Grassroots austerity: municipal bankruptcy from below in Vallejo,California

Austerity appears to be a globally coordinated restructuring process, where international and national governments cooperate to stymie economic crisis and socialize the costs of systemic economic failure. However, austerity is also shaped from the bottomup. This paper examines the 2008 bankruptcy of Vallejo, California. This city of under 120 000 people became the first municipal bankruptcy in the Great Recession period. We explore how it became the first to fail. In doing so, we outline the finances of a city whose entrepreneurial activities continued to flounder, making it a good candidate for austerity reforms. However, we also find the city home to a political movement long predicting a municipal default. When economic crisis hit, this movement pushed for the city to make an unprecedented test of Chapter 9 bankruptcy law. Vallejo’s bankruptcy, and the related changes to Chapter 9 law, are therefore interpreted as events that were generated by systemic conditions but ultimately precipitated by decisions taken at the municipal level. We therefore call for austerity to be understood as both a top-down and bottom-up process of state restructuring.