Workers World Vol. 19, No. 10
March 8 – It is now more than two long and bitter years since the full impact of the economic crisis hit New York City. Since then there has been an endless series of financial crises, all of which have ended in ever deeper encroachments into the living standards of the mass of the people, threatening to turn this great metropolis into a ruined city.
Let us consider the nature of this week’s crisis, the most current in the long series. It offers an invaluable look at the real relationships between the banks, the capitalist politicians, and the labor bureaucracy. It also enables us to get a deeper insight into the general economic crisis which is responsible overall for the havoc brought upon the workers.
Suppose you are a worker in a large company. On Monday the boss informs you and all your fellow workers that he needs $55 million to cover the payroll on Friday. He needs this money, he says, to help pay off a banker’s loan of a billion dollars to which you or your fellow workers were not a party.
Would you offer your savings to help your boss meet the payroll? Would you mortgage your house, assuming you had one? Would you sell your car? And would you offer your pension, for which you have worked some ten to twenty years?
Stripped of all the financial hocus-pocus and gobbled-gook financial terminology, this is what is happening in the current crisis between the people of New York and the bankers. You might say that the city of New York is not really a private company or a corporation, and is after all represented by elected officials like the Mayor and the City Council, and above all by such state officials as the Governor and the State Legislature.
The truth of the matter is, however, that the Mayor, the City Council, the Governor, and the State Legislature have handed over, voluntarily and illegally – repeat, illegally – their basic fundamental duties to the Emergency Financial Control Board. This very small group of officials is in the tight grip of the bankers. The officialdom from the Governor to the Mayor and all the way down put up token and hypocritical opposition to it but in the end go along with its really important decisions.
It is also true, of course, that the city officialdom, as well as the Governor and his entourage, have historically been merely the executive committee which protects and defends the interests of the big banks first and foremost and the large real estate and manufacturing interests. But they no longer have the legal and political authority they are entitled to under the Constitution. They voluntarily surrendered it through legislation they sponsored.
As a result, it these last two years the Carey-Beame alliance has unloaded upon the mass of the people the greatest economic and financial burden since the Great Depression.
Let us look at this latest crisis: The Company (that’s what the powerful grouping of big banks really are) is demanding a payment of a billion dollars in notes, which the city officials have borrowed from these same banks in your name. This billion dollars is only a very small part of the billions upon billions that the bankers have made on the basis of loans contracted by the officials of the city of New York.
The extortionate interest paid on these loans is so enormous that it could feed a small city for months if not years. Thus, this current billion-dollar load is really a mere pittance when you consider that the combined holding of the New York City banks are so vast they reach out into the four corners of the earth. They are more powerful, financially and economically, than the greater portion of the earth occupied by the less developed countries.
Last year a moratorium movement, although small and weak, had been started which slowly and gradually was making itself felt. It called for a general moratorium on all the debts, not only on the city’s: debts of poor and working people, small businesses, and homeowners. The bankers caught on to the potential significance of that move rather quickly.
Once before a general call for a moratorium had made it all the way to Washington. At that time the Roosevelt administration felt obligated not only to take note of it but to enact it into law. It applied to home mortgages and other forms of indebtedness.
Moratoriums are not a new phenomenon. They have been enacted into law in times of great crisis. A moratorium means a “stop payment” for a period of time.
Cognizant of the significance of such a move, the bankers and their willing stooges, the officialdom of New York, pushed through a token moratorium as a means of averting a general, wide-spread move for a real moratorium to alleviate the heavy debt burden, not only on the city and state, but on the mass of the people generally. It was a sly maneuver made in the light of the upcoming 1976 elections and meant to deflect a broad attack against the bankers who are the true bosses of the state and of the city.
The moratorium didn’t mean that the bankers were giving up their right to this billion dollar debt, which as we said is really a small pittance. It only deferred payment on the principal while the extortionate interest, as usual, when on. But the bankers also made sure to take advantage of the opportunity afforded when one of the small banks started to legally contest even this very limited and meager moratorium on the single, billion dollar debt.
The strangest thing about this is that the city, the state, and even the labor leaders took no note of this litigation at all, in spite of the fact that together they have an army of lawyers well-versed in this subject. Moreover, by not taking note of it they took the focus off the struggle against the banks and conveyed the impression that the New York Court of Appeals (a pack of scoundrels who would do the bidding of the banks just as readily as do the officialdom itself) would let the moratorium stand.
After the heat was off the banks and things more or less settled down with attention completely riveted on the national elections, the Court of Appeals cancelled out the moratorium.
Just like that!
Considering that this is a billion-dollar case, one would think that either the unions or the city officialdom would at least take it to the U.S. Supreme Court, if for no other reason than to delay, by legal maneuver, the payment of the debt.
Cases involving no more significance than the respective rights of a dog and a dog-catcher go to the U.S. Supreme Court. But a moratorium involving a billion dollars charged to the people of New York was not worthy of the attention of New York’s elected officials or the labor leaders. And so the right of appeal was lost.
The present cancellation of the moratorium by the New York Court of Appeals is in form an objective judicial decision, but in reality it is a decision made on behalf of the ruling class, represented by the banks, against the working class, the poor, and the oppressed. Historically the law is always an instrument of the dominant, possessing classes.
The court truly had no legal authority to interfere with the political decision to declare a moratorium. It is a social and political issue which, legally speaking, belongs to the State Legislature and the City of New York. By overriding it, the Court wrongfully arrogated to itself the right to determine that the profits of the bankers are more important than the livelihood of the 8 million people who live in New York City.
The even stranger aspect of this billion-dollar case was that after the court decision came down like a ton of bricks, the labor leaders sat on their hands. They could have decided to rally public opinion by focusing on the court decision and thereby turning it into a political struggle with the courts, such as has been done, for instance, over civil rights issues, women’s rights, and so on. Even after having sealed off one of the effective avenues of political attack against the bankers, that is, through the courts, they still could have opened the broader political avenue of struggle, rallying the mass of the people behind the kind of legislation that would circumvent the court’s decision and make the moratorium valid. It’s the legislature, after all, which is the source of public legislation.
The U.S. Supreme Court, for instance, originally invalidated all of Roosevelt’s National Recovery Act legislation, including the Wagner Act, the body of law from which the present-day right of collective bargaining is derived. But a wide-awake labor movement, with the help of millions of progressive people, made it incumbent upon the Congress to pass new legislation which for the most part restored collective bargaining and those measures which are today considered the fundamental rights of workers.
There is no reason why on a state level the labor leaders, together with progressives, civil rights organizations, and others, could not have mounted a campaign around the moratorium. Not only could they have fought the cancellation, but a struggle to widen and broaden the moratorium, if it became a reality, could force the federal government to enact a national moratorium which at least in part would alleviate the terrible economic situation which falls completely on the shoulders of the working people, the poor, and the unemployed.
But as matters stand the union leaders and the city officialdom, whether in collaboration with the banks or not, completely closed off the two avenues of political struggle on the moratorium – the courts and the legislature. Needless to say, they made no call for mass struggle in demonstrations in the street to combat the cancellation of the moratorium.
A virtual conspiracy of silence on all this prevails, so that the cancellation of the moratorium appears like a divine act of providence rather than the collusion of the holy trinity of banks, the state and city officialdom, and the labor bureaucracy.
Why is the labor bureaucracy so craven, so submissive like a beaten dog? There is first of all the fact that their fundamental ideological and class approach differs very little from that of the bankers and the city officialdom, notwithstanding that the labor bureaucracy represents the workers.
There is, however, a very potent additional factor that hangs like an albatross around the neck of the labor bureaucracy and from which they can scarcely extricate themselves at the present time, except by breaking with the city officialdom with whom they are politically allied. This they will not do.
It revolves around the pension funds which, according to the New York Times of March 7, amount to $10 billion. The workers have been propagandized to believe that the pension is something separate and apart from the weekly paycheck that they ear, that it is something that requires an elaborate trust fund, with administrators, trustees, consultants, and an incredible amount of red tape. In reality, a pension constitutes the retained earnings which are, properly speaking, part of the ordinary weekly paycheck.
The ordinary worker does not expect that his or her vacation money, whether it be for a week, two weeks, or four weeks, requires a special army of bureaucrats from union and management to administer. It would be shocking to suggest that vacation money be appropriated for other purposes.
Yet there is no fundamental difference between the retained earnings for a pension or for vacation purposes. It’s purely artificial. A pension, the right of a works to an earned pension, should be absolute and untouchable, either by the labor bureaucrats or management. It should have at least the validity of unemployment insurance or Social Security and should be as secure as U.S. currency.
Instead, however, because of the structure set up by the unions and the city, the pensions are in danger. They are in peril because the bankers have looked upon this $10 billion fund as a lucrative means of bailing themselves out of their difficulties, and ridding themselves of the risky and speculative loans that they made during the boom years of the Vietnam war.
The union leaders themselves originally regarded the pension funds as untouchable. When early in 1975 the bankers made a pitch for laying their hands on them, without in so many words saying so, it laid the basis for the Municipal Labor Committee, which represents most of the city’s unions, to threaten a general city-wide strike as a means of blunting and throwing back the offensive of the bankers. This had never happened before and threw consternation into the ranks of the capitalist establishment here.
At the time when the idea for a general strike was propounded, the trade union movement in New York and the municipal labor unions as a whole were in a strong, if not excellent, position to turn back the bankers’ anti-labor offensive. An offensive of the trade unions and the broad mass of the workers as a whole against the entrenched interests of the lords of high finance and industry was a real possibility.
But no sooner had the threat been made than the labor bureaucrats had second thoughts. There was an easier way out, or so they thought: capitulate on some of the social service cuts and layoffs and surrender only a small portion of the pension funds for use by the city and state officials to pay the banks.
But the so-called banking fraternity had other ideas in mind: to employ the salami tactics so frequently used by employers when they have the upper hand against the workers. The bankers thus set upon the course of making ever deeper cuts, a slice at a time, in social services and layoffs with each new and successive financial crisis.
At the present time, the unions have divested themselves of more than a third of the pension money which is held in hock by the bankers and there is no end in sight. Nor is there any end in sight for further layoffs, or the still more devastating and ruinous assaults on the poor, the unemployed, and those on welfare.
The current crisis as can now be seen is by no means the last. More of the same is sure to follow unless there is an awakening of the masses. This awakening is absolutely necessary and inevitable if the masses are to be uplifted from their present plight.
The crisis of this city is part of a national crisis which involved all the cities and even the rural and suburban areas. It is part and parcel of a protracted world capitalist crisis which is stubborn and unyielding to superficial and cosmetic approaches such as the Carter administration is now playing with.
The world capitalist stagnation shows no real sign of upturn, that is, an upturn in the old, classical fashion. The automatic processes of the capitalist economy which followed each capitalist crisis have not worked, certainly not since the great economic collapse of 1929.
Each of the succeeding crises since 1929 has been temporarily diverted by staggering arms production, imperialist wars, and colonial adventures. There has been no real economic upturn in the sense of those upturns which took place in the early part of the century or during the period of competitive capitalism. The cycle of automatic boom followed by crisis, stagnation, recovery, and then boom again has not happened since the Great Crash and is not likely to happen again.
The strategy of the ruling class is to throw the burden of the economic crisis on the shoulders of the workers with ever greater persistence and determination.
Contrariwise, the task of the working class and especially of the vanguard elements is to try to rally the masses into a general struggle to meet the offensive of the bankers. Partial, isolated, and even episodic struggles such have gone on in New York City for several years now are necessary and helpful and lay the basis for bigger struggles. But a general rising prepared in advance, which unifies both the employed and unemployed, the youth and the aged, Black, Latin, Native American, and Asian, is absolutely indispensable for a successful counter-offensive.
Last updated: 11 May 2026