Globalization and the
Urban liberalism not only failed to deal adequately with the problems of homelessness and disorder; it also directly contributed to these problems. While federal funding cuts to cities, the deinstitutionalization of mentally ill people without offering them community-based care, and additional funding cuts at the state level were important factors in the deterioration of urban public spaces, local urban liberal administrations took concrete steps that exacerbated these problems rather than relieving them. By relying on an economic development program that favored finance, real estate, and corporate headquarters at the expense of manufacturing, and by cutting social services and failing to prop up the bottom of the labor and housing markets, they allowed the homelessness and disorder problem to spiral out of control.
New York Mayor Edward Koch responded to the homelessness crisis of the 1980s by using city money to build thousands of units of lowincome housing to try to alleviate the pressure on the city’s overflowing shelter system. He was praised for his plan to spend $5 billion over ten years to build housing, beginning in 1987.1 A closer inspection, however, reveals two major problems with this strategy. First, only 10 percent of the units over the life of the program were affordable enough for homeless people,2 and second, in the decade leading up to this point, Koch supported real estate development tax incentives that resulted in the loss of more than 100,000 units of low-cost SRO housing, at a cost of up to $238 million a year in lost taxes.3 In effect, he and Mayor Dinkins were spending $350 million a year to treat some of the symptoms of a subsidy to real estate developers costing $300 million a year. The net result was billions of dollars spent to house a small percentage of people made homeless by Koch’s own economic development policies.
At the center of this failure of urban liberalism was its reliance on a