#barry bluestone

Government relief to business has by no means been a monopoly of the federal government.  States and localities have joined the parade in record numbers.  Thus, the public was subjected to such spectacles as governors and prominent legislators from more than a dozen states making the pilgrimage to Michigan, hat (and wallet) in hand, to beg General Motors to locate its new assembly plant for Saturn automobiles in their jurisdiction (GM eventually chose Tennessee). Nowhere has government support for private business interests been more visible than in the subsidization of urban real estate development by municipalities.  In the last chapter, we saw that the country's major urban centers have been undergoing a commercial revitalization in response tot he need of global corporations and their suppliers for a new physical environment of office towers, convention facilities, restaurants, and hotels within which to carry on their trade.  The most formidable obstacle to the transformation of the urban environment into a space amenable to the needs of multinational corporations and their contractors, suppliers, and advisers (not to mention their employees, who are searching for safe and comfortable housing) was the social and physical structure of the existing city.  Downtown areas were either crowded or abandoned- often both, at different times of the day.  Sanitation was deteriorating.  Electricity was not completely reliable.  Pollution of the air and water was increasing.  Good housing was becoming more scarce, even as the slums were spreading over more of the inner city.  Municipal budgets were inadequate, and more and more cities faced potential bankruptcy. Making cities safe and physically suitable for the central activities of the multinational corporations became a major objective of what John Mollenkopf has aptly termed the 'growth coalitions' that began to emerge in one large American city after another during the 1970s.  Real-estate developers, leading  architectural firms, big banks and insurance companies, corporation executives, unions of construction workers, and a new breed of mayors who cast themselves as the true architects of the 'new city'- all worked together to raise the money and prepare the ground for the restructuring of the social and (as the city planners say) 'built' environment. This agenda was far too important to business to be held hostage to any ideological consistency.  The watchword of the era may have been laissez-faire, but urban redevelopment was too big a matter to be conducted without government assistance.  Thus, as they did for the military buildup, conservatives closed their eyes and jumped in to help business in a major way.

At the outset of the American mobilization for World War I, the administration of President Woodrow Wilson moved quickly to inject government planning into the economic process.  It began by creating no fewer than five thousand agencies staffed by 'dollar-a-year men,' primarily on paid leave from large corporations.  These agencies were in charge of diverting resources from production for domestic consumption to production for war.  After much experimentation, Wilson placed responsibility for production in the War Industries Board (WIB), under the direction of Bernard Baruch, who had amassed a large fortune in stock-market speculation and 'creative investment.'  Baruch, who was also called upon later by President Franklin Delano Roosevelt to help plan the government's response to the Great Depression, viewed his function as a conciliator among powerful organizations, particularly the large corporations.  The WIB held ultimate authority over production and had the power to seize and operate plants when industry refused to cooperate.  At the height of its power in late 1918, the Board and its associated business organizations directed seventy-three industries with seven thousand plants.  With the approval of Congress, Wilson nationalized the railroad industry in December 1917.  The following summer, the federal government took over the telephone and telegraph systems and placed them under the direction of the postmaster general.  The agricultural sector was also under government mandate during the war.  The Food Administration, headed by Herbert Hoover, bought and sold all foodstuffs for the Allies and achieved record wheat, hog, and sugar production by guaranteeing minimum prices to farmers.  What we know in retrospect is that, by almost every conceivable standard, planning worked during World War I. The planning during the war taught some industrialists an enduring lesson, generating within part of the business community a new enthusiasm for similar measures in peacetime.

Yet even if they manage somehow to get off the New Federalism bandwagon before becoming trapped by the contradictions of fiscal decentralization, the liberals' standard program of stabilization, regulation, and redistribution has been doomed by history. The expansion of international competition and the new technological breakthroughs that make rapid capital mobility possible have produced a set of conditions under which government can no longer coerce the private sector to cooperate in the regulatory process or to provide the necessary revenue for the provision of public goods and social redistribution. Unfortunately the ability to provide an adequate social safety net was impaired before the liberal policy could complete its task of delivering a cleaner, safer environment and ridding the nation of poverty. The liberals still want both a high degree of laissez faire and an adequate social wage- including many public goods. Unhappily, in an era of hypermobility, the two do not seem to mix very well