The Default of Cleveland: Constructing Municipal Reality

Like corporations, municipal governments increasingly rely on external sources of finance capital. Inflation, recession, federal and state budget slashing, increasing social welfare expenditures, and declining tax revenues since the mid-1970s (and particularly since the new federalism of the 1980s) have forced local governments to seek loans from the private banking community. These loans are often necessary for local governments to meet their normal operating costs as well as for investments in economic development and growth. They become the lifeblood of the city. Losing or renegotiating loans often leads the municipality into a major crisis and even default. Where loans from