daniel Wortel-London: Well, I tried to trace a history of New York’s development strategies by looking at three periods of fiscal crisis. Uh, there’s the 1970s one, which a lot of us know about, but there was also one in the 1930s and then in the 1870s.

So by looking at these fiscal crises and the way people responded to them, you kind of get a moving window on. How broad or how narrow debates were on how New York City should respond to these, whether it should switch to a different [00:08:00] growth strategy or not. And in looking at these earlier fiscal crises, a lot of people blame them on the cost of growth, what you might call the externalities or social costs of growth.

You know, in terms of. Cities during boom times, making big plans for lots of infrastructure investment, going into debt on behalf of them, giving a lot of tax subsidies to actors, and assuming that they’ll pay them back, that those subsidies will, pay for themselves and. That often doesn’t work out.

And there are these moments when people in the gap left by those crises, people promote alternatives for how a city should grow or build up its finances. And often those strategies are ones that aren’t reliant on. Debt or speculation or attracting the 1%, but are built on leveraging the abilities of the people who already live in the city at the moment, the majority of [00:09:00] people.

And that was something people like Henry George and Jane Jacobs talked about, uh, Louis Mumford talked about in the thirties, and it’s this constant sort of push and pull. Do we wanna base the city’s economy on. The 1% and their wealth trickling down to benefit everyone else, or are we trying to build up the abilities of the majority of people in a city, meet their demands and build an economy around their needs and potential?

Jeff Wood: What is also interesting is how each of these crises kind of build upon each other. And I’m trying to think of like the right kind of reference. Like it’s not Russian nesting dolls. It’s not a Ponzi scheme necessarily, but it’s like thinking about how they kind of all stacked onto each other, the regulations and stuff.

And you call it at the end of the book, you call it sunk costs, but I think it’s something even maybe more insidious or at least not understandable by current standards. So I’m curious about that First. Kind of era and how we got into the idea that like real estate, that land ownership was something that we wanted to pursue.

And then how that led into second and third era is [00:10:00] where it’s this thing that everybody agrees on. Mm-hmm. Not everybody, obviously, ’cause you wrote this book, but the people agree on that. That is what moves economies forward and that’s an actual choice that was made early on.

Daniel Wortel-London: Yeah. Well, so much of the, um, ways that cities can pursue economic development are decided by laws on what they can and can’t do that are often set by people who don’t live in that city.

Like in New York’s case, it’s Albany. And very early on, New York and other cities were prevented from raising revenue in all kinds of ways except through the property tax. And it created very early on this kind of dependency of cities on land values in order to remain solvent. And once that was the case, once you had that.

Fiscal dependency on the property tax. It opens up discussions on, well, how should we develop property? How should we promote real estate? What kinds of growth do we want? [00:11:00] But it also prevented cities from experimenting with municipal ownership, let’s say, or focusing on cooperatives or even focusing on small business development as their priority.

Saw in most American cities before the 1930s was a focus on real estate, and this was connected to the fact that they relied so much on the property tax. And so after the Great Depression, a lot of cities begin to shift their focus as they see that real estate values alone aren’t going to keep them solvent.

Some of them rely on federal transfers, but that’s always a risky move. So it’s only after the thirties that you see more cities. Pay more fine grained attention to what kind of businesses should be in a city, what kind of enterprises or population should they be trying to attract? And there had been debates over that stuff before the thirties, but it’s really after the Great Depression that you saw theorists like Jane Jacobs or [00:12:00] Arthur Holden talk about how do we really develop the economic base of a community.

But before then, it was property values all the way.

Jeff Wood: I found those arguments early on against the property values. Very compelling. The public ownership idea where, you know, a lot of the early folks who are running New York were selling off land because they thought that the value was created better by individuals than it would be by the city and the government overall.

And now looking back on that was like a big missed opportunity because there’s so many. Ways that these natural monopolies could be used to create profit for cities, which is actually value created for citizens. So, mm-hmm. That’s the way I think about things nowadays. And it’s like frustrating to read your book and see like, oh, they actually had this idea early on and we didn’t have to have all these private franchises.

We didn’t have to have all these like monopolies where we just gave the profits away to folks that really didn’t earn them. Yeah. Because they’re created by the city overall. That early discussion, that early argument was really fascinating to look back at and wonder what if. Mm-hmm.

Daniel Wortel-London: [00:13:00] Yeah. I mean, after the 1870s fiscal crisis, there was all kinds of new proposals and solutions to how the city should grow, and people like Henry George municipal ownership advocates, municipal socialists, they were all saying, we can’t rely on private franchises and private landowners too.

Keep the city’s finances in the black, they’re going to attract profits for themselves and put all the costs on the public sector. And for Henry George by putting a lot of taxation on land values, it would allow land values to go down. That would then enable factories and actual employers to move to a city.

It would be more affordable for them. It would be more affordable to build a house in a city. And you know, when he wrote this book, progress and Poverty, he was saying that the more that a city progresses in terms of raising its land value, the more it causes poverty and unemployment and bad housing [00:14:00] conditions, all these other things.

By raising taxes on the land, he felt you could allow more productive industries, more employment in a city, and keep its economy stable and growing in a real sense. And for a time he was extremely popular, one of the first presidents of New York’s tax department. After the Greater New York was formed in 1898 was it died in the wool geist.

And a lot of the reasons that you saw so many skyscrapers come up in the 19 hundreds was because the city’s policy was to put a lot of taxes on land and that encouraged landlords to build pretty high on them as a way of getting income from, uh, the tenants. That policy had a lot of. Negative effects too, which we can get into.

But there was a lot of momentum behind the Georgia and municipal ownership folks in the early 20th century.

Jeff Wood: And they weren’t far off from winning a mayoral election.

Daniel Wortel-London: Oh, yeah, yeah. A couple of times you saw this kind of populist coalition, uh, behind Henry George in 1886 and then behind William Randolph [00:15:00] Hearst in the early 20th century.

And there were plenty of other, more policy specific campaigns that were, uh, pretty close run things as well. And yeah, you could definitely see, uh, shades of Zoran in some of these earlier campaigns for radical municipal ownership.

Jeff Wood: It’s interesting too, ’cause like other countries around the world have made that choice, right?

So like Hong Kong for example, uses its transit lines to develop property and then pays for the system. And I was actually over there last year talking to a friend and they were like, what do you mean America’s transit systems are public entities that aren’t privately supported by property? Uh, what do you mean that they’re not corporations like they are here because mm-hmm.

Other parts of the world, they don’t understand how things evolve to work here. I find it’s interesting that other places have actually evolved to continue doing those types of things, whereas we don’t now. And it’s said very clearly in your book is like, we don’t really like it when public entities can make profits.

Right? Yeah. We don’t like it when they can do things that actually benefit [00:16:00] people through that kind of system.

Daniel Wortel-London: Yeah, I think we have a very narrow sense in this country that the private sector is the for-profit sector and the public sector is the money loser, basically. And it doesn’t have to be this way.

You can have in the private sector actors like worker cooperatives or nonprofit enterprises that try to perform business without trying to just maximize revenue for private shareholders immediately. On the other hand, you can have the public sector being a business. Trying to earn revenue from its operations, from land ownership and trying to, you know, divert that revenue towards public goods and public spending.

And in the early 20th century, you had many activists saying New York should be run like a business. But what they meant by that is New York should be trying to get revenue from the value that its citizens create. You know, we all create the property values we all create together through our activities, the wealth of a city.[00:17:00]

We all are shareholders in this big municipal enterprise, so let’s get some of that value back to the people through different kinds of municipal enterprises. But what ultimately happened in America is. Basically the for-profit private sector is responsible for all economic activity and the public sector just taxes that activity and hopes that, you know, the taxes will be well spent on the losers, basically of, of this economy.

Also, those taxes are used to subsidize those very for-profit actors. But it’s a kind of liberal conception of the different roles of the for-profit sector and the state, which doesn’t hold in a lot of other places, and it’s a very narrow understanding, I think.

Jeff Wood: It really opens you up to the boom and bust cycles, right?

Like so that you’re depending on private enterprise to, you know, not overstretch. And so when they do with, which they’re naturally going to do because of the way capitalism works, generally, it feels like, you know, we’re tied to that unfortunately. And [00:18:00] so we are at the behest of the private companies, even if we are doing public things with public goods and taxes and all those things.

Yeah. You know, I wrote this as a note, the idea of a city as a corporation, not in the way that we think of it today, which is like, you know, the way people want it to be run like a corporation is to like belt tightening or like austerity, which is more like what they’re thinking versus the way that they were thinking back in the late 18 hundreds, early 19 hundreds.

And so I thought that was interesting and I’m glad you made that point because I feel like there are ways that we can think about cities as corporations and look at it differently than this normalization of the belt tightening ideal. It’s something that could be reframed in a way to be better.

Daniel Wortel-London: Yeah, no, absolutely.

I mean, if you’re relying on a couple of actors for revenue that are very mobile, that don’t have a lot of commitment to a particular place, uh, it’s kind of risky. And there are other theorists of urban economic development to say, let’s rely on anchor institutions like hospitals or universities. They’re not going anywhere.

They have a commitment to a place they wanna see that place [00:19:00] improve. The city is an anchor institution. You know, New York is not going anywhere, let’s look at all of our assets pooled together, not just the assets of a bunch of individual private actors, and try to maximize those resources. You could call it abundance or whatnot, but I just don’t think abundance is delivered by sort of relying on a bunch of separate actors who are very self-interested.

You know, on the one hand. You have the truth of folks like Jane Jacobs, that you need a diversity of different enterprises in a city. Uh, some small, some large, some maybe private, some more public or cooperative. You need that mix for a city to grow, but you also need a sense of coordination, a sense of how all the resources are being developed and used.

And I think that if we’re just relying on one strata of the private sector to do all the work of developing the economy, we’re denying ourselves the potential of a lot more growth and abundance. And I think the [00:20:00] city as a corporation. Is responsible for managing all these assets and trying to make all the shareholders of the corporation, us the citizens better off, and the city can do a more proactive job in doing that if it’s not just dependent on taxes for raising revenue.

Jeff Wood: Your book has a lot of really good political cartoons and charts and stuff. Mm-hmm. I really enjoyed that. One of the charts was looking at the budgets of different cities between Europe and the United States and like where they got their money from. And European cities seemed to, you know, have these revenue producing models where they created value and that was part of their budget, whereas a lot of ours were taxes.

And so I found that interesting too, is that there were actually models of this when they were having these discussions.

Daniel Wortel-London: I mean, one argument for municipal ownership was that it would lower taxes because rather than cities needing to put the tax burden on every property owner, it would get revenue from the people taking the subway or renting out land, or basically [00:21:00] taking advantage of city enterprises.

You had people in America looking at Europe and saying, Hey, why don’t we have lower taxes? Let’s just do municipal ownership. That’s not an argument you hear too much today, but it was one of these possible angles that helped make municipal ownership more attractive to a lot of folks, especially back before home ownership was as subsidized as it is now.

Jeff Wood: Yeah, a lot of these chosen paths in the book I found are very racist, right? Mm-hmm. Non-whites and unfavor immigrants. I’m imagining Irish and Italians were part of that early on as well. Um, were not allowed into unions. Neither were women. A lot of the folks had really low shots of property ownership and so.

As the property owners were the early ones that voted, and then they were the ones that kind of held the power. It seemed like they were the ones that were driving this boat down the river.

Daniel Wortel-London: No, absolutely. I mean, if you look at rates of home ownership, uh, certainly majority of folks, especially early on, are born in America.

Pretty well off land. Ownership in general is extremely [00:22:00] concentrated in New York before the 19 hundreds. My, the 1920s, though it does begin to change and you actually see second generation immigrants owning property at a higher rate than native born Americans in New York. And as more and more white American workers start owning homes, it changes the cal, the political calculus a little bit.

As these folks start getting more invested in property values invested in their homes, they become a little more skeptical of radical solutions. Let’s say, and this continues after the depression. One kind of irony of this is before the 1930s. Banks would often make loans to a homeowner based on the quality of the property.

They just assumed often that in a growing city, the land value of this house is going to go up as the population grows, so let’s just loan it. After the thirties, banks become a lot more [00:23:00] skeptical. They start focusing on what’s the character of the homeowner, what’s the income that they’re gonna bring in?

And the federal government through the FHA and these famous redlining maps plays a part in this. A lot of the folks involved in the FHA were real estate economists who said, we can’t rely as much on property values alone. We need to focus on the demographics. And that’s one of the sort of bad consequences of this shift.

The shift away from real estate as the guarantor of city finances puts greater pressure on the population of cities and the firms within cities as their economic pillar. And when you combine that with all these kind of racist assumptions that people had at the time, it means prejudice is going to be present in public policy in a different way after that time.

Jeff Wood: Another interesting part of this is the kind of the growth I don’t wanna use the phrase growth machine, I’ll talk about that in a second. But like the growth that was induced by the public investment, public investment in subways, public investment in [00:24:00] utilities, the stretching out to the suburbs, and you know how that led to calamity as well, because of the fact that it really wasn’t sustainable.

You’re giving people these tax breaks, you’re giving people these tax benefits that might not have accrued to the central city, but you’re giving it to folks, you know, leaving the city to go to the outside. And how this just over time wasn’t sustainable, and that kind of growth is not really great for the balance sheet.

It was great for maybe individuals, but it wasn’t really great for the city as a whole.

Daniel Wortel-London: Yeah. Well, you have this fundamental distinction between like the physical growth of a city in the twenties. Mm-hmm. Let’s say. Mm-hmm. Which is growing certainly by a large amount, but the debt that cities were accruing was growing on a much higher amount, and it wasn’t just.

Cities were going into debt. It was banks that were going into debt. It was citizens that were going into debt, and all of them were assuming that they would pay back this debt partly through the value of real estate as real estate went up. But this was a very fragile kind of house of cards. When the population’s [00:25:00] growth started to plateau or when banks were in trouble and they needed to call in their loans, the real estate values weren’t where they needed to be for cities to pay them back.

So you had this kind of trap where all of these people had a stake in real estate growth. They couldn’t afford to get more rational about it. ’cause as soon as they say, well actually growth projections are lower than we thought, then a bank is going to get concerned. Oh, what you mean? You’re not gonna pay us back as quickly as we thought.

So there was this. Kind of irrational exuberance about how fast cities were going to grow. And once banks needed to call in their loans in the Great depression and folks couldn’t pay, banks collapsed. And then the cities that relied on those banks got in trouble too. So yeah, it could not be sustained.

This disjuncture between the physical growth of cities, the actual growth of cities, and the debt that people were hoping to repay through that growth. [00:26:00]

Jeff Wood: It was a quality of life issue too. I mean, the debt was created to support this like physical growth, but also it’s not really self-supporting because you can’t fund the libraries and the schools and all the stuff that’s needed.

If you’re that much debt. And so the debt made real estate people rich, but it didn’t really make the city rich.

Daniel Wortel-London: Yeah. Well also, I mean, the idea of growing real estate values is that it makes a lot of things more expensive. It makes housing more expensive, but it also makes building libraries more expensive.

And this is where the title of my book came from, Louis Mumford. Talked about how the city of New York was only able to build public parks and libraries in the thirties because land values had gone down so much from what it had been earlier. And so he says, we can talk about prosperity as being a menace for us.

Being able to afford to build. Some things that we’d want. So yeah, it made things more expensive to build. And it also was very tough on poor working class tenants [00:27:00] because landlords were expecting their land values to go up. They would soak their tenants with very high rents and not try to repair their housing ’cause they figured that they will be selling off the building anyway.

And this is where housing reformers distinguish between blight and slums. Slums were just places where poor people lived. Blight was where landlords were expecting a windfall. They were expecting to be bought out, so in the meantime, they soaked their tenants. And didn’t maintain repairs. So the expectations of growth from these landlords was making them behave in antisocial ways.

So that’s another way that prosperity or the hope of growth was hurting a lot of people in the short run.

Jeff Wood: Yeah, I wrote down the quote, life values came back to the city only after financial values had been deflated from the standpoint of decent metropolitan living. One might well speak of the menace of prosperity.

Really fascinating. So where did the [00:28:00] idea of highest and best use come in to this framework? And especially related to like transportation, accessibility and mm-hmm. You know, we continue to hear this all the time. It’s, uh, it’s gone into the planner’s brain. Mm-hmm. And so it’s something that started back in the day and it’s continued to this day.

Daniel Wortel-London: Yeah, well there’s, there’s many ways of appraising real estate. You know, you can appraise it based on the income generated on it. You can appraise it based on how accessible it is to different kinds of uses. And the idea of highest and best use sort of applies to that latter idea before the early 20th century.

There weren’t a lot of theories of real estate growth. Um, someone compared it later to like the theories of medieval alchemy. Like people just assumed if you, if you build it, they will come. In the early 20th century, mortgage loaners started to become more concerned about whether they’ll get paid back and you start getting more theories of real estate to try to, um, figure out.

What are the best kinds of real estate investment, [00:29:00] and those early theories were where you get this idea of highest and best use. That basically what drives the value of a given parcel is how accessible it is. How possible it is to be used for the most profitable ends. One of the first real real estate economist in America, or at least one of the first, who wrote a textbook on this, Richard m Heard.

He writes, the use of a land parcel that garners the maximum possible revenue is the highest and best use of that land. What determines the value of a property for him? Its location, its accessibility to different land uses. What he writes is since value, depends on economic rent and rent, on location and location.

On convenience and convenience on nearness. The intermediate steps may be eliminated and say that value depends on nearness, and the way of getting things near is transportation. So this idea that [00:30:00] by making land accessible you increase its value was basically dogma for a lot of real estate economists and for planners, this is where we get the idea, location, location, location.

You try to make something accessible. And people like Robert Moses are holding to this even in the fifties. They’re basically assuming that if you build a highway to something, it’s going to increase its value because it’s more accessible to different kinds of uses and potentially ones that earn more revenue.

So this is where the idea of highest and best use comes from.

Jeff Wood: In the book you’re talking about in that kind of mindset anyways, we have all these subsidies that go towards, you know, extending the subway, the utilities, but also that it’s kind of like some gasoline is put on, you know, during the New deal, but also afterwards when you get all of the Hulk loans and the FHA and all these subsidies to homeownership, right?

And so there’s this idea of the highest and best use, but then you have all of this money [00:31:00] that goes into like. Pushing people to the periphery and pushing them to outside where you have access. But it’s a little bit of a different game than it was before where proximity was important and now it’s like, you know, your journey to work is almost the more important thing.

Daniel Wortel-London: It’s a real sort of disjunction in a way between the politics of transportation in the early 20th century, which is if you build heavy rail, if you build highways, it’ll increase density, increased highest and best uses. And then the residential section of that, which is we wanna keep these homes in amber, basically on the part of a lot of the homeowners there.

And to this day, you know, you have all of these rail and transit lines in the city’s outer boroughs and in, uh, the broader metro region. And the zoning is just not. Up to that. And it’s because you have these very different paradigms at the time of their construction between the planners who are expecting one thing and the homeowners expecting another.

Jeff Wood: At the subway companies, I mean the IRT [00:32:00] and others, they were like, well, we’re not going out there. We don’t, that’s not gonna get us any money. So. Why are we gonna build these line extensions? And the city was like, well, we’ll help you build them and we’ll pay for most of it. And everybody thinks like nowadays, I mean you look at like Brooklyn and Queens and all that stuff, and it’s dense in today’s world, right?

If you look at these suburbs and exurbs that we have in, in the United States, but at the time it wasn’t productive for the subways for their private enterprise. Yeah, you know, it might have been that which actually caused their demise and made them into the MTA right.

Daniel Wortel-London: Yeah, no, I mean it’s sort of ironic, but a lot of those early transit monopolists were right.

They knew they would lose money if they went out to these very sparse, not that settled areas. And the city was subsidizing them to get out there ’cause they wanted people to own homes. But even when they went out there, they were losing more money. And once they lost enough, the city had to step in and take over these kind of money losing operations.

So, yeah, it was sort of the cost of good intentions in that case.

Jeff Wood: Do you see a mirror in the Great [00:33:00] Depression from the pandemic in terms of rethinking what the central city should be? Nowadays we’re talking about the loss of workers from downtowns ’cause they’re working from home. And so there’s this thought that maybe putting in residential housing downtown is gonna change things and this real estate move is gonna change things.

And so I got these echoes from parts of your book that were talking about, the depression in the pandemic and the discussions that we’re having today.

Daniel Wortel-London: Yeah. Well, I think this idea of changing the central city, remaking it to fit new economic needs or threats is, it’s a very old one. You know, in the fifties, people were saying how land values in the central city are too high.

For office builders to wanna go in there. The city had to buy up the land itself through urban renewal processes and turn it over to private developers to build there. And they were thinking that the central city is good for white collar businesses, not for factories, because in white collar businesses they still need the central city ’cause they need to do all these [00:34:00] person to person wheeling and dealing.

And it was sort of a preview of. The idea of the creative economy that later folks like Richard Florida would come up with. But now you’re saying, you know, you don’t even need those kind of physical spaces to do work. It might be nice to live there on a residential quality of life basis, but cities are saying, you know, we don’t need offices as much.

And I think it’s a. Sort of risky move, or at least my fear is less the jobs are gonna be displaced from cities as that these jobs are not gonna exist at all. Thanks to things like ai. Uh, you’re gonna see the kind of white collar professions that cities formally relied on getting automated in a way that they weren’t before.

And I think cities. Can make their downtowns as nice as they want, but if people aren’t employed, uh, it’s not gonna matter as much. So I, you know, I’m not [00:35:00] honestly totally sure what the next economic base of cities should be. I think the threat of AI induced automation is one that a lot more cities are gonna have to deal with, and just building up more residences in downtown is not gonna address it.

I think ultimately cities can’t rely on the white collar sector alone to solve their financing for them, particularly as the white collar sector, uh, gets more enwrapped in finance, uh, and speculation, which we’ve seen often can harm cities. And I think these other solutions will often be ones focused on meeting the needs of people where they live.

And we need to find ways of producing and providing for one another locally as a way of keeping a resilient economy and relying less on speculative enterprises as a way of financing our economy.

Jeff Wood: Yeah, I go back a lot to, uh, Lewis [00:36:00] Worth’s urbanism as a way of life piece. He wrote it in the University of Chicago press, I believe it was, or at least the paper through the University of Chicago.

And, and it kind of discussed what cities were good for individuals. And I feel like if we followed that to a certain extent, which is like, it’s good to have that anonymity that you talked about, right? Like going to the city and being able to be an introvert, but also being able to be involved in a lot of different things.

And that speaks to the human side of things rather than like the economic development or the fiscal, solvency of a city or where it should go. And so I think we’ve seen through the pandemic, people still need people and whether it’s AI or whatever, new economic development thing in the book you talk about the rise of the office class and the knowledge workers, Richard Florida’s idea, et cetera.

But I think that if you go back to like W’s idea of urbanism as a general idea, it’s just like the collection of people. And people really need other people to work things out. You can work from home and you might actually, you know, be able to have a screen and everything like that. But in the end it feels like that’s like a hollow non-human existence.

And I, I don’t know which way it’s gonna go, but I feel like that’s some sort of an anchor we [00:37:00] can keep ourselves connected to. Absolutely. The book reads kind of like a who’s who of of today and yesterday’s arguments. I was fascinated to think about all of these things that have passed or still exist in like, you know, you could go to housing, Twitter, housing blue sky, or whatever it is today.

Obviously everything’s fractured and see a lot of this fi. A lot of these fights you see officials, home voter hypothesis. MOLECH is growth machine, yimby, strong towns, abundance movement, antitrust boosters, and of course the Georgia. Are out there as well. I feel like this book is a little bit red meat for all of those discussions.

How do you feel about like the discussions that are happening today when you were going through the book and putting this together?

Daniel Wortel-London: I mean, it’s gotten more exciting e every year. I think, you know, my book ends in the 1980s really, when there was a sense that there is no alternative to this kind of trickle down economics and what we’ve seen since the nineties and the sort of.

Triumph of that. There is no alternative model is basically the downsides of that model. [00:38:00] And after 2008, you’re seeing the revival of all of these things that haven’t been heard of in almost a hundred years. Things like antitrust, the Georgia municipal ownership. And I think there’s a lot to these strategies that build off one another and that those kind of synergies you can’t really see when everyone’s yelling at each other on Twitter or whatnot.

And. You know, I think the value of history is we can actually see, well, you know, what’s happened in the past, what have been the consequences of these things, and often the way that these coalitions in the past worked out were much more flexible and open-ended than people. Often would’ve predicted at the time.

You know, I think it’s important to go back even before the 20th century and see just how flexible and open these coalitions were around things like municipal ownership when you had renters, homeowners, municipal finance people, socialists altogether. Thinking about [00:39:00] how do we make cities more livable and stronger economically?

I think so much of those previous elements are here today. The concerns in some ways are the same. I do think housing costs are a much stronger part of the discourse today than they were even, you know, a hundred years ago. Mm-hmm. Uh, I think people in the 1870s, very few folks owned their own home back then, and.

People like Henry George was able to get a lot of support for his policy saying, this will help you own your own home. Uh, the land value tax will help you own your home. I think today we’re back at that point, almost for the first time in 150 years, where home ownership is once again becoming out of reach of so many people.

In a way it hasn’t since before the thirties and. I think that’s one more reason to go back to this earlier period and see how the, how these different coalitions coalesced to [00:40:00] pass certain kinds of policies that look like what we wanna do today. Whether it’s, abundance, antitrust, en bism, what have you.

Jeff Wood: I did find it interesting though in the, in the books where you talk about how close they got in each successive era where it was kind of getting further away from the actual change, right? So early on it felt like there was a real opportunity for the Georges to like, make a big change and go in a different direction.

The next era felt like they had an okay chance, but it, it didn’t quite work out. And then now it’s like, we’re just gonna do what we know. It’s all gonna be about real estate and downtown redevelopment and those types of things. And even, even there are discussion previously about the pandemic, like now the discussion’s like building more housing in the downtown.

It’s all, it’s like building, building more things, building more things instead of building more value. And so I’m interested in how, and I mentioned this kind of at the beginning, is, you know, there’s the sunk cost of what exists now and it’s all been stacked on top of itself since the 1870s, since that time period.

And so how hard is it? To get out of that. I feel a little bit like the princess and the P and the [00:41:00] problems are the P and we’re just, all these mattresses are stacked up, up high, high, high. And so how do you get to the P at the bottom?

Daniel Wortel-London: Well, so much of the reason that those early proposals didn’t work is ’cause money came from somewhere else.

You know, the Georgias were partly defeated ’cause cities started going into debt. In more professional ways in the early 19 hundreds, rather than rely on the land value tax, they just went into debt to build subways, and they were able to get people homes through that rather than this radical strategy.

So debt. Foreclosed that opportunity in the thirties, the federal government came to the rescue and was able to bail out landlords and prevent these other radical strategies from that time, from taking root. And then after the 1970s, you had the growth of the finance sector basically siphoning off money from other places.

New York was one of the lucky ones where the sector was heavily located, so the finance sector was able to [00:42:00] save New York in some ways, even though it was, very destructive in other ways, and there was certainly other solutions it could have chosen. I just don’t know if the cavalry will be coming to the rescue the same way today as it has in the past.

I think if you look around, there are other cities that have been able to. Revive in different ways than relying on the white collar sector. Preston and England is a good example here, Cleveland, with its anchor institutions, there are all these experiments of cities trying new things now Detroit doing some good stuff.

Yeah. But we, we don’t really have a movement based on those kind of things. I mean, I have to say like a lot of the progressive social movements today, they’re not necessarily thinking of economic reconstruction within cities as their goal. And I think that the YIMBY abundance strong towns movements are each taking a piece of this picture, but they’re not [00:43:00] necessarily coming together to think how can we get a workable city built around these different paradigms?

And I think if we can get some working models of how cities can revive and provide for their citizens through these alternatives. It can be worth its weight in gold because if we don’t have those, then like you’re saying, basically cities are gonna just be playing the best hits of what seemed to have worked before, and there’s better options out there I think.

Jeff Wood: It’s just kind of building on current structures and the current structures aren’t really well built, right? Mm-hmm. So, building on capitalists, it’s the

Daniel Wortel-London: devil. You, yeah. Folks are very comfortable with the devil, you know, but we need to show that there are angels out there.

Jeff Wood: Yeah. We had David Schleicher on to talk about his book in a Bad State.

I don’t know if you’ve read that one. Um, really fascinating. But he talks about basically all of these bailouts that have happened and going back to the different times in history. The 18 hundreds up till now where bonds like crashed economies and things like that. And he came up with this [00:44:00] interesting theory, which is the trilemma, which is like you can only have two of these three things when you’re considering bailouts for financial institutions and bond holders, which is avoiding economic hardship, preventing future reckless borrowing, which is a moral hazard, or maintaining access to credit for states and localities.

And so you can only have two outta those three in order to like make things work. And so I feel like. New York in your example, keeps on going down the moral hazard route where you’d keep on doing this future reckless borrowing. You keep on having these bailouts from the federal government. You know, it’s not all just bailouts, but it’s all type of fiscal aid, and so the book really feels like it’s trying to give you another alternative to this kind of.

Boom and bust economy. Mm-hmm. The bailout economy, which has been created since the Great Recession and the pandemic. And so I’m interested in your thoughts about the different ideas that maybe could come out of, and we talked a little bit about them, but I mean the different ideas that could come and actually like help think about this differently because we keep on getting into these cycles, but there are ways out.

Yeah.

Daniel Wortel-London: You know, it’s, it’s helpful to think of the [00:45:00] city’s finances as sort of a bucket, and you have some flows of this money that are being made in a city flowing outside of it, and often those money flows can be going towards purposes that harm a city, whether it’s promoting extractive, polluting industries that can raise the water levels, or it could be promoting industries that ultimately are competing with those in another city.

I think if we’re able to expand what I call sort of our fiscal imagination and think about how are we using our material resources, how are profits being distributed and where are they going in a city, then you can see, well, what are the costs and benefits of this current approach? Can there be other ways of doing business here?

And I think there are models for this. One is like the public balance sheet, where basically you look at economic development decisions around choosing business A or business B to be subsidized. And so many [00:46:00] of our economic development decisions are untransparent. They don’t show up in budgets. Tax subsidies for business often don’t show up in budgets.

They’re made behind closed doors by. These kind of economic development corporations that often aren’t elected. And I think once we start seeing a city’s economy as affecting all of us as being open to change, but as for political reasons outside of our control, outside of our view, once we realize this, I think we can.

Start getting aware and angry enough to think of, well, why is it being done in this way? Who’s benefiting? And can we choose other options? One example of this is public banking. Uh, right now in New York has so much of its money in private banks. That money is being invested outside the city. It’s not necessarily benefiting the folks who live here who pay the taxes that those banks are enjoying.

So if we had a public bank, that money could be reinvested in [00:47:00] ways that could make our city more resilient and probably more prosperous, and that would apply to many other cities around the country. Following the money is very good for reporters and it’s also very good for citizens when it comes to thinking about the places we live.

Jeff Wood: I love this idea because I, I just, I have this idea personally here in San Francisco about basically taking all of our infrastructure back from pg e and creating a public utility and then setting up like electric car chargers around the city, and then using the profits from that to fund muni the transit.

Agency. So it’s like, you know, you, you have all these opportunities to do these things in cities. You can have public broadband, you can have public utilities, the natural monopolies as you mentioned in the book. And these private franchises are just kind of siphoning off the city. They’re taking the value that’s created from the city and then they’re privatizing it.

And so if we create value for the city, we should be able to keep it. And I think that that is a hard. Sell for some folks because they’ve done it this way for so long, but there’s so much value that’s created through cities and [00:48:00] there’s so much value that they’re sitting on. Public housing. You mentioned this in the book.

Mm-hmm. And we, we didn’t really get to cover it in this show, but public housing, the way that, I think it’s Virginia, where they’re doing the city is buying a stake in a development, and then instead of taking the profits, they’re letting it be subsidized housing or, you know, low income housing. So there’s ways of doing this that.

You know, create value for cities that’s not just profits that go into the pockets of somebody who is taking the value from the people who live in a city.

Daniel Wortel-London: Yeah, no, I think a lot of us are focused, especially on the left, are focused on distribution as being the main front of our political activity, and I think.

If we focus more on production of value in particular, I think it opens up all these possibilities, like you’re saying, of raising money, directing that money, not being dependent on a couple of actors for that money in a way that ultimately constrain our politics. So yeah, I, I totally agree with you. Yeah.

You know, to public housing, that was the hope of so many of the early public housing movement. So much of it was to allow [00:49:00] public housing to be profitable, to raise the money that it needed to cross subsidize potentially other municipal um, priorities. So I think, yeah, I mean what’s old is hopefully new again on this.

Jeff Wood: Yeah. I saw somebody write in a, I think it was a medium post, their housing authority went to somewhere in, in Europe, it might have been Vienna or somewhere around there. And they were talking about public housing and social housing and, and they were like, how do you build this non-market housing? And the people there were like, what do you mean non-market?

We are the market. Yeah, yeah. No, that’s right. That kind of sums it up to me.

Daniel Wortel-London: Yeah, I mean, in some ways the affordable housing crisis is an opportunity because a lot of actors are not gonna be interested in building if they’re not making a certain profit margin. And cities can step in and they can get profits.

Then they could use that to subsidize other actors in a way that maybe the private sector alone wouldn’t,

Jeff Wood: and they could fund those through the public bank. Right?

Daniel Wortel-London: It’s all, it’s all an ecosystem. And you know, Jane Jacobs, again, she felt strongest about her legacy as an economist. [00:50:00] You know, we didn’t get as much into some of her theories on economic development, but so much of it is about nurturing the.

Assets of a city, the old buildings, the working class people, nurturing those assets and taking advantage of them to grow up a city and not relying on attracting and retaining someone from outside. And I think we can use a lot of that today.

Jeff Wood: We could talk about this for hours. There’s so much in the book.

I wanna recommend this for folks because I feel like there’s so many quotes, there’s so many pieces of history. I feel like, abundance is great. It talks about a lot of really interesting things. There’s a lot of books out there that are talking about the public sector needing, abundance, but also capacity and things like that, which is really good.

But. I feel like I’m getting more from like the history and understanding where we came from and what we might have been able to do and how we kind of missed the boat in some ways. Some neighborhoods missed the boat in terms of getting this value, and so I think it’s very valuable to go back and read these histories to give us ideas about what we can do in the future.

And we talked about like. A sliver of what’s in your [00:51:00] book, A tiny sliver of what’s in your book. And so I hope folks can get it. I hope folks can go read it and then go back and listen to the episodes with Yoni Applebaum about his book, stuck. Go listen to the episode about Pacific Circuit. Go listen to David Schleicher in a bad state.

All these things are connected and I really appreciate what you did in putting this together. And so where can folks find it? ’cause I think they should get a copy.

Daniel Wortel-London: So this is on bookshop.org. You can find it on Amazon order through University of Chicago Press email me. I’ll try to get you a test copy if I can.

But um, yeah, it’ll be available September 24th. And yeah, I’m looking forward to your

Jeff Wood: thoughts. And where can we find you if you wish to be found?

Daniel Wortel-London: You can find [email protected]. I’m on Twitter at d London Tel, and you can email me at [email protected]. Awesome.

Jeff Wood: Daniel, thanks for joining us. We really appreciate your time.

Daniel Wortel-London: Thanks so much. This was wonderful.