hearts’ desire. That collective right, as both a working slogan and a political ideal, brings us back to the age-old question of who it is that commands the inner connection between urbanization and surplus production and use. Perhaps, after all, Lefebvre was right, more than forty years ago, to insist that the revolution in our times has to be urban—or nothing.
CHAPTER TWO
The Urban Roots of Capitalist Crises
In an article in the New York Times on February 5, 2011, entitled “Housing Bubbles Are Few and Far Between,” Robert Shiller, the economist who many consider the great housing expert in the US, given his role in the construction of the Case-Shiller index of housing prices, reassured everyone that the recent housing bubble was a “rare event, not to be repeated for many decades.” The “enormous housing bubble” of the early 2000s “isn’t comparable to any national or international housing cycle in history. Previous bubbles have been smaller and more regional.” The only reasonable parallels, he asserted, were the land bubbles that occurred in the US back in the late 1830s and in the 1850s.1
This is, as I shall show, an astonishingly inaccurate and dangerous reading of capitalist history. The fact that it passed so unremarked testifies to a serious blind spot in contemporary economic thinking. Unfortunately, it also turns out to be an equally blind spot in Marxist political economy. The housing crash of 2007–10 in the US was certainly deeper and longer than most—indeed, it may well mark the end of an era in US economic history—but it was by no means unprecedented in its relation to macroeconomic disturbances in the world market, and there are several signs that it is about to be repeated.
Conventional economics routinely treats investment in the built environment in general, and in housing in particular, along with urbanization, as some side-bar to the more important affairs that go on in some fictional entity called “the national economy.” The sub-field of “urban economics” is thus the arena where inferior economists go while the big guns ply their macroeconomic trading skills elsewhere. Even when the latter notice urban processes, they make it seem as if spatial reorganizations, regional development, and the building of cities are merely some on-the-ground outcome of larger-scale processes that remain unaffected by that which they produce.2 Thus, in the 2009 World Bank Development Report, which, for the first time ever, took economic geography and urban development seriously, the authors did so without a hint that anything could possibly go so catastrophically wrong as to spark a crisis in the economy as a whole. Written by economists (without consulting geographers, historians, or urban sociologists), its aim was supposedly to explore the “influence of geography on economic opportunity” and to elevate “space and place from mere undercurrents in policy to a major focus.”
The authors were actually out to show how the application of the usual nostrums of neoliberal economics to urban affairs (like getting the state out of the business of any serious regulation of land and property markets and minimizing the interventions of urban, regional and spatial planning in the name of social justice and regional equality) was the best way to augment economic growth (in other words, capital accumulation). Though they did have the decency to “regret” that they did not have the time or space to explore in detail the social and environmental consequences of their proposals, they did plainly believe that cities that provide
fluid land and property markets and other supportive institutions—such as protecting property rights, enforcing contracts, and financing housing—will more likely flourish over time as the needs of the market change. Successful cities have relaxed zoning laws to allow higher-value users to bid for the valuable land—and have adopted land use regulations to adapt to their changing roles over time.3
But land is not a commodity in the ordinary sense. It is a fictitious form of capital that derives from expectations of future rents. Maximizing its yield has driven low- or even moderate-income households out of Manhattan and central London over the last few years, with catastrophic effects on class disparities and the well-being of underprivileged populations. This is what is putting such intense pressure on the high-value land of Dharavi in Mumbai (a so-called slum that the report correctly depicts as a productive human ecosystem). In short, the report advocates the kind of free-market fundamentalism that has spawned a macroeconomic earthquake of the sort we have just passed through (together with its continuing aftershocks) alongside urban social movements of opposition to gentrification, neighborhood destruction, and the use of eminent domain (or more brutal methods) to evict residents to make way for higher-value land uses.
Since the mid 1980s, neoliberal urban policy (applied, for example, across the European Union) concluded that redistributing wealth to less advantaged neighborhoods, cities, and regions was futile, and that resources should instead be channeled to dynamic “entrepreneurial” growth poles. A spatial version of “trickle-down” would then, in the proverbial long run (which never comes), take care of all those pesky regional, spatial, and urban inequalities. Turning the city over to the developers and speculative financiers redounds to the benefit of all! If only the Chinese had liberated land uses in their cities to free market forces, the World Bank Report argued, their economy would have grown even faster than it had!
The World Bank plainly favors speculative capital over people. The idea that a city can do well (in terms of capital accumulation) while its people (apart from a privileged class) and the environment do badly, is never examined. Even worse, the report is deeply complicit with the policies that lay at the root of the crisis of 2007–09. This is particularly odd, given that the report was published six months after the Lehman bankruptcy and nearly two years after the US housing market turned sour and the foreclosure tsunami was clearly identifiable. We are told, for example, without a hint of critical commentary, that
since the deregulation of financial systems in the second half of the 1980s, market-based housing financing has expanded rapidly. Residential mortgage markets are now equivalent to more than 40 percent of gross domestic product (GDP) in developed countries, but those in developing countries are much smaller, averaging less than 10 percent of GDP. The public role should be to stimulate well-regulated private involvement … Establishing the legal foundations for simple, enforceable, and prudent mortgage contracts is a good start. When a country’s system is more developed and mature, the public sector can encourage a secondary mortgage market, develop financial innovations, and expand the securitization of mortgages. Occupant-owned housing, usually a household’s largest single asset by far, is important in wealth creation, social security and politics. People who own their house or who have secure tenure have a larger stake in their community and thus are more likely to lobby for less crime, stronger governance, and better local environmental conditions.4
These statements are nothing short of astonishing given recent events. Roll on the sub-prime mortgage business, fueled by pablum myths about the benefits of homeownership for all and the filing away of toxic mortgages in highly rated CDOs to be sold to unsuspecting investors. Roll on endless suburbanization that is both land- and energy-consuming way beyond what is reasonable for the sustained use of planet earth for human habitation! The authors might plausibly maintain that they had no remit to connect their thinking about urbanization with issues of global warming. Along with Alan Greenspan, they could also argue that they were blind-sided by the events of 2007–09, and that they could not be expected to have anticipated anything troubling about the rosy scenario they painted. By inserting the words “prudent” and “well-regulated” into the argument they had, as it were, “hedged” against potential criticism.
But since they cite innumerable “prudentially chosen” historical examples to bolster their neoliberal nostrums, how come they missed that the crisis of 1973 originated in a global property market crash that brought down several banks? Did they not notice that the commercial property–led Savings and Loan crisis of the late 1980s in the United States saw several hundred financial institutions go belly-up at the cost of some US$200 billion to US taxpayers (a situation that so exercised William Isaacs, then chairman of the Federal Deposit Insurance Corporation, that in 1987 he threatened
