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.