For your reference:
The New York City financial crisis
of the mid-1970s

(Based on an article in The Workers' Advocate, June 24, 1976)


. For over a year, New York City, the headquarters of the U.S. financial oligarchy, has been in the grips of a severe financial crisis. Since June of last year the city has been on the verge of bankruptcy. This crisis is a sharp manifestation of the overall deep crisis and decay of U.S. imperialism. The U.S. is in its worst (its sixth) economic crisis since World War II, a crisis which has become very deep and widespread. Since the fall of 1973 the crisis has spread to many areas of the U.S. monopoly capitalist economy, which has been racked with severe inflation of the dollar, the energy crisis in the winter of 1973-74, a severe over-production crisis in industry, the failure of several banks and companies and, most recently, the crisis in the finances of the public sector, particularly the governments at the state and local levels. The public sector has historically been expanded by the monopoly capitalists as a bulwark against total economic collapse. The fact that this sector, then, is in crisis plainly exposes that the U.S. monopoly capitalist system is thoroughly crisis-ridden and in rapid decay. The program of the finance capitalists in attempting to alleviate the financial crisis in New York City has been to attack the city workers and to shift the burden of their crisis onto the city workers, the oppressed nationalities, the students and the working people as a whole.

New York City government launches onslaught
against city workers and broad masses

. Since the onset of the crisis the capitalist government has launched many attacks on the livelihood of the New York city workers and broad masses in its effort to make the working people bear the brunt of the crisis. The city government has attacked the city workers' trade unions by unilaterally breaking the union contracts, declaring the city workers' wages frozen at the pre-June 1975 level and annulling scheduled wage increases. Furthermore, a 2.3% cut in take-home pay has been imposed by the city government decreasing its payments into the city workers' pension funds, while the workers' payments into them were increased. Some 46,000 city workers' jobs have been eliminated out of an original 300,000, both through attrition and direct layoffs, throwing tens of thousands of workers into the ranks of the unemployed. As well, the city has seized the city workers' pension funds and is using the workers' money to back the city's debts and to buy city bonds. All interest earned by these funds above 4% is being siphoned off as additional revenues for the city government. This last measure amounts to robbing over $100 million a year out of pension funds which are already in danger of running out in ten years.

. The remaining employed city workers have had their labor enormously speeded up. For instance, since June 1975 the number of teachers has been decreased by 20% -- only 44,000 out of 55,000 remain. As a consequence, class size has increased to between 45 and 60 students per class, and the teachers have a much heavier work-load. The sanitation workers have been put on smaller work crews and have higher collection quotas per crew. In the city hospitals the nursing staff has been reduced down to one nurse per ward. In the Parks Department, 3,713 workers now do the work formerly done by 6,107.

. There have been many cut-backs in areas of the city budget which are not so vital to the capitalists at this time. This is causing great hardship to the working masses. The cut-backs in the Education budget -- lay-offs of 11,000 teachers as well as the closing of several schools -- have severely affected elementary and high school education. The budget has been cut in the city university system (CUNY) -- a system including 20 colleges with a 1975-76 enrollment of some 270,000 students - and the burden of the crisis placed squarely on the students and their families. The budget cut and reorganization of the university system has meant an end to the open enrollment policy (where any high school graduate could enter the city university system), and the institution of an annual tuition fee of an estimated $750 lo $900 per year while until now there has been no tuition fee. It is estimated that enrollment in September 1976 will be reduced by at least 10,000 students from that of a year ago as a result of the budget cut. The health care budget has been cut. One hospital and whole wings of others have already been closed and plans have been made to close at least four more hospitals. Ambulance service has been cut. Out-patient schedules are running 4 months behind. Welfare and Medicaid coverage are being cut back, and plans have been proposed to remove a substantial number of people from the welfare rolls. Along with the lay-offs, wage freeze and cutbacks in various services, there has been a $550 million increase in city taxes since June 1975.

The masses resist the shifting of the crisis burden

. The city workers and masses have many times responded to these attacks on their living conditions with stiff resistance. The 10,000 sanitation workers, almost 3,000 of whom were among the 19,000 city workers laid-off last July 1, waged a militant strike struggle in response to these lay-offs and heavier work-loads. As well, many other city workers staged work slow-downs or called in sick to combat the layoffs. The city nurses have also struck the city. In September, the 55,000 city teachers waged a strike struggle in response to drastic elimination of teachers' jobs and attacks on working conditions such as increased class size, reduced sick leave, longer work week and so forth. Repeated demonstrations have taken place by students, faculty and workers opposing the undermining of the City University system as well as cut-backs in other areas.

Brief history of the cause and development of the crisis

. The New York City fiscal crisis broke out when the revenues extorted from the impoverished masses could no longer pay the finance capitalists their ever-increasing amounts of tribute, particularly the debt-service payments to the big banks. The New York City government greatly increased its spending throughout the 1960's -- more than doubling the total budget from 1965 to 1970 alone. The purpose of this was to develop government spending as an area from which the monopoly capitalists could extract maximum profits. This is done in several ways:

. At the same time as the city government was greatly increasing its spending, its tax base was eroding. That is, the total value which the city government taxes (income, property, sales, etc. ) was decreasing in relation to expenditures. The ever-growing impoverishment of the masses, an . inherent feature of capitalism, but stepped up in the last two years due to the burden of the present economic crisis, has made it difficult for the city government to extort ever-increasing tribute from them. The parasitism and decay of U.S, imperialism has been developed to an extreme degree in New York City, which is the headquarters of U.S. finance capital. The economic base of the city is characterized by a preponderance of service and finance. Over the last thirty years, the number of manufacturing jobs in the city has decreased by over 500,000, a drop of nearly 50% of the total. What industry there is in the city is in light manufacturing, principally garment and related sectors, and takes place in small shops which are especially susceptible to collapse in times of economic crisis. One eighth of the population has been forced onto welfare and there is a high rate of unemployment (officially 12.2% in Jan. '76). Also there has been a decline in population. In order to pay for its increasing expenditures the city has put a heavier and heavier tax burden on the masses (who are the most heavily taxed in the entire country) and has accumulated a massive indebtedness to the big banks -- a debt which now totals some $13 billion.

. From June of 1975 to the present, the New York City financial crisis has been extremely acute and there is still the possibility of bankruptcy. The city has been selling bonds to cover debt-service on other bonds for several years. New York City has sold large quantities of short-term notes (as opposed to long-term bonds). As a consequence, it has experienced repeated crises when it has found that needed cash is not in hand to meet the maturing of billions of dollars of short-term notes. As early as the latter part of 1974 the city was selling bonds at 91/2 % interest due to the high risk of the investment. Finally, in March 1975, the big banks refused any further credit to the city, preventing it from meeting its payments.

What is the "solution" of the finance capitalists?

. On June 10 of last year, the night before the city was to default, the Municipal Assistance Corporation was set up by the State Legislature. In September, another extra-governmental body, the Emergency Finance Control Board was established. These two bodies, which are made up directly of the big New York bankers, were set up to "solve" the city's fiscal crisis. Under conditions of crisis the financial oligarchy, in order to implement its program, threw out the existing government apparatus and superseded it with the establishment of these extra-ordinary bodies. This shows the illusory nature o£ the bourgeois "democratic" apparatus, which is kicked aside by finance capital at will. A look at the programs of these two bodies makes clear what the ''solution" of the finance capitalists is.

. The main points of the Municipal Assistance Corporation plan were:

. The Emergency Finance Control Board plan provided for:

. What is the essence of these programs and what are their consequences? Their program is to further increase the city's over-all indebtedness. This can only cause hardship and grief for the masses of people who must pay the millions of dollars of purely parasitic interest (as high as 11%) on the bonds to the financial oligarchs through heavier and heavier taxes. To "balance the budget through massive cut-backs" means to throw 46,000 city workers out of work, place heavier work loads on the remaining workers and cut their wages. It also means to impose great hardship on the masses by cutting various areas of the budget. Furthermore, the program guarantees full payment to the city's creditors in case of default by hoarding millions of tax dollars to insure their investments, thus insuring that finance capital's profits go unscathed by the crisis that they themselves and their social system brought about.

. The cause of the financial crisis in New York City is not "mismanagement", as the capitalists claim, but it is an inevitable outcome of the over-all crisis of the monopoly capitalist system. No amount of extra-governmental bodies with their criminal programs against the city workers and the working masses can avert such crises. The present financial crisis in New York City is an important part of the general crisis which is gripping the entire imperialist world. <>

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Last modified: December 20, 2008.