Interview with David Harvey: Rebel Cities & Urban Resistance Part II

Emanuele: You talk about the geographical distribution of economic crises. Namely, how crises spread from one part of the globe, to the other. You mention that people shouldn't have been surprised by the economic collapse of 2008. For example, right now we have economic crises in the EU zone and North America, yet you mention exploding GDP growth in Turkey, and various parts of Asia. You also mention a paradox: For instance, with China, while they've been going through a tremendous process of urbanization over the past twenty years, those same industrial projects that yield massive profits have displaced millions of Chinese people and destroyed the natural environment. All the while, many of these projects, and entire cities, sit utterly empty, as only a very small percentage of the Chinese population can afford such luxuries and accommodations. Can you talk about these phenomena and contradictions?

Harvey: Well, China is doing it the same way the United States got out of the Great Depression—by suburbanization after World War II. I think the Chinese, when faced with the question of what they're going to do, particularly in a global economic down-turn, and in light of sluggish economic gains circa 2007-08, decided they were going to get out of their economic difficulties by urbanization and infrastructure programs: high-speed railways, highways, skyscrapers and so forth. These became the means by which the surplus capital was absorbed. Of course anybody who was supplying China with raw materials did very well, because Chinese demand was very high. China absorbs half the world's steel supplies. So that means if you're producing iron ore or other metals like Australia has been, then of course Australia does very well as they haven't been experiencing much of a crisis over the past few years. The Chinese have in effect taken a leaf out of the book on United States economic history by repeating the post-1945 economic development program of the US.

In short, China figured it could save itself with the same sort of strategy and avoid any economic stagnation or decline. You know, the United States and Europe are both mired in low-low growth, as opposed to the Chinese who have enjoyed very rapid rates of growth. But, again, it's about absorbing the surplus-capital in ways that are productive. That's the question: I say hopefully, because we don't know if the Chinese boom will go bust. If the Chinese boom goes bust, like the housing market and financial markets did in the US circa 2008, then global capitalism will be in serious trouble. Right now, the Chinese are trying to limit their growth rate. So, instead of aiming for that 10% GDP growth rate, they're shooting for 7-8% growth in the coming years. They'll try and "cool-off." I mean, come on, the Chinese have over four empty cities. Can you believe this? Completely empty cities. What happens in the coming years? Do these cities become productive urban areas? Will they just sit there and rot? In which case, a lot of money would be lost and a great depression would hit China as well.

In this case, some very uncomfortable political decisions would be made, and surely we could expect severe social unrest amongst the Chinese working classes and poor. The world looks very different depending on which part of the world you're in. For example, I was just in Istanbul, Turkey; and there's construction cranes all over the place. Plus, Turkey's growing at 7% a year, so it's a very dynamic place right now. When you're standing in Turkey, you really can't imagine the rest of the world being in crisis. Then, I flew two and half hours to Athens, Greece; I don't have to tell you what's going on there. Greece is like going into a disaster-zone where everything is stopped. All the shops are closed and there's no construction going on anywhere in the cities. Here, you have two cities that are 600 miles from one another, yet they're two completely different places. This is what you should expect to see in the global economy right now: some places boom, others bust. There's always an uneven geographical development of economic crisis. To me, this is a very fascinating story to be told.

Emanuele: In Chapter Two, "The Urban Roots of the Crisis," you discuss the link between economic crisis in the United States, homeownership and individual property rights, which are both important ideological components within the American Dream, but you're also quick to point out that such "cultural values" become quite prominent when subsidized by state policies. What are those policies? And how can we talk about these trends through an ideological scope? Moreover, later in the chapter, you mention that we must move beyond Marx, while utilizing his more prescient insights. How should we "move beyond Marx?"

Harvey: Well, if you go back to the 1930s, you'll find that less than 40% of Americans were homeowners. So, around 60% of the population in the US were renting. This was particularly the case with lower-class, or middle-class populations. They typically rented. Now, these populations were rather restive populations. So the idea had grown up over the previous 40-50 years that you could stabilize relatively restive populations and make them pro-capitalist and pro-system by cutting them into homeownership possibilities. So there was plenty of state support for what we used to call saving and loan institutions, which were separate from banks. These were places where people would put their savings, and those savings were used to promote homeownership for low-income populations. The same thing was true in Britain's "Building Society." In the 1890s this trend starts as the business-class was wondering how to get lower-income populations stabilized and less restive. There was a wonderful phrase the business-class used to use, "Incumbent homeowners don't go on strike!" Remember, people had to borrow to become owners. There's your control mechanism. Overall, this system was very weak all the way through the 1920s, until the 1930s when the US government and business-classes decided to strengthen it. To begin with, when you took out a mortgage in the 1920s you could usually only get it for about three years, then you would have to renew, or renegotiate the mortgage. Then, in the 1930s, they created the 30 year mortgage. But in order for that 30 year mortgage to work, it had to be guaranteed in some way. So this led to the establishment of state-institutions that would guarantee the mortgages.

Of course this lead to the Federal Housing Administration. At the same time, the banks needed a way to pass the mortgages on to someone else, so they created this organization called Fannie May. Again, this is what you have throughout this time period: State organizations being used to encourage and guarantee homeownership, particularly for the middle to lower-classes, which of course discouraged these people from striking or stepping out of line. Now they're in debt. These institutions really took off after World War II. During this period, there was plenty of propaganda about the "American Dream" and what it meant to be American. The mortgage tax-deduction came into play, which allowed you to deduct the interest on your mortgage. Remember, this is a huge subsidy to homeownership. There was state-subsidy of homeownership; there were state-institutions promoting homeownership. So, all of this becomes crucial when connected with the GI Bill, which gave privileged homeownership rights and incentives to soldiers returning from World War II. There was an incredible push from the state apparatus to encourage and guarantee homeownership. Remember, this was taking place within the context of suburbanization. These institutions became very critical to the housing market, and they still exist of course. Everybody was talking about how Fannie May and the new one, Freddy Mac were government run, but partially privately owned, yet we see they in essence have become nationalized. So, throughout time, the government has promoted homeownership and has played a tremendous role in creating these sub-prime mortgages.

This was done during the Clinton Administration in 1995, as they were trying to promote homeownership amongst minority populations in the United States. The development of the "sub-prime crisis" was very much connected to both what the private sector was doing, but also what government policies were guaranteeing. For me, this is a crucial aspect of American life, where people move from 60% of the population being renters, to the high-point in 2007/08 when over 70% of the population becomes homeowners. This, of course, creates a different kind of political atmosphere. A political atmosphere where the defense of property rights and property values starts to become very important. Then you have neighborhood movements where people try to keep certain people out of neighborhoods because they perceive those people as driving down property values. You get a different kind of politics because housing becomes a form of savings for middle and working-class families. Of course, people tap into those savings by refinancing their houses. There was a lot of refinancing going on during the property boom in the US. A lot of people profited from high housing prices. This promotion of homeownership is now treated as if it were some long-standing dream of those living in the United States. However, to be sure, there's always been this sort of idea in the United States with migrant worker populations, that if you get a bit of land, grow some things on it, and so forth, you could end up having a nice life. Yes, this was part of the immigrant dream. But this has been transformed into suburban homeownership, which is not about having cows and chickens in your backyard, it's about having symbols of consumerism all around you.

Now, the reason why Marx is important in all of this is because Marx had an acute understanding of how capital-accumulation works. He understood that this perpetual growth machine contains many internal contradictions. For example, one of the foundational contradictions Marx talks about is between "use-value" and "exchange-value." You can see this worked out in the housing situation very clearly. What's the use-value of a house? Well, it's a form of shelter, a place of privacy, it's where one can create a family life, and we can list a few other use-values of the house, but the house also has an exchange-value. Remember, when you rent the house, you're simply renting the house for what it's worth. But when you buy the house, you now view this home as a form of savings, and after a while, you use the house as a form of speculation. As a result of this, housing prices start shooting up. So in this context, the exchange-value starts to dominate the use-value of the house. The relationship between exchange and use-value starts to get out of hand. So when the housing-market busts, suddenly five million people lose their homes and the use-value disappears. Marx talks about this contradiction and it's an important one. We must ask the question: What should we be doing with housing? What should we do with healthcare? What are we doing with education? Shouldn't we be promoting the use-value of education? Or should we be promoting the exchange-value of these things? Why should life necessities be distributed through the exchange-value system? Obviously we should reject the exchange-value system, which is caught up in speculative activity, profiteering, and actually disrupts the ways in which we can acquire necessary products and services. That's the kind of contradiction Marx was well aware of.