When Rahm Emanuel became mayor of Chicago in 2011, he proclaimed: “I will not be a patient mayor.” It was an understatement. The former chief of staff to Barack Obama returned home with a near-legendary reputation for his take-no-prisoners style of operating. That is how he acquired the nickname “Rahmbo”. He once famously mailed a dead fish to a pollster with whom he had fallen out. There are few significant Washington figures who have not felt the lash of his tongue. In Emanuel’s lexicon, the word “f***” is almost an endearment. Emanuel, 54, lost half a middle finger in a kitchen accident when he was a teenager. It was an amputation that – in Obama’s unforgettable phrase – rendered him “practically mute”.

It was with the first black president’s blessing that Emanuel quit Washington to audition as “Boss” of Chicago – an endorsement that helped him greatly with the city’s African-American vote. “Obama gave him a big wet kiss,” says Delmarie Cobb, a South Side activist who helped manage Jesse Jackson’s 1988 presidential bid. Emanuel got more votes than the other four candidates combined (two of them African-American).

A ferociously ambitious, sharp-suited policy wonk, Emanuel’s mayoral style gels with the spirit of the age. Having nearly chosen a career as a ballet dancer, he is also a man of surprises. He served as a civilian volunteer for the Israel Defence Forces in the 1991 Gulf war (Emanuel’s father, Benjamin, emigrated to Chicago from Israel in the 1950s). Denizens of Chicago’s new economy identify with his workaholic, wisecracking persona (in our first interview, he asked what I preferred to be called and after I said “Ed”, took great amusement in enunciating “Edward” in a Downton Abbey accent). But he does not click with everyone.

Crudely measured, Chicago is roughly a third white, a third black and a third Hispanic. Most Chicagoans seem to accept it that way. “We are the most segregated city in America,” goes the joke. “Ain’t it great?” Since Emanuel took office, however, things have polarised. Most white Chicagoans support him – as do a majority of Hispanics, according to the polls. Most African-Americans no longer do. The corporate world within Chicago’s elevated rail “loop” has rarely had it so good. The same goes for pockets inside its largely Hispanic West Side. But Chicago’s South Side, where a young Obama cut his teeth as a community organiser, continues to fester. A rash of school closures last year did little to help. “Black families who can leave Chicago are still leaving,” says Cobb. They call it “degentrification”.

Emanuel’s often testy relations with Chicago’s black neighbourhoods could be pivotal to his re-election next year. The gulf between the two Chicagos is at least as big as that between the “two New Yorks”, which Bill de Blasio, the new mayor of the Big Apple, has promised to bridge. De Blasio comes from the Democratic party’s liberal (“Sandinista”) wing and promised to make New York’s Upper East Side pay more to make life better for its underclasses. Emanuel is closer to Michael Bloomberg, de Blasio’s predecessor, who drew on his philanthropic networks to revitalise New York’s economic heart. Both are enthusiasts for non-union charter schools. De Blasio, on the other hand, is a champion of the unions.

Emanuel’s Chicago versus de Blasio’s New York may be the closest America has to an experiment in how to make its cities both liveable and competitive in the 21st century. “Look, we face international forces that are far bigger than us,” Emanuel told me in an interview in Mexico City, which he was visiting to inaugurate a city-to-city partnership (almost a quarter of Chicagoans were born in Mexico). I had asked him whether he and de Blasio were rivals. “We both have a great amount of concentrated wealth and great poverty,” he replied. “My challenge is to make it a still-great city for the middle-class families that are the bedrock of Chicago.”

Emanuel’s impact so far depends on whom you ask. Along Chicago’s “Magnificent Mile” department stores, the city is once more doing brisk business after suffering worse from the Great Recession than either New York or Los Angeles (Chicago is America’s third-largest city with 2.7 million people). Inside the Loop, Emanuel is in his element. Between his time in the Clinton administration, where he was a senior adviser (and inspiration for the West Wing character “Josh Lyman”, minus the expletives) and his four terms in Congress representing the fifth district of Illinois – encompassing a well-heeled portion of Chicago’s North Side – Emanuel returned to Chicago to make his fortune. In just two years at the boutique investment bank Wasserstein Perella, he netted $18.5m. It may not come close to Bloomberg’s estimated fortune of $31bn, but it was plenty. Emanuel spent $450,000 of it on his first election to Congress. Six years later, he raised record sums for his party to help obliterate the Republicans in the 2006 midterm elections. You might call it the Abba phase of his career. “The first third of your campaign is money, money money,” Emanuel told Democratic staffers. “The second third is money, money, money. The final is votes, press and money.”

Since taking over from Richard M Daley, who was Chicago’s mayor for the preceding 22 years and the most powerful city boss of late-20th-century America, Emanuel has put these skills to good use. Daley, whose father, Richard J Daley, ran the city between 1955 and 1976 (totalling 43 years of Daley rule in the last 56) had good relations with Chicago’s business community, but America’s business elites see Emanuel as one of their own. Among those who contributed the maximum $50,000 to his 2011 campaign were the late Steve Jobs of Apple and Donald Trump, whose Trump International Hotel & Tower is one of Chicago’s tallest skyscrapers. Other donors included Steven Spielberg and David Geffen – courtesy of Ari Emanuel, Rahm’s younger brother, a Hollywood agent, who is as big in entertainment as Rahm is in politics.

Emanuel has persuaded many companies, including United Airlines and Google Motorola Mobile (recently bought by China’s Lenovo) to shift to Chicago’s stunning business district. They joined big brands such as Boeing, Exelon and Hyatt. Others, such as Kraft Foods, McDonald’s and Walgreens are based in Chicago’s suburbs. Emanuel has also helped to create 10,000 digital jobs, most of which are based at 1871, a thriving incubator housed in the city’s venerable Merchandise Mart. The company is named after the year of the great fire of Chicago, which marked the start of its ascent to become middle America’s so-called third coast. Large chunks around it are gentrifying. Chicago has a higher share of graduates in the workforce than any other large city in the US. “If Rahm fails – and I don’t believe he will – it will not be for lack of trying,” says Michael Sacks, a Chicago financier, who co-chairs World Business Chicago (WBC), the city’s de facto economic steering committee.

At Emanuel’s request, WBC commissioned a 10-point plan from McKinsey and the Brookings Institution to revitalise Chicago’s economy. Emanuel has also asked The Chicago Council on Global Affairs, the Midwest’s leading think-tank, to devise a “foreign policy” for the city. “It will draw on Chicago’s global roots,” says Ivo Daalder, Obama’s savvy former ambassador to Nato, who heads the council. Chicago is Mexico’s fifth-largest city, Poland’s second-largest and home to America’s largest population of Ukrainians, Serbs and Koreans. From Greektown to Chinatown, Emanuel is fond of describing Chicago as the “most American of American cities”. Unlike New York or LA, each of which are built around one industry – finance and entertainment – it is diversified. No single industry accounts for more than a seventh of its jobs. “We have hardly begun to leverage Chicago’s diversity,” says Daalder.

On the other side of the tracks, few of Emanuel’s successes are much in evidence. In the decade before he became mayor, Chicago haemorrhaged 200,000 people – almost all of them African-American. Under Richard Daley, most of the South Side’s notorious housing projects were levelled. Nothing was built in their place. Upholstered neighbourhoods such as Bronzeville – one of the so-called minx ghettos – were gradually taken over by the dispossessed. Well-to-do African-Americans continue to flee to the suburbs in a “black flight” that mirrors the “white flight” of the 1960s and 1970s. Around the now-demolished Michael Reese Hospital, where the young Obama organised unemployed steel workers, gangs have long since ruled. The two Chicagos rarely intersect. Yet the South Side’s murder rate mortally impinges on Chicago’s global image. From within the Loop, crime is chiefly a problem of perception. The streets of Chicago’s North Side are among America’s safest. At 415 homicides last year, Chicago’s fatalities were less than half their peak. Reducing it further – and ending Chicago’s reputation as America’s murder capital – is one of Emanuel’s three obsessions. His shorthand is “safe streets”. The other two are “stable finances” and “strong schools”.

Rahm Emanuel (L) and his wife Amy Rule waves as he is introduced at an inaugural ceremony before being sworn in as mayor of Chicago at Millennium Park on May 16 2011
With wife Amy, at his 2011 election © Eyevine

In his recent memoir, Robert Gates, the former secretary of defence, described Emanuel as a “whirling dervish with attention deficit disorder”. A private family man, Emanuel has two daughters and a son, whom he rigorously shields from the media. His wife Amy, who converted to Judaism when they married, also keeps a low profile. Emanuel, who gets up at 5.30am every day and is frequently seen jogging along Chicago’s Lake Shore, puts as much energy into fighting crime as he does rejuvenating the business district. Given Chicago’s reputational problem, they are two sides of the same coin. “I need stronger gun laws and I need stronger parents,” Emanuel tells me. “One I can work on and one I can ask for.” From after-school mentoring to expanded summer youth-jobs programmes, Emanuel puts the same emphasis on social work as he does on “flooding the zone” with police. Although still considerably higher than LA or New York, Chicago’s crime rate fell last year to its lowest since 1965. This is in spite of Emanuel’s efforts to convince adjacent jurisdictions to tighten their gun laws. Guns are banned in the city itself but Chicago’s environs do a roaring trade.

Emanuel’s largely unrecognised success has been won in the face of drastic budget cuts – a consequence of Chicago’s spendthrift noughties. This is where his stellar Rolodex makes a difference. In 2011, he raised $50m from donors to fund a “public safety” initiative. Some muttered about a “Chicago shakedown” (an offer you cannot refuse). But in an era of austerity, there can be few better examples of philanthropic democracy in action. It is catching on at the federal level. In his State of the Union address last month, Obama announced corporate funds for faster broadband in schools. In addition to financiers, Emanuel has befriended people like Magic Johnson, the LA-based former basketball star, who has invested a lot of his fortune in venture philanthropy on Chicago’s South Side. “I think you can do well and do good at the same time,” said Johnson, at an event with Emanuel in January.

Emanuel is also making extensive use of the Chicago Crime Lab, a research unit set up under Daley that is largely privately funded. “It’s not just police,” Emanuel says. “It’s summer school programmes, it’s midnight basketball, it’s Becoming a Man [a mentoring programme] so teenagers have a place to go with an adult who will mentor and supervise them.” Mostly it is about squeezing what he can from dwindling resources. “Rahm is pushing at the margins of what he can do within the constrained limits of what he can control,” says Roseanna Ander, head of the Crime Lab. “Chicago is becoming a laboratory on how to prevent crime before it happens.” Call it the pre-crime, or Minority Report phase of Emanuel’s career. A lot rides on its success.

Rahm Emanuel standing near the reflecting pool of the Washington Monument in 1992
1992: in Washington © Getty Images

But it is Emanuel’s most pedestrian-sounding goal – to achieve “stable finances” – where his path is most hazardous. Plugging Chicago’s vertiginous pensions gap is also where he is likeliest to make the most enemies. To judge by how union leaders talk about him, he already has. It is also where Emanuel parts ways with Daley, who gave the young North Sider his first break in 1989, when he made him finance chair of his mayoral campaign.

In an interview with Daley, the former mayor waxed lyrical about Chicago’s past and present. In his awkward, trademark lisp, he talked about much else besides. When the subject turned to Emanuel, however, his expression froze. “I don’t talk about Mayor Emanuel,” he said. Emanuel responded to my question about Daley in much the same vein. “I won’t talk about my predecessor,” he said curtly. Then he changed the subject: “When I became mayor I decided: we cannot afford another lost decade . . .”

Whichever way you look at it, Chicago’s “lost decade” cost a lot of money. Chicago’s funding ratio – the difference between what it owes in pensions and what it has set aside – is 35 per cent. Actuaries say a 70 per cent ratio is safe. No other big US city ranks so poorly. By comparison, New York’s is 60 per cent and LA’s is 77 per cent. “Chicago’s funding gap is a big red flag,” says Elizabeth Foos, an analyst at Morningstar, the research firm. It is far bigger than that of Detroit, which declared bankruptcy last year (the difference being that Chicago has a thriving corporate economy, whereas Motown is a shell of its former self).

Rahm Emanuel walking with Bill Clinton and other White House staff
1997: Clinton staffer © Getty Images

Some of Chicago’s future was frittered away on Daley’s 2016 Olympic bid. Obama even flew to Copenhagen in 2009 to try to sway the International Olympic Committee. His home town came an ignominious last. It was not Obama’s finest hour. Ironically, given its history, the IOC cited Chicago’s reputation for corruption as a minus point. “Daley’s Olympic bid was a very expensive piece of hubris,” says Paul O’Connor, a senior partner at Skidmore, Owings and Merrill, the renowned Chicago-based architecture firm, and a former chairman of World Business Chicago. “Daley mortgaged Chicago’s future and got nothing but embarrassment in return,” he adds. “We will be paying the bill for decades.”

In fairness to Daley, he did a great deal to rejuvenate downtown Chicago, which had been dubbed “Beirut on the Lake” before he moved into City Hall. Among his legacies are the Millennium Park and the renovated Navy Pier, which have turned the city’s lake front from a wasteland into a world-class venue, with free “culture in the park” events during summer evenings. Unfortunately, Daley’s largest bequest was his pay awards to the unions. Terrified they would ruin Chicago’s Olympic chances by striking, Daley brought “labour peace” by awarding the city’s 33,000 employees double-digit pay rises, shorter working hours and plusher benefits. It was a big punt that would have exacerbated the city’s budget even had it won the bid.

Rahm Emanuel with Democratic leader Nancy Pelosi and his brother Ezekiel
2006: the midterm elections © Eyevine

Instances of City Hall’s beneficence abound: police officers who retire on a full pension at 48; firemen who take “Cadillac” healthcare years before retirement. My favourite are the “hoisting engineers” at the department of streets and sanitation, who get $90 an hour in overtime; among the cognoscenti it is known as “grease time”. To politicos, such perks lubricated the famous “Chicago machine”, by which City Hall’s largesse was spread among unions, alderman and ethnic community leaders in return for their – how to put it? – electoral enthusiasm. The machine’s get-out-the-vote operation, which Daley inherited from his father, got him re-elected five times. It was a blue-collar operation. “The machine is a Robin Hood mechanism that keeps the Haves from enslaving the Have Nots,” said a Fortune article in 1938.

The machine had a good run but it is now dead, according to Emanuel. It is tempting to take him at face value. Considering his awkward relationship with the unions, it is hard to see how he could keep it ticking over, even if he wanted to. Given the trajectory of Chicago’s budget – a seventh of which will be eaten up by pension payments in 2014, rising to a fifth in 2015 and approaching half within a decade – even Daley would struggle to grease its cogs. Austerity and urban machines do not mix well. “The moment of reckoning is here,” says Emanuel.

Rahm Emanuel with his brother Ari
2010: with brother Ari © Getty Images

It is a bold stance that could yet see him unseated in his re-election bid next year. “I have never heard Rahm flinch from confronting the pension challenge,” says David Axelrod, Obama’s former senior adviser, also now back in Chicago, whom I interviewed at his lakeshore apartment. Its views of Lake Michigan and the Loop are as panoramic as his apartment is sparse. Axelrod, who lost his trademark Gallic moustache in a bet during the 2012 campaign, managed Emanuel’s first race for Congress and was instrumental in persuading Obama to hire him in 2008. He was also chief witness at Emanuel’s wedding in 1994 (yes, it’s a small world). He is nevertheless blunt in describing the mayor’s challenge. “Rahm can’t pretend the pensions problem doesn’t exist, otherwise he will lose credibility with the markets,” he says. “But he can’t talk too much about what it will cost to fix, or he will never get re-elected. He needs to walk a very fine line.”

In an interview in his capacious fifth-floor City Hall office, Emanuel tiptoes around my questions with uncharacteristic caution. Most of the time he talks in a rapid stream of statistic-laden bullet points. Occasionally he leans forward to say something more bluntly off the record. Every now and then he raises nine-and-a-half fingers to drive a point home. On Emanuel’s office walls hang contemporary Chicago works of art. He proudly shows me his desk, which once belonged to Anton Cermak, the Czech-American mayor who is credited with having invented the machine (Daley took his desk home with him).

Projections show that Emanuel would have to raise property taxes by up to 150 per cent if he were to leave Chicago’s pensions untouched, which would cripple its economy. Alternatively, he would have to eliminate essential services to keep pensions intact; Beirut on the Lake would return with a vengeance. Reality dictates he must cut the pensions themselves. The unions will be sure to fight it bitterly in the courts and at the ballot box. “Everyone faces the same problem,” Emanuel says. “We [Chicago] face it in spades. One of the things I’ve tried to do is show that if you give a little, you get a win-win situation. If you try to hold on to what you have, you won’t progress. You can’t tax your way out of this, or cut your way out of this. We are kind of the same as New York and Los Angeles. Our economy is incredibly strong, our fiscal picture is weak and the combination to the lock that I’m trying to work through is how to fix the fiscal piece without derailing the economy.” Time is scarce: Chicago’s pension-funding “holiday” ends in 2015.

Emanuel’s final promise is “strong schools”. If crime is Chicago’s most notorious problem and pensions its most hazardous, education is its least tractable. In the long run, it will be the arbiter of its success as a global city. Here, Emanuel’s record is murkier. Shortly into his term, he fell out with Karen Lewis, head of the powerful Chicago Teachers Union. Lewis, who declined to be interviewed, told colleagues that Emanuel said “f*** you” to her face. She returned the compliment. From then on a teachers strike looked preordained. In his campaign, Emanuel had pledged to extend Chicago’s school day – the shortest in America. Last year he also closed 47 schools in Chicago’s most depopulated areas. Both may have made fiscal sense but their brunt was felt on the South Side.

The teachers strike in late 2012 ended with a longer day – an extra hour and 15 minutes. But it left Lewis as a much-strengthened force in Chicago politics. In contrast to City Hall’s expectations, polls showed that a majority supported the teachers. Emanuel had recently lobbied Illinois to pass a law requiring a three-quarters threshold of teachers for a strike to go ahead: almost 90 per cent endorsed the strike. Relations with the African-American community have never recovered. Meanwhile, 24 charter schools have opened since Emanuel took office, some of them lavishly funded.

“Rahm misjudged the public on this,” says Bill Daley, Richard’s younger brother, who briefly replaced Emanuel as Obama’s chief of staff (it is indeed a small world). I interviewed Daley at his offices at JPMorgan Chase in Chicago. “What he didn’t seem to grasp was that the only good, middle-class jobs left for blacks in most of the neighbourhoods are teaching positions in the schools,” said Daley. “The closures cut deeply into whole communities. He could have shown greater empathy.”

It is this perceived lack of sensitivity to the underclass that is Emanuel’s real Achilles heel. For all his faults, Daley knew Chicago’s community leaders intimately. Emanuel conducts events with an impressive grasp of facts and the structures underlying them (in one interaction with schoolchildren he gave the best description of hydraulic fracking I have heard). But his delivery lacks soul. “You earn what you learn,” is a phrase he is fond of telling students. You might call him a McKinsey Democrat. “Daley was a ‘lunch bucket’ [blue-collar] Democrat,” Kari Lydersen quotes a “senior elected official” as saying in her recent book, Mayor 1%. “Daley knew the streets, he knew the drivers of the garbage trucks, he knew their parents. Rahm has no clue who the drivers are . . . But you ask him who the head of the Chicago Mercantile Exchange is, and he’ll have him on speed dial.” The criticism is as harsh as it is anonymous: the head of the CME would have been close to Daley as well. And Emanuel makes strenuous efforts to hold events on the wrong sides of town. Over several days, I observed him interact competently with callow eighth-grade students, weather-beaten city aldermen and passengers on the morning Brown Line commute from his home in Ravenswood, North Chicago. But in politics, perception is king. It was Chicago, after all, that popularised the “regular” American. “You don’t see that every day,” said one besuited commuter to another as Emanuel boarded the train at 7am. Chicago’s mayor spent most of the rest of the 20-minute journey reading on his iPad. “Yeah,” said the other. They paid no more attention.

What then is Chicago’s new machine? The answer lies inside the Loop. The age of the precinct captain and door-to-door politics is waning. In its place comes sophisticated voter micro targeting. The era of the union-funded machine is also fading. Their substitutes are the millionaires and billionaires with whom Emanuel rubs shoulders. Deep pockets are essential to US electoral success and few can tap them as effectively as Emanuel.

But they come with baggage. One of them is a strong bias for charter schools. “The old neighbourhood model has been replaced by a new business machine that Rahm has perfected,” says reporter Don Rose, who has covered Chicago’s politics since the late 1940s, when the mafia still ran many wards. “The old order was ‘city patronage’ through the wards and the city departments. The new order is ‘pinstripe patronage’, which is channelled through the contractors, the consultancies and the charter schools. It is less corrupt than the old machine. But it has less need to be.”

Emanuel is nothing if not pragmatic. He neither invented the 1 per cent economy, nor is he its cheerleader. He is merely harnessing it to his will. Yet nothing ever comes for free. Bloomberg showed in New York that philanthropic democracy can achieve impressive feats, winning big investments, rebuilding dilapidated neighbourhoods and launching new schools. It can also underwrite bigger ambitions. Recall the record-breaking financial prowess of Emanuel’s former boss in the White House. Observe, also, Obama’s reluctance to challenge the interests that funded him.

Before being hired by Obama, Emanuel used to say he wanted to be America’s first Jewish Speaker. Now he is Chicago’s first Jewish mayor. If he succeeds, chiefly by fixing the city’s troubled finances, money would be no object. “I have never heard Rahm say he wants to be president,” says Axelrod with conviction. “I am done in this job,” says Emanuel, when I ask him if he wanted to be America’s first Jewish president. “I am done. Period. I have achieved my lifetime’s ambition.”

Emanuel’s answer left me with no room for doubt. I was almost tempted to believe him.

Edward Luce is the FT’s chief US columnist. To comment on this article, please email magazineletters@ft.com.

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