Jonathan Mahler’s The Gods of New York describes how bankers played a role in changing New York City

Gabfest Reads is a monthly series from the hosts of Slate’s Political Gabfest podcast. Recently, host Emily Bazelon spoke with author Jonathan Mahler about his new book, The Gods of New York.

This partial transcript has been edited and condensed for clarity.

Emily Bazelon: I also wanted to ask you about the reality of New York leading up to this period. You tell us that a million people left the city before 1986, a million people went on welfare, and then there’s this crazy series of fires that I either didn’t know about because I’ve never lived in New York or had forgotten. What are the fears leading up to the mid-’80s about what New York could become?

Jonathan Mahler: Yeah, I mean, the ‘70s, the city had just bottomed out in such an extreme way that, as you say, there were these arson fires which decimated hundreds of thousands of units of housing. I mean, they just swept across the Bronx and destroyed home after home. And the subway, everyone can picture those images maybe from movies like Taxi Driver or The Warriors or something where the city was just covered, the subways were covered in graffiti. Central Park was just a dust bowl, all the playgrounds were falling apart. And the city had really no economy to speak of because it had been this thriving manufacturing and shipping city after the war. It was this great working-class city with these powerful labor unions and just lots and lots of working people.

After de-industrialization in the ‘60s and into the ‘70s, the economy gets hollowed out and there’s no way forward for the city. People are flooding out of the city, heading to the suburbs, heading to wherever. There are no jobs; there’s no tax base. It seems like there’s no future for New York.

And then all of a sudden Ronald Reagan is elected in 1980, and he brings the gospel of Milton Friedman and the free markets. He cuts corporate taxes; he cuts taxes on the wealthy; he deregulates Wall Street. And at the same time you have technology—new technology is speeding up trading and making international trading easier, making it possible to treat new kinds of securities and Wall Street starts to boom. And so the city goes from being on death’s door in the 1970s to really booming on the back of Wall Street and, tangentially, real estate in the ‘80s.

So do the bankers effectively save New York City in the 1980s?

The bankers effectively saved New York City, but ‘saved’ is a tricky word in this context because they saved the city for a certain segment of the population. A large part of the population wasn’t able to get a foothold in the new economy. So the new economy was built around Wall Street, as I said, was built around finance, was built around real estate and insurance, and ultimately things like media and marketing and public relations, and these, what we now call, ‘knowledge industries.’ But that did not leave a lot of space for people who weren’t college educated, really like working class New Yorkers, and these were the New Yorkers of an earlier generation, immigrants who came to New York and got jobs as garment workers or wherever. There was no longer that escalator into middle-class life in New York.

Yeah. Maybe the bankers saved New York and warped New York or wrecked New York depending on your point of view.

Exactly. They saved it and destroyed it, right?

So, set the table also for us by telling us, why was Ed Koch the man for the job as mayor in New York? Before everybody decided they hated him, why did they love him? Because he gets elected for three terms, right?

So there were two reasons. One is that just as a character, he loved New York, and you have to remember, he was elected in 1978 when the city was just in the dumps. And here comes this guy who literally rides the bus to his first inaugural, the city bus after feeding reporters Entenmann’s cookies from a box in his little rent-controlled apartment in Greenwich Village. And he’s out in the streets all the time—not unlike our leading mayoral candidate right now—he’s engaging with New Yorkers, he’s showing New Yorkers that he loves the city and he’s reawakening a love for the city in people. He really becomes the mascot of the city as much as the mayor of the city.
So there’s that more vibe-y reason. And then there’s another more practical reason which ends up being more complicated, which is that he realizes it’s his job to figure out how to save the city financially, too.

In that moment, the path he chooses is basically to shrink the government to cut the city budget, which means closing city hospitals, it means cutting back on police, cutting back on garbage collection, cutting back on public services, and he chooses to basically incentivize development and try to encourage investment in the city. So what that means ultimately is that rich real estate developers like Donald Trump get massive tax breaks and massive zoning waivers to build new buildings in Manhattan. And that does help jumpstart the economy, no question. But obviously looking back, it feels a little bit like misguided policy, and particularly because if you think about the affordable housing crisis that New York is in now and has really been in for many years, though, I think it’s really maybe at its worst now, that all really begins when the city starts demolishing all of its cheap housing and turning it into luxury co-ops and condos. And that really happened in the 1980s again, as a way to goose the economy. You’re destroying all these old welfare hotels that are filled with people who are going to have nowhere to go but the streets.

All right. Let’s go down the housing path a little further. I thought that the idea of free market-based increase of housing supply is that it’s okay to build housing for rich people because it still increases the supply overall. And eventually we’re going to see those more affordable units come back because the wealthy people will move into the super high end ones and that will open up space. Why doesn’t that work out in New York? Or do there have to also be more regulatory forms that allow that to actually take place?

Yeah, I think yes. And I think that what the problem is that what happened in New York is that there was no plan. So later, once the city came to realize that it was in a crisis, they started incentivizing developers to build affordable housing. This is a policy that has been of questionable success, I would say. I mean, some people say it’s been the best way to go. I think it’s also been pretty widely criticized, and certainly if Mamdani is elected that the city’s going to move away from that approach. But in the ‘80s, that wasn’t on anyone’s mind. No one was thinking about, ‘oh, we might create an affordable housing crisis.’ All the city’s leaders and Ed Koch were thinking about was how do we get this economy moving again?

And to be fair, these old welfare hotels, which were providing a lot of the affordable housing in the city, were housing of last resort to people who were on welfare, people who would soon become homeless. It was not desirable housing. It was rundown and something needed to be done with it regardless. But I think the real problem is that the city got to this problem, recognized this crisis too late and has been really just playing catch-up ever since.

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Jonathan Mahler’s The Gods of New York describes how bankers played a role in changing New York City

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