The urban process under financialised capitalism

Abstract

Over half a decade has passed since the first global financial crisis of the 21st Century, and political economists are still trying to make sense of its causes and ramifications. In a major recent intervention Costas Lapavitsas argues that what was thrown into relief was the sheer penetration of the financial process into all facets of everyday life. Financialisation represents, Lapavitsas says, nothing less than a historic transformation in the structural process of capital accumulation itself: one which has been globally unfolding and locally evolving over the last three to four decades, and has now installed itself at all levels and dimensions of everyday life. At the centre of this argument is an analysis which focuses on the way financial intermediaries have been able to draw people, and the social infrastructure people depend on, deep into the circuit of financial accumulation. To a considerable degree this thesis backs up Lefebvre and Harvey's analysis made some four decades earlier: that financial capitalism was liable to mutate into a new urban form, based on the intensification of ‘secondary’ circuits of exploitation operating both inside and outside the realm of production. In this paper I try to connect the financial and geographical frameworks of Lapavitsas and Harvey to see what new light is cast on emerging urban forms of rent-extraction. Through an examination of the financialisation of the urban landscape I argue that urbanism does not merely reflect or represent the culture of financial accumulation, but has been a crucial socio-spatial process enabling the permeation and penetration of finance into the fabric of daily life.

Acknowledgements

This article took shape during The New Urban Question series of seminars at the Bartlett School of Planning, between January and March 2014. Thanks to Andy Merrifield and Michael Edwards for making this programme intellectually kinetic, politically charged and hugely enjoyable. Thanks also to the referees for their helpful comments and for the astute recommendation of Zola's The Kill I am very grateful to Nallini Thevakarrunai.

Notes

1 (Zola 2008, 94)

2 (Wolf 2008)

3 Taken from London (1994) Patrick Keiller's fictional documentary film portrait of London in the early 1990s. See Catterall (2012) for another discussion in CITY in context of Keiller's later film Robinson in Ruins (2012).

4 See the following recent BBC TV and radio programmes first broadcast in 2014: ‘Mind the Gap: London vs. the Rest’ and ‘The Country Formerly Known as London’.

5 “What happened to mid-nineteenth century Paris,” Merrifield writes, “is now happening globally, not only in big capital cities and orchestrated by powerful city and national political-economic forces, but in all cities, orchestrated by transnational financial and corporate elites everywhere, endorsed by their respective national governments. While these class forces in and out of government aren't always consciously conspiring, they nonetheless create a global orthodoxy, one that's both creating and tearing apart a new urban fabric that clothes the whole wide world.” (2014, x)

6 As Braudel succinctly put it: “Towns spelled money, the essential ingredient of the so-called commercial revolution” (1984, p94–5); a proto-urban revolution that laid the spatial infrastructure for industrialisation and market expansion in the 19th Century.

7 Some highlight the dominant trends surround the problem of ‘shareholder’ value, others technical and institutional innovation in the financial system. A hybrid Marxian and Post-Keynsian tradition links the phenomenon to the rise of neoliberal restructuring making way for a new social form of rentiership (see Krippner 2005and Lapavitsas 2011 for an overview of the debates).

8 See Walker (2004); French et al. (2011) for a commentary on this.

9 See Aalbers (2009); Zeller (2007); Wójcik (2009); Jameson (1998); Smith (2002) respectively.

10 See Christophers (2011); Kaika & Ruggiero (2013); Merrifield (2014)

11 This was, as Haldane shows, reflected in the sharp divergence in the recent trajectory of the market valuation of financial and non-financial companies: ‘To illustrate this rather starkly, consider a hedged bet placed in 1900, which involved going long by £100 in financial sector equities and short in non financial equities… From 1900 up until the end of the 1970s, this bet yielded pretty much nothing, with financial and non-financial returns rising and falling roughly in lockstep. But from then until 2007, cumulative returns to finance took off and exploded in a bubble like fashion. Only latterly, with the onset of the crisis, has that bubble burst and returned to earth’ (5).

12 This is something borne out by the crisis, Lapavitsas says, although the restructuring of institutions along the lines of neoliberalism certainly enabled the crisis it did not directly produce it. What is emphasised as a significant motive-force, however, is that of technological change and new organisational forms. Without transformations in ‘internal organisation…the speed of transactions, the feasibility of financial engineering, the techniques of pricing and risk management, and so on” it would have been impossible to “deal with huge numbers of borrowers’ (2010, 12). Yet, the crucial point is precisely the centre of gravity created by financial concentrations of capital: drawing banks, industry and households more and more into the sphere of circulation.

13 From an interview transcript with Costas Lapavitsas and the author, 12 December 2013.

14 We should add an important caveat here to avoid the charge of economic determinism overriding cultural and social aspects. Cultural theorists sometimes labour under the view that Marxian political economy reduces all cultural and social phenomena to the ‘infrastructural’ realm of material production. But the most creative Marxian thinking on the relations between culture and economy occurs, as Fredric Jameson says, when one views abstractions such as base and superstructure not as a universal theory of determinism, but a more nominal description of the process of determination ‘whose solution is a unique, ad hoc intervention’ (1996, 46). In this case our interest here is to understand the ‘malaise’ of real accumulation, and the way finance has become a solution which has absorbed the urban fabric. The reproduction of the infrastructure of everyday life, in other words, has become shaped according to the adventitious search of finance for its highest and best spatial fix.

15 ‘It is by reason of the existence of durable equipment,’ Keynes said in a remarkable passage, ‘that the economic future is linked to the present. It is, therefore, consonant with, and agreeable to, our broad principles of thought, that the expectation of the future should affect the present through the demand price for durable equipment’ (2007, 146).

16 Hence we see the reason why investment in the largest types of capital goods – infrastructure – often require the formation of public concerns to manage their investment. The relationship between the public and private sectors of the economy is, therefore, not an antagonistic structure as crude economic theory may lead one to believe. In fact the formation of these dual sectors can be see as a product of the internal contradictions of capital accumulation, requiring public funding mechanisms to ‘socialise’ the costs of production.

17 See Hoyt (1933) and Barras (2009) for comprehensive accounts of the relationship between accumulation and development in building cycles.

18 ‘The circulation of interest-bearing capital in land titles,’ Harvey writes, ‘plays an analogous role to that of fictitious capital in general. It indicates the locational paths for future accumulation and acts as a catalytic forcing agent that reorganises the spatial configuration of accumulation according to the underlying imperatives of accumulation. The fact that it sometimes forces too hard (beyond the capacity of either labour to bear) or in erroneous directions (because of the inevitable distortions that arise when the circulation of money capital…makes use of the monopoly privileges that attach to private property in land) simply establishes that the land market internalizes all the fundamental underlying contradictions of the capitalist mode of production. It thereby imposes those contradictions upon the very landscape itself’ (372)

19 In a forthcoming article, based on research of the UK urban experience of financialisation, I will try to develop this point in context of the way the production of the built environment has become central to a change in the urban pattern of financial accumulation.

20 In a fascinating example Marazzi suggests that the furniture store IKEA is paradigmatic of a business model which ‘delegate[s] to the client a whole series of functions (individuation of the code of the desired item, locating the object, removal of shelves, loading it into the car, etc.), externalizes the labour of assembling the “Billy” bookshelf; this is externalizing consistent fixed and variable costs that are now held by the consumer with a minimal benefit in prices, but with large savings in terms of company costs’ (2010, 51).

21 ‘When General Motors was at its peak,’ Turner points out, ‘it employed over 800,000 people’ now ‘Facebook has an equity value of $170 billion but employs only 5000 people: and it has recently acquired Whatsapp for $19billion, a company that employs just 55 people.’ (2014, 5)

22 Less entertaining are the more recent stories of stress, intimidation, exhaustion - and in one highly publicised case, death - of those competing to intern in the worlds of high finance (Malik 2013).

Additional information

Louis Moreno is completing a PhD at the UCL Urban Laboratory and Department of Geography, University College London. He also teaches in the Department of Visual Cultures at Goldsmiths, University of London. Email: [email protected]