Is it still My Kind of Town? Chicago in the Age of Neo-Liberalism

By Matthew Dunn

                Chicago, the windy city, The Second City, Chi-town.  A place where the only thing bigger than the  skyscrapers are the dreams of its citizens from the traders in the pits, to the ballers on the courts. Creator of the of deep dish, the Chicago dog, and all kinds of magnificent meat.  Home of those lovable losers, The Chicago Cubs, the presently great Chicago Blackhawks, and of course Da Bears.  It gave us Michael Jordan, who not only won basketball championships, but forever cemented the relationship between business and sports.  Chicago gave us the Second City Comedy troupe, which spawned the careers of many of our great comedians like Bill Murray and Steven Colbert.  It allowed the rise of an African American woman, Oprah Winfrey, who was born into poverty to triumph over adversity and become one of the most successful media personalities ever.  And of course last but not least, Chicago gave rise to a small time community organizer, who would eventually become the most powerful person on the planet. 

                There is no doubt that Chicago has been a tremendous part of the American culture.  Besides these cultural phenomena, Chicago was also the birthplace of many of the most influential economic ideas.  Most of these came from The University of Chicago’s Department of Economics.  The Chicago School of Economics has long been considered one of the world’s best economic departments.  The faculty of the department have won more international awards for achievement in economics than any other university.[1]

                Along with the prestige of the university department, has come a general set of economic ideas.  Collectively these ideas make up much of what could be called free market fundamentalism, monetarism, or neoliberalism.  The ideas of neoliberalism could best be described in a quote by Milton Friedman, a Nobel Prize winner in economics, who taught at the University of Chicago:

The society that puts equality before freedom will end up with neither.  The society that puts freedom before equality will end up with a great measure of both.[2]

                Those who follow along with the neoliberal way of thinking believe that government causes almost all major economic problems.  This happens because governments try to contain or control the economic market.  Because of this neoliberal economists advocate for governments to de-politicize the economy. 

                Price Inflation is one of the major problems that neoliberal economists believe is caused by governments.  Neoliberal economists advocate for government to limit its actions so it can stop inflation.  Because governments have a tendency to spend more money than they take in, governments find themselves running deficits quite often.  Therefore because governments increase the supply of money, they are the main cause of inflation.  Neoliberal economists advocate that governments counter this by having government pass laws requiring governments to balance their budgets.[3]  In order to help them reach their goal of having a balanced budget, governments should also sell off assets, which private business could run at a profit.  This will help private business as well as helping government to unload costly assets.  Also, neoliberal economists recommend that governments loosen and end regulations on the market, in order to allow the market to reach its full potential.[4] [5]

                Since many of these ideas were formulated at the University of Chicago, it is only natural that they would have a great deal of influence on the city.  Since the 1800’s Chicago had been home to the Chicago Board of Trade, the world’s oldest futures and options exchange.  This exchange and the others that followed (such as the Chicago Mercantile Exchange) trade futures contracts on commodities such as eggs, meat, and grain.  These contracts are designed to reduce the amount of risk in price fluctuations for the suppliers of these commodities.  Traders who buy and sell these contracts can profit greatly or fail greatly, when they speculate on the contracts.  Free market economists from the University of Chicago saw these exchanges in the postwar United States as one of the last bastions of true free market capitalism. 

                In the 1960’s Leo Melamed became Chairman of the Chicago Mercantile Exchange.  Melamed was very interested in the ideas of free market capitalism and sought to expand the business of the exchange.  He believed that the exchange could make a great deal of profit trading futures in financial products such as currencies, stocks, and bonds.  Melamed discussed his ideas with Milton Friedman who went on to write a paper arguing for futures trading in the currency market.[6]  Friedman’s article and Melamed’s business savvy, worked and the exchange began trading futures based on financial products in the 1970’s.[7]  With trading in financial futures underway, the Chicago Mercantile Exchange expanded rapidly, and financial trading would create enormous fortunes in the city of Chicago in the following decades. 

                Soon after this in the 1980’s, Chicago would see the rise of it longest ever serving mayor, Richard M. Daley.  Daley is the son of the second longest serving mayor in Chicago history Richard J. Daley.  The elder Daley, was known as a tremendous power broker in the national Democratic Party, rumored to have rigged the Presidential Election in Chicago in 1960 to help John F. Kennedy become president.  However, once the younger Daley became mayor in the late 80s, his economic policies looked much more like a strong Republican’s rather than the party his father had been so influential in.  It seems as though he was strongly influenced by the economic ideas which emanated out of the prestigious university of his hometown. 

                Daley’s election was celebrated by the Chicago business community.  Daley was thought of as pro-business, which essentially meant that he supported neoliberal economic policies.  He laid off workers in city industries to cut government spending, supported renovations to bring in tourism and wealthy residents, and privatized city industries.  In one of his most famous moves, Daley privatized the city’s parking meters and gave a private company rights to the meters for 75 years.[8]  In addition to this, Daley along with Chicago Public Schools CEO Arne Duncan, pressed for more accountability in the schools, closed failing schools, and opened up more privately managed charter schools.[9] [10]

                Daley was able to win five terms as mayor in Chicago, serving even longer than his father did.  After his fifth term ended he decided not to run for another and Rahm Emmanuel, The White House Chief of Staff, succeeded him.  One of Emmanuel’s first jobs in politics was working on Daley’s campaign.[11]  Emmanuel won by a large margin in the mayoral election and has largely carried on Daley’s policies especially the one’s dealing with Chicago’s public schools. 

               

                So how has all of this free market policy worked out in Chicago?  Has it become an entrepreneur’s  paradise, that might have been imagined by economists at the University of Chicago?  Are the people of Chicago actively pursuing their own self interest, leading to a greater good?  For many of the residents of Chicago unfortunately the answer is no.

                Chicago in many ways can be seen as a failing city.  Descriptions of Chicago in recent business magazines use words like depressing and miserable in their headlines to describe the current state of affairs.  The unemployment rate and the rate of home foreclosure in Chicago are both well above the national average.  For those who are not employed, high sales taxes, long commute times, and the highest gas prices in the nation make for unpleasant travel conditions.[12]  For those without regular employment, coupled with a public transportation system that is perpetually underfunded, it compounds their already difficult situation.[13]  In addition to this, the parking meters, which were privatized under Daley, are now the most expensive in North America.[14]  Turns out privatization doesn’t always work out best for the consumer. 

                Chicago’s schools were reorganized in a neoliberal fashion under Daley as well.  However, this has not led Chicago’s schools to any kind of great improvement.  According to Northwestern University Chicago’s dropout rate is two points higher than the national average, and one out of every five male Chicagoans does not have a high school diploma.[15]  On the National Assessment of Educational Progress, tests that measure educational ability nationwide, Chicago’s test scores remained flat between 2003-2007, and high school performance continued to be very low.[16]  However, despite this, Mayor Emmanuel has continued to follow neoliberal policies in education, and is in the process of closing over fifty schools.[17]

                Although Chicago has had neoliberal policies drive their government actions for over 20 years, it has not helped with the city’s deficit.  The city has run deficits since 2001, and it doesn’t seem to be stopping anytime soon.  The budget deficit is predicted to continue increasing and may reach $800 million by 2014.[18]  With many public services already cut, and key assets sold off to private companies, one wonders where the city government will find the money for their debts. 

                Neoliberal economists believed that the power of the market combined with the reduction of the welfare state, would help African Americans improve their station in society.  Throughout his famous documentary “Free to Choose”, Milton Friedman showed many enterprising African Americans who were not taking government handouts and working hard to become part of the entrepreneurial and middle classes.  Chicago was a city that was much affected by segregation in the postwar era.  Martin Luther King Jr. moved to Chicago in 1966, in order to highlight the great amount of housing segregation which existed there.[19]  Has the power of the marketplace liberated African Americans from extreme poverty there?  Unfortunately it has not.  The average black person makes 45% of what whites make in Chicago.  The only city where the income disparity is worse between whites and blacks  in America is Dallas.[20]  In addition to this, segregation seems to continue on a great scale in Chicago.  The historically African America district of the South Side which has a population of 752,496, continues to be 93% African American.[21]

                Statistics such as these are abhorrent to many, but perhaps the most horrifying statistic about Chicago is the murder rate.  According to a recent investigative report, between 2003 and 2011 Chicago had 4,265 people murdered. This is death toll almost as high as the number of Americans killed in The Iraq War during the same time period.  In 2012, 512 people were killed.  This has led to some gang members nicknaming Chicago “Chiraq”.[22]  With murder rates as high as this, Chicago is one of the most violent cities in the nation. 

                In November of 2008, Barack Obama was elected President of the United States.  As a man who had worked his way up through Chicago politics, he had much to thank the city for.  When he first went to Washington, he brought Arne Duncan and Rahm Emmanuel along with him, to give them high level cabinet posts.  By appointing these two men to his cabinet, he showed that he was in favor of the policies that Chicago had followed in the decades before.  Frank Sinatra once sang in the famous song “My Kind of Town”, that Chicago was one town that won’t let you down.  Unfortunately for many of the residents of Chicago, the conditions have let down many, especially the most vulnerable populations.  If these neoliberal policies, many of which originated in Chicago, continue in the United States, much of the country will continue to be let down. 

               

               

               

               

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[1] University of Chicago Economic Department, http://economics.uchicago.edu/about/history.shtml.  (Accessed June 18, 2013). 

[2] Friedman, Milton.  Free To Choose: A Personal Statement.  Directed by Peter Robinson.  Arlington, Virginia, 1980. 

[3] Chang, Ha-Joon.  Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.  New York: Bloomsbury Press, 2008.  Location 3167. 

[4] Klein, Naomi.  The Shock Doctrine.  The Rise of Disaster Capitalism.  New York:  Picador, 2007.  Pgs 68-69. 

[5] These are no means the only ideas of neoliberal economists, just some of the major ones.  If you are interested in learning more about neoliberal economic theory any of the books or films mentioned in these footnotes can give you a great deal of information.

[6] Lambert, Emily.  The Futures:  The Rise of the Speculator and the Origins of the World’s Biggest Markets.  New York: Basic Books, 2010.  Pgs 80-82. 

[7] Harvey, David.  The Enigma of Capital and the Crises of Capitalism.  New York:  Oxford University Press, 2010.  Pg 262. 

[8] Moreci, Michael.  “Chicago: The Privatized City of the Future”.  http://www.huffingtonpost.com/michael-moreci/chicago-the-privatized-ci_b_187753.html.  (April 16, 2009).

[9] Kingsbury, Kathleen.  “Will Arne Duncan Shake Up America’s Schools?”.  http://www.time.com/time/nation/article/0,8599,1866783,00.html.  (December 16, 2008). 

[10] Mayor Daley put Chicago’s schools under mayoral control.  The superintendent’s of the Chicago Public Schools was redefined, and renamed the Chief Executive Officer.  This title implies a business leader, rather than a civic one. 

[11] Rahm Emmanuel Biography.  http://en.wikipedia.org/wiki/Rahm_Emanuel.  (Retrived June 17, 2013).

[12] Wile, Rob.  “25 Facts That Make Chicago The Most Depressing Big City in America”.  http://www.businessinsider.com/chicago-is-the-worst-american-city-2013-6#this-year-forbes-named-chicago-the-countrys-fourth-most-miserable-city-its-residents-suffer-from-long-commutes--1. (June 2, 2013).

[13] Moreci, Michael.  “Chicago: The Privatized City of the Future”.  http://www.huffingtonpost.com/michael-moreci/chicago-the-privatized-ci_b_187753.html.  (April 16, 2009).

[14] Abernathy, Samantha.  “Chicago Has North America’s Most Expensive Parking Meters”. http://chicagoist.com/2012/12/26/chicago_has_nations_most_expensive.php.  (December 26, 2012).

[15] Wile, Rob.  “25 Facts That Make Chicago The Most Depressing Big City in America”.  http://www.businessinsider.com/chicago-is-the-worst-american-city-2013-6#this-year-forbes-named-chicago-the-countrys-fourth-most-miserable-city-its-residents-suffer-from-long-commutes--1. (June 2, 2013).

[16] Ravitch, Diane.  The Death and Life of the Great American School System:  How Testing and Choice are Undermining Education.  New York:  Basic Books, 2010.  Pgs 158-159.

[17] Democracy Now.  “Chicago to Shutter 50 Public Schools: Is this Massive Closure an Experiment in Privatization?”  http://www.democracynow.org/2013/5/28/chicago_to_shutter_50_public_schools.  (May 28, 2013). 

[18] Jones, Tim.  “Chicago’s Budget Deficit Widens $50 Million to $635.7 Million”.  http://www.bloomberg.com/news/2011-07-29/chicago-s-budget-deficit-widens-50-million-to-635-7-million-mayor-says.html.  (July 29, 2011).

[19] Allen, Susie and Michael Drapa.  “When King Made History At UChicago”.  http://www.uchicago.edu/features/20120109_mlk/.  (Retrived June 18, 2013).

[20] Cottrell, Megan.  “Second City or Dead Last?  Income Apartheid in Chicago”.  http://www.chicagonow.com/chicago-muckrakers/2011/02/second-city-or-dead-last-income-apartheid-in-chicago/.  (February 28, 2011). 

[21] Demographic Information gained on Wikipedia’s article on the South Side of Chicago.  http://en.wikipedia.org/wiki/South_Side,_Chicago#Demographics.  (Retrived June 18, 2013).

[22] Morton, Thomas. “Chiraq”.  VICE produced by HBO.  Originally aired on June 9, 2013.  Statistics found on corresponding website, http://hbo.vice.com/episode-nine.