Crisis and Resistance in the Neoliberal City

David Harvey: This foreclosure crisis, this financial crisis, has to be thought of as a crisis of the city, a crisis of urbanization – and if it’s a crisis of the city and of urbanization, then the solution has to be a
reconfiguration of the city and a redirection of what urbanization is about. The pattern of this crisis is not anything new; and one of the things that happens in the U.S., and on the left in general, is that we seem sometimes to suffer from amnesia as to what has happened in the past. I would like to recall that the last biggest crisis period of capitalism, from around 1973 to 1982, was a deep crisis of urbanization. It began with the collapse of global property markets in the spring of 1973, leading to the bankruptcy of several financial institutions, followed of course by the Arab-Israeli war and the oil price hike (which everybody remembers more than they remember the property market crash). This was followed by a crisis of municipal finance and the disciplining of almost all cities, not only in the U.S., but around the world, to a new regime of financial terror, what I’d also call “neoliberal politics.” Understanding what this regime was about is crucial because it was part of the solution to the crisis of the 1970s, a solution which underpins the nature of the crisis we are currently in. This is a terribly important point to make, because how we come out of this crisis is almost certainly going to define the nature of the next crisis down the road – unless we decide to say, “To hell with capitalist crises! To hell with capitalism!”

In the 1970s it was clear that corporate America was in difficulty, economically and politically. Economically, it decided to try to get out of it by confronting and disciplining labor, big time, and it had a number of means to do that. First, it opened up immigration, for instance the 1965 Immigration Reform Act in this country. It’s very interesting to remember that in the 1960s and the 1970s the Germans were importing people from Turkey, the French were actually subsidizing bringing in immigrants from the Maghreb, Britain was of course accepting people from the ex-empire, and the Swedes were bringing in people from Yugoslavia. Immigration became one of the capitalist class’ main tools to try to solve the “problem” of the power of labor, the scarcity of labor, and the high level of wages. Second, they tried to use technological change to throw people out of work as much as possible, through labor-saving innovations. The third was the invention of interesting politicians with names like Reagan and Thatcher, whose main mission was of course to screw labor and destroy labor organization – they did it democratically while Pinochet did it through military violence in Chile. And finally if this political assault on labor didn’t work you could always offshore production to Mexico or the Philippines or Bangladesh or ultimately even to China.

By all these means, capitalists successfully disciplined labor in the 1970s and early 1980s, such that by the time you get to 1985 the labor question is no longer a serious barrier to capitalist accumulation. What that meant however, was that labor had very little power in the market, and as a result of that, real wages did not increase anywhere in the world, even in the United States, from the 1970s to the present day. We’ve been through 30 years of wage repression, guaranteeing capitalist profits, with a public policy which was actually oriented in that same direction. I always remember that Margaret Thatcher’s economic advisor said in effect, sometime after he left the postion, that he really believed that the fight against inflation was really a cover to bash the workers and create an industrial reserve army so that capitalists could have easy profits ever thereafter.

What we’ve seen since then is of course a tremendous increase in inequality and a tremendous concentration of wealth in the upper classes. The story we’re told is that the upper classes should have that wealth, after all, they invest, and as they invest they create jobs and aren’t-we-all-grateful-to-them-for-doing-so. The idea that we could actually get jobs by other means is ruled out of the picture, of course. But in fact the capitalist class doesn’t particularly care about creating jobs, it cares about making money. And it soon found, in the 1980s in particular, that it could make money by investing in asset values rather than in production, so it started to invest in the stock market, in property markets, in oil futures and so on. New markets were developed in which you could actually make even more money than you could spending your money on assets through purchasing derivatives of assets – and very soon you could buy on derivatives of insurances of derivatives of assets and so on.

What resulted was a financial asset bubble, rather than at real expansion of production and real jobs. The rest of us were reduced very frequently to service functions, reconfiguring the class structure. We went through deindustrialization in this country, through a reconfiguration of the nature of job structures and also of the kinds of people who can occupy those job structures. This was crucial to fueling the bubble that grew in the 1990s in particular. During that period, if you asked where to put your money, you were told to put it in property markets. It’s important to remember that we’ve had many financial crises over these last thirty years, and many of those crises have been related to urbanization, and have been about property. We had the Savings and Loans crisis in 1987-89, when somewhere around 600 or 800 banks or financial institutions were declared bankrupt, and this was a crisis tied very much to commercial property. In 1992 the Swedish banking system went bankrupt over excessive property development. In 1989 the Japanese economy crashed around land market prices. What we’ve had is a whole series of asset bubbles and we seem to forget what these asset bubbles are about. These asset bubbles are like Ponzi schemes: people put money in the stock market, the stock market rises, and people put more money in the stock market, and it just keeps going like that, the same with property markets, the same with oil futures. And this leads us to a point where, finally, the asset bubble breaks. It breaks big time this time, not like it did in 1987, which was sort of contained, but in a much bigger way, that becomes global immediately, as the 1973-75 crisis was global. That then poses the problem: what exactly are we going to do about this?

Now the answer to this lies in the way we came out of the crisis in the 1970s, when the New York investment banks acquired vast quantities of money from recycling petro dollars. Their big problem was where to invest it–the economy wasn’t doing well, so where do you put your money to make a sufficient rate of return? One of the things they decided on was lending to developing countries–because the good thing about lending to countries is that countries can’t disappear, you know where they are and you know you can go get your money. So in the 1970s they lent to places like Mexico. Then they raised the interest rates and Mexico couldn’t pay, and was going to go bankrupt–which meant that the New York investment banks could go bankrupt. So at that point, the government stepped in, the treasury and the IMF got together, and they bailed out Mexico so that Mexico could bailout the New York banks. But they bailed out Mexico in such a way that the Mexican population suffered a drop in living standards of about 20% in the next two to five years. This is what’s called saving the banks and socking it to the people.

Now I defy you to look at what’s been going on in this country in terms of its public policy and say its anything other than saving the banks and socking it to the people. We’re the ones who are paying, they are the ones who are benefitting. This is a class project, it was a class project back in the 1970s and it continues to be one now. If we come out of this crisis with this class project intact then we are in deep trouble. We have to turn it around in such a way that government policy gets turned into support of the people, not support of the banks. The banks should be nationalized, turned into public utilities which serve people, not capital. And this is something on which we really need to concentrate our ideas on, right now. In particular, the biggest danger of all is that the stimulus package which is being passed is going to be handed out to mayors, handed out to cities, handed out all over the place, in such a way that there is absolutely no control over exactly what’s going to be done with it. So what’s going to be done with it is that people are going to be use it to fund their favorite projects. Mayor Bloomberg’s favorite project is to give $45 million to retrain Wall Street executives, which seems to me an astonishing way in which to spend the money – but that’s the way Mayor Bloomberg thinks. But I think we have different ideas; in New York, together with the some of the social movements who are forming the Right To The City group, we would like to suggest a whole different set of ways the stimulus package could be spent in order to benefit people rather than capital. Along with that, we have the supreme irrationality that you have tent cities arising in California and elsewhere, increasing homelessness, at the same time that you have all these vacant properties around. Is that a rational situation? And it seems that this is a situation where political activism can take very direct action–for instance, Picture the Homeless in NYC tried to commandeer a building last week–and this is the kind of thing we need to be supporting publicly as much as we can.