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Living in a Capitalist City With No Capital


Dedrick Asante‑Muhammad​ (@DedrickM) is the Chief of Membership, Policy and Equity at the National Community Reinvestment Coalition.

This post continues a joint symposium with our comrades at Just Money on Destin Jenkins’s The Bonds of Inequality. Expect new posts in this series to appear on Thursdays throughout the late summer and early fall.


Bonds of Inequality: Debt and the Making of the American City details the rise and fall of the municipal bond market as an economic engine for municipalities. Destin Jenkins, a Professor of History at Stanford, focuses on the development of San Francisco and its use of the municipal bond market, weaving that local story together with national repercussions. This first book by Jenkins convincingly argues how debt, though little understood, is consequential in shaping policy and the very cities we live in. It explains how the interests and worldviews of a financial elite manage to reproduce inequality in the name of infrastructure and economic development.

The book is divided into three main sections: The Rule of the Experts, The Paradox of Debt, and  Supremacy.

In “The Rule of the Experts,” we see how city finance officers in the 1940s had to manage the technical areas such as debt-service charges, annual rate of debt reduction, and trend of taxable valuation to participate in the municipal bond market. Yet, equally important, city finance officers had to “manage the social needs and political pressures that shaped and were shaped by shifting revenues, expenditures, taxes, and debt.”

As the municipal bond market grew, financial officers were tasked with raising funds for a city redesigned for a growing white American middle class and a white economic elite without raising taxes to the point that these same constituents rebelled. Utilizing a municipal bond market in the context of low-interest rates allowed for affordable payments on municipal debt that provided infrastructural development. This utilization of a municipal bond market to fund city development was not only affordable in terms of debt payments but profitable for the elite that purchased municipal bonds. As Jenkins describes, “The ability to collect tax-exempt interest income from municipal bonds at a time of high federal marginal tax rates was the primary attraction” for the wealthy bond purchaser. The tension of privatizing investment for city infrastructure and services through profit for the economic elite builds throughout the book. Jenkins describes how cities “have become dependent on financiers, rating agencies, and the bond market for their most fundamental responsibilities.” 

The transformation of a city from a concentration of industrial workers to a concentration of activities and sites for monied interest occurred early in San Francisco. Jenkins reviews how San Francisco built its economy on the elite white industries of finance, insurance, and real estate, transforming the city into a consumer playground for these elite white-dominated industries and other white professionals.

In Jenkins’ attempt to highlight the undemocratic nature of private financial markets, he leans toward exaggerating the level of democracy found in mid-twentieth-century government. Jenkins goes as far as calling American cities “paragons of democracy.” The patriarchy, white supremacy, and overall elitism described in Bonds of Inequality were not unique to the bond market. These discriminatory characteristics derive from the foundation of our political economy and our “democratic” constitution. Yet, Jenkins’ analysis of the way that the undemocratic nature of the bond market strengthened the undemocratic aspects of our political economy is revealing.   

Though much of the narrative in this book focuses on racial economic inequality, particularly as it relates to African Americans, I found the book too often bogged down in details of finance and using vague academic language to describe the gritty reality of Black economic disenfranchisement. Phrases such as “infrastructural investment in whiteness” may be more opaque than clarifying. 

Jenkins writes, “The New Deal remade the racial state into a racial welfare state,” meaning that the white supremacy so characteristic of the United States before the New Deal continued with increased government benefits and subsidies that maintained racial inequality. These government benefits and subsidies were designed primarily for white citizens, and like municipal bonds, when they started becoming associated with Blacks in particular and people of color in general, these programs and investments were deemed less worthy.  

Blacks received trickle-down benefits through the New Deal, such as an increase in homeownership. Yet, African Americans were never a strong enough part of the economy nor integrated enough into the political economy to shape the mechanics of economic mobility that created a strong white middle class, white professional class, and a growing white financial class. Similarly, African Americans were never in the position to substantively benefit from the municipal bond market in terms of employment, infrastructure, or capacity to profit off of the debt economy underlying municipal bonds. Bonds, like the rest of the American economy, were meant to serve whites by whites.  Black neighborhoods, Black neighbors, Black electoral politics, Black protest, etc., were all seen as damaging to future returns of white capital, resulting in a downgrade of the value of an investment or a diminished political will to invest in social welfare in as much as it was associated with Black people.  

Despite finding weaknesses in some of Jenkins’ phrasing, I found Jenkins’ history of municipal bonds and how they reinforced institutional racism one of the most helpful takeaways from the book. The Reverend Jesse Jackson Sr, a leading civil rights voice on the economics of racial inequality, has commented on how challenging it is to be in a capitalist society with no capital. That theme flows throughout the book. Jenkins outlines a white “intraracial cross-class compact” where elite white capital is used to create housing for middle-class whites built by working-class whites. Nowhere in this process, nor in the profit of lending, the employment of housing construction, or the long-term appreciation of white homeownership, was there a meaningful place for African Americans to bridge racial economic inequality.   

Jenkins also describes a compact amongst different levels of white capital. He breaks out white capital into “little capital,” “middle capital,” and “big capital.” “Little capital” makes their profit from those with the least, which is disproportionately people of color. “Little capital” is described as “slumlords, absentee owners, and small-property owners.” Jenkins also includes the minimal Black capital class in “little capital.” He vividly describes Black “little capital” or small business owners during mid-twentieth-century America as part of “a segregated enclave economy” whose business model collected “segregated profits.”

Jenkins transitions to “middle capital” in discussing urban renewal, sometimes referred to a “Negro removal.” Urban renewal provided “little capital” the opportunity to profitably sell their property to “middle capital” who could redevelop the properties into housing for middle-class whites displacing the poor, often minority, communities that previously had lived there. “Big capital” were the bond purchasers and lenders that “small capital,” “middle capital,” and eventually cities themselves used to fund their investments.

In “The Paradox of Debt” section, we see how white-only urban infrastructure was met with protests that received the most attention in the 60s with Black urban rebellions in San Francisco and throughout the nation. This protest “undermined the fiction of race-neutral infrastructure investment” and laid bare “the realities of white supremacy in a city that proclaimed the absence of racism.” Investors become less and less interested in municipal bonds as the calls for using municipal debt for racial justice became louder, interest rates rose increasing the cost of municipal debt, and other opportunities of mass profits for investors emerged. 

The last section of Bonds of Inequality is titled “Supremacy.” This section title encapsulates how the municipal bond market and the unseen financial interest that managed the bond market captured and eventually limited investment in city infrastructure. Rather than a grand conspiracy, the process was just the way bond markets and other markets worked. Municipalities were not the clients of municipal bond markets but were the producers of municipal bonds, the products sold to the actual customers: big finance.

There is no happy ending to Bonds of Inequality: Debt and the Making of the American City. As we know, racial economic inequality still shapes our urban centers, particularly San Francisco. Instead of a happy ending, Jenkins is content to leave the reader with the challenging reality that, to this day, the privileging of capital over the needs of urban residents leaves us with deep and undemocratic inequality. Jenkins’ hope is that “detailing the mechanics of debt and revisiting some of those critiques might help the residents of tomorrow’s Detroit and Puerto Rico—that is, all of us.”  I think there is great hope that Jenkins’ first work and his future work will help all of us address our country’s deep structural inequality.