Rebel Cities. David Harvey
property market crash has also carried over into the virtual bankruptcy of states like California, visiting huge stresses in state and municipal government finance and government employment on almost everywhere in the US. The story of the New York City fiscal crisis of the 1970s eerily resembles that of the state of California, which today has the eighth-largest public budget in the world.7
The National Bureau of Economic Research has recently unearthed yet another example of the role of property booms in sparking deep crises of capitalism. From a study of real estate data in the 1920s, Goetzmann and Newman “conclude that publically issued real estate securities affected real estate construction activity in the 1920s and the breakdown in their valuation, through the mechanism of the collateral cycle, may have led to the subsequent stock market crash of 1929–30.” With respect to housing, Florida, then as now, was an intense center of speculative development, with the nominal value of a building permit increasing by 8,000 percent between 1919 and 1925. Nationally, the estimates of increases in housing values were around 400 percent over roughly the same period. But this was a sideshow compared to commercial development which was almost entirely centered on New York and Chicago, where all manner of financial supports and securitization procedures were concocted to fuel a boom “matched only in the mid-2000s.” Even more telling is the graph Goetzmann and Newman compile on tall-building construction in New York City (see Figure 2). The property booms that preceded the crashes of 1929, 1973, 1987, and 2000 stand out like a pikestaff. The buildings we see around us in New York City, they poignantly note, represent “more than an architectural movement; they were largely the manifestation of a widespread financial phenomenon.” Noting that real estate securities in the 1920s were every bit as “toxic as they are now,” they went on to conclude:
The New York skyline is a stark reminder of securitization’s ability to connect capital from a speculative public to building ventures. An increased understanding of the early real estate securities market has the potential to provide a valuable input when modeling for worst-case scenarios in the future. Optimism in financial markets has the power to raise steel, but it does not make a building pay.8
Figure 1 The Property Market Crash of 1973
Clearly, property market booms and busts are inextricably intertwined with speculative financial flows, and these booms and busts have serious consequences for the macroeconomy in general, as well as all manner of externality effects upon resource depletion and environmental degradation. Furthermore, the greater the share of property markets in GDP, the more significant the connection between financing and investment in the built environment becomes as a potential source of macro crises. In the case of developing countries such as Thailand—where housing mortgages, if the World Bank Report is right, are equivalent to only 10 percent of GDP—a property crash could certainly contribute to, but not likely totally power, a macroeconomic collapse (of the sort that occurred in 1997–98), whereas in the United States, where housing mortgage debt is equivalent to 40 percent of GDP, it most certainly could and did generate a crisis in 2007–09.
Figure 2 Tall Buildings Constructed in New York City, 1890–2010
THE MARXIST PERSPECTIVE
Since bourgeois theory, if not totally blind, at best lacks insights in relating urban developments to macroeconomic disruptions, one would have thought that Marxist critics, with their vaunted historical-materialist methods, would have had a field day with fierce denunciations of soaring rents and the savage dispossessions characteristic of what Marx and Engels referred to as the secondary forms of exploitation visited upon the working classes in their living places by merchant capitalists and landlords. They would have set the appropriation of space within the city through gentrification, high-end condo construction, and “Disneyfication” against the barbaric homelessness, lack of affordable housing, and degrading urban environments (both physical, as in air quality, and social, as in crumbling schools and the so-called “benign neglect” of education) for the mass of the population. There has been some of that in a restricted circle of Marxist urbanists and critical theorists (I count myself one).9 But in fact the structure of thinking within Marxism generally is distressingly similar to that within bourgeois economics. The urbanists are viewed as specialists, while the truly significant core of macroeconomic Marxist theorizing lies elsewhere. Again, the fiction of a national economy takes precedence because that is where the data can most easily be found and, to be fair, where some of the major policy decisions are taken. The role of the property market in creating the crisis conditions of 2007–09, and its aftermath of unemployment and austerity (much of it administered at the local and municipal level), is not well understood, because there has been no serious attempt to integrate an understanding of processes of urbanization and built-environment formation into the general theory of the laws of motion of capital. As a consequence, many Marxist theorists, who love crises to death, tend to treat the recent crash as an obvious manifestation of their favored version of Marxist crisis theory (be it falling rates of profit, underconsumption, or whatever).
Marx is to some degree himself to blame, though unwittingly so, for this state of affairs. In the introduction to the Grundrisse, he states that his objective in writing Capital is to explicate the general laws of motion of capital. This meant concentrating exclusively on the production and realization of surplus value while abstracting from and excluding what he called the “particularities” of distribution (interest, rents, taxes, and even actual wage and profit rates), since these are accidental, conjunctural and of-the-moment in space and time. He also abstracted from the specificities of exchange relations, such as supply and demand and the state of competition. When demand and supply are in equilibrium, he argued, they cease to explain anything, while the coercive laws of competition function as the enforcer rather than the determinant of the general laws of motion of capital. This immediately provokes the thought of what happens when the enforcement mechanism is lacking, as happens under conditions of monopolization, and what happens when we include spatial competition in our thinking, which is, as has long been known, always a form of monopolistic competition (as in the case of inter-urban competition). Finally, Marx depicts consumption as a “singularity”—those unique instances that together make up a common mode of life—which in being chaotic, unpredictable and uncontrollable, is therefore, in Marx’s view, generally outside of the field of political economy (the study of use values, he declares on the first page of Capital, is the business of history and not of political economy), and therefore potentially dangerous for capital. Hardt and Negri have therefore recently been at pains to revive this concept, for they see singularities, which both arise from the proliferation of the common and always point back to the common, as a key part of resistance.
Marx also identified another level—that of the metabolic relation to nature, which is a universal condition of all forms of human society and therefore broadly irrelevant to an understanding of the general laws of motion of capital understood as a specific social and historical construct. Environmental issues have a shadowy presence throughout Capital for this reason (which does not imply that Marx thought them unimportant or insignificant, any more than he dismissed consumption as irrelevant in the grander scheme of things).10
Throughout most of Capital, Marx sticks broadly to the framework outlined in the Grundrisse. He focuses sharply on the generality of production of surplus value and excludes everything else. He recognizes from time to time that there are problems in so doing. There is, he notes, some “double positing” going on—land, labor, money, and commodities are crucial facts of production, while interest, rents, wages, and profits are excluded from the analysis as particularities of distribution.
The virtue of Marx’s approach is that it allows a very clear account of the general laws of motion of capital to be constructed in a way that abstracts from the specific and particular conditions of his time (such as the crises of 1847–48 and 1857–58). This is why we can still read him today in ways that are relevant to our own times. But this approach imposes costs. To begin with, Marx makes clear that the analysis of an actually existing capitalist society/situation requires a dialectical integration of the universal, the general, the particular, and the singular aspects of a society construed