of 1968 in the United States, as discontented white middle-class students went into a phase of revolt, seeking alliances with other marginalized groups and rallying against US imperialism to create a movement to build another kind of world, including a different kind of urban experience (though, again, anarchistic and libertarian currents were pitted against demands for hierarchical and centralized alternatives).7
Along with the ’68 revolt came a financial crisis. It was partly global (with the collapse of the Bretton Woods agreements), but it also originated within the credit institutions that had powered the property boom in the preceding decades. This crisis gathered momentum at the end of the 1960s, until the whole capitalist system crashed into a major global crisis, led by the bursting of the global property market bubble in 1973, followed by the fiscal bankruptcy of New York City in 1975. The dark days of the 1970s had arrived, and the question then was how to rescue capitalism from its own contradictions. In this, if history was to be any guide, the urban process was bound to play a significant role. As William Tabb showed, the working through of the New York fiscal crisis of 1975, orchestrated by an uneasy alliance between state powers and financial institutions, pioneered a neoliberal answer to this question: the class power of capital was to be protected at the expense of working-class standards of living, while the market was deregulated to do its work. But the question then was how to revive the capacity to absorb the surpluses that capitalism must produce if it was to survive.8
Fast-forward once again to our current conjuncture. International capitalism was on a roller-coaster of regional crises and crashes (East and Southeast Asia in 1997–98, Russia in 1998, Argentina in 2001, and so on) until it experienced a global crash in 2008. What has been the role of urbanization in this history? In the United States it was accepted wisdom until 2008 that the housing market was an important stabilizer of the economy, particularly after the high-tech crash of the late 1990s. The property market absorbed a great deal of the surplus capital directly through new construction (of both inner-city and suburban housing and new office spaces), while the rapid inflation of housing asset prices, backed by a profligate wave of mortgage refinancing at historically low rates of interest, boosted the internal US market for consumer goods and services. The global market was stabilized partly through US urban expansion and speculation in property markets, as the US ran huge trade deficits with the rest of the world, borrowing around $2 billion a day to fuel its insatiable consumerism and the debt-financed wars in Afghanistan and Iraq during the first decade of the twenty-first century.
But the urban process underwent another transformation of scale. In short, it went global. So we cannot focus merely on the US. Property market booms in Britain, Ireland, and Spain, as well as in many other countries, helped power the capitalist dynamic in ways that broadly paralleled that in the US. The urbanization of China over the last twenty years, as we shall see in Chapter 2, has been of a radically different character, with a heavy focus on building infrastructures. Its pace picked up enormously after a brief recession in 1997 or so. More than a hundred cities have passed the 1 million population mark in the last twenty years, and small villages, like Shenzhen, have become huge metropolises of 6 to 10 million people. Industrialization was at first concentrated in the special economic zones, but then rapidly diffused outwards to any municipality willing to absorb the surplus capital from abroad and plough back the earnings into rapid expansion. Vast infrastructural projects, such as dams and highways—again, all debt-financed—are transforming the landscape.9 Equally vast shopping malls, science parks, airports, container ports, pleasure palaces of all kinds, and all manner of newly minted cultural institutions, along with gated communities and golf courses, dot the Chinese landscape in the midst of overcrowded urban dormitories for the massive labor reserves being mobilized from the impoverished rural regions that supply the migrant labor. As we shall see, the consequences of this urbanization process for the global economy and for the absorption of surplus capital have been huge.
But China is only one epicenter for an urbanization process that has now become genuinely global, in part through the astonishing global integration of financial markets that use their flexibility to debt-finance urban projects from Dubai to São Paulo and from Madrid and Mumbai to Hong Kong and London. The Chinese central bank, for example, has been active in the secondary mortgage market in the US, while Goldman Sachs has been involved in the surging property markets in Mumbai and Hong Kong capital has invested in Baltimore. Almost every city in the world has witnessed a building boom for the rich—often of a distressingly similar character—in the midst of a flood of impoverished migrants converging on cities as a rural peasantry is dispossessed through the industrialization and commercialization of agriculture.
These building booms have been evident in Mexico City, Santiago in Chile, in Mumbai, Johannesburg, Seoul, Taipei, Moscow, and all over Europe (Spain’s being most dramatic), as well as in the cities of the core capitalist countries such as London, Los Angeles, San Diego, and New York (where more large-scale urban projects were in motion in 2007 under the billionaire Bloomberg’s administration than ever before). Astonishing, spectacular, and in some respects criminally absurd urbanization projects have emerged in the Middle East in places like Dubai and Abu Dhabi as a way of mopping up the capital surpluses arising from oil wealth in the most conspicuous, socially unjust and environmentally wasteful ways possible (such as an indoor ski slope in a hot desert environment). We are here looking at yet another transformation in scale of the urban process—one that makes it hard to grasp that what may be going on globally is in principle similar to the processes that Haussmann managed so expertly for a while in Second Empire Paris.
But this urbanization boom has depended, as did all the others before it, on the construction of new financial institutions and arrangements to organize the credit required to sustain it. Financial innovations set in train in the 1980s, particularly the securitization and packaging of local mortgages for sale to investors world-wide, and the setting up of new financial institutions to facilitate a secondary mortgage market and to hold collateralized debt obligations, has played a crucial role. The benefits of this were legion: it spread risk and permitted surplus savings pools easier access to surplus housing demand, and also, by virtue of its coordinations, it brought aggregate interest rates down (while generating immense fortunes for the financial intermediaries who worked these wonders). But spreading risk does not eliminate risk. Furthermore, the fact that risk can be spread so widely encourages even riskier local behaviors, because the risk can be transferred elsewhere. Without adequate risk-assessment controls, the mortgage market got out of hand, and what happened to the Péreire Brothers in 1867–68 and to the fiscal profligacy of New York City in the early 1970s was then repeated in the sub-prime mortgage and housing asset-value crisis of 2008. The crisis was concentrated in the first instance in and around US cities (though similar signs could be seen in Britain), with particularly serious implications for low-income African-Americans and single head-of-household women in the inner cities. It also affected those who, unable to afford the skyrocketing housing prices in the urban centers, particularly in the US southwest, moved to the semi-periphery of metropolitan areas to take up speculatively built tract housing at initially easy credit rates, but who then faced escalating commuting costs with rising oil prices and soaring mortgage payments as market-interest rates kicked in. This crisis, with vicious local impacts on urban life and infrastructures (whole neighborhoods in cities like Cleveland, Baltimore, and Detroit have been devastated by the foreclosure wave), threatened the whole architecture of the global financial system, and triggered a major recession to boot. The parallels with the 1970s are, to put it mildly, uncanny (including the immediate easy-money response of the US Federal Reserve, which is almost certain to generate strong inflationary threats, as happened in the late 1970s, sometime in the future).
But the situation is far more complicated now and it is an open question whether a serious crash in the United States can be compensated for elsewhere (for example, by China). Uneven geographical development may once again rescue the system from a totalizing global crash, as it did in the 1990s, though it is the United States that is this time at the center of the problem. But the financial system is also much more tightly coupled temporally than it ever was before.10 Computer-driven split-second trading, once it does go off-track, always threatens to create some great divergence in the market (it has produced incredible volatility in stock markets) that will produce a massive
