Just Money Profiles
Destin Jenkins, Co-Editor

Destin Jenkins is the Neubauer Family Assistant Professor of History at the University of Chicago. He specializes in racial capitalism’s history and consequences for democracy and inequality in the United States. He earned his undergraduate degree from Columbia University (2010), and doctorate from Stanford University (2016). He has held fellowships at the Charles Warren Center for Studies in American History at Harvard University, and the Robert L. Heilbroner Center for Capitalism Studies at The New School.

Destin Jenkins is the author of The Bonds of Inequality: Debt and the Making of the American City (The University of Chicago Press). Indebtedness, like inequality, has become a ubiquitous condition in the United States. Yet few have probed American cities’ dependence on municipal debt or how the terms of municipal finance structure racial privileges, entrench spatial neglect, elide democratic input, and distribute wealth and power. In The Bonds of Inequality, Jenkins shows in vivid detail how, beyond the borrowing decisions of American cities and beneath their quotidian infrastructure, there lurks a world of politics and finance that is rarely seen, let alone understood. Focusing on San Francisco, The Bonds of Inequality offers a singular view of the postwar city, one where the dynamics that drove its creation encompassed not only local politicians but also banks, credit rating firms, insurance companies, and the national municipal bond market. Moving between the local and the national, The Bonds of Inequality uncovers how racial inequalities in San Francisco were intrinsically tied to municipal finance arrangements and how these arrangements were central in determining the distribution of resources in the city. By homing in on financing and its imperatives, Jenkins boldly rewrites the history of modern American cities, revealing the hidden strings that bind debt and power, race and inequity, democracy and capitalism.

He is also co-editor of Histories of Racial Capitalism (New York: Columbia University Press, 2021). Although Cedric J. Robinson popularized the term, racial capitalism has remained undertheorized for nearly four decades. Histories of Racial Capitalism brings together for the first time distinguished and rising scholars to consider the utility of the concept across historical settings. These scholars offer dynamic accounts of the relationship between social relations of exploitation and the racial terms through which they were organized, justified, and contested. Deploying an eclectic array of methods, their works range from indigenous mortgage foreclosures to the legacies of Atlantic-world maroons, from imperial expansion in the continental United States and beyond to the racial politics of municipal debt in the New South, from the ethical complexities of Latinx banking to the postcolonial dilemmas of extraction in the Caribbean. Throughout, the contributors consider and challenge how some claims about the history and nature of capitalism are universalized while others remain marginalized. By theorizing and testing the concept of racial capitalism in different historical circumstances, this book shows its analytical and political power for today’s scholars and activists.

His writings have appeared in The Washington Post, The Nation, Just MoneyPublic Book, among other outlets.

Jenkins teaches on the history of racial capitalism, urban history, African American history, comparative race and ethnicity, and mass incarceration.

His research interests include twentieth-century United States, African American history, urban studies, race and inequality, and the history of capitalism.



Destin Jenkins’s The Bonds of Inequality: Debt and the Making of the American City

Destin Jenkins’s The Bonds of Inequality: Debt and the Making of the American City
Destin Jenkins’s The Bonds of Inequality: Debt and the Making of the American City


Prompt for Discussion

Contributors: Monica Prasad, John N. Robinson III, Joy Milligan, Dedrick Asante-Muhammad, Nic John Ramos, David M.P. Freund, Stacy Seicshnaydre, Abbye Atkinson, Brian Highsmith, David Stein, Brittany Alston

The municipal bond market is often treated as a sleepy, fairly uncontroversial financial domain where local government borrowers, sellers of financial information, bankers, and investors meet without much conflict. That market is imagined as without history or, at most, as an operation that develops over time in almost linear fashion.  (Ironically, the same could be said about histories that embrace contingency but approach “the market” as a matter of degree, identifying modernity bluntly with “more” commercial activity.)  In this view, the bond market transparently reflects the seemingly timeless work of bankers who channel the savings of wealthy investors into the routine borrowing needs of American state and local governments. Except when they tackle spectacular moments (bankruptcy, default, or the hint of repudiation), few accounts relate the municipal bond market to questions of democracy. Nor do those accounts place the bond market at the center of debates about the urban crisis, racial inequality, the troubled trajectory of American cities, and the inequities that persist there despite judicial and legislative reforms. Indeed, until very recently, the municipal bond market and municipal debt have been treated as peripheral, if acknowledged at all.

Considered in this light, the publication of Destin Jenkins’s The Bonds of Inequality: Debt and the Making of the American City (The University of Chicago Press, 2021) is a watershed.  First, the book introduces readers to a cast of characters and range of activities rarely seen and little understood.  But more, the book exposes the drama they create.  It reveals the ways in which municipal debt proves to be a mechanism that powerfully produces racial inequality in cities large and small.

This JustMoney Roundtable opens a symposium on Jenkins’s The Bond of Inequality. We invite participants in the symposium to discuss the book’s contributions to the history of racial capitalism, the political economy of credit, and financialization.   We welcome them to identify and explore the large questions at the heart of the book.  How is municipal credit delineated to configure race and wealth in the United States?  How do the ways we understand finance conceptualize public authorship, private responsibility, and the line between them?   How have social movements strategized in the face of conventions – economic, legal, political, cultural, or other —  that deflect attention to critical sites of distribution?   When have they succeeded and how shall we understand the resilience of the current system?  How should we connect the racialized levers of finance to violence on the streets and in our prisons?  Is there a politics that can reimagine the operation of capital in the modern political economy?

In short, the symposium aims to generate a larger discussion about the entanglements between money, governance, and public welfare in the modern United States.

The forum includes posts from the contributors, and an author’s response.


August 12, 2021
The Myth of Fair Share/Equal Share Bond Projects
Nic John Ramos, Drexel University

August 19, 2021
Public Money without Public Goods
David Stein, University of California – Los Angeles

August 26, 2021
Histories of Hammers
Monica Prasad, Northwestern University

September 9, 2021
The Bondholders’ Veto
Brian Highsmith, Harvard & Yale Universities

September 16, 2021
Making Public Debt a Public Good
Abbye Atkinson, University of California – Berkeley 

September 23, 2021
The Same System, the Same Results
Brittany Alston, The Action Center on Race & the Economy (ACRE)

B. Alston, The Same System, the Same Results

September 23, 2021

Brittany Alston, The Action Center on Race & the Economy (ACRE)

Destin Jenkins’s The Bonds of Inequality drives home points that many of us have experienced intimately—the current municipal finance system is racist and inherently flawed. Jenkins explores how municipal debt shaped the contours of power in San Francisco, the location of public goods and services, and the experience of inequality within the city and beyond. The racial hierarchies created by the cast of banks, technocrats, and associated acts reveal how entrenched racism is in the system. From credit ratings to pro-bank policies and agencies, these players have financialized the tools our cities rely on to fund communities. As a result, Black and Brown communities have seen unparalleled disinvestment and are left to fight for public goods and services with unseen but hefty price tags. Through his historical case study, Jenkins successfully builds the case that we must reimagine our system of municipal finance so that it is reparative and democratically controlled. 

As Jenkins tells the story, city technocrats and bond financiers, whom he dubs “the fraternity,” blurred the lines between the public and private sphere. They prioritized the interests of the financiers and deprioritized the needs of communities. In doing so, these so-called “experts” of the municipal finance system hid behind an apolitical, technocratic facade. But Jenkins makes clear that this system is highly racialized and politicized. He describes the facade as a “deracialized discourse of technocratic aggregations and euphemisms.” One representative from Standard & Poor, for example, “acknowledged that the rating agency considered race ‘only from the economic standpoint.’” The modeling schemes of bond technocrats, however, employed coded inputs based on their racist values, which, in turn, produced racist results. The percentage of non-white residents was, for instance, considered critical in evaluating the credit worthiness of a city. These models restricted non-white cities from having access to cheap debt, making it costly for cities to fund services and community development. 

It remains true today that municipal bond ratings are dominated by racist metrics that rob communities of much needed revenue. Nearly all of the cities at the bottom of the ratings scale are majority-minority. Based on ACRE and Refund America’s 2017 analysis of rating agencies and local governments, credit rating agencies cost these cities millions annually while increasing profits for banks and other private sector actors. Rating agencies—like Moody’s, S&P, and Fitch—have a huge impact on a public entity’s ability to fulfill their funding obligations to the communities they serve. Their ratings determine the creditworthiness of nearly all bond issuances for state and local governments. And poor ratings from any of the ratings agencies can cost cities money that otherwise would be used to fully fund public, community services. Light touch government regulations fail to assess the adverse impact that these agencies have on our public services and infrastructure projects. 

Such metrics open the floodgates for banks and privatizers looking to make a profit. Jenkins touches on Puerto Rico in the epilogue and how debt necessitated the colonization of the island: “the ongoing struggle in Puerto Rico against creditors who use the idea of a debt crisis to extract still more concessions, and to exercise outsized political authority over spending decisions, reminds us that the politics of municipal debt extend beyond the continental United States.” It is important to note that Puerto Rico did not come to take on record levels of debt on its own. There was always a bank willing to issue debt to Puerto Rico, well-aware of the precarious nature of the island’s finances. And the banks that underwrote Puerto Rico’s bonds did not do so at random; they recognized they could profit off the Commonwealth’s unsustainable debt burdens. This process led to a horrific display of how municipal debt can be used to circumvent democracy and further defund Black and brown communities. 

State and local governments are still fighting themselves out of toxic debt deals, like the ones made in Puerto Rico. Currently, cities and states are engaged in a fight with big banks after whistleblowers came forward alleging that banks involved in selling variable-rate bonds colluded to raise interest rates on the bonds. According to a lawsuit filed by the City of Philadelphia, big banks secretly agreed to rig the rates from February 2008 to June 2016, when they controlled about 70 percent of the VRDO market (a long-term municipal bond). Similar to a variable rate mortgage, the interest rates on the bonds fluctuated. When those interest rates were low, investors could opt to sell them. The lawsuit alleges that the banks worked together to keep the interest rates high so that investors would not sell. Without sellers, the banks would have less work to do, but they could keep charging municipal borrowers tens of millions of dollars in fees each year. State and local governments in Philly, Baltimore, California, Illinois, and New York have identified the bonds in question, filed suit against the banks, and are demanding pay back for the excess fees that took revenue away from city services. This highlights yet another example of Wall Street looting our public budgets. If we want to break free of Wall Street’s long-lasting chokehold, our current municipal finance system needs restructuring. 

In order to kick Wall Street to the curb, we have to organize in support of public vehicles that can fully fund and finance our public goods and services. In Spring 2020, the Federal Reserve created the Municipal Liquidity Facility (MLF), a tool that allowed the Fed to lend directly to state and local governments. It is worth noting that the facility was not without its flaws. Its initial iteration came with parameters that would have effectively locked out Black cities throughout the country from even considering the financing. Only one of the thirty-five most Black cities met the Fed’s criteria for assistance. In its final iteration, interest rates were sky-high and most governments and public entities could not justify participating in the facility because they were able to borrow more cheaply elsewhere. While acknowledging these flaws, the tool demonstrated that our central bank is a public one, with the latent power to restructure the entire municipal finance system. A stronger liquidity facility would allow the Fed to directly lend to state and local governments at no cost, with no fees—a move which would save governments over $160 billion annually. Every year, governments and public entities wrestle with tough decisions about how they will fund their communities, and every year we absolve Wall Street of its role in siphoning money away from our public budgets. Enough is enough. It’s time to reimagine our municipal finance system and cancel Wall Street.

Return to Jenkins Symposium Page


A. Atkinson, Making Public Debt a Public Good

September 16, 2021

Abbye Atkinson, University of California – Berkeley

Public debt in the form of municipal bonds permits municipalities to survive and to grow.[1] Public debt is how cities and towns—hampered as they perpetually seem to be by their limited pecuniary resources—repair crumbling schools, restore failing sewers, improve public transportation, attract tourist dollars, and more.[2] For example, the Oakland Unified School District currently broadcasts that debt, i.e., a recent municipal bond offering, will facilitate “major repairs to fix deteriorating classrooms, bathrooms, plumbing, potentially faulty electrical systems, heating, and air conditioning, and leaky roofs.”[3] Similarly, public debt fixed significant infrastructure problems like the failing sewer system that threatened to embarrass the City of Atlanta while it was “on the world stage” during the 1996 Olympics.[4]Public debt also facilitated Chattanooga, Tennessee’s glow up into an international model of free, public, lightning-speed broadband access.[5]

In this sense, public debt is a public good. It is meant to function symbiotically in the polity, providing liquidity to fund present public projects that will yield returns for both municipal residents and private investors alike. Yet, as Professor Destin Jenkins tells it, public debt can also function like an invasive species. It repairs school and sewer systems, but it also tends to take over the municipal ecosystem, initiating an antagonistic parasitism in which the polity’s resources are slowly siphoned to nourish and enrich its private investors. Once the investors eat their fill, those in power then feed the strongest and most robust of the citizenry first, leaving the remaining scraps, if any, for the marginalized.[6]It is a variety of unnatural selection, where the winners are determined by nurture rather than nature; by those with the power to create and reify this hierarchy.[7]

Thus, what Jenkins so compellingly reveals is that public debt is first and foremost a private good. Infrastructure improvements are just a means of wealth maximization, facilitating tax-free wealth accumulation for bond investors who, in turn, consider the social well-being of residents only in relation to the investors’ own financial interests. Consequently, the welfare of this most democratic of institutions—the local polity—functionally matters only to the extent that it can produce a profit for its investors.

Viewed through this lens, municipal debt is no more than another for-profit business. And, like any other for-profit business, the bottom line governs all both positively and normatively. Indeed, the world of social welfare and the overall well-being of various stakeholders has no meaningful place in this world of financialized business. Instead, the fate of a municipality is to devolve into a mere product, ripe for exchange on the market. Commoditized in this way, very little is beyond the reach of abstraction and quantification;[8] not the well-being of school children,[9] not the persistence of racialized socioeconomic subordination,[10] and not the very governance meant to be imbued with our most sacred democratic principles.[11] Rather, municipal debt transforms the municipality from a democratic entity intended principally to work for the public good of its residents into a unit of exchange, abstract and fungible. Thus, as Miranda Joseph has observed elsewhere, public debt simultaneously destroys community even as it particularizes and shapes what remains.[12]

Yet, how can municipalities survive if they do not sell themselves this way? As Jenkins notes, cities and towns and utility districts and all the other varied forms of municipality are structurally dependent on debt.[13] That is to say, as a practical matter, there is no growth, and sometimes no survival, without debt, even though debt sometimes “kill[s] the watchmen” and “welcome[s its] comrades at the open gates.”[14] Consequently, as a practical matter, failing to appease creditors, to prioritize their interests, to mold the polity according to their predilections, means no money to provide services; no money to fund growth. In turn, no money often means municipal decay. This includes the risk of becoming “minimal,” as Professor Michelle Wilde Anderson explains, with cash-starved municipalities first “cutting,” “selling,” and “(de)regulating” in order to “adapt their services, proprietary functions, and regulations to long-term declines in revenues,” before perhaps descending into complete insolvency.[15]

Indeed, municipalities in fiscal decline risk losing relatively wealthy residents, whose tax dollars provide a backstop against default and complete insolvency.[16] Once these residents’ flight reaches a critical mass, the municipality risks becoming a “city in distress,” namely one likely to be characterized by historically subordinated and democratically excluded “majority-minority” residents and, consequently, by disproportionate levels of  “poverty and population loss.”[17] Thus, municipalities are in significant ways forced to compete for the affections of relatively wealthy residents, because the latter’s residence within the bounds of the municipality is not guaranteed nor to be taken for granted.[18] Indeed,  as Robert Nozick once suggested, “each community must win and hold the voluntary adherence of its members.”[19] In the burgeoning, 20th San Francisco that Jenkins surfaces, this meant positively and normatively financing a “spatial vision” intended to court and nurture “whiteness,” with all its state-subsidized financial advantage.[20] It also meant positively and normatively nurturing racialized inequality through the city’s regressive deployment of municipal debt.[21]

Is there a sustainable alternative to this perverse, structural dependence on privatized municipal debt? This is the elephant in the final pages of Jenkins’ story. The truth is that municipalities often struggle to provide even basic services like quality public education, transportation, and reliable sewage services with just tax dollars or other state or federal support. For example, one recent study reports that state-mandated limits on municipal tax collection “can create daunting challenges for cities and counties as they try to balance their budgets while maintaining the level of services their residents expect in the long term.”[22] Thus, in addition to the usual types of regressive funding that Jenkins highlights (like fixed-rate transportation fees and sales taxes), these sorts of budget shortfalls lead to perverse outcomes like the adoption of other forms of regressive taxation meant to fund municipal operations.[23] For example, as the Justice Department revealed in its investigation into the Ferguson Police Department after Officer Darren Wilson gunned down Michael Brown in the middle of the street: “Ferguson generates a significant and increasing amount of revenue from the enforcement of code provisions,” and “[c]ity officials have consistently set maximizing revenue as the priority for Ferguson’s law enforcement activity.”[24] Moreover, as Ta-Nehisi Coates observed, “[t]he ‘focus on revenue’ was almost wholly a focus on black people as revenue.”[25]

To some degree, then, a world unencumbered by privatized municipal debt is unimaginable without a massive overhaul of our very socioeconomic foundation. Indeed, structural dependence on public debt is a hallmark of democratic capitalist governance at all levels of government. As Professor Christine Desan has observed, our English forebearers centered the interests of private investors in the business of public monetary policy, “expand[ing] the role that investors, pursuing their own interests in profits, played in the system of modern money creation.”[26] Indeed, the English government’s creation of the Bank of England “installed a new theory at the heart of political economy—the theory that individuals pursuing profits produced money.”[27] One hundred years later, the American nation’s founding was similarly financed by dependence on private financial interests.[28] Moreover, anyone who knows the lyrics of “Cabinet Battle No. 1” understands the consequent political prioritization of bondholders/creditors interests over citizens.[29] If Alexander Hamilton was to be believed, “a punctual performance of [debt] contracts” is “the price of liberty.”[30] If, however, it is the gospel truth that “[n]o one can serve two masters, for … he will be devoted to the one and despise the other,”[31] the ensuing tension between privatized debt and democracy that Jenkins so expertly documents seems inevitable and irresolvable.

Factoring debt positively into the social well-being of the polity would require that the wealth accumulation of private investors not overtake the needs of the people the debt is meant to serve. One possible solution to the problem of the public interest succumbing to private interests is Professor Saule Omarova and Professor Robert Hockett’s proposal for a National Investment Authority (NIA).[32] Omarova recently testified before the House Committee on Financial Services on the potential for the NIA to “deliberately and systematically seek to correct the deep structural roots of racial, economic, and environmental injustice and inequality.”[33] She noted that the new federal agency would perform a more symbiotic role by “coordinating and overseeing ongoing investment in critical public infrastructure and socially inclusive and sustainable growth.”[34] Specifically, among the initiatives that the NIA would undertake would be to “mobiliz[e] and channel[] public and private finance into large-scale critical public infrastructure projects,”[35] like developing reliable modes of transportation to permit spatially isolated marginalized communities to get to work on time.[36]

In other words, a public agency like the NIA would center broad social welfare in its fiscal mandate rather than individual wealth accumulation. For example, it could readily support infrastructure geared toward remediating racial justice. This is in stark contrast to Jenkins’ description of how Civil Rights-era racial justice measures in San Francisco presented too much risk for the “fraternity” of private bondmen and financial intermediaries to support. In their shuttered view, because “for bondholders, cities were a means of capital accumulation,” lenders could rightly “penalize[]” municipal borrowers who sought to implement change in the name of racial justice.[37] Municipal bondholders’ bottom lines would not accommodate greater rights for marginalized people. Consequently, Jenkins shows how they used their power to thwart municipal efforts to respond to calls for justice.[38] By contrast, a public agency whose mandate is to support long-term growth and to promote equality in infrastructural development, among other community-focused considerations, represents a promising alternative to the existing world of privately financed infrastructure that burdens municipal well-being.

[1] Destin Jenkins, The Bonds of Inequality: Debt and the Making of the American City (Chicago: University of Chicago Press, 2021), 69;  John R. Fallon, “Municipal Bonds: In the Shadow of an Underfunded Pension Crisis, Puerto Rico, and A Low Interest Rate Environment,” North Carolina Banking Institute 24 (2020): 274 (“Great American achievements, such as the Erie Canal and the Golden Gate Bridge, were funded by municipal bond investors.”).

[2] Ibid., 131.

[3] “Measure Y Bond,” Oakland Unified School District, https://www.ousd.org/Page/20908.

[4] Steven P. French & Mike E. Disher, “Atlanta and the Olympics: A One-Year Retrospective,” Journal of the American Planning Association 63 (1997): 384-85.https://www.tandfonline.com/doi/pdf/10.1080/01944369708975930.

[5] E.g., Andy Berke andJonathan Gruber, “The Infrastructure Success Story in Chattanooga,” The American Prospect, June 17, 2021, https://prospect.org/infrastructure/building-back-america/infrastructure-success-story-in-chattanooga/. My thanks to Tejas Narechania for introducing me to this fact.

[6] Jenkins, The Bonds of Inequality, 152-153 (observing that “bond failures [signified] a disinterest in investing in black futures”); Ibid., 156 (describing how general use bonds funds were devoted to improving life for whites).

[7] Ibid., 148 (describing the “fraternity” of bankers and other white male intermediaries who functionally controlled the bond market).

[8] David Graeber, Debt: The First 5000 Years (Brooklyn: Melville House, 2011).

[9] Jenkins, The Bonds of Inequality, 49 (observing that “[i]n the memorandums and thick reports of bond dealers, schools were coded as commodities”).

[10] Ibid., 148 (describing statements of a banker who opined that “all black people within cities everywhere were drains on municipal funds”).

[11] Ibid., 223 (noting “bondholders’ ambivalence to democracy and their many efforts to protect their investments”).

[12] Miranda Joseph, “Making Debt,” Occasion: Interdisciplinary Studies in the Humanities 7 (2014); Jenkins, The Bonds of Inequality, 149 (“Prevailing and aspirational models made explicit that evaluations of municipal creditworthiness were more than mere reflections of racial inequality; they actively constructed it.”).

[13] Jenkins, The Bonds of Inequality, 211.

[14] Virgil, The Aeneid.

[15] Michelle Wilde Anderson, “The New Minimal Cities,” Yale Law Journal 123 (2014): 1159.

[16] Ibid., 1145 (observing that “[t]he presence of assets and incomes capable of contributing to public services through taxes is the most fundamental limitation on revenue generation”).

[17] Ibid., 1139-1140.

[18] E.g., Clayton P. Gillette, “How Cities Fail: Service Delivery Insolvency and Municipal Bankruptcy,” Michigan State Law Review (2019): 1213 (observing that “it is not clear that tax increases, even if legally available and politically plausible, will necessarily generate additional revenues” because they may “motivate those who bear the relevant burden to exit, triggering a downward spiral of property values that causes net revenues actually to decline”).

[19] Robert Nozick, Anarchy, State, and Utopia (Basic Books, 1974).

[20] Jenkins, The Bonds of Inequality, 69.

[21] Ibid., 218 (observing that “Fears of financial contagion became an alibi for a political project that entailed retrenchment, while protecting the structural commitment to bondholders.”)

[22] “Local Tax Limitations Can Hamper Fiscal Stability of Cities and Counties,” Pew Charitable Trusts, Jul. 8, 2021, https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2021/07/local-tax-limitations-can-hamper-fiscal-stability-of-cities-and-counties

[23] E.g., Alexandra Natapoff, “Misdemeanor Decriminalization,” Vanderbilt Law Review 68 (2016): 1059 (noting that the imposition of fines and fees as a punishment for a minor violation of the law, “functions as a kind of regressive tax, creating perverse incentives for low-level courts that increasingly rely on fines and fees to fund their own operations”).

[24]“Investigation of the Ferguson Police Department,” U.S. Department of Justice at 9, March 4, 2015, https://www.justice.gov/sites/default/files/opa/press-releases/attachments/2015/03/04/ferguson_police_department_report.pdf.

[25] Ta-Nehisi Coates, “The Gangsters of Ferguson,” The Atlantic, March 5, 2015, https://www.theatlantic.com/politics/archive/2015/03/The-Gangsters-Of-Ferguson/386893/.

[26] Christine Desan, Making Money: Coin, Currency, and the Coming of Capitalism (Oxford University Press, 2014).

[27] Ibid.

[28] E.g., Alexander Hamilton, First Report on the Public Credit (1790) (observing that “loans in times of public danger, especially from foreign war, are found an indispensable resource”).

[29] Lin-Manuel Miranda, et al., Hamilton: An American Musical (2017) (“If we assume the debts, the union gets new line of credit, a financial diuretic/How do you not get it, if we’re aggressive and competitive/The union gets a boost, you’d rather give it a sedative?”).

[30] Alexander Hamilton, First Report on the Public Credit.

[31] Matthew 6:24.

[32] Robert C. Hockett and Saule T. Omarova, “Private Wealth and Public Goods: A Case for A National Investment Authority,” Journal of Corporation Law 43 (2018): 439 (“This new federal instrumentality, which we call a National Investment Authority (NIA), would be charged with the critical task of devising and implementing an ongoing and comprehensive long-term development strategy for the United States.”).

[33] Written Statement of Saule T. Omarova, United States House of Representatives Committee on Financial Services, “Build Back Better: Investing in Equitable and Affordable Housing Infrastructure,” last modified April 14, 2021, https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-omarovas-20210414-sd002.pdf.

[34] Ibid.

[35] Ibid.

[36] E.g., Saule Omarove, “The Other Half of the FedAccounts Plan: What Happens on the Asset Side of the Fed’s Ledger?,” Just Money Blog, last modified Nov. 19, 2020, https://justmoney.org/s-omarova-the-other-half-of-the-fedaccounts-plan-what-happens-on-the-asset-side-of-the-feds-ledger/.

[37] Jenkins, The Bonds of Inequality, 146-149.

[38] Ibid.

Return to Jenkins Symposium Page


B. Highsmith, The Bondholders’ Veto: Fiscal Federalism and Local Democracy

September 9, 2021

Brian Highsmith, Harvard & Yale Universities

In The Bonds of Inequality, Destin Jenkins documents the consequences of American cities’ structural dependence on the municipal bond market. He describes how collective decisions about local public investments came to be channeled through an elite collective of distant white financiers, who asserted their influence to entrench racial hierarchy. Although the focus of his book is on the effects of this pernicious institutional arrangement, Jenkins also sketches an account of its origin. Among many culprits behind this “conservative logic of financialization,” one stands out: the withdrawal of centralized fiscal transfers from higher levels of government. Without access to state and federal funds, cities became dependent on the market to meet even their most basic responsibilities.

Jenkins’ account helps us develop a fairly clear story about the relationship between democracy and our fiscal federalism design, which places on local communities the primary responsibility for funding critical public goods. The bondholders’ veto derives from cities’ reliance on debt, which in turn is created by the absence of redistributive transfers across geography. In this way, the municipal bond market is but one example of a general dynamic that results from the interplay between jurisdictional fragmentation, local fiscal responsibility, and racialized economic inequality. American cities’ structural reliance on municipal debt might be understood as part of a larger structural reliance on concentrated, mobile capital that is a consequence of our comparatively unique system of fiscal federalism. 

The democratic consequences of this arrangement can be observed in Jenkins’ narrative when cities, navigating dire fiscal straits, consistently held their debt obligations to be sacrosanct “because bondholder power was of greater concern to municipal officials than the outrage of ordinary residents.” But these same dynamics are implicated when the most valuable public company in the world escapes local taxation by leveraging the threat of exit to defeat a popular initiative to address chronic housing instability. Or when a Republican governor offers to a foreign multinational, as part of a $3 billion enticement package, a unique and unprecedented right to appeal any unfavorable decision directly to the state’s GOP-controlled Supreme Court. Or when Chicago opts to outsource its parking enforcement authority to a group of private investors, under terms restricting—for the next 75 years—the city’s ability to manage its urban design and requiring a vast, costly supply of on-street parking. 

Each of these antidemocratic outcomes should be understood, at least in significant part, as a downstream consequence of the economic capture that results from our decision to block redistribution across geographic space. Under our fiscal federalism design, local public goods are funded predominantlypredominately from wealth contained within constructed and contested municipal boundaries. This design is not inevitable: even other systems characterized by political and programmatic decentralization feature considerably higher inter-jurisdictional redistribution, typically through centralized fiscal transfers. One group of researchers recently noted “how distinctive the United States is in the way it combines institutional arrangements that facilitate metropolitan fragmentation (through jurisdictional proliferation) and those that reward such fragmentation (through opportunities for resource hoarding).” 

Overlaid on top of patterns of racial and economic segregation, this design creates particularly acute fiscal pressures in oppressed communities. As Margaret Weir and Desmond King have put it, “Greater degrees of local governmental fragmentation promote inequality by allowing more affluent residents to choose the level of services and taxes they wish to pay for, while less affluent residents may remain trapped in jurisdictions with weak tax bases and poor services.” Through mechanisms I have described as “municipal hoarding,” cities’ boundariescities boundaries come to function effectively as tax shelters for white residents of segregated neighborhoods. Accumulated wealth that has passed down across generations—over decades in which families of color were systematically excluded from economic opportunity—is thus shielded from the democratic demands of neighboring families. 

Under a system that restricts fiscal transfers across jurisdictions, devolution may be inevitably associated with a structural reliance on market-like mechanisms for public goods provision. Consider public investment possibilities in a municipality that lacks significant taxable wealth within its jurisdiction. Absent centralized transfers, such places have limited options: they can either underinvest in local public goods, or seek to provide them without taxing wealth. The latter can be done through regressive charges on their current populations (as through user fees) or by borrowing from the future (as through public debt). Even where the state itself avoids credit markets, the charges it imposes in their place will tend to become debt at the individual level, as poor families who lack the means to make immediate payment then turn to credit

The democratic implications are clear: even if the members of this municipality unanimously desire to fund public investments like schools through progressive taxes on wealth, they cannot do so. When wealth concentrates in fortified white alcoves, and unconditional centralized transfers are withheld, neighborhoods targeted by racialized oppression and spatial neglect have little choice but to “bribe” in the capital that is required to make local investments—relinquishing, in the process, democratic control.  Indeed, American cities’ structural dependence on the municipal bond market is not unlike the wage dependency that allows American employers to exercise domination over their workers. The comparison allows us to see how both forms of domination are contingent on the organization of our political economy. For cities and workers alike, commodification results from the absence of redistributive transfers provided through the state—thus ensuring that risks are individualized while gains are hoarded. 

The analogy extends even more directly. The cavernous gaps that characterize our individual-level social safety net do not only drive American workers into unsafe and underpaid employment: they also drive them into debt. This is not merely an American phenomenon: as Andreas Wiedemann recently summarized, “A growing body of work associates higher debt levels with limited welfare states, suggesting that the former can substitute for the latter.” But as Chloe Thurston has documented, the United States’ political economy is uniquely characterized by its “enlist[ing] market mechanisms to fulfil the goals of social policy, including protection against risk, meeting basic needs, and securing opportunity for mobility.” Jenkins’ account helps us extend these frameworks, by incorporating public debt—and demonstrating that the relationship between state withdrawal, reliance on market mechanisms, and antidemocratic subordination can be fruitfully generalized across contexts.

Doing social policy through credit scores has predictable effects: after all, capital tends to chase returns, rather than majoritarian preferences. And so a central characteristic of this structural reliance on market mechanisms, including various forms of public and private debt, is to undermine democratic control. In Jenkins’ book, this happens through the bondholders’ veto—but it would also include, for example, the leverage used by dominant firms to extract public subsidies and regulatory favors from economically precarious cities, or that wealthy white homeowners deploy when they threaten to flee to the suburbs. Our system of fiscal federalism impedes social democracy by guaranteeing holders of private wealth—by virtue of their wealth—a veto over the democratic use of public money. As Eleni Schirmer put it last month, “Creditors and credit rating agencies loom over public institutions like shadow governance systems.”

It is striking, then, that this anomalous feature of our institutional design is so often defended in democratic terms—as allowing sorting according to preferences for public goods and protecting the sacrosanct virtue of local control. This apparent irony can be resolved by seeing clearly, as the LPE framework helps us do, what is unstated in many such accounts: that preferences can be weighted by wealth, and “democracy” understood as what allows wealth holders to act without regard for the collective will. Seen in this light, the underfunded public schools in poor communities reflect not the satisfaction of residents’ idiosyncratic preferences, as implied by classic accounts, but rather the triumph of markets over political equality and an inclusive democracy.

At one point Jenkins recounts how San Francisco mayor George Moscone, preparing his constituents for the “difficult times” that lay ahead, assured them that there was no “pot of gold, a secret cupboard, or some budget gimmick which ‘makes it all work out.’” But of course, there is: the federal government, which—under a different system of fiscal federalism—could allow cities to make democratic investments with the immense wealth produced by our economy, no matter how it is distributed over geographic space. Doing so would reduce cities’ reliance not only on the municipal bond market, but also on all the various other mechanisms that similarly outsource democratic authority from the public to holders of mobile wealth.

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M. Prasad, Histories of Hammers

August 26, 2021

Monica Prasad, Northwestern University

Destin Jenkins’s astonishing new book had me reaching for poetry: “Then felt I like some watcher of the skies / When a new planet swims into his ken.”  The new planet is municipal bond finance.  No, wait!  Don’t close the page!  Jenkins’s book shows how important bond finance is, and also how the vague fear of something both boring and difficult that the words “municipal bond finance” evoke is crucial for creating a veil behind which bond financiers make decisions that affect everyone.

The book is a tapestry of stories about capital and labor, votes and riots, sewage systems and credit rating, but I want to focus here on one major thread that was not quite as compelling.  Jenkins’s basic story is that cities in the post-war period took out loans (bonds) to finance their infrastructural development, at a time when interest rates were at historic lows; doing so led them to follow the preferences of bondholders and the needs of capital, which produced infrastructure that would benefit whites but not African Americans.  

As an explanation of racial inequality, the argument is not convincing, because it implies that some other method of financing infrastructure, perhaps one more open to democratic processes, would have resulted in infrastructure that would have benefited African Americans.  Really?  In 1940s and 1950s America?  Would any alternative mechanism of financing infrastructure or building a municipal welfare state have been more racially egalitarian?  Certainly not one subject to the wishes of majorities across the country.

This observation brings up a broader question.  Municipal bond finance is an important technology, but is it a technology more like a hammer or a technology more like an automobile?  That is, does it help to instantiate the things that people want to do–the tool through which racism was built into the physical structure of our cities—or does it dramatically transform what is possible and even what people might think of wanting to do?  If bond funding is an instrument, like a hammer, it reflects pre-existing racism but does not create a new world of racial possibilities on its own.  On the other hand, if bond funding is more like an automobile, it reshapes our ideas of space and time and perhaps our very identities.

I would have appreciated a clearer discussion of this issue, because I think the conclusion could be more optimistic than Jenkins suggests.  The post-war period was, by many measures, the most economically egalitarian period of recent American history.  One question for scholars of racial capitalism is whether the racial inequality of that period was somehow necessary for the intraracial economic equality, or whether it’s possible to recreate the economic equality but this time without racial inequality.  One piece of Jenkins’s argument is that there was a cross-class compact between white investors, borrowers, workers, and city dwellers to create the cities of the post-war period, and this starts to lean to the “necessary” pole, white egalitarianism created by excluding African Americans.  By concentrating power in the hands of bond financiers, municipal bond financing of urban infrastructure made possible both the economic equality and the racial inequality.

But if that racism would have come through any tool—if bond finance was just the hammer–then this is ironically a glimmer of hope.  It suggests that as the times change, the uses and effects of the tools could change.  If bond financing is like a hammer, then it would be possible to use this kind of financing to build infrastructure that has much more positive consequences.  That is exactly the hope of Democrats today, in this period of low interest rates that echoes the period Jenkins describes.  Jenkins presents the negative case for bond finance, pointing to the concentration of power and the difficulties when interest rates rise, but progressives today have been making a positive case for debt financing.  One does not have to go to the extremes of “modern monetary theory” to think that borrowing when interest rates are low, to finance infrastructure that could make the country prosperous enough to pay back those loans without difficulty, makes sense.  That investment in infrastructure could reduce inequality both directly in the short term, through the jobs created, and indirectly in the long term, through the benefits of the resulting transit lines, broadband expansion, etc.

But the progressives who are defending debt financing have not grappled with the racial implications of the practice, and here is where Jenkins’s book could open up a necessary conversation.  It would be naïve to think that racist practices will not somehow work their way into debt financing today, but the question is whether there would be more racism without the debt-financed infrastructure, and here the answer is not clear.  There is a chance that the debt financing that created the racist structures of mid-century could now be employed for precisely the opposite purposes.  If so, the issue is not debt financing itself, but how it’s used.

On a more tangential note: It’s depressing that Jenkins considers it appropriate to publish rather than simply describe cartoons of naked women, in a chapter claiming to be troubled by the sexist world of the bondsmen who first published these cartoons.  It’s hard to believe, for example, that he would have published a cartoon of a naked man in Native American headdress as he is willing to do of a naked woman in Native American headdress.  He has recreated a context in which it’s appropriate to publish these pictures and inappropriate to criticize their publication, precisely the context he claims to deplore.

Still.  This book is a real accomplishment, and although I have my complaints about it, I want to underline exactly how much of an accomplishment it is.  You can’t build a house without a hammer, and Jenkins is convincing that the dramatic expansion of mid-century American cities would not have been possible without bond financing.  It’s as if we lived, before this book, in a world where no one had noticed hammers.  I’ve spent twenty-five years studying and thinking about capitalism, but this book rearranged my understanding of so many things that I’m embarrassed, now, not to have known about before I read the book.  Why had I never really thought through how municipal infrastructure was financed?  Why had I never been particularly interested in bonds, or come across these incredible stories such as the attempt to boycott southern municipal bonds and the strange impasse it ran into?  How can it be possible to say something entirely new about cities, race, government, and economics at this date?  And yet Destin Jenkins has done so.  I will never think about cities in the same way again.

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D. Stein, Public Money without Public Goods

August 19, 2021

David Stein, University of California – Los Angeles 

At the opening plenary of the 1998 Critical Resistance conference, the longtime radical intellectual Mike Davis took the stage with a piece of concrete in his hand. Davis described to an audience of those dedicated to abolishing policing and imprisonment the vexed role of public investment in 20th century California. “When I was a child growing up in California in the 1950s, this [concrete] is what the California dream was made out of,” he said. “[The] great dams, new highways, schools, hospitals everywhere; and for a lot of Californians—not all—unionized, good jobs.” But by 1998, something had changed. “Now I look at concrete and it seems like it’s something rather sinister. There is too much of the stink of claustrophobia and human oppression and slavery about it. And you can’t go anywhere in California these days—in rural California—in deserts and cotton fields, or even in the Redwoods without seeing the gray prison walls looming up on the horizon.” As Davis suggested, public money could shape society—it would produce the future. But who controlled it? Who steered its path? 

The shift that Davis was highlighting is one that Jenkins also foregrounds—how neighborhood level uneven development, overlayed with redlining to enable a “racial welfare state.” As Jenkins puts it, “the racial welfare state, of which infrastructure and social services were a crucial part, became acceptable only insofar as the allocation of borrowed funds helped secure white rights while keeping taxes low.” Bonds of Inequality foregrounds public money for sewers and schools and other infrastructure and amenities which comprised this racial welfare state. This was public money producing segregated goods; these segregated, not-quite-public goods both reflected and created racial hierarchies, fabricating whiteness alongside the construction of pools, parking lots, and playgrounds. By the 1980s and 90s, these fiscal capacities were increasingly deployed in the way Davis described—to build cages. 

As Bonds of Inequality demonstrates, municipal debt was used to build a racial welfare state, to enrich mostly white bondholders, and to provide wages for mostly white workers in the segregated building trades. In this sense, it was a key component in consolidating what Nell Irvin Painter has highlighted as the third enlargement of whiteness, when Italians, Jews, and immigrants from Southern and Eastern Europe came to be understood as white. These spending choices did not simply reflect a changing concept of whiteness—they contributed to its refurbishment, solidifying the bloc of people who would not just believe themselves to be white, but benefit as such.  The boundaries of whiteness were often written onto the redlined map. As Jenkins shows, being white in San Francisco meant not living in Hunters Point, and thus not being exposed to toxic land uses. Being white in San Francisco meant being part of what he emphasizes was a cross-class compact where bondmen in the city’s Bond Screening Committee developed the infrastructure they deemed needed, and white workers built it. 

Bonds of Inequality underscores how the municipal bond market was shaped by actual people—the group that Jenkins dubs “the fraternity.” This was a group of men who, “develop[ed] trust through racism, elite white supremacy, rip-offs, and misogyny, [and in so doing, these] furthered their ability to act collectively to stitch together the municipal bond market.” Their decisions about which cities, which bonds, and at what interest rates shaped the lives and possibilities of whole communities. Although euphemisms were frequent, Jenkins shows how the perceived credit-worthiness of cities was wholly intertwined with racist assumptions. As a result of this financial architecture, cities have been structurally vulnerable to the whims of the municipal bond market, which is to say, the actual individuals who comprised this fraternity. And making matters more arduous, due to limits on their debt-bearing capacity, state and municipal budgets swing pro-cyclically with the business cycle, leaving cities at their most vulnerable during recessions and business downturns.

The racialized bond market has not been imposed without resistance. I first learned about the municipal bond market in 2006 under the tutelage of the late, great prison abolitionist and environmental justice activist, Rose Braz–the organizer Ruth Wilson Gilmore dubbed “the activist’s activist.” Braz, who had been a key organizer of that 1998 Critical Resistance (CR) conference, was in the midst of trying to halt a massive expansion of the California prison and jail system. The proposal, which would have utilized lease revenue bonds in order to avoid voter approval, would have steered upwards of $18 billion in public money to lenders. But Braz and her comrades in CR and the anti-prison coalition Californians United for a Responsible Budget sought to crash the fraternity’s party.

Braz believed in using a variety of tactics to slow the onset—and remove the existence—of the deadly scourges of policing, prisons, and pollution. While she is no longer with us, we can still learn from her. Alongside the other anti-prison activists of CR and CURB, she sought to prevent the use of lease revenue bonds, bringing a lawsuit contesting how the decision was made. As Braz argued, “We think voters have a right to approve or reject debt. And that was violated here when they used lease revenue bonds to try to build these new prison cells.” It was tactics like these, along with a number of other factors which ensured that those 78,000 new prison beds were not built. Like, the activists who make memorable appearances in Bonds of Inequality, Braz and Critical Resistance confronted a political and financial logic whereby public money was used to control and cage poor people, Black people, Latinx people, trans people, and people of color, and refused when it came time to refurbish or build schools, parks, or public housing. Braz and these activists contested what Jenkins highlights as the efforts “to further insulate bond finance from popular input.” In this sense, what Braz and her comrades were confronting was the product of a history that Bonds of Inequality tracks: how the racial welfare state created contradictions—as well as institutions—which, as Gilmore has argued, would be politically resolved by the carceral state.

The efforts of Braz and her comrades also fits within a longer trajectory of political struggle to challenge the bondmen and their fraternity. In the 1970s, Watts Congressman Augustus Hawkins tried to create some alternatives to the pro-cyclical nature of state and local budgets by further connecting them with the federal government. An early version of what would become the Humphrey-Hawkins Full Employment Act included a provision to create a “permanent, counter-cyclical grant program that will serve to stabilize State and local budgets during periods of recession and high unemployment.” In a sense, this could have been an automatic-stabilizer for state and local governments, thus leaving them less dependent on the capriciousness and high interest rates of the bond market during the times of greatest fiscal stress. Although this may not have fully euthanized the rentiers or altogether solved the conundrum of fiscal federalism, it could have undermined the power of the bondmen over urban policy. 

However, this section of the Humphrey-Hawkins bill was excised in subsequent versions of the bill after coming under attack from those who wanted to sustain the existent racial, economic, and power inequities. This opposition was framed in different languages. Notorious North Carolina Senator Jesse Helms’s chosen economist cautioned against such a program for states and municipalities, which in his mind would enable “federal governmental domination”. J. Charles Partee, on behalf of the Federal Reserve, opposed this provision due to concerns about“ [t]he inflationary implications of…stabiliz[ing] State and local government budgets over the cycle.” Readers will surely be familiar with the relationship between white supremacy and states’ rights rhetoric, but the connection with inflation may be less clear. During this period, fears of “inflationary bias” were often deployed to uphold the status quo—in defense of elite governance and central bank independence; on the heels of the victories of the civil rights movement, it also merged with trepidations from some of too much democracy.  Jenkins emphasizes one of the concrete ways this played out: the municipal bondmen themselves thought their power depended on preventing federalization of the municipal bond market. 

Indeed, the role of the federal government haunts Jenkin’s book. One of the shadow stories of Bonds of Inequality is how the Federal Reserve’s interest rate hikes roiled the municipal bond market even before the 1979 Volcker Shock. In 1956, it was the Fed’s high interest rates that upended San Francisco bond issues and would facilitate the 1957-58 recession, a key instance of what I’ve written about elsewhere as Jim Crow monetary policy. A decade later, the Fed’s interest rates hikes enabled the 1966 credit crunch—something Jenkins reveals to be of critical importance in the history of both San Francisco and the time horizons of a financialized economy—pushing an increase in short-term over long-term debt issues. All this is before the wrath of the 1970s high interest rates. Jenkins shows how just as Black people were winning political power, bondmen and bankers were making it more difficult to utilize. 

The battle at the federal level continues today. In the past year, as the pandemic-induced recession put state and local budgets in dire straits, Congress gave the Fed a brief opportunity to alleviate their fiscal stress by creating a Municipal Liquidity Facility (MLF). As Jenkins highlighted at the time, the Fed’s new credit facility could “undo decades of damage.” But instead, the Fed—along with Treasury Secretary Mnuchin—did basically what the municipal bond fraternity would have advised: they backstopped and stabilized—but did not repair—the municipal bond market. To run their new credit facility, the Fed hired a member of that same fraternity, one whose prior contribution to public service was helping create the infamous Puerto Rico Oversight, Management, and Economic Stability Act, and its fiscal control board—dubbed by many Puerto Ricans, “la junta.” Then, when the Fed did allow struggling municipalities to borrow from the facility, they only did so at high, “penalty rates.” In the words of the Center for Popular Democracy’s Fed Up campaign: the MLF was “aiming to underachieve.” Or, as Cong. Ayanna Pressley and I argued in July 2020, “It is unconscionable that as cities and states battle these dual public health and economic crises, relief would be conditioned on accepting punitive interest rates.” 

Despite its squandered promise, the MLF also provided a glimpse of what types of public investments are possible and how they can be financed beyond narrow frames of 1:1 redistribution. It is no accident that two of the most important books on racial capitalism in the 20th and 21st Century—The Bonds of Inequality and Ruth Wilson Gilmore’s Golden Gulag—make public debt a critical feature. As Gilmore emphasizes, “the employment of working people’s future surplus (what repayment of public debt is) is a political decision… The problem is not, then, debt, but rather the uses to which public borrowing is put.” By documenting how public debt produced our present nightmare, Jenkins and Gilmore also allow us to dream about its alternative uses; how we may use public money to attempt to mend the ills of our era, to create what anthropologist Hannah Appel has called reparative public goodseducation, housing, healthcare, and jobs for all.

David Stein is a UC President’s Postdoctoral Fellow in the Department of African American Studies at UCLA and author of the forthcoming book, Fearing Inflation, Inflating Fears: The Civil Rights Struggle for Full Employment and the Rise of the Carceral State, 1929-1986

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N. J. Ramos, The Myth of Fair Share/Equal Share Bond Projects

August 12, 2021

N. J. Ramos, Drexel University

Destin Jenkins’s focus on municipal bond financing in The Bonds of Inequality contributes to a growing field of literature demonstrating how monetary and financial policy play a significant role in reinforcing racial inequality. Jenkins shows that municipal over-reliance on bonds produced two limits. First, he shows how politicians, allied with the bond industry, limited the federal government’s role in lending money to cities so that the private bond market became the only suitable tool for politicians to address urban crisis. Second, he highlights how politicians largely limited bond projects to benefit white neighborhoods and middle class and affluent interests. Jenkins suggests these limits eventually not only led city leaders to develop an addiction to the bond market but that their dependency also drove them to invest deeper into whiteness despite the fact that most cities were now populated with larger numbers of people of color.[1]

This short essay extends Jenkins’s arguments to cities where Black municipal leadership played a major role in city politics by the 1960s and where city leaders raised bond money for projects with the explicit mission to give Black residents the benefit of infrastructure built elsewhere. San Francisco, the main object of Jenkins’s study, did not have a Black mayor until the 1990s and consistently passed up bonded projects meant to furnish Black residents the benefit of infrastructure built elsewhere. I thus offer a brief study of San Francisco’s southern neighbor, Los Angeles, in hopes of demonstrating how Black political leaders were also susceptible to governing under the logics of what Jenkins calls “bondholder supremacy.”[2] An investigation of Los Angeles also affords a moment to assess a bonded project that sought to match the quality of healthcare and hospitals in white neighborhoods by building a Black-led public hospital attached to a private medical school, called King-Drew Medical Center (King-Drew), constructed as a response to the 1965 Watts Uprisings.  Although officials managed to theoretically match some of the critical health resources found in white neighborhoods in a Black neighborhood through King-Drew, I will show how the hospital’s purpose ended up servicing whiteness and white real estate outside of Black districts in similar ways to the bonded projects in Jenkins’s study.

Extending Jenkins’s analysis to include Black political leaders and Black bonded projects compels us to re-think the wisdom that political representation and the appearance of institutions and practices associated with whiteness and privilege, such as homeownership and hospital access, in Black communities makes Black and white neighborhoods equal. In fact, as Keeanga-Yamahtta Taylor argues, although post-1965 home loans for Black homeowners in the inner-city achieved a semblance of white homeownership in urban neighborhoods, that semblance was superficial.  According to Taylor, extractive and exploitative outcomes hidden in new predatory financial terms and objectives often undermined real racial equity.[3]

Indeed, the separate-but-equal doctrine of Jim Crow’s revival through post 1960s financial and monetary policy did not create equality but simply turned the racially-differentiated spatial containment of laborers Du Bois once referred to as the “real estate” nature of U.S. race and capitalist relations into profit and development elsewhere.[4] If, as Nathan Connolly argues, that real estate is just “land turned into property for the sake of further capital investment,” then the real estate nature of Jim Crow segregation has consistently, “served as one of the chief vehicles for the development and continuance of anti-Black racism.”[5] Here, the persistence of racial inequality in spite of a semblance of bond equality underlines how a possessive investment in whiteness structures the phenomena of bond supremacy detailed in Jenkins’ study.[6]

According to Jenkins, municipal leaders across the United States from the 1890s to 1966 found it relatively easy to borrow and pay back loans to build infrastructure to facilitate both population and economic growth based on low interest rates and generous repayment terms. Naming this era as a period of “infrastructural investment in whiteness,” Jenkins argues that municipal officials used the power of the referendum to improve infrastructure and services in already existing white neighborhoods or invested in new areas to make land suitable for white settlement. Such bonds also tended to be voter approved, suggesting voters passed bonds with the idea that public subsidies would secure the territorialization of whiteness in ever larger cities and suburbs to benefit white citizens and lubricate free market relations in them. For example, public hospital bond campaigns before 1966 in Los Angeles rallied voters to support referenda based on the idea that each measure would care for “pioneer” white migrants, quarantine contagious “aliens,” secure higher white birth rates, and train and educate white doctors who would eventually care for white patients in profitable suburban hospitals. This unidirectional flow of capital accounts for the neglect and deterioration of infrastructure, lack of stable and sustainable employment, and eventual dependency on welfare programs seen in segregated real estate associated with people of color.

The compulsory nature of bonded debt eventually drew city leaders and voters to navigate bond decisions not on the merits of desire, will, and needs of urban residents alone but on the interests of mostly white male bondholders who often lived elsewhere. The absence of financing public projects through other means coupled with diminished tax bases, anti-tax movements, and inner-city rioting/rebellion pushed political leaders deeper into the hands of bondholders who took advantage of higher interest rates through short-term repayment plans and through their refusal to buy bonds that expanded welfare and improved infrastructure and services in neighborhoods of color. Despite such unfavorable terms, Jenkins highlights how bond addiction led city leaders to increasingly exploit legal loopholes to fund bonded projects not approved by voters. Their bond dependency also led leaders to green-light only plans that met the investment preferences of bondholders in order to improve their chances of bondholder purchase.

Driven by fear of meeting the same fate as Detroit and St. Louis, San Francisco’s leaders borrowed at rates and terms so high and short that public projects designed to avoid urban crisis, like public housing, ended up costing taxpayers more money than projects of similar scope and purpose a generation before. Concern over the prospect of a bankruptcy like New York’s additionally drove municipalities to invest mostly in projects that claimed to pay for themselves. Not only did municipalities like San Francisco end up dedicating a higher portion share of so-called public housing units to market rate housing to service debt more quickly but they also began limiting projects to “user fee” and purportedly “revenue generating” projects such as stadiums, toll bridges, toll highways, and parking garages that ultimately serviced the leisure and comfort needs of middle class and affluent white citizens. The combined effect illustrates how white supremacy in the form of “bond supremacy” worked to build cities that consistently put the wants and needs of the white population, including wealthy male bondholders, first. In essence, bonded projects built amenities for white real estate before 1966 and continued to service white citizens through projects that kept the city as a destination for affluent and middle class leisure while aiding their return to cities as gentrifiers and easing their commutes to and from suburbs after 1966.

The 1965 Watts Uprisings marks a watershed moment for Jenkins’s study because it signaled the turn from one form of infrastructural investment in whiteness to another. A closer look at the 1965 Watts Uprisings, however, shows that it produced a bonded project outside of the normative boundaries outlined by Jenkins. Just ten months after the riots, the Los Angeles County Supervisors and Black civic and medical leaders attempted to float a bond measure to build a public hospital in Watts in order to fulfill one of several McCone Commission riot remediation recommendations. When the referendum failed to pass, the Supervisors created a Joint Powers Authority (JPA) with the City of Los Angeles that raised bond money without voter approval. The product of that JPA agreement between the City and the County was King-Drew, planned and constructed after 1966 and eventually opened in 1972.

That the hospital bonds were pushed by municipal leaders and successfully sold to bondholders shows that some public projects firmly associated with welfare dependency today held a different meaning in the years immediately following the Civil Rights Act (1963) and President Johnson’s signature antipoverty and healthcare legislations in 1965. In the nineteenth century, bonds to build a public hospital system helped further secure the theft of Indigenous land for white settlement; in the twentieth century, those bonds helped transition white Midwestern and Southern migrants unaccustomed to healthcare services to regular hospital care. By the 1960s, Los Angeles’s public hospitals and the racially unequal distribution of New Deal, GI, and Hill-Burton programs helped lift white citizens into the middle class and augured their transition to free market healthcare as they migrated to suburbs. Many Black newcomers to Los Angeles, however, found themselves in crowded districts with neither public hospitals nor sufficient private hospitals. In fact, a post-riot report by the California Hospital Association found that Watts had 0 out of 735 hospital beds deemed appropriate for a hospital district of similar size.

The role that Los Angeles’s public hospitals played in developing the region’s profitable hospital industry inspired civic and medical leaders to consider how President Johnson’s Great Society, anti-poverty, and Medicare/Medicaid laws could extend the benefits of New Deal liberalism to the Black community. In the case of King-Drew, public officials argued the hospital could be used as an economic engine to change the neighborhood’s character from a welfare dependent neighborhood to a self-sustaining community. Medicare and Medicaid provided hospitals in poor neighborhoods with overnight cashflow and opened public hospitals to the possibility of billing paying patients. As part of a “community action program” aligned with the objectives of the Office of Equal Opportunity, King-Drew’s leaders hoped training and employment opportunities via the hospital’s plant, medical school, and allied health education programs would change the patient mix such that it would eventually produce an “independent” community hospital that would be public in name only.

In this way, the hospital’s original “master plan” was not to purvey healthcare per se but to help the Black community achieve universal wage labor participation and health coverage via the free market. As strange as it may seem now, this original plan intended the hospital to function similarly to other “revenue-generating” bonded construction projects traced in Jenkins’s book. According to local Black physician, Dr. Hubert Hemsley, the hospital was “one of the grandest schemes in medicine.”[7] Its program managed to maintain support by both President Johnson’s and Nixon’s administrations, particularly when the latter heavily rhetorically invested in “black capitalism.”[8] Although federal officials held great interest in the project, the irony of all anti-poverty era programs, as Jenkins points out, is that they required municipalities to go into deeper debt by turning to the bond market to raise the local portion of funds demanded by federal law.

Despite the hospital’s bold ambition, the undeniable weight of deindustrialization and widespread emergence of working poverty via worklessness, underemployment, and increased undocumented immigration in Watts caused the City and County of Los Angeles to reconsider King-Drew’s mission when it finally opened in 1972. By 1973, even its staunchest supporters, such as Black council member-turned-mayor Tom Bradley, no longer believed King-Drew’s economic activity and job growth could absorb the scale of poverty unfolding in Watts. As Ruth Wilson Gilmore argues, however, governments stuck with infrastructure built to function within older labor-capital arrangements found themselves either eliminating “surplus state capacity” or re-purposing it to fit the needs of new emerging labor-capital arrangements.[9]

Intimately knowledgeable about King-Drew’s shortcomings and not wanting to shut it down barely after opening, Bradley sought to re-absorb the hospital into a new comprehensive urban re-vitalization plan to globalize Los Angeles’s economy by expanding office space in a new financial district downtown and reviving a nearby garment, toy, light manufacturing and warehousing district that mimicked the labor conditions found in Mexico, India, and China.  Instead of making the city’s Black and Brown districts “self-sufficient,” Bradley took advantage of the presence of King-Drew and Los Angeles County General Hospital in nearby South and East Los Angeles to make the economic health of these districts dependent on the region’s new labor-capital relationships being mounted downtown. The success of a revitalized downtown, made possible by the flexibility of labor in Black and Brown neighborhoods, would, in Bradley’s opinion, keep the entire city and its white neighborhoods from deterioration.

Thus, while the County’s public hospitals could not furnish jobs at the scale leaders originally intended, Bradley understood they could furnish healthcare for the City’s working poor in ways that allowed emerging financial interests to benefit. The proximity of public healthcare to downtown allowed Bradley to advertise the region’s nearby cheap labor pool as an asset to a finite set of finance, insurance, and real estate firms searching to cut “overhead” office costs. As many scholars point out, new janitorial firms in Bradley’s financial district took full advantage of the region’s welfare and social service programs by offering office tenants subcontracted cleaning services staffed by lower-paid workers reliant on County healthcare.[10] These services were once provided by in-house unionized janitors with healthcare benefits.

Low wage work in the financial district and garment district also favored the employment of mostly Black and undocumented female workers. To maximize this labor pool, the County worked with the City to construct huge publics clinics close to downtown to serve women on welfare according to new federal standards that aimed to transition them off public assistance through a new welfare policy of working motherhood that differed from the widowed mothers welfare policy of the early twentieth century. This antagonistic relationship helped feed Black, Latinx, and undocumented women into the janitorial, garment, and service sector jobs in a “revitalized” downtown.

More than feeding the needs of downtown office building and the garment industry interests, Los Angeles’s bonded hospital infrastructure also serviced the needs of profitable private hospitals elsewhere in the region. Shortly after opening King-Drew, the County “regionalized” its public health infrastructure into “catchment” districts aimed at evenly dividing and assigning equal sums of non-paying patients to each of its County hospitals. Such a plan tacitly encouraged for-profit and nominally non-profit hospitals in outlying neighborhoods to “dump” poor patients into the County system in ways that protected their profitability.

In this way, although Los Angeles’s public hospitals did not appear to directly service the comfort, taste, and needs of bondholders and white affluent and middle class citizens in the same ways that bonded stadiums, parking garages, and toll bridges did, they supported whiteness and bondholder interests by helping to drive down wages and benefits for low wage workers already in distress. As some of my other research has shown, municipal leaders knew its re-zoning plans and recalibration of health and human service aims would lead to deeper forms of suffering, states of neglect, and even more dehumanizing living and health conditions.[11]Knowing this explains why deeper investments in policing and prisons were believed necessary as accompaniments to these plans. If this is the case, the 1992 Uprisings were as much of an anticipated feature of Los Angeles’s labor-capital restructuring as its hosting of the 1984 Olympics.

Taken in sum, whether we consider bonds in the hands of white politicians and bondholders or bonds in the hands of Black politicians ostensibly for use in Black neighborhoods, the seemingly intractable quality of anti-Black racism in private bond financing suggests that it is an inherently flawed system:  the United States’s structures of domination created a fundamental bind between anti-blackness and finance.  That connection cannot be reformed by diversifying its stakeholders or portfolio of projects if its profit motive tends to favor the reproduction and enforcement of segregated real estate. If, then, an addiction to bond financing only leads to more dire forms of crisis, then Jenkins’s scholarship prompts us to re-consider the limits of federal intervention and segregated space outlined in the opening of this essay. We must redefine the federal government’s role in building local infrastructure and urban space to consider the diffusion of racially-differentiated and concentrated poverty through programs that affirmatively move society to racial integration at the neighborhood level.

– – –

[1] Destin Jenkins, The Bonds of Inequality: Debt and the Making of the American City (Chicago: University of Chicago Press, 2021).

[2] Jenkins, The Bonds of Inequality, 18.

[3] Keeanga-Yamahtta Taylor, Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership (Chapel Hill: University of North Carolina Press, 2019).

[4] WEB Du Bois, Black Reconstruction in America, 1860-1880 (New York: Harcourt, Bruce and Company,  1935. Reprint, New York: The Free Press, 1998), 7. For a thorough examination of what Du Bois meant by the real estate nature of U.S. slavery relations (and its afterlives) see also Zach Sell,      Trouble of the World: Slavery and Empire in the Age of Capital (Chapel Hill: University of North Carolina Press, 2021), 15-36.

[5] Nathan Connolly, A World More Concrete: Real Estate and the Remaking of Jim Crow South Florida(Chicago: University of Chicago Press, 2014), 6.

[6] George Lipsitz, The Possessive Investment in Whiteness: How White People Profit from Identity Politics(Philadelphia: Temple University Press, 1998. Twentieth Anniversary Edition, 2018).

[7] Stanley Williford, “Doctors Fear King Hospital May Become Charity-Oriented.” Los Angeles Times, March 2, 1970, A1.

[8] Mehrsa Baradaran, The Color of Money: Black Banks and the Racial Wealth Gap (Cambridge: The Belknap Press of Harvard University Press, 2017).

[9] Ruth Wilson Gilmore, Golden Gulag: Prisons, Surplus, and Opposition in Globalizing California(Berkeley: University of California Press, 2007), 78-85.

[10] Edna Bonacich and Richard Appelbaum, Behind the Label: Inequality in the Los Angeles Apparel Industry (Berkeley: University of California Press, 2000); Ruth Milkman, LA Story: Immigrant Workers and the Future of the US Labor Movement (New York, Russel Sage Foundation, 2006).

[11] Nic John Ramos, “Poor Influences and Criminal Locations: Los Angeles’s Skid Row, Multicultural Identities, and Normal Homosexuality”      American Quarterly 72, no. 2 (June, 2019): 541-567.

Return to Destin Jenkins: The Bonds of Inequality symposium prompt.

Race and Money

Race and Money

Prompt for Discussion

Contributors: Mehrsa Baradaran, Michael O’Malley, Michael Ralph, David M. P. Freund, Destin Jenkins, Peter Hudson,  K-Sue Park

In several historic moments of banking or monetary reform, issues of race were inextricably tied to issues of money. The legacy of institutional segregation continues today. More crucially, the history of money, credit, and banking is implicated in ongoing exclusion and exploitation of vulnerable communities.

Scholars in several fields have explored how the institution of enslavement has shaped American capitalism, monetary debates, credit markets, and banking. Enslavement and its long shadow caused stark and ongoing wealth distortion. The Constitution marked slaves as “articles of commerce” and financial ledgers tracked “property in man” as assets, credit, debt, and monetary value. Between 1820 and the Civil War, banks across the south issued notes with images of slaves printed on the money. The Union won the bloody ground battle thanks to war generals Grant and Sherman, but it also, and perhaps more importantly won the currency war thanks to President Lincoln, Treasury Secretary Salmon P. Chase, and the Supreme Court of the United States. Lincoln’s “greenbacks,” backed by the full faith and credit of the US Treasury (but not backed by gold) enabled the Union victory. In turn, the success of the Union army fortified the new currency. The success of the new fiat currency and the Union soldiers were inextricably linked.

The war over slavery was also a war over the future of the economy, the nature of property rights, and the essentiality of value. By issuing fiat currency, Lincoln opened up a debate about how elastic the money supply might be. Fiat money transparently based money’s worth on the federal government’s determination to take it for value. As Keynes said of legal tender—”the state claimed the right not only to enforce the dictionary but to write it!” Scholars in this roundtable will discuss how those crucial debates affected modern theories about money and value.

The scholars in this roundtable will also discuss the ongoing effects of slavery, Jim Crow, housing segregation, and employment discrimination on the modern economy. In America, each rung on the ladder toward prosperity consisted of bank credit—even more so in the 20th century when homeownership became synonymous with both mortgage credit and prosperity. For Blacks and others, the path toward wealth was closed. It was closed by segregation, government policies, and by realities of finance. In this roundtable, we have invited pre-eminent scholars whose work illuminates core issues at the intersection of money and race. We have asked them to respond to a few questions: How did slavery shape the US monetary, credit, and banking system? How did the economic system and monetary forms shape racial dynamics? What aspects of the modern economic system are influenced by America’s racial history? How has America’s racial history affected theories of capital, money, or debt? What do you think current debates about the history of capitalism reveal about the future of the field?


September 25, 2020
How Did Redlining Make Money?
K-Sue Park, Georgetown Law

July 28, 2020
Currency, Colonialism, and Monetary History from Below
Peter James Hudson, University of California, Los Angeles

July 17, 2020
Finance and Violence
Michael Ralph, New York University

June 15, 2020
Debt and the Underdevelopment of Black America
Destin Jenkins, University of Chicago

June 8, 2020
Money is productive, and racist institutions create money
David M. P. Freund, University of Maryland

May 28, 2020
Money and the Limits to Self Making
Michael O’Malley, George Mason University

May 19, 2020
How the Right Used Free Market Capitalism against the Civil Rights Movement
Mehrsa Baradaran, University of California Irvine

D. Jenkins, Debt and the Underdevelopment of Black America

June 15, 2020

Destin Jenkins, University of Chicago

In his 1983 classic, How Capitalism Underdeveloped Black America, Manning Marable asked, “What is development, and what is its structural relationship to underdevelopment?” Marable rejected liberal replies as well as the ontological approach to seeing development as a condition of the West, and underdevelopment as that of the non-West. For Marable, underdevelopment was “not the absence of development; it is the inevitable product of an oppressed population’s integration” into what we might call racial capitalism.[1]

But what was it about capitalism that, in actual terms, underdeveloped Black America? Marable identified four vectors. For starters, the “repressive and bestial force” of slaveholders, judges, juries, prison wardens and police preserved and reproduced “fraud and force,” the essential dynamics of American capitalism. Second, capitalism was the culprit because it generated structural exclusion and discrimination, at one level, and the select integration of the “Black petty bourgeoisie” into the system, at another level. Third, and relatedly, capitalism was to blame because of its ideological tentacles. Black elites theorized that the problem of underdevelopment was not capitalism per se, but that white capitalists hoarded all the wealth. Finally, Marable argued that the very foundations of capitalism—patriarchy and racism—led to the under-compensation of black women in ways that generated “higher profits for white capitalists.”[2]

I want to add to Marable’s thesis. But rather than focus on violence, intra-racial class relations, the theory of black capitalism, or capitalism’s patriarchal and racist foundations as the agentic force, I want to emphasize the role of municipal debt in the underdevelopment of Black America. Marable is surprisingly quiet on the matter of finance in general, and credit-debt in particular. He did not think beyond consumer debt and interpersonal lending arrangements.[3] Because Marable did not consider credit-debt as central to capitalism, it had no bearing on his tragic story of underdevelopment.

Across distinct traditions, it is well established that credit and debt, as much as investment capital and profitability over time, are key dynamics of capitalism. Influenced by Joseph Schumpeter, German historian Jürgen Kocka has recently commented that, “the entrepreneur carrying out innovations requires capital in advance, which he contracts as debt in order to pay it back with interest later if the project is successful.”[4] Whereas Schumpeter emphasized the relationship between credit and innovation, Karl Marx considered how lending to state governments allowed a “class of state creditors” to rechannel their claims on future public revenues into other profitable investments.[5] Clearly, then, credit-debt is key to capitalism’s dynamism. And, from the seventeenth century onward, this crucial dyad has been articulated through race.[6]

Scholars have not yet focused on the relationship between race and municipal debt, one of the principal means through which US state and local governments finance public infrastructure. And because they have rarely directed their sights to the municipal bond market—a politically constructed network linking government borrowers, individual and institutional investors, and sellers of financial information—much less on the role that race plays in structuring assessments of creditworthiness, they have missed how bond ratings and the private bond market more generally furthered illicit white racial advantages.

The organizers of this roundtable have asked us to consider how monetary forms shape racial dynamics. To that end, and in keeping with Manning Marable’s insistence that development and underdevelopment are mutually constitutive processes, I want to spend what space I have left sketching out how municipal debt contributed to the development of white America and underdevelopment of Black America during the mid-twentieth century.

Housing and labor market advantages for white Americans were structured through New Deal policy and throughout the New Deal Era. The story of federal efforts to revive the US housing market during the Great Depression, and how those efforts were circumscribed by racism, has been adequately told. Federal mortgage guarantees drew white Americans to the suburbs and triggered the divestment of mortgage capital from cities around the country.[7] Yet, federal officials advertised postwar suburbanization as a product of the free market, erasing the government guarantees that made the investments possible.[8]

The transformation of the Cotton Belt into the Sunbelt occurred through the defeat of left Keynesianism (and its program of full employment through federal spending on social welfare) and the domestic implementation of military Keynesianism. Federal support proved crucial to the emergence of the military industrial complex, which meant, in turn, high salaries for white, white-collar suburbanites in places like Orange County, California.[9] And despite the successful efforts of industrial unions to organize across racial and ethnic boundaries, there were far too many instances of local craft unions working to exclude black Americans. White working-class advantages came in the form of union benefits and high wages that might also allow for the suburban dream.  

The postwar baby boom and metropolitan development fueled greater demands for debt-financed infrastructure in the suburbs. In 1955, one-third of state and local government expenditures were financed out of current tax receipts. “The remainder is financed by borrowing,” in the words of one student of municipal debt.[10] The municipal bond market had seen 3,300 new bond issues totaling $1.2 billion in 1946. Almost twenty years later state and local governments nearly doubled the number of bond issues, raising $11.1 billion.[11]

Municipal credit was transformed into segregated infrastructure. The carbon copy, assembly-line production of identical homes was often the subject of discussion, but the racially segregated Levittowns across the country depended on debt-financed sewage treatment and water systems to make upscale homes worth the price. To reach fast food chains along and just off the interstates cutting across America required new and improved side streets. Indeed, what good was a Buick Super State Wagon, large enough to fit a family of six, golf bags, and fishing equipment, if the roads were full of potholes and parks and playgrounds left dilapidated?


What’s more, racially structured housing and labor market advantages were foundational to the strong borrowing reputations of suburban communities. There were many variables to which credit rating analysts looked to determine a municipal bond rating. But per capita income was high on the list. “The growth of debt has been almost matched by the growth in income and so sustenance of a high rating for state and local government obligations is reasonable—if income continues to be high.”[12]

To be clear, these were illicit racial advantages that furthered the development of white America. The ‘illicit’ is often used to characterize the behaviors and income generating practices of those excluded from, and locked out of, formal labor and housing opportunities. But political philosopher Charles W. Mills inspires for me a very different usage of the term.[13] Indeed, illicit advantages can be produced through formal markets just the same. In this case, the illicit is that which people lay claim principally because of their whiteness; through no work of their own but because of the particular ‘work’ that whiteness does.

The advantages perpetuated by the ‘doubling’ mechanism of both the US housing- and municipal bond markets were plenty. Not only did white flight benefit homeowners through increased equity, but it also created a more lucrative bond market that could fund their public resources. White middle-class Americans benefited from community resources provided by the bond market, while white upper-class bondholders collected tax-exempt interest income on their investments. Investment in public schools for white children could and did unlock a world of possibilities. Incurring debt to invest in racially segregated suburban schools not only meant increased opportunities for social mobility and improved collective life chances. It also meant, in effect, “expanding the real freedoms that (white) people enjoy,” to quote a notable economist.[14]

It is not true that postwar cities were completely divested. The flight of white Americans who still worked or shopped in the downtowns of urban America mandated not only new highways, but also parking facilities and metropolitan transportation systems. Towering above the anonymous crowds moving through downtown America were garish signs selling some product and experience, and fashionable cast-iron street lamps. Bond financiers profited from white flight and the desperate pursuit of cities to attract white middle-class Americans as workers and consumers. And it was too often the case that black people living in Chicago, San Francisco, among other cities, serviced municipal debt without getting much in return. 

Nearly twenty-five years ago historian Thomas J. Sugrue underscored “two of the most important, interrelated, and unresolved problems in American history: that capitalism generates economic inequality and that African Americans have disproportionately borne the impact of that inequality.”[15] What’s more, how is it that, during a moment of relatively low interest rates (roughly between 1946 and 1965), when demand for municipal bonds was relatively strong among institutional investors, and when borrowers issued a plethora of new debt, black children across the nation still continued to attend dilapidated schools? How is it that they either had poor access to parks or played inside poorly maintained spaces?

I do not have the space to answer these admittedly large questions. And doing so requires more localized research. But I take the following as my starting point for addressing this story of underdevelopment: Lenders did not extend credit to municipal borrowers, and borrowers did not transform credit into public infrastructure without already-existing relations of racial inequality. This implies that to separate yields, interest rates, and credit ratings from shifting racial regimes is not only ahistorical. It is also to buttress the ideological fiction that the market is insulated from race and responsible principally to price signals, supply and demand. My starting point also implies that during the golden age of American capitalism and low interest rates, investment was less about costs than about who or what was rendered worthy of debt, determinations mediated by racial logics.

Across a wide swath of domains, the attempt to code some activities as ‘economic,’ and thus more central than practices coded as ‘cultural,’ has proven remarkably successful. For their part, bond rating analysts participated by insisting that their ratings were reflections of objective economic conditions. Whatever inequality generated through municipal debt or the municipal bond market was the upshot of depoliticized and deracialized processes, they claimed. To illustrate the slippage between their explicit avowals and what ratings actually represented, I want to draw from a Congressional hearing held in the midst of the credit crunch and broader concerns over the urban fiscal crisis of the late 1960s.[16]  

Take Moody’s Investors Service, Inc. and Standard and Poor’s (S&P) for example. Founded in 1909 to assess the creditworthiness of corporations, ten years later Moody’s broadened its scope to rate municipal bonds.[17] By the late ‘60s the firm published annual data on some 15,000 political subdivisions and rated bonds issued in amounts $600,000 and above.[18] Letter grades standardized the variety among the thousands of issuers of municipal debt, which enabled bankers to purchase bonds and resell these securities to investors who never set foot in the issuing community. Standard Statistics Company, Inc. and Poor’s Publishing Company merged in 1941 to form Standard & Poor’s. In 1949, the newly consolidated firm began publishing Bond Outlook, a weekly listing of municipal bond ratings. S&P relied on subscriptions and charged municipal borrowers a fee to have its bonds rated.[19]

S&P’s Brenton Harries and Moody’s Robert C. Riehle described a similar ratings process. With federal securities as “the benchmark from which our ratings stem,” S&P attempted to “measure the relative investment quality of one municipal obligation to another.”[20] Harries remarked that the procedure began with “a history of the immediate prior years.” The firm looked to key indicators such as net debt to assessed valuation ratio, overlapping debt, and “economic” and “socioeconomic” factors such as population, industry, tax base, and welfare costs. After analyzing the past and present, S&P analysts postulated on what might happen in the future: how did borrowers plan to sustain economic growth? What if growth stalled?[21] After analyzing similar audited information and a discussion of “impressions and recommendations” with the Moody’s Rating Committee, analysts voted in support or against the rating. Ratings were then “disseminated to the issuer” and published in various trade publications.[22] In the end, Robert C. Riehle explained that despite the usage of different methods by the various rating agencies, ratings depended “upon our individual philosophies at various points.”[23]

Historian Robert Self has persuasively shown how real estate developers, city planners, municipal officials, among others, often saw blight as an “economic problem” rather than “a symptom of inequality.”[24] Bond rating analysts went further to effectively elevate suburbs over cities. According to Riehle, “few, if any, of the nation’s older and larger cities have been without problems.” Cities were marked by “blight” and the suburbanization of the “young, vibrant middle-income group” had become a fact of urban America. At the same time, older cities could not escape “the influx of others, who through no fault of their own possess modest skills and limited earning capacity.”[25] It was one thing for cities to struggle with higher debt service charges as real estate tax revenue slackened. Perhaps most disconcerting, Riehle noted, was that suburbanization implied “the potential loss of an electorate with a desire for efficient, conservative, sophisticated government” to be filled, presumably, by voters who proposed the opposite: inefficient, fiscally liberal, and primitive government.[26] American cities were being made to pay for a postwar political economy in which they were structurally disadvantaged.

Just as African Americans were beginning to realize the early gains of the civil rights revolution, rating analysts offered recommendations that would only deepen the underdevelopment of Black America. Robert Riehle argued that while the problem of suburbanization was intractable, city officials were not without options. They could charge tuition to attend City College. They could increase water, sewer, and transit fees and fares.[27] One of the major demands of the black freedom struggle was greater access to a more expansive public—access to the public sector, public institutions, and public spaces. After all, racially segregated public institutions had been essential to the upward mobility of white middle-class Americans after the Second World War. But in the late 1960s—before the economic and fiscal crises of the 1970s—bond rating agencies were basically outlining a program of privatization. As the public sector became a crucial mechanism for black mobility, black Americans had the rug pulled out from under.

I want to conclude by returning to Manning Marable. Staring defiantly at the sharp teeth of Reaganism and Thatcherism, Marable declared, “The immediate task before the Black movement in this country is to chart a realistic program to abolish racist/capitalist underdevelopment.”[28] In the face of racial revanchism and the looting of public funds by corporate elites, the task remains just as urgent. And just as violence, black capitalism, and the nexus of patriarchy and white supremacy remain foundational to underdevelopment of Black America, so too are matters of credit-debt. Along with theorization, then, the task is to identify the pressure points, and to press hard.


[1] Manning Marable, How Capitalism Underdeveloped Black America: Problems in Race, Political Economy and Society (Boston, MA: South End Press, 1983), 2,7.

[2] Ibid., 2, 9-10, 19, 105-114, 134.

[3] Ibid., 151, 162.

[4] Jürgen Kocka, Capitalism: A Short History (Princeton University Press, 2016), 15.

[5] Karl Marx, Capital: A Critique of Political Economy, Volume III (Penguin Classics Reissue, 1993), 607.

[6] See, for instance, K-Sue Park, “Money, Mortgages, and the Conquest of America,” Law & Social Inquiry, 41.4 (Fall 2016):1006-1035; Edward Baptist, “Toxic Debt, Liar Loans, Collateralized and Securitized Human Beings, and the Panic of 1837,” in Capitalism Takes Command: The Social Transformation of Nineteenth-Century America, ed. Michael Zakim and Gary J. Kornblith (University of Chicago Press, 2011); David M.P. Freund, Colored Property: State Policy and White Racial Politics in Suburban America (University of Chicago Press, 2007).

[7] Robert O. Self, American Babylon: Race and the Struggle for Postwar Oakland (Princeton University Press, 2003), 19-20.

[8] David M.P. Freund, “Marketing the Free Market: State Intervention and the Politics of Prosperity in Metropolitan America,” in The New Suburban History, ed. Kevin M. Kruse and Thomas J. Sugrue (University of Chicago Press, 2006).

[9] Bruce J. Schulman, From Cotton Belt to Sunbelt: Federal Policy, Economic Development, and the Transformation of the South, 1938-1980 (Duke University Press, [1991] 1994); Fred Block, “Empire and Domestic Reform” Radical History Review, 45 (1989):98-123;  Lisa McGirr, Suburban Warriors: The Origins of the New American Right (Princeton University Press, 2001), 26-7.

[10] Roland I. Robinson, Postwar Market for State and Local Government Securities (Princeton University Press, 1960), 5-6, 40.

[11] Joint Economic Committee, Subcommittee on Economic Progress, “State and Local Public Facility Needs and Financing: Volume II,” 89th Cong., 2nd sess., December 1966, 8, 105-106.

[12] Robinson, Postwar Market for State and Local Government Securities, 65.

[13] Charles W. Mills, Black Rights/White Wrongs: The Critique of Racial Liberalism (Oxford University Press, 2017), xv, 125, 131.

[14] Amartya Sen, Development as Freedom (Penguin, Random House, 1999), 3-4.

[15] Thomas J. Sugrue, The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit (Princeton University Press, [1996] 2005), 5.

[16] For the credit crunch, see Greta R. Krippner, Capitalizing on Crisis: The Political Origins of the Rise of Finance (Cambridge, MA: Harvard University Press, 2011), 60-8; Louis Hyman, Debtor Nation: The History of America in Red Ink (Princeton University Press, 2011), 224; Monica Prasad, The Land of Too Much: American Abundance and the Paradox of Poverty (Cambridge, MA: Harvard University Press, 2012).

[17] Richard Sylla, “A Historical Primer on the Business of Credit Ratings,” in Ratings, Rating Agencies and the Global Financial System, ed. R.M. Levich, et.al. (Boston: Kluwer, 2002), 19.

[18] Statement of Robert C. Riehle in “Financial Municipal Facilities: Volume II,” Joint Economic Committee, Subcommittee on Economic Progress, 90th Cong., 2nd sess., July 9-11, 1968, 211-212.

[19] Statement of Brenton Harries in “Financial Municipal Facilities: Volume II,” 195; Testimony of Harries, “Financial Municipal Facilities: Volume II,” 272.

[20] Statement of Harries, Ibid., 195, 202.

[21] Testimony of Harries, Ibid., 192.

[22] Statement of Riehle, 214; Moody’s Investors Service, Inc., “Appendix B,” Ibid., 228-9.

[23] Testimony of Riehle, Ibid., 277.

[24] Self, American Babylon, 139-142.

[25] Statement of Riehle, “Financial Municipal Facilities: Volume II,” 240.

[26] Riehle, Ibid., 238, 246.

[27] Riehle, Ibid., 237-9.

[28] Marable, How Capitalism Underdeveloped Black America, 10.