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Globalization and the American Model of Urban Development: Making the Market

Paul Kantor


Ce travail discute de l’argument selon lequel le modèle de développement urbain américain serait le reflet d’une pénétration du niveau local par de nouvelles forces libérées par la globalisation économique. Bien que le modèle américain contienne de nombreuses caractéristiques néo-libérales, cette analyse dévoile le rôle important joué par le gouvernement américain dans la constitution d’un système urbain radicalement décentralisé bien avant la nouvelle économie. Il montre également comment ce système est activement soutenu par une intervention croissante de l’Etat à tous les niveaux. La nouvelle économie ne saurait être confondue avec le modèle américain de développement. Au contraire, l’expérience urbaine américaine révèle bien le caractère essentiellement politique du processus de globalisation et le rôle omniprésent des politiques publiques dans son fonctionnement.

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1A core belief among critics of globalization is that this new economy presents many negative consequences for democratic politics. More open markets are thought to threaten people and their governments to a future of lost jobs, falling incomes, and environmental decay. As trade barriers fall, increasing economic competition among cities, regions and nations must grow. This is forcing governments everywhere to reduce wages, cut taxes, water down environmental regulations and adapt to the new market realities - or be left behind.

2Many see the U.S. urban experience is a harbinger of this reality. The U.S. model of urban development is said to incorporate neo-liberal practices that spring from the forces of globalization. This survey probes the nexus between globalization and government, and takes issue with this understanding of the American model. It concludes that many critics mistakenly conflate economic globalization with the American model and erroneously marginalize the role of the state in creating it and managing it. As such, analysts also fail to recognize the genuine political choices that drive the U.S. model and globalization itself.

3There is hardly universal agreement about the meaning of globalization, much less its origins and consequences1. Yet most social analysts view it as the penetration of national economies by forces of international economic competition and engagement (Sassen, 2006; 1988; 1991; Dicken, 1992; Fainstein, 1994; Lever, 1997; Chase-Dunn, 1989; Smith, 1988). This usually takes the form of a « political convergence thesis: » As global economic competition spreads, national, regional and even local governments are pressured to adopt very similar public policy responses as they scramble for strategies to protect or enhance their market positions (Savitch and Kantor, 2002). National governments lose control of monetary and fiscal policies to international shifts of capital. Social safety net and other welfare state programs diminish in order to accommodate the movement of capital, labor, and to achieve cost advantages. At worst, freer movement of people and jobs means nations struggle against each other in a « race to the bottom ».

4Indeed, from this gloomy perspective globalization diminishes the political choices of governments everywhere. Not only do public officials have to bend to the winds of the new forces of international competition and the decisions of international economic decision makers, but democratic governance itself must diminish. Ultimately, governments can survive politically by succeeding in the marketplace, if only to avoid the electoral consequences of being on the losing end of international economic competition (Lindblom, 1977). Choices over social policy are driven strongly by changing economic realities, rather than what the public wants. Further, the voices of business assume greater importance in governance, distorting the political process in favor of corporate interests and players.

5According to convergence theory, local politics and the urban scene are deeply influenced by such economic internationalization - perhaps even more than at the national level of governance. The struggle to meet international competition encourages a melting away of national urban policies that are dedicated to preserving communities and promoting values of social equality. This happens due to reductions in national grant assistance to local governments or by or the refashioning of urban aid programs based on social equity considerations in favor of more stringent criteria that contain expenditures and taxes. This sets off a chain reaction. These cuts increase pressures on local and regional governments to reduce taxes and limit expenditures. Most important, local governments become more visibly market centered in their economic development policies. In order to become economically competitive, they must move in the direction of neo-liberal policies to promote « good business climates » and to court business in hopes of luring jobs and money into the community. In this globalized environment, local democracy matters less and less as issues of economic well being and community building are left to the marketplace to determine.

6Not all analysts agree with this scenario, of course, (see for example, Newman and Thronley, 2005; Cox, 1992; Hirst and Thompson, 1994; Hirst, 1995; Kantor and Savitch, 2002), and it would be impossible to capture all contours of the debate. Some critics are quick to argue that there is variation in resistance to or promotion of economic liberalization among nation states, particularly due to the « accumulation strategies » of dominant classes (Jessop, 1999a; 1999b). Others suggest that attempts to react to the national, regional and local impact of global economic changes through re-scaling and reconfiguring of state spaces preclud anything like a linear denationalization of the state by markets (Brenner, 2004; Peck, 2002, 2002; Wade, 1990). Most recently, Sassen’s (2006) magisterial study of world systems stresses how the process of state making made the global economy possible by creating institutional capabilities specific to the organizing logic of a global marketplace. All of these scholars challenge Susan Strange’s (1996: 4) dictum that « …markets… are now more powerful than states ».

7Nevertheless, dominant urban scholarship remains uncertain about the scope for local political choice. At best, scholars tend to depict the state-especially local government - as responding to the far more resolute forces of a globalized marketplace, shedding and shifting some of their traditional roles in a process of variable accommodation2. This raises questions about the function, including the significance or triviality, of such political interventions in the face of global influences. As Brenner (2004: 5) describes, « …historically entrenched forms of national state territoriality are being systematically unraveled and, consequently, that diverse sociopolitical struggles to reorganize the institutional geographies of capitalism are proliferating at all spatial scales ».

8In the debate about the reach of globalization, however, scholarship tends to regard American urban development politics as an illustration of the rising influence of globalization in precipitating neo-liberal practices and policy. Indeed, descriptions of what is happening to cities and regions in the USA sometimes border on portraying it as a microcosm of the globalization process itself, and therefore an important harbinger of the future postindustrial world (Smith and Guarnizo, 1998; Clarke, 2003; Sassen, 1998; Abu-Lughod, 1999; Grieder, 1997; Kanter, 1995; Judd and Fainstein, 1999). The latter image invariably draws attention to important differences between the USA and Europe. There is evidence Western Europe is better able than the USA to influence some social and political changes in the international economy (Newman and Thornley, 1996; Hall, 1989; Savitch and Kantor, 2002; Le Gales, 2002; Salet and Krukels, 2003; Jouve and Lefevre, 2002). Most Western European nations are characterized by better organization of labor unions, the presence of established and powerful left wing political parties, and centralized governments with long-standing national urban policies that are geared to propping up even the worst off urban communities and towns that are being bypassed in the world economy. Thus, the ultimate consequences of globalization will not appear there as quickly or profoundly.

9In contrast, the USA lacks many of these political buffers. American trade unions are much weaker than in most of Western Europe - indeed they are a pale shadow of what they were only a few decades ago - and they are not well connected to the party system. Socialist parties with long standing ideological commitments to ambitious welfare state programs have never existed. National urban policy has never gained stable political support and has become a thing of the past. Political decentralization is the dominant feature. American cities have always been responsible for extensive areas of economic policy, especially in the administration of land use, environmental regulations, and tax policies, and its cities are especially vulnerable to the impact of the new economy. Indeed, the American federal system of government enables federal, state and local governmental relations to change rapidly. Recent decades have witnessed even greater decentralization as the federal governmental presence in cities has shrunk. Consequently, the American model of urban development is often believed to reflect the new global realities. In particular, the last quarter of the 20th century in the USA is seen as evidence of a melting away of the state and the surge of neo-liberal policy adaptations, confirming the globalization/convergence argument (Fainstein and Fainstein, 1989; Vogel and Harrington, 2002; Judd and Swanstrom, 2005; Smith, 1988; 2001).

10Few scholars dispute the fact that since the late 1970s important social programs and urban aid policies have been cut back or watered down in the USA, not only under Republican administrations but also by Democrats in Congress and the White House. Critics usually suggest this is because these officials have little choice but to accommodate new global realities, become more economically competitive and sometimes serve the neo-conservative political tide in order to survive politically. Declining intergovernmental financial assistance to localities amidst increasing competitive pressures on cities is said to have precipitated dramatic changes in local development politics. Local governments almost everywhere are vigorously pursuing pro-growth policies and rapidly forming new public-business partnerships in order to bring jobs and dollars into town. In fact, American local governments are sometimes likened to businesses, pursuing more « entrepreneurial » strategies than ever before and absorbed with growth (Peterson, 1981). Consequently, they avoid programs that aid the poor, and other socially dependent groups in favor of policies that have greater payoff for the local economy.

11This analysis cannot probe all aspects of this globalization/convergence thesis. Aspects of this argument already have been examined by this author in another study Savitch and Kantor (2002). It is my purpose here to question certain critical assumptions of the globalization thesis in respect to local politics, and the American model in particular, however. I believe it is seriously flawed as theory and practice. As theory, it discounts the importance of political choices and state intervention in the process of creating economic liberalization; in doing so theorists tend to wrongly conflate neo-liberalism in policy with globalization itself. As practice, it misinterprets the American model of development, depicting this experience as empirical confirmation of what globalization means. In particular, it erroneously portrays U.S.A. urban development as an instance of a melting away of the state in deference to the pressures of the new international marketplace, implying that political choices about urban development are few or even absent in this context. Closer inspection actually suggests the opposite, however; the state is central to the U.S. model of urban change, not peripheral to it, much less receding in the face of globalization. It is the form and substance of government intervention that has been changing; giving rise to what in effect is a new regulatory state of vast dimension. Since this is essentially a political construction, the scope for political choice and local democracy is much greater than many globalization theorists believe.

Globalization as Theory: Economic Revolutions as Politics

12The most glaring flaw in much globalization theory is the assumption that it is essentially an economic process: neo-liberal practices are displacing political regulation of the marketplace in response to internationalization. The actual history and dynamics of capitalist development belie this notion, however. In his wide ranging analysis of industrial capitalism first published in 1944, Karl Polanyi (2001) shows why economic revolutions are also political revolutions. Surveying the industrial world since the late 18th century, Polanyi noted why the role of government in Great Britain was essential to the birth and development of industrial capitalism. In The Great Transformation he observes that the idea of a self regulating market was at the heart of the industrial revolution. It constituted a new and powerful organizing force, eventually redefining the fundamental relationships among land, labor and capital as it spread throughout the West. In this sense the industrial revolution was an economic revolution—markets became the primary means by which society attempted to solve its major economic problems, a major departure in Western social development.

13Yet he also stresses how the market economy of the industrial age was highly contingent upon almost continuous state intervention. In his view a self-regulating market system never actually existed because it threatened everybody in society with unacceptable social consequences (Polanyi, 2001). This included such things as the deforestation of the landscape, falling wages, unpredictability and volatility of the value of money, falling prices, mass hunger and poverty, and other forms of agonizing upheaval of the social order. The idea of a market society was considered a social monstrosity even at its birth, and virtually all interests sought to shield themselves from the actual dynamics of the marketplace, despite the ideological rhetoric extolling the virtues of markets by liberal political economists of the age.

14Polanyi’s analysis also demonstrates how industrialization was accompanied by a double movement to grapple with the fallout of industrialization. This « consensual counter-movement »- that is, a broadly based coalition that included capital, labor as well as landed interests - shared essentially similar objectives in containing and sometimes even eliminating attempts to build a market utopia (2001). Consequently, it triggered widespread governmental intervention throughout the industrial era in order to make this form of economy sustainable. This included everything from arcane laws requiring the testing of anchors and cables, ordinances regulating the cleaning of bake houses, to poor law reforms necessary to stimulate the formation of freer labor markets, or to slow down the formation of markets in order to preserve valued ways of life.

15Let us examine the specifics of this analysis which some even implicitly acknowledge in the current globalization debate (Sassen, 2006). Polanyi brilliantly observes that the growth of public regulation was essential for several objectives. First, such public regulation was necessary to break down traditional institutions that impeded the formation of markets, including those for land, labor and money. The market re-organization of society did not simply happen on its own. It required fundamental changes in English laws, customs and social practices that were deeply imbedded in anti-market institutions created over centuries.

16Second, political regulation of market society was required in order for government to defend critical general public interests that virtually all major groups in society shared. This included such things as the preservation of the environment, investments in land, defense of the homeland, stability of incomes, the value of money, factory safety, agricultural self-sufficiency and other things central to social order. In effect, Polanyi suggests that promotion of a public interest by government was just as crucial as the market itself in bringing about the industrial revolution, for no market could exist without it. Further, no political system could permit the wholesale social dislocations attendant with a market economy because such an economy would have destroyed society itself (McRobbie and Polanyi Levitt, 2000).

17Polanyi’s recognition of public general interests that sought protection did not preclude his acknowledging the clash and competition among particular interests that sprang to action in a highly contingent political process. Polanyi demonstrated how nothing about the industrial revolution was deterministic. In a trenchant observation about left and right wing politics, he showed how the uses of the state could take many different forms in the dash to regulate and shift the costs and benefits of economic liberalization (Polanyi, 2001). He avoided constructing a theory that tied the obvious inequities of industrial society to any particular set of interests because he believed that larger and more holistic forces overshadowed these influences. In doing so he avoided both sociological determinism and perspectives that would have obscured the governmental dimension in shaping economic change.

18Finally, Polanyi described how a public sector capable of shielding particular groups and classes from many of the potentially devastating consequences of freer markets grew alongside industrialization. Yet it is important to note that Polanyi’s view of the state was not entirely benign in the sense of ameliorating social costs. Rather Polanyi observed how this role of government also was a highly contingent one; competing interests sought state power to slow down economic restructuring, shift its social burdens, and otherwise regulate its social impact for essentially particularistic objectives (Polanyi, 2001). The politics of the age essentially became a struggle over political and economic boundaries - the circumstances under which market forces would be permitted to drive the economy and society. Since virtually no significant social interest wanted to be left to the pressures of the marketplace, the dominant political agenda was almost never about political control of the marketplace itself, but about the means of regulating it to protect particular interests while also sustaining market development.

19Taking Polanyi’s cue, it is clear that contemporary global economic restructuring has also required extensive public intervention, as well as coordination among nation states and international agencies. From free trade treaties, the creation of new international financial organizations, changes in tax policies and monetary regulation, and adjustments in domestic economic regulations, liberal economic change has remained highly contingent upon public policy. As in the industrial era, the political struggle is essentially over similar things: creating market institutions, promoting critical public interests, and establishing boundaries in order to cope with the social fallout of internationalization. « Globalism to serve whom and how? » is the dominant issue - not the displacement of state by market forces.

20From this perspective, the American model of urban development must be understood differently than many globalization theorists suggest. Although it is illustrative of an expanding role for economic internationalization, the U.S. model also represents deliberate political choices that are antecedent to globalization rather than reflecting accommodation to powerful economic changes. In particular, is important to examine how this style of urban development has redefined - rather than displaced - the continuous role of government that makes it sustainable.

The American Model

21During the past half century or so American urban communities have not only become subject to new global economic forces; they have also become part of a regulatory regime that is essential to this economic system. Much as in the industrial revolution, the postindustrial age also is redefining the traditional role of the state and engaging government as a crucial player in new ways.

Urban Change in New York City and Paris: A Look at the Variable State

22What is the « American Model » of urban development? One way of capturing it is to consider the following comparison of how two major cities - one in the USA and one in France - addressed a common problem: namely, how to modernize their central business areas3. Beginning about 25 years ago officials in New York City wanted to develop a decaying area in Manhattan that had once been an attractive playground filled with theaters, cinemas, pleasant restaurants and shops - the vicinity of Times Square where the famous Broadway theaters are located. Once termed the « Great White Way », Times Square had fallen upon hard times. Its streets were dominated by peep shows, fast food outlets, porno movie houses, pawn shops and neglected rooming houses. The area’s legitimate theaters no longer were attracting the numbers of visitors and tourists they once did.

23City officials created a special joint business-government corporation to help plan the neighborhood’s renewal. The authorities relaxed the density controls and building height regulations in the area in order to lure investors to build office towers and hotels. They later gave millions of dollars in tax concessions, loans and outright cash grants to businesses, including to one wealthy multinational corporation, so that they would move hundreds of jobs to this location or invest in some of the new buildings. Throughout this process, the city government negotiated with developers and investors in order to maintain their confidence and participation in the renewal scheme. As it evolved in objective and scope, many poor or marginal tenants in the old shops and apartments were displaced to make way for a new « Great White Way ». Yet care was also taken to limit this social dislocation, particularly by getting developers to spare and upgrade a number of historic legitimate theaters and providing housing for some theater related groups. Anchored by a Walt Disney theater, a new giant hotel, upscale shopping arcades and restaurants, and acres of subsidized office space in labyrinth commercial buildings, this became the spearhead for revitalization of the city’s underused West Side.

24At about the same time in Paris, officials and planners also were engaged in a plan to revive the city’s old built-up areas in the center and then move much new development toward the eastern edge around it. Armed with vast authority to freeze property values, direct the movement of businesses to new premises and possessing huge amounts of public capital investment, Mayor Jacques Chirac and national planners decided to re-build the very epicenter of the city. Public agencies built large cultural, recreational and commercial centers at Les Halles and at nearby Centre Pompidou. Using their extensive powers to acquire land, clear it and redesign its use, the city and state established the parameters of development, coordinated its massive infrastructure of road and rail access, and then, after these components were in place, private developers, investors and prospective purchasers of space were invited to make their bids.

25Within a short time Les Halles and Centre Pompidou were central attractions for tourists and citizens, and also brought new vigor to surrounding neighborhoods. Not least, this success set the stage for larger projects as the need to balance development in the eastern parts of the city where vacant or underused land was becoming ripe for reclamation. The Parisian Prefect bought huge parcels of land in that area. Local and national agencies cooperated in formulating plans for what eventually became known as Secteur Seine Sud Est. Housing, offices and light industry began to fill the area. The final boost came from building a large sports complex, moving the ministry of finance into the Secteur, and by the opening of numbers of restaurants, banks and suppliers in the area. It was not long before the formerly deserted eastern frontier sprang to life, encouraging even more plans in nearby parts of the city.

26These examples typify contrasting approaches to city building. In the American case, officials leaned heavily toward the marketplace as a driving force in shaping the timing, direction and management of the project. Working in close collaboration with the private sector as a source of money and leadership, New York City officials participated as public entrepreneurs. They bid for the cooperation of private investors and employers in the hopes that the project would take off in the direction they wished. The role of government was big, yet it remained highly dependent on the preferences and largesse of private corporations. At the same time, local officials used their authority to ensure some of the city and neighborhood’s vital interests. This included using public power to revitalize one of the city’s most valuable, but underused, commercial districts, powerfully enhancing the revenue base of the city; it also included enabling cultural interests to have political access and win concessions from developer interests and, if only marginally, to ameliorate some social dislocation in the area.

27In the French case, the hand of government was paramount throughout. The public sector initiated and managed a vast development project that kept business investors at the margin. They were called in to participate only after most of the plans were set. In the building process, officials asserted a large public presence in the form of housing, libraries and other facilities to anchor and shape these vast commercial developments. Investor preferences and the private developers had to go along with this or get out of the way. State bureaucracies and their partisan overseers in government directly represented important social interests and placed them centrally in the project planning.

28Clearly, the U.S. style of development stays close to the market and seeks to incorporate business participation at almost every turn in order to make public objectives possible. In the European case, the opposite is true. In both countries there are exceptions to these patterns, of course (Savitch and Kantor, 2002; Jouve and Lefevre, 2002). Yet in New York, as in most other US cities, the hand of government actually looms large - but more as an initiator and provider of money inducements than as a planner and investor. Local governments like New York are expected to cope with social dislocations with very limited resources and without compromising a leading role for private capital. Yet market-led U.S. urban development does incorporate local and state governments as major players in what is a highly political process of give-and-take.

29Paradoxically, during recent decades the use of tax abatements, loans, land sales discounts, and other business incentives has become standard practice in urban development, even in the most hard-pressed American cities where budgets are tight and revenues are very scarce. Similarly, the use of public-private partnership arrangements in which public officials share power and planning with business investors is now common practice in most US cities, as it is in France. It dominates undertaking most new developments, including downtown shopping malls, convention centers, new office complexes, sports stadiums and even many local government facilities, such as civic centers and the like. Thus, in the US model, local government is a big presence. Yet it plays a different role than is usually found in the European context. What is most important, private and public power does not simply displace each other—they engage each other in complex ways. How is this possible? What is the role of the regulatory state in the new economy? What are the prospects for political choice in such an environment?

30The answer is surprisingly close to Karl Polanyi’s depiction of politics and the state in economic transformations. A closer look at the evolution of the American model reveals the critical role of public intervention in 1) creating its market-centered structures, 2) protecting compelling public interests in this functioning, and 3) in regulating its urban social consequences.

Present at the Creation: Government As Marketplace

31U.S. urban development during recent decades does not represent the triumph of global markets over government despite the facilitator role that local government often plays. The model of urban development that emerged during the postwar period suggests that government was not only present at the creation, but it was essential in organizing it. The contingent nature of this process is suggestive of the reality of alternative pathways for shaping a globalizing marketplace within an urban system.

32All cities in market economies - whether in North America or in Europe - must be responsive to the movement of private wealth since local governments lack much control over the movement of capital and labor. Equally important, however, urban development is also decisively shaped by the kind of political environment within which communities compete to promote their well being. The political environment specifies rules under which local communities try to manage economic change and it determines the public resources available to local governments for this purpose.

33In the case of the USA, the political environment strongly favors private sector influence over urban development. This environment favors neo-liberal solutions to public problems when supported by powerful political interests. Yet this was not a result of globalization. Rather, it was the result of deliberate political choices made over many decades by governments at all levels in the USA. Most of these choices were not made to accommodate global postindustrial developments because they usually preceded them by years or even decades (Kantor, 2006; 1995; Dilworth, 2005). Later governmental decisions that accompanied postindustrial development generally reflect powerful political pressures of interests seeking to exploit this environment and benefit from these internationalizing changes. In neither case have global market pressures only forced political accommodation, however.

34The postindustrial economy of the past fifty years or so unleashed fundamentally new forces influencing the shape of cities, nations and even the entire global order. Land, labor and capital all underwent radical re-organization and dispersal. Many businesses that once were strongly tethered to the factories, downtowns and railway terminals of major cities were liberated from these central places and became freer to re-locate to other areas well outside of the big cities where they could reap new cost advantages. Computer technologies, telephone services, and the availability of lightweight and other man made materials, such as plastics, enabled manufacturing businesses to move away from sources of raw materials. The growth of services rapidly replaced manufacturing production as the major sector of the economy. Transformation to a predominantly office-based economy permitted more businesses to shift these operations more easily to sites in suburbia, the Sunbelt and abroad. The organization of capital also changed fundamentally, typically decentralizing divisional operations in scattered locations while only concentrating corporate headquarters functions in traditional urban centers.

35Dispersal of jobs was accompanied by the scattering of urban populations. The post war years were colored by a trek to suburbia of historic proportions and on a scale that has not yet been duplicated inmost other Western industrial nations. In the USA suburbanization was strongly influenced by race, as more than 5 million African-Americans moved to Northern cities. This new presence accelerated the flight of white families from inner city areas to the suburbs, creating highly segregated metropolitan areas all over the Mid-west and Northern sections of the USA by the 1970s.

36This process of deconcentration and deindustrialization has relentlessly continued, creating a situation where many cities have become more interchangeable as business sites while corporate investors are better able to pick and choose among cities, suburbs and even rural areas competing for their investments. It is a phenomenon experienced by virtually all Western industrial nations in recent decades, posing essentially similar problems for their political systems.

37What distinguishes the USA, however, is that the political order for managing and channeling these new social forces stands apart from the political systems in Europe and other industrial nations. In the US the dominant political response has been to construct an urban system that radically decentralizes governmental power and authority and discourages shifting problem solving to higher levels of government (Kantor, 1993).

38The creation of this institutional order largely preceded these global changes. The ideal of small scale politics and the notion that local people know best how to solve their own problems has a long history in America. Thomas Jefferson celebrated the local community found in rural areas, towns and villages, while he cast suspicion on central governmental power (Wood, 1992). Throughout the 20th century a decentralist urban policy was built and then was extended to form America’s response to postindustrial change.

39Initially state governments played the crucial role. As families and jobs left central cities, state governments enabled suburbanites to incorporate into autonomous local governments that could assert control over land use and keep out unwanted people, industries and other “intrusions,” including people of color, public housing and the poor. People leaving the cities and their problems were permitted to fragment entire metropolitan areas into hundreds or, as in New York, even more than a thousand local governments, each competing to minimize service burdens and keep taxes low. Bringing in the tax rateables and keeping out the “undesirables” became the suburban governmental mantra. At the same time, state governments supported this by refusing to permit central cities to expand their territorial boundaries as wealth exited into unincorporated areas; they passed laws enabling suburbanites to create special district governments to provide services beyond their local government’s reach, such as commuter transportation, water, sewers and other services that could only be financed by large scale governments. The result is the metropolis we know today (Danielson, 1973; Judd and Swanstrom, 2005). The suburbs remain predominantly a bastion of white upper income groups while the central cities house those left behind.

40The federal government’s policies reinforced the building of this decentralist order, and in doing so stimulated the creation of a more market driven urban society. During the initial post war decades, federal urban programs dramatically expanded to play a dual role. On one hand, the federal government subsidized urban economic competition among cities, suburbs, and regions through a bevy of programs that stimulated flight of people from extant urban centers. For example, federal mortgage guarantee programs for veterans and mid-income families were biased in favor of new suburban locations, rather than older inner city areas. The interstate highway program, begun in the 1950’s, subsidized the use of the automobile to commute to distant suburban locations while denying even the modest use of federal funds for mass transit until the 1970s. National defense programs that expanded rapidly during the Cold War favored governmental spending in military related projects in newer locations in the Sunbelt, rather than crowded central cities (Mollenkopf, 1983).

41On the other hand, federal programs also attempted to address some of the harsh social consequences of these policies. During this period central cities still played a major role in national electoral coalitions of the Democratic Party. Housing and urban renewal programs were launched to assist downtown renewal, while later programs of the 1960s Great Society agenda focused on addressing urban poverty.

42By the 1970s, however, the population movement to the suburbs and Sunbelt, together with national partisan electoral realignments, diminished the importance of central city electorates in national party coalitions. This triggered almost continuous political marginalization of the cities during succeeding years. Fueled by a powerful conservative tide and a new Republican political majority, the last decades of the century witnessed almost continuous withdrawal of the federal government from the cities and the elimination or diminution of national urban programs. Beginning with the last two years of the Carter administration, Democratic as well as Republican administrations undertook major cuts in federal aid to cities, as well as the housing and economic development initiatives of earlier years. This shift in federal policy reflects the power of electorates in the suburbs and Sunbelt who believe they can benefit from permitting neo-liberal solutions to play a big role in guiding changes in urban development - it has little to do with global markets (Weir, 1996; Caraley, 1992).

43These changes in the policies of higher level governments reconstituted the rules under which urban economic development took place in the postindustrial USA. That is, an implicit national urban policy was forged that essentially mandated a radical devolution of decision making to the lowest governmental levels, forcing cities, suburbs and towns to compete for their economic well being by attracting jobs and dollars from increasingly footloose business investment markets. The rules of this game are simple: people and businesses are free to « vote with their feet » in choosing places to live and invest. National urban policy is a means of enforcing this by encouraging industrial dispersal and limiting higher governmental intervention in assisting cities that become losers in intergovernmental warfare for economic growth. Cities have little choice but to lean close to the market if they are to survive. In effect, the federal system of government has been re-designed to permit new market pressures to play a larger role than they might otherwise play in guiding postindustrial economic restructuring. It is not a result of globalization. It has always been a political choice.

Regulatory Governance: Managing the Marketplace

44If globalization really meant the inevitable compliance with globalizing markets in America’s urban development, one would expect that local and state governments would strongly limit and even diminish their intervention in the vicissitudes of the marketplace. According to this thesis, the growth of international market forces necessarily means displacement of significant governmental regulation that places boundaries on emerging private market forces (Friedman, 1962). Yet this has not happened in the U.S.A.. Instead of declining governmental regulation, the American model today incorporates a virtual explosion of new forms of state regulation of urban development; significantly much of this intervention seeks to manage and often limit the potentially destabilizing impact of new territorial economic competition (Eisinger, 1988; Anderson and Wassmer,200). Although it is true that many national governmental programs that are urban-related have diminished, a new regulatory state has emerged in which local and state governments dominate the scene.

45This has happened because the spread of private sector pressures in city building triggered a political countermovement at state and local levels of government in an effort to assert greater public control over the urban consequences of postindustrial change for particular communities and regions. This countermovement can be best understood as a response to protect vital diffuse public interests even though it has also benefited some particular interests more than others, as virtually all development programs do. This political response has very little to do with liberalism or conservatism, Republicans or Democrats or other ideological divisions, because virtually every city, county, town and state has supported forms of new public intervention (Kantor, 1995; Savitch and Kantor, 2002; Eisinger, 1988). Much as Polanyi observed about an earlier time, this is a broad and consensual response by local communities to avoid letting market pressures alone determine their destiny. Although the prevailing policies are commonly regarded as « pro-growth », their primary purpose of preserving or enhancing the market position of a particular community also essentially makes them programs of market containment.

46As described above, local and state governments now heavily subsidize urban business investment with a plethora of tax, loan, regulatory and other business incentive programs in an effort to bend the pressures of the marketplace to their favor. These programs usually seek to control the supply-side of the development process. They have dramatically proliferated during the past several decades—especially since the 1960s (Kantor, 1995). State governments have created new economic development agencies, and legislatures have passed laws providing authority of local and state agencies to provide bounties of nearly all descriptions in order to promote the expansion of existing businesses or to lure new ones into their jurisdictions. Today in nearly every large city in the USA there is hardly a major investment project, such as a shopping mall, office building, skyscraper, industrial park, new factory or other development that gets built without very large subsidies of some kind from the governmental jurisdiction where these projects occur. Sometimes termed the new « Entrepreneurial State », it signifies a closer engagement between government and the business sector (Eisinger, 1988). Indeed, in 2005, the Supreme Court of the U.S. measurably expanded the right of local governments to take private property to achieve public purposes (eminent domain). The justices in Kelso vs. New London held that local officials could seize private property to sell to another private party in order to increase its economic value to the community as a whole, acknowledging the clamor of cities to use public power to control local economic development.

47This trend has occurred because local businesses, electorates, homeowners, taxpayers, civil servants, and almost every other interest that is vulnerable to the dislocations of postindustrial change use political muscle to resist allowing economic competition to drive what happens to them. When national government fails to heed their demands, they turn to local government and the states. In a political system where localities must raise most of their tax revenues by themselves and can expect little compensatory financial assistance from the national government and even many states, the pressure to seek business growth and minimize the service burdens of disadvantaged people is irresistible. Even though many if not most of these subsidy programs fail to have a large impact on particular business location decisions, they are thought to slow down adjustments to capital movement, preserve a role for local government in allocating costs and benefits of community economic changes, and provide symbolic reassurance to electorates (Goetz, 1990).

48This accounts for the inclination of American local officials to frequently take a short term perspective on urban development, relying extensively on providing incentives to the businesses that will bring into the locale bricks and mortar projects, like office buildings, luxury apartments and shopping malls - things that assuredly cannot move and can quickly generate jobs and tax revenue payoffs. Despite the many difficulties that this style of development brings (it often does not succeed in moving jobs), few city councils or state legislatures are willing to entrust economic outcomes to whatever the private sector may bring. At the same time, local government intervention has expanded to capture an important role in mobilizing new resources to preserve jobs, neighborhoods, and to ameliorate the impact of capital mobility on voter populations. Perhaps the most significant instance of this is the governmental manufacturing of culture as local economic development. This includes efforts to capitalize on historic preservation, the arts, museums, parks and recreation and the provision of other public amenities that are particularly attractive to workers in the symbolic economy and to tourists (Zukin: 1995). Although one can cynically argue that that culture as development disproportionately benefits upper income groups and property owners, it is also the case that these programs so easily receive public support because they promise to safeguard local fiscal health and provide new jobs and small investment opportunities to ordinary people in an economy that often excludes them (Freiden and Sagalyn, 1991).

The Rise of Money Generating Government

49The American model also deviates from globalization predictions about the governance of economic development. One face of globalization is the apparent drift towards greater privatization of certain public functions and spaces, from contracting out routine services to organizing public-private partnerships for large governmental undertakings. Yet it can be argued that this drift is overshadowed in political impact by an opposite development; namely, big government dedicated to mobilizing vast sums of public money to promote urban development. This now pervades cities and regions. In order to succeed in the marketplace, local officials must constantly seek to leverage investment money from private sources. This is especially important when it is necessary to assemble large sums required to take on major capital projects, such as renewing old downtown areas, building convention centers and sports arenas, and other such endeavors. Unlike Europe, however, where national governments normally borrow and then distribute the funds for capital investments to the cities, in the U.S. cities are usually on their own. They must issue their own bonds to municipal investors who seek assurance that they will eventually be paid off. Accordingly, local officials provide this assurance by creating independent development authorities whose projects, officials and revenues are untouchable by general purpose local governments. In this way, bond obligations will not have to compete with ordinary city services and projects, such as teacher salaries, street sweeping or health centers, at budget time (Sbragia, 1999).

50The result: the rise of a whole network of « money generating governments ». These are agencies like the Lower Manhattan Development Corporation (created following 9/11), the New Jersey Meadowlands Exhibition Authority, the Maryland Stadium Authority or Chicago’s Metropolitan Pier and Exhibition Authority. They are almost always appointed, distant from voter control, and financially independent. These money generating governments dominate the urban development game almost everywhere because they have proliferated so dramatically in recent decades (Judd and Swanstrom, 2005: 355). For example, in New York City during the 1960s there were only 6 special authorities (Walsh, 1990). By 2006 there were nearly 40 such governments, from luxury housing authorities, urban renewal agencies to transportation providers. They usually generate their own revenues by means of income from the projects they help finance or build, rather than being dependent on legislative appropriations. Their insularity allows them to avoid entanglement in social programs in favor of infrastructure and other economic development ventures that will make money.

51These authorities raise serious questions about their distance from voter control, their frequent lack of involvement in the social aspects of their projects, and their insularity. Indeed, they fit oddly within a democratic order. Yet they have won legitimacy or at least tolerance because they function to provide one overriding preservationist purpose - to raise money to fund vital infrastructure needed to enhance the economic survival and well being of the locality. Little wonder that such state- centered institutions have such a central role in urban development.

Regulating the Social Consequences of Globalization

52Globalization theory anticipates a declining role for government in social regulation as more responsibility for the casualties of economic change is left to the marketplace. The American model displays the opposite trend, however. It is true government support for social safety net programs has diminished in the USA, especially at the national level. The local governmental level of the American model usually does not play an ambitious role in ameliorating social tensions occasioned by economic change. Yet there are other ways of dealing with social polarization than reducing them through social spending. Governments can also regulate the political consequences of increasing social polarization in order to manage their impact on social order, rather than attempting to overcome these divisions. The latter public policy approach has dominated the American model, mainly by building political firewalls that socially segregate urban populations, thereby limiting their contact and competition (Katznelson, 1981; Lemann, 2002; Oliver, 2001). The result: economic restructuring can take place with less confrontation, competition or coalition building by winner and loser populations in the urban development process. In effect, the process of addressing the social fallout of globalization has not shrunk; it has assumed a new regulatory form in a counter movement to manage the local borders of the international marketplace.

53The logic of this “containment” strategy is simple. As explained above, America’s radically decentralized urban policy has now produced one of the most territorially segregated urban societies in the industrial West. This policy permits and even encourages suburban residents to escape from the central cities, walling off racial minorities and have-not groups in separate, although large, enclaves. Thus, territorial segregation by government to limit social conflict has become the major means for managing social polarization - indeed, it is at the core of America’s contemporary regulatory state4.

54This regulatory landscape is becoming increasingly contentious as it is expanding within cities. As financially pressed central city governments compete in a world that often favors suburban locations, their efforts invariably focus on modernizing downtown and attracting suburbanites, tourists and members of the so-called « creative class » (Florida, 2000), bypassing ordinary neighborhoods and people who are considered less important for such growth strategies (Judd and Fainstein, 1999). Predictably, this has increased socio-economic disparities because much of the economic growth that occurs in cities does not produce many benefits for large numbers of lower income residents who actually live in the community. For example, in New York City nearly all of the job growth in recent decades has been concentrated in Manhattan and certain parts of downtown Brooklyn, while the city’s outer boroughs have stagnated or even shrunk in real family incomes (Parrot, 2001; 2001). Further, such growth strategies cannot work unless the glaring disparities between poor marginalized neighborhoods and the downtown centers of commerce, culture and wealth are kept separated. These paradoxical results must be actively managed by government, in effect politicizing global restructuring (Sites, 2003).

55Consequently, the remaking of cities for upscale groups amidst very large impoverished resident populations has precipitated new ways of separating tourists, white collar workers, and corporate business activities from poor residents and sight of their nearby decaying areas. The geography and politics of cities in the 21st century is being powerfully shaped by perceptions of safety and security. Neighborhoods and the downtowns of large cities are often demarcated and defended from surrounding land uses that might seem threatening. The barriers that protect downtowns come in various forms, such as shopping centers, entertainment districts, and tourist enclaves (Judd, 2002). Perhaps the most comprehensive barriers have been built in Atlanta and Detroit, where a large proportion of downtown office workers commute to the sealed realms of the Peachtree Center and the Renaissance Center. In both these structures, workers drive into parking garages and then enter a city-within-a-city where they can work, shop, eat lunch, and find a variety of diversions after work. They never have to set foot in the actual social community of the city. In other cities, the downtown enclosure may be less extreme, but for visitors the experience of the city may not be much different. Business travelers and tourists who visit central cities now commonly fly into an airport, take a taxi or a light rail to a downtown hotel, and stay within the well-defined enclave of restaurants, shops, hotels and offices, never seeing or even becoming aware of the larger city around them.

56The creation and maintenance of this exclusionary environment is no accident. It is the result of active and purposeful planning by government in collaboration with the private sector. One of the more innovative regulatory efforts to separate the visitor class from the poor has been the creation of business improvement districts (BIDs). These are essentially special assessment enclaves where property owners contribute revenues to a common fund that provides enhanced services, from sanitation, street repairs to even fairly significant public works, such as park renovations. The BIDs enable commercial businesses and other property owners to encapsulate a portion of what are really tax revenues and to use them to supplement city services through their private governments who they elect to manage the activities. Although this « saves » money for cash strapped city governments, it also creates privileged and privately administered areas that siphon away funds that would otherwise be part of general revenues. This further segregates the city’s economy from the rest of the city, enabling business to assert a measure of control over territory and services without having to compete with other interests. Little wonder that BIDs have spread to encompass more and more business and commercial districts in cities all over the USA during the last 20 years (Kohn, 2004).

57Other aspects of segregated development as social control arise from efforts by city governments to « militarize » and privatize valuable urban spaces to defend them from poor resident populations (Davis, 2002). This includes the use of bonus zoning laws that reward developers of high rise buildings for including essentially quasi-public mini parks, atriums and other boutique settings patrolled by private security guards who keep these areas free from people who do not shop or do business there. It also includes changing street furniture to discourage loitering, walling off commercial neighborhoods from nearby slums with roads, parks and other public infrastructure, and beefing up law enforcement efforts to focus on quality of life offences and otherwise discourage contact between the visitor class and residents who appear out of place (Zukin, 1995; Kohn, 2004). These and other methods of social control require major innovations in policy and administration on the part of local governments and planners. They constitute a significant, if often perverse, expansion in the regulatory scope of government at the local level - not shrinking government in the face of globalization.

The American Model of Development: A Politics of Economic Choices

58In many respects, the response of the U.S. to postindustrial change has been quite inventive and singular. The American model is not the triumph the global economy over policy and government. To the contrary, government has played a huge role in erecting a radically decentralized urban system in advance of the new economy and then actively sustaining it through public policy despite pressures to change it. Rather than limiting the intervention of government in order to accommodate the global postindustrial transformation, local government responsibilities have expanded greatly to compensate for the withdrawal of the federal governmental presence in cities. Lacking ambitious national urban policy, local and state governments have undergone an explosion of new economic measures to check and divert the community impact of neo-liberal economic changes.

59Similarly, this regulatory landscape is expanding to find ways of addressing the forms of social polarization associated with the global economic restructuring of urban areas. Although programs that use governmental largesse to cushion populations from the dislocations and discontents of more market driven development have diminished, the employment of containment strategies to separate and defuse potential political conflicts over economic change have mushroomed. Especially when the benefits of the new global economy do not distribute widely among urban populations, local governments are becoming more active as social regulators through urban planning, public investment, special design and private sector collaboration to manage potential political opposition to its policies.

60All of this points to the verity of Karl Polanyi’s understanding of politics and markets. The American urban model reflects the reality that global economic change is as much a political phenomenon as it is an economic transformation. The urban U.S.A. is hardly a case of convergence and accommodation to essentially market driven developments. Rather, it is evidence of a deliberate governmental effort to create an urban marketplace in advance of globalizing changes. It is also evidence of the uses of state power to secure and promote vital public interests that are challenged by global restructuring, especially the preservation of extant political communities and sustaining local political influence over changes in economic development. Finally, it is suggestive of a political countermovement of diffuse, but competing, social interests that are threatened by this fast evolving economic system and seek to manage its social impact. Although radically decentralized and often supportive of pro-market solutions to public problems, the U.S. model constitutes a dramatic reorganization and expansion of government for the purposes of managing global restructuring. As such, it provides a platform for harnessing economic liberalization for its own political ends, not merely adaptation to exogenous forces. Looked at in this way, the scope for future public action to turn the U. S, model in new directions in order to serve other interests that are presently excluded becomes clearer. This competitive struggle will be played out in the political marketplace of policies, institutions and power.

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1 The beginnings of modern global or internationalized national markets is a matter of considerable debate, but Sassen (2006) dates this to the early post war decades, particularly following the end of the Bretton Woods system.
2 Even Sassen is ambiguous in this regard, although her study is about national states. For example, she concludes «…that while some aspects of state participation are in fact instances of states adapting to and participating in the global, other components…are themselves strategic sites for the structuring of the global…(Sassen, 2006: 222-276) ».
3 The following discussion of New York and Paris draws upon Savitch and Kantor, 2002.
4 This is by no means an entirely new policy, however. In fact it has roots that go back to the early 19th century when local communities routinely excluded most poor people from the privileges of town living and reserved alms-giving for only long term members of the community (Rothman, 1971; Piven and Cloward: 1971; Kantor, 1995). What is novel is its return on such a vast scale at a time of dramatic economic change.
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Paul Kantor, « Globalization and the American Model of Urban Development: Making the Market »Métropoles [En ligne], 1 | 2007, mis en ligne le 21 mai 2007, consulté le 05 décembre 2023. URL : ; DOI :

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Paul Kantor

Fordham University, New York City USA, kantor(at)fordham[point]edu

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