Rebel Cities. David Harvey
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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 the American Bankers Association with nationalization unless they mended their ways)? That the end of the Japanese boom in 1990 corresponded to a collapse of land prices (still ongoing)? That the Swedish banking system had to be nationalized in 1992 because of excesses in property markets? That one of the triggers for the collapse in East and Southeast Asia in 1997–98 was excessive urban development in Thailand?5
Where were the World Bank economists when all this was going on? There have been hundreds of financial crises since 1973 (compared to very few prior to that), and quite a few of them have been property- or urban development–led. And it was pretty clear to almost anyone who thought about it—including, it turns out, Robert Shiller—that something was going badly wrong in US housing markets after 2001 or so. But he saw it as exceptional rather than systemic.6
Shiller could well claim, of course, that all of the above other examples were merely regional events. But then so, from the standpoint of the people of Brazil or China, was the housing crisis of 2007–09. The epicenter was the US southwest and Florida (with some spillover in Georgia), along with a few other hot-spots (the grumbling foreclosure crises that began in the late 1990s in poor areas in older cities like Baltimore and Cleveland were too local and “unimportant” because those affected were African-Americans and minorities). Internationally, Spain and Ireland were badly caught out, as was Britain, though to a lesser extent. But there were no serious problems in the property markets in France, Germany, the Netherlands, or Poland, or at that time throughout Asia.
A regional crisis centered in the United States went global, to be sure, in ways that did not happen in the cases of, say, Japan or Sweden in the early 1990s. But the S&L crisis centered on 1987 (the year of a serious stock crash that is typically and erroneously viewed as a totally separate incident) had global ramifications. The same was true of the much-neglected global property market crash of early 1973. Conventional wisdom has it that only the oil price hike in the fall of 1973 mattered. But it turned out that the property crash preceded the oil price hike by six months or more, and the recession was well under way by the fall (see Figure 1). The property market crash spilled over (for obvious revenue reasons) into the fiscal crisis of local states (which would not have happened had the recession been only about oil prices). The subsequent New York City fiscal crisis of 1975 was hugely important because at that time it controlled one of the largest public budgets in the world (prompting pleas from the French president and the West German chancellor to bail New York City out to avoid a global implosion in financial markets). New York then became the center for the invention of neoliberal practices of gifting moral hazard to the investment banks and making the people pay up through the restructuring