Once controlled by manufacturers, city hall is now dominated by finance and real estate capital. The new bosses are building a racist business climate at the expense of working Chicagoans.
Chicago is the city that works, but who does it work for? The question can be approached in many different ways, some more illuminating than others. The obvious place to begin would be to look at the government of the city, with particular focus on the office of the mayor. The mayor, after all, appoints the Chief of Police, the head of the Chicago Transit Authority, the entire Board of Education, and so on.
Though useful in some ways, this method produces more questions than answers when it comes to the crucial question of power and who wields it. Why does the mayor make the decisions she makes? And whose interests do these decisions tend to prioritize? Why have all Chicago mayors in recent memory, from Richard M. Daley and Rahm Emanuel to Lori Lightfoot, tended to do more or less the same things while in office: shower corporations with tax breaks and subsidies, cut budgets for health and education, privatize public assets and services, and staunchly defend the impunity of a notoriously violent police force?
The answer to these questions must begin from the fact that Chicago is among the wealthiest cities in the world. But to say this is to say nothing of how that wealth is distributed across the population of the city, or of how those who possess the lion’s share of it came to have it in the first place. As is well-known, Chicago is a radically unequal city—a place with scores of billionaires that also has some of the highest rates of poverty in the United States, a place that is both a key citadel of global capitalism as well as the site of immense human suffering. And in a society long disfigured by racism, even poverty is not distributed equally: 32 percent of Black and 21 percent of Latinx Chicagoans live below the poverty line, whereas the figure is only 9 percent for whites. To see why this is the case—and, more importantly, to determine how best to contest this unjust state of affairs—we have to dig beneath the surface and get to the root of the matter. We have to look carefully at the economic machinery of Chicago and see who has the power to control it to find why they use it as they do.
Origins of the Neoliberal City
As in the past, political and economic power in Chicago today remains firmly in the grip of wealthy business owners. But whereas the dominant business interests in the city over a generation ago were manufacturers, since the late 1970s a different wing of the ruling class has come to dominate: FIRE (finance, insurance and real estate). While these sectors of capital, like their counterparts in manufacturing, are opposed to the interests of the working-class majority, their specific interests and motivations (given the nature of their business) are different from the industrialists of the past in ways that are important to grasp if we’re to understand how Chicago is run today.
Like manufacturing capital, FIRE wants to maximize profits and to do that it must secure favorable conditions for accumulation; but what FIRE needs to be profitable—and what it demands from government, how it views the existing population of the city—differs in crucial ways from the needs of industrial capital. As we’ll see, the central feature of FIRE is that it sees cities not as living environments for people, but as investment climates for capital. In order to understand the dominance of FIRE, however, we need to wind back the clock and see how and why this sector of capital eclipsed the once hegemonic rule of manufacturing.
From Manufacturing to Crisis and Transformation
Chicago rose to prominence as a major city after the end of the Civil War on the basis of explosive growth in manufacturing. At various points between the 1880s and the 1950s, Chicago was among the world’s leading cities in industries ranging from slaughtering, meatpacking, lumber production, iron, steel, printing, and furniture. This regime depended upon a large, mostly poor and immigrant working-class to produce the huge sums of wealth that would be accumulated and concentrated in the hands of a small class of owners who, in addition to being tyrants on the shop floor, also dominated city politics. Unsurprisingly, this lopsided state of affairs produced sharp class conflict in the late nineteenth and early twentieth centuries, some of which boiled over into violent conflagrations between labor and capital.
But in the second half of the twentieth century, the manufacturing-based “hog butcher for the world” was running out of steam: by 1969 the Union Stockyards closed down permanently and the steel mills were on their last legs, many of which would shutter in the 70s and 80s.
These tectonic shifts in economic structure were hardly unique to Chicago—indeed, they tracked large-scale transformations in the global economy that were decades in the making. Emerging relatively unscathed from World War II, US manufacturing enjoyed uncontested dominance in the world market throughout the two decades that followed. But this hegemony began to be challenged in the 1960s by the return of Germany and Japan as major players in manufacturing. Intensified competition among manufacturers drove each to accumulate excessive capacity and produce more output than could be sold at a profitable price point. This put tremendous downward pressure on corporate profits in the advanced capitalist countries, a development that would culminate in a major economic downturn in the early 1970s that afflicted the world economy as a whole.
Financialization and the Rise of FIRE
Employers responded to this economic crisis in a variety of ways, both economic and political. First, the bosses went on a relentless campaign of attack against the collective bargaining power of organized labor in order to drive down wages and speed up the pace of work. Widespread layoffs and plant closures drastically eroded the power of workers and severely reduced the number of available jobs in the industrial strongholds of the United States in the midwest and northeast. Between 1978 and 1983 scores of industrial workers lost their jobs and real wages dropped 10 percent and continued to fall even when the economy began to recover later in the decade.
The particularly devastating effect that this had on the Black working class in Chicago cannot be exaggerated. Racist practices by employers had long concentrated Black workers in the lowest-paid, “least skilled” positions in Chicago’s manufacturing industry—and these were precisely the first positions to be cut once recession set in. As Manning Marable pointed out in the early 1980s, “Despite the destruction of de jure segregation, the white capitalist class has not abandoned racism. Instead, it has transformed its political economy in such a way as to make the historic ‘demand for black labor’ less essential than at any stage of its development . . . Blacks are concentrated in exactly those industries that are undergoing rapid decline and conversely are excluded from those sectors of the economy targeted for growth.”
Politically, the employers also went on the offensive during the crisis of the 1970s, drastically increasing the amount of money they spent influencing government. At all levels, from the municipal to the federal, they lobbied hard for deregulation, tax cuts for the rich, severe reductions in public expenditure on social welfare, and a sharp deflation of the money supply. It’s no coincidence that dozens of new corporate PACs and business-funded right-wing think tanks—e.g. The American Enterprise Institute, The Heritage Foundation, Cato, etc.—were all formed in the early 1970s. Reagan’s victory in 1980, which ultimately led to a sharp reduction in federal dollars going to cities such as Chicago, was a key turning point in this decade-long battle to discipline oppositional social movements, drive down the cost of labor and reestablish favorable conditions for corporate profit-making.
An earlier change in the machinery of the global financial system, however, would have equally profound effects on the power structure of Chicago. In 1971, in the midst of growing economic malaise, Nixon decided to do away with the Bretton Woods system whereby the value of the US dollar was linked to gold. This led to volatile, “floating” currency exchange rates which, in turn, sparked a massive increase in speculation and the use of instruments such as options, futures, derivatives, and so on. The Chicago Mercantile Exchange and Chicago Board of Trade were thus prompted to start trading in foreign currency futures, followed by gold futures, treasury bills, and other futures later in the decade. As David McNally notes, “By the mid-1990s, the daily volume of currency trading was equal to the average monthly volume of trade in goods and services.” The result was that over the course of the 70s and 80s FIRE industries in Chicago grew enormously and came to occupy a new and crucial place in the functioning of the global economic system.
This shift would have a powerful impact on urban form, especially on the spatial layout of the downtown business district. By the end of the 1970s, manufacturing was severely eroded, defense contracts had dried up, Moody’s had downgraded Chicago’s bond rating, and the school system was facing a major budget shortfall. All the while the Loop skyscrapers rose as did white-collar employment at a steady pace. FIRE was now in the driver’s seat.
Let’s take a closer look at the constellation of industries that make up FIRE and how they operate. As we’ll see, commercial real estate, in particular, is of special importance—indeed, it’s difficult to overstate the centrality of real estate capital when coming to terms with where power resides in the city today.
In this respect, Chicago is hardly unique. Global real estate is now worth thirty-six times the total amount of gold ever mined—some $217 trillion—and comprises roughly two-thirds of the world’s assets. Though homeownership is currently at a fifty-year low, the speed with which homes are bought and sold is on the rise—and record numbers of purchases are being made by corporate investors who have no intention of ever living in the many homes they’re acquiring. In Chicago as in other large cities throughout the world, real estate today is little more than a vessel for financial speculation, having little connection with the needs of ordinary people or the exigencies of the real economy. And, as we’ll show, this has far-reaching political implications insofar as governments, especially at the city level, are becoming ever more single-mindedly fixated on doing anything and everything possible to boost property values and project the image of a “global city” on the rise.
The Real Estate Ecosystem
Commercial real estate in Chicago is dominated by a handful of large-scale “institutional investors,” that is, groups of investors gathered by private equity and hedge funds, banks, insurance companies, and so on that pool funds in order to maximize returns. Their goal is to cash in on gaps between the current value of a piece of land and the value it might command in the future if the property itself or the surrounding environment were to change, e.g. if current residents were to be pushed out, if buildings were to be razed or renovated, or if new public investment in infrastructure and parks were to dramatically increase.
Typically, institutional investors look for properties whose value can be easily assessed and measured against standardized criteria, so the asset can be sold easily at a moment’s notice. But the economic value of real estate property is not easily determined or standardized, and access to the knowledge of the relevant conditions (neighbor activity, local demographic trends, government investment) is heavily guarded by local actors. These local idiosyncrasies become financial risks that can impede the ease with which buildings can be bought and sold so that financial gains can be realized by speculators. What’s more, the fact that the construction of new buildings takes on average two to three years to complete introduces more risk and uncertainty into real estate speculation.
These factors lead investors to find ways to bundle risk into new financial instruments, which themselves become the object of speculation on new markets. There is thus no clean way to cut the joint between finance and real estate, insofar as the latter just is a series of speculative bets on debts and future revenue streams (e.g. rents to be charged to future tenants in as-yet unconstructed buildings). High-end real estate in Chicago is financialized through and through—it is as much about the circulation of “fictitious capital” and slips of paper as it about brick-and-mortar properties.
Who are the players in this speculative ecosystem? The cast is populated by a network of brokers, traders, and appraisers who have all come to try to cash-in on these new opportunities for profit-making. In the Loop, the biggest profits come when commercial tenants—financial institutions, corporate headquarters, trendy tech giants—move, often from less to more expensive digs, in an effort to “upgrade” their offices. This process requires a legion of salespeople of various sorts whose purpose is to convince tenants to move and investors to plunge cash into new construction and renovations. In order to keep this process moving, salespeople are under enormous pressure to manufacture a need that often doesn’t already exist: a burning desire for tenants to leave their current space and pay significantly more to move into newly constructed (or newly renovated) buildings.
Thus, these salespeople are then compelled to invent concepts such as “obsolescence,” according to which office buildings have a shelf life of thirty years, or ten years—it’s completely arbitrary. It is unprofitable for real estate capital to have tenants and buyers of property who are too contented, for contented tenants see no reason why they should pay more to move into more “prestigious” units or chase newer amenities.
The purpose of these cycles and all the attendant white-collar labor poured into them is to keep the capital flowing in large volumes. An individual construction project may yield a hefty return, but the long-term game is to set up Chicago as the center for ongoing opportunities of this sort. That requires constant flow, but also constant new inputs of capital.
These new inputs increasingly come not merely from local capital but from investors all over the world. If manufacturing capital was more rooted in the local and national terrain, FIRE tends to rely more upon flows of capital that are global in scope. Because of this, a key political and economic project of the first and second Daley administration was to brand Chicago as a “global city”—a city that is not just the trading post of the United States, but rather a metropolis comparable to Tokyo, London, or New York. On the ground, Chicago’s downtown transformed into a center of skyscraping corporate headquarters, high-end lakefront tourism and luxury hotels, including the largest convention center in the United States. When mayors tout Chicago as a “global city,” their intended audience is primarily investors: they mean Chicago is an excellent place to park your capital, that it is a business climate on the ascendancy with plenty of sleek new construction projects geared toward luxury consumption.
Thus began a years-long process culminating with Rahm Emanuel’s trips to Asia and the signing of the Gateway Cities Agreement with the Chinese Ministry of Commerce and eight Chinese cities, ensuring record-breaking investment from China over the last few years. Thus far, the strategy has produced spectacular results for Chicago’s ruling class. According to an IBM Global Trends Report, Chicago has now been the top US city for foreign direct investment for seven years in a row. Furthermore, Chicago also became the number one metro area in the United States for corporate relocations and expansions. Tech leaders, banks, and the super wealthy were convinced that Chicago would be the right place to park their cash and assets because of the prestige discourse of the real estate ecosystem—the brokers, the appraisers, and not least the officials in city government facilitating all of it.
Local Government: Steward of the Business Climate
When Chicago’s economic power structure was dominated by manufacturing capital, city politics revolved primarily around advancing the interests of manufacturers. This meant discipline and punishment from police for unruly workers disposed to challenge employer authority; public investments in infrastructure and services aimed at aiding manufacturers, and relatively cheap housing for workers, the better to ensure that industrialists had ready access to a sufficiently large pool of labor to exploit in their factories.
The infamous “Chicago Machine” that reached its apex under Richard J. Daley in the postwar era owed its staying power to its ability to service industrialists and keep working-class resistance to a minimum. As with any tyrannical regime that achieves a measure of long-run stability, Daley’s machine maintained power over the working masses through a combination of carrots and sticks, of material favors to loyalists and brutal subjugation of those who refused to submit. The favors typically took the form of patronage: working-class Chicagoans willing to dutifully carry out the orders of the machine were given cushy public sector jobs as rewards, and pliant and deferential trade union leaders were rewarded, the better to clamp down on labor radicalism and keep manufacturers happy. All the while, state violence co-existed with these incentives, as exemplified by the shameless assassination of Fred Hampton in the effort to neutralize a city-wide, multiracial, militant resistance movement.
As federal aid to cities dried up and the manufacturing-based model collapsed, the old machine could no longer maintain control in the same way it had. But with the rise of FIRE, the needs of capital were changing too, and with them the services required of the state machinery. City hall has had to adapt how it operated in order to effectively serve these new masters.
But why should government officials be compelled to serve capital first and foremost? What’s to stop them from disregarding the interests of the rich and simply doing the bidding of the masses of the population instead? Here’s why: virtually nothing the city government does can be accomplished without locally collected tax revenue—and, in the absence of federal aid, this revenue comes only when there is sufficient local economic activity and business investment. But in a capitalist economy, where business investment is monopolized by privately owned, profit-seeking corporations, such investment is only forthcoming when capitalists are confident that they can make large enough profits. And they’re only confident that they can make large enough profits when there is a generally favorable “business climate” that assuages their fears about risk and uncertainty and puts them at ease. Even other sources of government revenue—loans in the form of city bonds or wholesale selloffs of city infrastructure through privatization—depend upon the willing participation of capitalist investment. There is thus enormous pressure on city government officials, no matter their ideological commitments, to do everything they can to promote a good business climate for capitalists.
Whose Machine is This?
Creating a “good business climate” is not the same as creating a good city for all those who live in it—in fact, many of the features that make a climate good for capital make it downright hostile for workers and the poor. This is illustrated by many examples in which the needs of FIRE clash with the needs of the working-class majority.
What residents see as a city with buildings and parks, schools and hospitals, investors view in terms of risk and return. Active, member-driven unions that can collectively bargain from a position of strength to deliver good pay and working conditions for working-class people are seen by capitalists as a scourge to be avoided at all costs. Progressive sources of government revenue—taxes on luxury consumption, financial transactions, high-end assets, corporate profits, etc.—are similarly rejected as the exact opposite of what constitutes a favorable climate for big business. So it is with policies such as rent control, publicly financed social housing, environmental restrictions on business activity and construction, and so forth. In short: those locked into the project of fostering a “good business climate” for capital will have reason to thwart all manner of policies that benefit the 99%.
It must also be said that democracy—popular participation by the masses in local governance in any way—is generally scorned by those whose primary objective is to entice global capital to invest. They know perfectly well that ordinary working people will, all else equal, tend to prefer downward redistribution (from rich to poor) and public investments in education and health that may have no immediate payoff for the owners of capital.
Moreover, democracy introduces a measure of uncertainty that capitalist investors cannot abide: they can spend enormous sums locking down the ruling coterie of climbers and careerists who constitute the core personnel of the Cook County Democratic Party, but they can have no such assurances of reliability when the working class turns out en masse to vote and elect candidates capital never courted in the first place. Worst of all is the prospect of a citywide strike that could disrupt the normal operating of business on a more fundamental level. The working masses are far less easily controlled than small cliques of self-serving politicians looking to cash in on pay-to-play schemes; thus, FIRE would prefer to have as little real democracy as possible.
What exactly is a “favorable business climate” from the perspective of FIRE, however? In the past, a good business climate would have been one in which employers in manufacturing could extract maximum productivity from workers on the shop floor for the lowest possible wages. That is still a dynamic at work today, but given the structural changes in the city’s economy, creating a good business climate now depends more and more on inducing speculators to invest in real estate by assuring them of competitive returns on their outlays.
In order to do this well, the Chicago machine had to remake itself. From a labor disciplinarian, it grew into the administrator of a new kind of profitable investment climate. Cheap beer at neighborhood bars gave way to chic cocktail lounges. Public housing projects were razed while a plethora of cutting-edge downtown office buildings were subsidized.
This process began in earnest under Richard M. Daley. Whereas before, the carrots and sticks revolved around patronage for precinct captains and crackdowns on disloyal operators, now the machine would increasingly be greased by cash furnished by wealthy investors in FIRE.
A cursory glance at the list of investors in the political campaigns of Richard M. Daley, Rahm Emanuel, and Lori Lightfoot illustrates the point. To be sure, the optics and public personas projected by these different mayoral administrations have differed, but one constant has been the enormous amount of money flowing to city hall from finance and real estate interests. When local journalists Ben Joravsky and Mick Dumke did some digging to determine who Emanuel was meeting with behind closed doors most frequently when he was mayor, they found that he overwhelmingly spent his time hobnobbing with the FIRE wing of the ruling class. There is no reason to think this practice ended when Emanuel left office. For example, people like Michael Sacks, CEO of Grosvenor Capital Management and former head of World Business Chicago, donated large sums to Emanuel as well as Lightfoot. So, too, did a handful of donors from Madison Dearborn, a leading private equity firm, contribute large sums to both Emanuel and later to Lightfoot.
That Chicago mayors have been so close to the leading figures in FIRE should not be surprising. A strong mayor with few other loyalties than to their obscenely rich campaign contributors is exactly what the new real estate ecosystem needs from the political machine. That is because the new purpose of municipal government, above all else, is to strive to create a stable, consistent political and economic landscape that inspires confidence among real estate developers and the investors who back their projects.
The best mayor, on this view, is one who is able to set investors at ease; who is widely regarded in the business community as a reliable, consistent steward of their interests; who is powerful enough to keep all the various branches of city administration within their grip; who is open to privatizing core municipal institutions or at least allowing capital to be part of managing them; who can be counted on to act swiftly to eliminate disruptions such as strikes, demonstrations, and the like; who can be trusted not to embark on unforeseen, erratic policy initiatives that haven’t been properly vetted by capital; and who work tirelessly to ensure that the city’s branding and public image is not tarnished by bad press.
The Centrality of Racism
This approach to governance has far reaching implications for the politics of race and class in the city. As David McNally points out, this political ethos requires the criminalization of informal economies and even of poverty itself, for these “collide with the sanitizing mission of neoliberalism, which seeks to present cities as spaces for investment.” This, then, “is why neoliberal urbanism has been so concerned with segregating and hiding the poor and with criminalizing the non-conforming.”
This staunch commitment to “cleaning up” urban spaces has clear racialized overtones, where talk of “rejuvenating” districts often means “whitening” spaces long derided as barren, “blighted,” and unsuitable for investment because of their association in the public imagination with poor communities of color. As Tommie Shelby puts it, “If blacks as a group are stigmatized as inferior, then a black-majority neighborhood will also be stigmatized, “tainted” by the debasing black presence . . . in this status hierarchy, the blacker the neighborhood (all else equal), the lower its social status.” Police, then, will be called upon to contain the “debasing” presence of Black people, to make them feel unwelcome and unsafe in spaces targeted for gentrification.
In districts in which gentrification is underway but incomplete, police are tasked with assuaging the (in many cases explicitly racist) anxieties of wealthy new property owners anxious to see their investment appreciate as quickly as possible. So-called broken windows policing and stop-and-frisk policies are examples of this approach and underscore the way racial oppression and profit are linked in the neoliberal city. Even while police funds remain bloated and untouchable, targeted austerity—punishing cuts to public spending on schools, medical care, parks, infrastructure, transit, and so forth—also plays a role in displacing poor people of color to render more space open to speculative investment and gentrification.
The toll is devastating. Between the affluent white Chicago neighborhood of Streeterville and the poor Black neighborhood of Englewood there exists a thirty-year difference in life expectancy—the largest such difference of any city in the country. It is in this context that the widely noted mass exodus of Black residents from Chicago in the last ten years must be understood.
When Mayor Lightfoot recently announced to the Economic Club of Chicago that she wants to “rebuild our population and grow it back to 3 million,” there was little likelihood she was seeking to regain the sizable population of working-class Black people it has lost in the last decade and beyond. Though careful to pepper her speech with rhetorical nods to the protracted suffering and economic turmoil of the South and West Sides, her gilded audience must surely have known that the biggest returns on investment are to be made from recruiting well-heeled (and mostly white) populations able to afford high-end real estate properties and luxury retail. The most profitable version of “repopulation” will not be one in which Chicago remains a majority-minority city, but one in which it gradually becomes more and more like Lincoln Park, where 85 percent of residents are white and the median annual income is in excess of $90,000.
Of course, it’s certainly not the case that residents of the South and West Sides don’t need and want large-scale economic investment. These communities have been organizing for decades to reverse the destruction wrought by disinvestment. The problem is that capitalist investment is always conditional; investment from the ruling class is forthcoming when big returns from displacement are to be had, whereas communities in desperate need of resources are left for dead when investors see no viable way of reaping large returns for themselves.
In neither case—when neighborhoods are suddenly barraged with speculative investment nor when they are systematically neglected and left to crumble—do the voices and well-being of poor people of color actually matter to those who run the system. This explains the paradox whereby residents of economically depressed neighborhoods both desire improvements but also remain rightly anxious that “too much” new investment—whether public or private—will result in their expulsion from the area before they even have an opportunity to enjoy its benefits. A biting headline from the Onion hits the nail on the head: “Neighborhood Starting to Get Too Safe for Family to Afford.”
This absurd state of affairs illustrates why any hope of a city for the many requires rejecting the capitalist rules of the game altogether, and collectively constructing a socialist alternative where human need is prioritized over corporate profitability.
It also underscores why triage measures such as lifting the ban on rent control are so important for Chicago’s working class. Rent control, after all, would permit improvement of one’s community without soaring rents and displacement. But even a whiff of support from high-ranking city officials for this modest reform would foment an enormous torrent of anger from capital and damage the image of Chicago as a consistent, safe business climate suitable for global capital. Placing public, legally codified limits on how much rent landlords can extract from tenants, after all, couldn’t be more at odds with the basic coordinates of the reigning philosophy of governance at play.
This is why it is so crucial to grasp the inner workings of Chicago’s machine—to defeat the powers that be, we need to know what motivates them, what their strengths and potential weaknesses are, and how they’ve managed thus far to maintain their political and economic dominance.
The Inner Workings of the Machine
There are several key mechanisms by which the city cultivates and protects the business climate for FIRE industries: by boosting property values, by funneling tax money to them directly using tax increment financing, by setting bond markets at ease and placating ratings agencies, and by either selling off public assets or rolling out “public-private partnerships” that turn over control of key city institutions to private investors. Below we examine each of these strategies in turn.
Because Chicago’s city government relies heavily on property taxes to secure the bulk of its funding, there is enormous pressure on city officials—whoever they might be and regardless of ideological stripe—to secure economic conditions generally favorable to consistently increasing property values. This is a key way in which the entire ecosystem of real estate speculation, construction, and destruction described above plays a major role in setting the priorities of local government.
Examples of this dynamic are not difficult to find. For instance, by expanding commercial development, such as in the various Loop business district plans implemented by the city administration, the city government hopes to attract businesses, headquarters of large companies, and high-profit industries such as tech. The growing tax base thus created provides further revenue for the city, which is in turn poured into attracting further capital, and in this way the cycle continues. Moreover, it’s not just more buildings that produce this effect, but new construction. As the scholar Rachel Weber explains, local states have a specific interest in new construction because newer buildings, with the higher density of occupants they are likely to have, create much bigger revenue flows from rents and thus tend to be assessed for taxes at higher values per square foot.
There are three primary mechanisms by which city governments encourage new construction. The first concerns deregulation. Deregulation can take many forms, for example: lax construction requirements, large tax breaks for developers, and changes in zoning land use regulations that decrease costs for real estate speculators.
Secondly, cities can use public tax dollars to increase the value of new construction by developing its surrounding environment. A new transit station or park, for instance, can significantly boost the property values of surrounding buildings, and incentivize new construction by providing further guarantees of prolonged property value. In some cases, public tax dollars can also be used to offer low-interest loans for new construction financing.
Finally, local governments can promote “hot” new areas or building complexes using city branding. Here the neighborhood-specific flags on major commercial thoroughfares throughout Chicago come to mind, all of which advance the “city of neighborhoods” branding and seek to cement an identity for a neighborhood, preferably based around its shopping district and consumer culture. Sometimes the branding is aspirational and seems to speak as much to potential investors as consumers: for example, in the Woodlawn neighborhood on the South Side, which is increasingly being placed within the crosshairs of speculators, banners along 61st street bill the area as “A Vibrant Community Full of Possibilities!”
A good business climate for real estate also requires that the entire market be tightened through the removal of excess supply. Demolishing buildings, or facilitating their conversion, is not immediately profitable, but it is crucial for the flow of the real estate ecosystem. Due to its structural position outside the private sector, the local state is able to take on some of the longer-term risks and responsibilities that come with the cycles of real estate profit-making, which private actors or institutional investors would frequently write off as too large a liability or too distant a revenue prospect. By removing excess space, city governments also remove barriers to entry in the real estate sector. As Weber points out, “Investment can move between old and new products more efficiently when the costs of redevelopment are shifted to the public sector.”
Tax Increment Financing
Another important way that city officials promote a favorable investment climate for FIRE is tax increment financing (TIF)—a local financing tool by which public tax dollars are siphoned off from the official city budget and diverted to specific real estate development projects. TIFs are first and foremost a policy instrument, whereby the city designates an area “blighted,” thus claiming that it would not be redeveloped except for public intervention and assistance. The city then uses projected future increases in property taxes generated post-development in the area to finance the initial outlays, usually as subsidies to large developers.
Tax increment financing has, in the last several decades, become the go-to policy instrument of cities across the country. Already by 2007, TIF was dubbed by mayor Richard M. Daley “the only game in town” for promoting economic development in Chicago.
The idea that TIF money would be applied to economic development projects high on the list of real estate developers was not a given from the start. Why, for example, couldn’t the projected revenues of property taxes be used to fully fund public schools or support job creation or retention among underserved city residents?  As Rachel Weber and Sara O’Neill-Kohl have shown, it took an army of private consultants in the 1970s, fear-mongering about the deindustrialization crisis, to ensure property tax money would be funneled into the deepening pockets of the real estate industry.
Theoretically, the designation of a TIF district can only occur in cases of so-called blight, where an area would not see economic development “but for” this state intervention. Based on extensive data, a 2014 study by T. William Lester has demonstrated that over thirty years of TIF usage has yielded no tangible economic development benefits for local residents. In effect, this has meant that TIF instruments have functioned as legally-sanctioned theft by real estate developers from the public coffers.
Over the last decade alone, countless real estate moguls and gentrifying developers have benefitted from this unregulated plunder of public funds, including Loyola University Chicago ($20 million), Randolph Tower City Apartments Inc. ($34 million), Northpoint Development ($42 million), Wilson Yard Development I LLC ($54 million), Chicago Lakeside Development LLC ($97 million), and the infamous Sterling Bay ($1.3 billion). Here is a case where city government is little more than an instrument for servicing FIRE, with the result that the working-class majority is left out in the cold and made to foot the bill.
Bond Ratings and Municipal Debt
Another key way that FIRE benefits from city government is through the mechanisms of bond ratings and municipal debt. As it stands, cities are still required to provide at least some services for the people who live in them, but neoliberal mayors in the epoch of FIRE’s reign have found ways to ensure that even raising essential revenue would result in massive financial transfers to financiers.
For cities, one of the largest streams of funding after the cuts of the 1980s has been loans from the private sector. If the city needs to take a loan, they sell a bond to lenders. The cost of the debt that a city takes on varies depending on the city’s bond rating. With a higher rating, the interest on the loans is less, and the city can afford to take out more or pay off its debt sooner. But high-interest debt channels public funds to Wall Street, leaving the city to raise necessary funds historically through more taxes on working and poor populations. This process is intentional and leaves cities beholden to credit rating agencies.
Now, agencies such as Moody’s or S&P Global claim to provide reliable assessments of how risky it is for potential investors to lend money to a borrower. If the credit rating agency labels the borrower, say the City of Chicago, as junk, they are saying the borrower is likely to default on their debt, which means higher risk for lenders, which in turn means that lenders will demand higher interest rates for their loans to make them worth the risk. But in reality, as Saqib Bhatti and Alyxandra Goodwin put it, “credit ratings for state and local governments are largely a sham, because municipal borrowers almost never default.”
Simply put: credit ratings are the means by which finance capital intimidates local governments into implementing austerity, repressing unions, and doing anything and everything to placate lenders. And, to add insult to injury, these same lenders make enormous profits by charging the taxpayers obscene fees in return for lending the city money.
The figures are astounding: as of right now, the City of Chicago has $25 billion in outstanding long-term debt. Notably, that figure does not include the debt of any of the city’s related but separate sister agencies, such as Chicago Public Schools, the Chicago Transit Authority, or Chicago Housing Authority. And here’s the kicker: the city paid over $1.8 billion in debt service payments last year alone, of which approximately 60 percent was interest payments. According to Chicago’s most recent Comprehensive Annual Financial Report, the city expects to again make almost $2 billion in debt service payments in 2020, of which about $1.24 billion or 64 percent is purely interest. This means that Chicago is paying Wall Street bankers billions in sheer profit year after year.
The money for such debt service payments comes largely from regressive property taxes and other fees on working Chicagoans. Thus, working-class Chicago—overwhelmingly Black and Brown—is forking over a large chunk of its income every year to pad the profits of some of the biggest financial institutions in the world, many of which were the recipients of massive bailouts in 2007–08.
Here’s another example of this institutionalized graft: Rahm Emanuel infamously continued Richard M. Daley’s use of “scoop-and-toss” financing, a self-defeating process whereby interest on previous loans is paid by taking out further loans. By doing this, Daley and Emanuel dug the city exponentially deeper into the financial hole, while multiplying the interest payments to Wall Street. The obvious way out of this mess would be to directly tax the super wealthy in order to secure funding for necessary services, rightful pension obligations, and infrastructure, among other things. Instead, city government has played the role of willing and uniquely capable extractor of profits for finance capital.
Selloffs and Privatization
In what has become a disturbingly common scenario, when other revenue streams have proven too difficult to secure, recent Chicago mayors have resorted to selling off the long-term guarantees of fiscal stability to plug short-term budget holes, in what amounts to “burning the furniture to heat one’s house,” as Ben Joravsky has put it.
Since Richard M. Daley’s first budget in 1989, the city has privatized a range of services and public assets ranging from abandoned vehicle towing, tree stump removal, CTA fare collection, downtown parking garages, various services at O’Hare, and even the Skyway bridge, which was leased to private investors for 99 years, effectively amounting to a transfer of property ownership from public to private hands.
But such city infrastructure leases are not just one-time sales of crucial public assets or the transformation of public goods into private, financialized commodities. Because the ongoing value of these new “commodities” depends upon a myriad of business climate factors that can be influenced by the state, the sales themselves are attached to ongoing commitments by the city to ensure their value, thus turning the city into an active collaborator in the extraction of profits.
This collaboration can take the form of restraining competition, or, as in the case of the 2008 parking-meter deal to investment bank Morgan Stanley and partners, a commitment “to enforce a wider set of traffic regulations and practices to incentivize parking payment.” That is, in order to increase and maintain the value of the infrastructure for the new private leaseholders, the city committed to a long-term crackdown on petty traffic violations, primarily affecting poor people. Chicago thereby sold police harassment services to corporations to maintain profitability.
City infrastructure has also been sold off partially through public-private partnerships. As pointed out by Ashton, Doussard, and Weber, the mayor even maintains a separate nonprofit agency off the city’s official balance sheet, called the Chicago Infrastructure Trust, the purpose of which is to seek out ways to “package and sell revenue streams from public infrastructure projects and places the City in a central role coordinating repayment to investors.”
Privatization largely began under Richard M. Daley and was met with roaring applause in the national press that hailed the “end of patronage” and the rise of a fresh, more efficient mode of governance based on “free enterprise.” The practice continued under Rahm Emanuel, whose chief financial officer, Lois Scott, had advised Pittsburgh and countless other municipal governments on privatization deals, and whose budget director, Alex Holt, served as legal counsel to the coterie of investors eager to purchase Midway Airport when Daley’s enthusiasm for selling off city assets was at its apex.
Though Lightfoot has said she generally opposes privatization deals, it is worth noting that Rahm Emanuel said the same when he was a candidate, even going as far as to say the notorious parking meter deal “offended” him so much he might want to renegotiate or cancel it. Once in office, however, Emanuel neither wished to renegotiate nor cancel the dirty deal—indeed, he spent enormous sums of public money defending it in court.
The sale or lease of public assets appear to be one-time events insofar as the city gets one-time revenue, but these collectively represent in fact an ongoing commitment to reorienting state power toward private profit extraction. Selling off pieces of the city patches up yearly budget holes at the cost of profoundly compounding the inevitable financial day of reckoning. At the same time as they cut off permanent streams of revenue for the city in the here and now, they also make future privatizations even more likely in order to replace them. For years, city officials have been selling off our future.
Serving Capital: All or Nothing
Why is city government so beholden to FIRE? Transactional “pay to play” politics alone does not explain the pervasiveness of the city’s subservience to capital’s preferences. Campaign contributions and lobbying are part of the story, of course, but the true source of the problem goes deeper and requires that we take the long view and think about how city government has come to internalize the needs of FIRE as its own. Indeed, the history of the city administration’s handling of political and social conflict in Chicago paint a pattern, out of which one can begin to recognize the dominance of an entire philosophy of governance and constitutional approach.
The notion that the government is a “reliable steward” of capital extends beyond the active involvement of capitalists in the process of policy making. Because city officials are dependent upon the subjective assessment that capital—both locally and, as we emphasized above, globally—holds of them, city officials cannot simply maintain a balance of individual policies which on the whole benefit capital, while making one or two concessions to movements who’ve taken to the streets to press their demands.
The point is to inspire confidence among the business elite, and that requires consistency above all else—and here consistency means projecting an image of the ideal neoliberal city populated not by social movements or unruly citizens capable of disrupting business as usual, but of isolated consumers whose only desire is to transact in the marketplace.
Thus, when the mayor digs in their heels all the way to the end on a particular issue, such as the coverup of Laquan McDonald’s murder or the power to dictate even petty details to the Chicago Teachers Union (CTU) during the strike, it has less to do with the specifics of the case, and everything to do with projecting unswerving dedication to the maintenance of the business climate. To be seen unstintingly as reliable for capital, the mayor has to embody this philosophy at each and every turn, so that each case becomes a showdown, a litmus test for the whole governing approach. This is so deeply ingrained in the culture of the Democratic Party establishment that dominates city politics that this ethos strikes many as common sense, as the natural vocation of those working in municipal government.
Mutating Racism in the Service of Profit
The rise of global real estate capital and the associated reshaping of local government priorities has had significant ramifications for communities of color. Though the personnel of city government have become more racially diverse in the last forty years, city government has not ceased to take an active part in reproducing racial oppression. Racism has always been a key political weapon against working people in the United States, but the specific role it plays has shifted along with the structural changes in the economic machinery of the city.
When manufacturing capital dominated Chicago, the dominant function of racism—especially, but not exclusively anti-Black racism—was to increase the rate of exploitation of workers by employers. Racism was a key means of driving down wages and disciplining unruly Black workers who contested the workplace tyranny of bosses and their foremen. Moreover, racism was a key mechanism by which industrialists divided the working class against itself and thereby staved off a united, multiracial revolt from below. So long as white workers could be induced, as W. E. B. Du Bois once put it, to prefer poverty to equality with workers of color, just so long would a serious, powerful labor movement be prevented from taking shape.
Today, racist divide-and-conquer strategies are still regularly deployed by the rulers of the city—and securing regular access to a low-paid, docile labor force by racist means remains as desirable as it ever was to employers. But in the wake of the economic transformations outlined here, local government is now reoriented toward the new needs of real estate capital accumulation, and there are two related but distinct ways that these needs are served by racism. Firstly, racist oppression in Chicago seeks to justify the brutal processes associated with gentrification and displacement. But the ascendancy of real estate has also partially transformed the workforce, creating new positions of structural power for Black and Brown workers.
As manufacturers increasingly automated or left the city since the 1970s, Black workers were more and more thrown out of work by plant closures and industrial decline. With the shift away from manufacturing, capital’s attitude toward Black labor has shifted to some extent: whereas manufacturers wanted exploitation, real estate speculators simply want to marginalize or expel poor communities of color altogether.
Due to years of intentional disinvestment, many Black and Brown neighborhoods in Chicago have been ripened for real estate speculation and profits. Developers know, however, that they can only gentrify an area and reap the profits by driving out the (Black and Brown) communities who live there. As radical theorist Iris Marion Young once noted, “Marginalization is perhaps the most dangerous form of oppression,” because it “expels a whole category of people from useful participation in social life and thus potentially subjects” entire communities to “severe material deprivation and even extermination.” This new context has produced forms of racism that are distinctive and must be recognized as such if they’re to be successfully combated.
The process of gentrification has targeted Black communities in particular for disinvestment and expulsion. As Keeanga-Yamahtta Taylor shows in her recent book Race for Profit, the legacy of racist home-ownership laws in 1960s and 1970s Chicago has had lasting consequences, creating generations of precarious living situations for Black Chicagoans. Racist housing practices in Chicago, of course, date much further back than the ’60s and ’70s. But the story since the financial meltdown of 2007–08 has been one in which scores of Black homeowners have been devastated by foreclosures and evictions meted out for the benefit of banks who were showered with taxpayer bailouts by the federal government.
This state of affairs, combined with cruel waves of austerity such as Rahm’s infamous (and historically unprecedented) decision to close more than fifty public schools in 2013, is what has caused Chicago’s Black population to decline significantly in the last several decades.
If city government truly respected Black Chicagoans as equal citizens and full members of the city community in good standing, they would regard this as the crisis that it is. Yet, from the perspective of real estate investments’ need for boosting property values, the decimation of Black Chicago is seen not as a tragedy but as an opportunity to profit from displacement—and city officials, ever eager to grease the axles of real estate speculation, are more than happy to play along, especially by flooding Black communities with violent police.
A Working-Class Town
Despite all its changes, Chicago’s economy, like any capitalist economy, still relies upon labor in order to run. The working class of Chicago today is overwhelmingly Black and Brown—and the employers who profit from the wealth-creating labor of these workers have no qualms about weaponizing racist tropes to fight union drives, resist raises to the minimum wage, and drive up the rate of exploitation more broadly. Trump’s racist crusade against Latinx workers has also strengthened the hand of employers who can use the threat of possible deportation to keep undocumented workers underpaid and powerless.
The shifts in the economy have also reshaped the city’s workforce. For years, Chicago’s largest employers have been city schools, health-care providers, local government, and universities—sectors essential to the reproduction of labor power (workers). The entire real estate industry and the “global city” tourism and convention clamor that sustain it are built upon racialized and gendered labor. The critical paid and unpaid labor of workers in hospitality, transit, domestic labor, and elsewhere allows the downtown accumulation process to flow unhindered. Hotel workers, for example, who are predominately immigrants and women of color, are crucial to the operation of the global city’s downtown. When thousands of Chicago hotel workers went on strike at twenty-six hotels in the fall of 2018, flexing their power against health-care insecurity, racism, and sexual harassment on the job, they landed a blow directly against the tourism and real estate industry.
Neither the racist exploitation upon which Chicago capitalism relies nor the regime of marginalization and displacement involved in profitable gentrification have gone unchallenged by those most directly affected. Key among the countervailing forces are the community institutions and social fabrics that have been able to raise the political costs of plundering Black communities and communities of color for the profits of real estate capital. Schools are perhaps the most important of these institutions in that they form the epicenter of a communal social care and reproduction—thus, to close them or starve them of funding is in a very real way a direct assault on the existence and future of a people.
By eliminating schools, the nodal point of a community, Emanuel was taking dead aim at the very heart and soul of Black Chicago: the nurturing and care for an entire generation, as well as one of the few refuges from a violent world afflicted by poverty and police brutality. As Simone Clark, a retired teacher and community member in Bronzeville said at a community meeting on a school closure in their neighborhood, “This is a historical family. This is a family from one of the original and important African American communities in the city of Chicago, and Mayo School represents the historical continuity of the Bronzeville community in an extraordinarily important way.”
Eve Ewing has noted the significance of schools in the fabric of social life today: “A fight for a school is never just about a school. A school means the potential for stability in an unstable world, the potential for agency in the face of powerlessness, the enactment of one’s own dreams and visions for one’s own children.” This is all the more pertinent under the reign of real estate state. In this context, to merely assert one’s humanity and attempt to survive becomes a profound act of resistance.
The reality of school-centered community resistance to Rahm Emanuel and now Lori Lightfoot’s neoliberal attacks is borne out by the prominence of the CTU among broader-scale struggles from below. By taking on the racism inherent in the mayoral assault against schools and teachers, against affordable housing, against the civil rights of undocumented residents, the CTU has become the most visible and respected counterforce to the FIRE-dominated political agenda we’ve been describing throughout this piece.
During the 2019 teachers’ strike, the political terrain was explicitly defined as, on the one hand, the needs of bondholders seeking a stable investment climate, and on the other, the needs of working-class communities articulated as quality educational institutions, decent-paying teacher jobs, and housing guarantees. Politically, Lightfoot vs. the CTU was about control of the city, the ability to set the climate for the city to serve either big capital or the needs of its multiracial working-class residents. This was not lost on the masses of working people in Chicago—the teachers consistently remained far more popular than the mayor throughout the duration of the strike.
A Glimpse of the Alternative
A common refrain of the business class when faced with the power of movements from below has been to sound off dire warnings about the danger of driving investment away. Shrill and misleading talk of “job-killing” taxes and calls to heed the needs of “the market” abound. But these threats are largely empty, as Stephanie Farmer has aptly noted,
Chicago’s centrality in the regional and national economy is due to capital’s need for agglomeration of headquarters, business and financial services, proximity to transportation/logistics, and access to research facilities and other sectors that facilitate accumulation. The scale and scope of its economy means Chicago will continue to attract investment capital seeking place-based advantages from the clustering of these business sectors, limiting the efficacy of a real estate capital strike.
Capital requires a profitable home, and city officials have for decades done everything they can to ensure Chicago cannot be ignored by the rich.
Chicago’s political-economic terrain was built for the benefit of the ruling classes, and is filled with obstacles for working people. But it also has a number of weak links. Years of reliance on slush funds and payoffs have hollowed out the organizing ground game of even the most established political fixtures. A steady separation between Chicago’s political class and the needs and relations of average Chicagoans has created a gulf that is not easily bridged by the campaign materials money can easily buy, such as piles of mailers and paid “activists” who go door to door giving bloodless, tepid pitches for residents to vote for establishment candidates they probably don’t even support themselves.
It was by seizing upon this structural political weakness that Chicagoans were able to elect six members of the Democratic Socialists of America to city council in the last round of municipal elections. Activists from a variety of movements—movements against racist policing, gentrification, deportations, environmental destruction, austerity, the list goes on—are already thinking strategically about how to replicate this success on a larger scale in the next round of elections.
Social movements have also mad breakthroughs in terms of rebuilding the power of unions and pushing back against the entrenched impunity of the police to commit a range of atrocities. Let us not forget that it was militant, stubborn antiracist organizing from below that led to ouster of Anita Alvarez, Garry McCarthy, and, ultimately, Rahm Emanuel. Were it not for the disruptive mass actions of the movement, the cop who murdered Laquan McDonald in cold blood—on video, for the whole world to see—would never have been charged with a crime, let alone be convicted.
The future is wide open. It is possible to live in a city where people matter more than profit, where popular democratic control isn’t continually thwarted by the power of big money. It is possible to have world-class, fully funded schools and transportation free to all at the point of access. It is possible for all Chicagoans—not simply the wealthy and white—to be able to walk freely through their own city knowing that they are safe, that they are respected, that they are recognized as full members of the city community with all of the rights that entails. This is no pipe dream—but it is a vision of city life very different from the one embraced by those who currently hold power.
To know what we must do to restore power to the people, we must first of all know what we’re up against. As their grip on Chicago’s lucrative machine loosens, it’s up to us to defeat them and build a new red metropolis on the lake, run by and for working people.
 David McNally, Global Slump: The Economics and Politics of Crisis and Resistance (San Francisco: PM Press, 2010), 36.
 Manning Marable, How Capitalism Underdeveloped Black America: Problems in Race, Political Economy, and Society (Chicago: Haymarket Books, 2015), 29.
 Perry Anderson, “Homeland,” New Left Review 81 (May June 2013). https://newleftreview.org/issues/II81/articles/perry-anderson-homeland
 McNally, Global Slump, 95
 Samuel Stein, Capital City (New York: Verso, 2019), 2.
 McNally, Global Slump, 118.
 Rachel Weber, From Boom to Bubble: How Finance Built the New Chicago (Chicago: University of Chicago Press, 2015), 76.
 Weber, From Boom to Bubble, 77.
 Rachel Weber and Sara O’Neill-Kohl, “The Historical Roots of Tax Increment Financing, of How Real Estate Kept Urban Renewal Alive,” Economic Development Quarterly 27, no. 3 (May 8, 2013).
 T. W. Lester, “Does Chicago Tax-Increment Financing Programme Pass the ‘But-for’ Test? Job Creation and Economic Development Impacts Using Time-series Data,” Urban Studies 51, no. 4 (July 10,2013): 655–74.
 Philip Ashton, Marc Doussard, and Rachel Weber, “Reconstituting the state: City powers and exposures in Chicago’s infrastructure leases,” Urban Studies 53, no. 7 (2016): 1396.
 Ashton, Doussard, and Weber, “Reconstituting the state,” 1397.
 Quoted in Eve Ewing, Ghosts in the Schoolyard: Racism and School Closings on Chicago’s South Side (Chicago: University of Chicago Press, 2018): 110–11.
 Eve Ewing, Ghosts in the Schoolyard, 47.
Sean Larson hails from a barley farm in eastern Montana, holds a PhD in German studies from NYU, and is a member of the Rampant editorial collective.
Tyler Zimmer teaches philosophy at the University of Chicago and is a member of the Chicago Chapter of the Democratic Socialists of America. He is on the Rampant editorial collective.