- The measures of inequality. The Gini coefficient for
economists in many new US cities is much worse than it is in
developing nations overseas, Los Angeles, Miami, other cities have higher
measured inequality than places like Costa Rica or Zimbabwe,
so there's terrible inequality and it continues within cities. There's also inequality between cities and economists thought both of these things would be
competed away by the market, that within the city,
skills would equalize, and incomes would come
down and between cities, expensive places would be
too expensive in capital and labor would move. But they haven't, that hasn't happened. Neither of those inequalities
has diminished significantly. I'm Rick McGahey, I'm an
economist at the New School. I used to work here at INET. I have a lot of public policy experience, working as Senator
Kennedy's economic advisor, and also time at foundations,
at the Ford Foundation on urban economic development. My book is "Unequal Cities", published by Columbia University
Press in January of 2023. America is an urban economy,
as most modern economies are. 90% of our GDP comes
from metropolitan areas. So you would think, well, that's great, we must honor, we must
take care of cities, we must promote them. But the history of the United States and contemporary practice is
in fact, to treat cities badly, to underfund their needs, to strip their political power,
and to make them unequal. This is deeply rooted in American history, it goes all the way back to the revolution and the Constitution and
has not, it's changed, but I would say cities are still at a significant disadvantage from where they should be economically. So the book has three case studies, New York, Detroit, and Los Angeles. Those are all cities
that tried pretty much on their own to fight inequality, to institute social policies and housing, employment, economic, civil rights. And by and large, I'm sad to
say they all largely failed because they face several
structural challenges. One is the hostility of the
federal government to cities. Second, and a bit of a surprise to me when I was writing a book is how hostile state
governments are to the cities and the power of the states in our political economy
really disadvantages these three areas. The third major factor
is structural racism. That the concentration of non-whites, especially blacks in the core cities in the metropolitan region,
from housing segregation and economic discrimination,
really gave the cities most of the region's problems and much less of the resources
they need to combat them. This goes way, way back,
Thomas Jefferson said, "cities are a pestilence
on the body politic." I'm paraphrasing this one, but when yellow fever
epidemic hit, he said, "well, it may that it'll
have some benefits. It'll kill off a lot of
this urban population." Now you might think, okay, this is an 18th century slave holder and you would expect those views. But it's pretty built into
our system, this hostility. States, start with the electoral college. Rural states have much
more power to elect people. The US Senate, I think, a person
from Wyoming has something like 70 or 80 times the representation that a citizen of California has. Each state has two senators. And then within states,
states have the ability to set voting rights, to legislate, to set their legislative districts or gerrymander them as they often do. And the combination of those factors, both federal and state, put
cities at a real disadvantage. It's heightened in
America in a lot of ways. If you look at London, for
example, people think, well, there's something natural about
the formation of the cities. We have, the New York economy has over 750 municipal governments in it, three state governments, a
bunch of regional boards, water boards, planning boards. You can say, "well, it's just so big. It had to sprawl out that way." But the city of London, Westminster, the little pocket aside,
is run by one mayor. Now they delegate authority
to the regional areas. And in thinking square miles,
it's about the same size as New York, smaller population. So it's not anything that's natural or just occurs because of
the way the economy works, it's driven by policy. So economists, mainstream economics, has a very partial view of cities, but it's improved some in recent years. It used to be that it was just
models of household choice. How do people decide where to live and trade off commuting versus work costs? That's a truism, but
not really the driver. The revival of mainstream
urban and economics really came by paying attention to cities as hubs of innovation and hubs of growth. Ed Glaeser at Harvard is a
big proponent of this work and has done a lot of
good empirical work on it. The theoretical work is a
problematic, in my view. It actually draws on Jane
Jacobs, the famous urbanist, who was a big believer
in cities as innovators. And that's been the
real energy that's come into mainstream urban economics
in the last couple decades. Cities as innovators, bringing
together innovative forces and those innovations, in turn, drive economic growth
for the whole economy. So what to do about this problem, and I am somewhat
skeptical about our ability within the current political structure to solve the city problem. I was inspired by looking
at some geographers who did a study of what
economists call commuting zones and just what are the mapped patterns of where people go to
work and where they live. And they were able to map
almost 90 plus percentage of commuting trips in the lower 48 states to about 50 pockets, all
centered on metropolitan areas. And looking at that map, I thought, well, what if those
were the states instead of the states we have? They would be centered on cities. Some would still be Republican
or more conservative, but probably not as strongly
as the states that we have. And so I thought, well,
let's return to city states, let's just get rid of the
states in the United States, make the political map look a
lot more like the economic map so we can align those interests and cities wouldn't be harmed so much. It's a thought experiment. It makes you think about why
the political arrangements that we do have are so
disadvantageous to cities, which are the things
that give us prosperity. So there's two types of
inequality that I look at in the book, one is within cities, that is, cities are very unequal places. The measures of inequality,
the Gini coefficient for economists in many
US cities is much worse than it is in developing nations overseas. Los Angeles, Miami, other cities, have higher measured
inequality than places like Costa Rica or Zimbabwe,
so there's terrible inequality and it continues within cities. There's also inequality between cities and economists thought both of these things would be
competed away by the market, that within the city,
skills would equalize and incomes would come
down and between cities, expensive places would be too expensive and capital and labor would move. But they haven't, that hasn't happened. Neither of those inequalities
has diminished significantly, and a lot of that's due
to the policy structure that we have, the, again, states
are empowered over cities. Cities are creatures of states legally, not the federal government. They, and cities, can't do anything if their states won't let them. And so to the extent that you
have a non-progressive state, which is a lot of them, they block cities from doing anything. One quick example. State of Missouri has two big cities, Kansas City and St. Louis. Both cities passed a citywide
minimum wage increase, not a statewide, but a citywide. The Missouri State legislature
overturned both those laws and then passed a law saying that neither city could
enact a minimum wage increase on its own, it had to have state approval. This is because cities
are legally creatures of states in America. So another great example of
the difference between politics and economics in states and
cities, the Texas triangle. So at the top, it's Dallas-Fort Worth, San Antonio-Austin, and Houston. That triangle is about 75% of Texas GDP, it's not cows and oil, it's those cities driving the economy. About 65% of the state's population, yet they're totally disempowered
in terms of state politics. If you look at Texas, what it passes, it's not anything that
those cities support, and that's because the state
is gerrymandered heavily and unequally and controlled. This summer, during the heat wave, the state legislature passed
a law forbidding those cities to mandate heat breaks for workers when the temperature was
routinely over 110 degrees 'cause the cities wanted
to pass those laws, and the states were able to prevent, Texas was able to prevent
them from doing that because again, cities are
creatures of states in America. Most of the working from home, it's not people moving
from one metro to another, most of the moves working from whom are within the same metropolitan area, but people not commuting into
the central business district. Let's take New York for an
example, the reduction of trips into the central business district has hurt cities' tax revenue, has hurt the low income workers, food service, janitorial services, office cleaning, security guards, that depended on a vigorous
central business district for their jobs. And that the suburban workers who already disproportionately benefit from the urban economic effects created in a metropolitan area, but
live in exclusive suburbs where non-whites aren't allowed to live, and there's no multi-family housing, by staying home or expanding
out a little bit further into their metro have made it
even harder in the short run for New York and cities like
it to deal with inequality. So I was surprised when
I was writing the book. I knew the federal
government was bad on cities because of the support to states. What really surprised me was how hostile historically
states have been to cities and how I think that continues in most or many American states, the
power of state governments to control cities entirely,
this was a legal battle that was fought out in
the late 19th century, oddly over railroad
financing, but states won. And the prevailing rule now is that states can block cities
from doing almost anything, and they often do. At the same time, those cities
and metropolitan structures within those states, I gave
an example of Texas earlier, think about New York. The New York metro area is by
far the largest contributor of revenue to New York state,
but yet the state controls and on large number of things
that the city is allowed to do and constraints it in policy terms. So the cities, you also
see this between states, that more metropolitan states send revenue through the federal government to more red rural Republican states, they benefit greatly from the
economic prowess of cities. But the fiscal and tax returns
aren't nearly equivalent. Of my three cities, Los Angeles, I think, has done the most
consciously around cities. After the Rodney King riots where a black motorist
was beaten almost to death by the Los Angeles Police Department, a group of people got together and tried to bring together different, call them progressive,
but different groups in the population who
hadn't worked well together. And those were labor unions
and some economic developers. And the second is communities
of color who wanted jobs but didn't, had been excluded by unions, and also by traditional
economic development. And the third were
environmentalists who often or sometimes take a
anti-development position. And by harnessing those
three groups together, through a process of intense
organizing and constant meeting and constant talking to each
other, this isn't a magic thing where suddenly everybody gets enlightened, you have to work out those interests. But they did that. My best example of how
they were successful, in 2008, in the middle of the
global recession depression, Los Angeles passed a tax increase, a sales tax increase on the ballot to build the metro system. And in California, it
takes a two thirds vote to pass a tax increase as
a legacy of Proposition 13. And they did it. They got a two thirds vote in the middle of one of the worst recessions we've had since the depression, and they did that because the metro appealed
to the environmentalists for those reasons, they
had a vigorous jobs program for people of color,
particularly young men, to get into unionized construction jobs, and it created unionized construction jobs and new opportunities
for economic development. So that triangle of forces,
I think, is the best hope I've seen for cities to move
forward in a progressive way. Even, this is a controversial
thing for some progressives, but even market rate or luxury
housing helps everybody. And we have a lot of good
empirical evidence now. One of the good things about the new twist in mainstream economics that they do a lot of good empirical work. The theoretical stuff is, you don't need, to look at the empirics. And there's very good empirical work that shows that housing
supply lowers rents and lowers prices and doesn't
lead to the displacement and gentrification of
people legitimately fear, but you just can't find it statistically. I'd make those housing
jobs unionized if I could, and also make sure that the communities of color got their share of
that work and of the affordable, and it would have mandatory
affordable housing in it. But housing would be where I'd start. One thing that's important
to always remember, and this is true of lots of
issues in the United States, is that you can't understand
what's happened to cities and what's happening to
them without thinking about structural racism. It permeates really everything
about the city experience. So in the post-World War II period, when these mostly white suburbs grew, they grew with federal
support in transportation, in mortgage lending, at the same time that blacks were legally barred from owning houses and buying them. Levittown, the famous suburb
on Long Island outside of New York, had explicit
clauses in contracts saying that houses could not be sold or resold to someone who wasn't white, and you see those all across the country. I grew up in Kansas City and the main developer there, JC Nichols, was a pioneer of these racial covenants. So it really shaped the political form that as the suburbs are
politically independent from the city and the city
can't get the tax revenue, it also blocked city residents, particularly black and poor
residents, from moving to places with higher tax bases and better schools, and perpetuates this inequality. So there are a lot of
factors that go into this, but it's, I think, very
important to understand how racism is an integral part of it and remains part of it now. I've always been interested
in cities and I'm an economist and I read a lot of urban
economics and it wasn't satisfying to me, but it goes back for that. I grew up in an all white
suburb of Kansas City and cared a lot about civil rights, but there was nothing happening
in the Civil rights movement when I was growing up. And I've always wondered
why things were so unequal and so both economically
and racially unequal, when I was in high school, when Martin Luther King was assassinated, there were violent disturbances
in downtown Kansas City, three miles from my high school. I was in a high school of 2,100 people that had two people of color,
exchange students from abroad. And that level of segregation and inequality has just always, I've never understood it really. And so I think the book is
a attempt many years later to try and really understand it, but also understand the economics of it.
