The Urban Roots of Financial Crises:

Reclaiming the City for Anti-Capitalist Struggle

By David Harvey:


Property market booms and busts are inextricably intertwined with speculative financial flows and these booms and busts have serious consequences for the macro-economy in general as well as all manner of externality effects upon resource depletion and environmental degradation. Property booms and capitalist crises also refocus politics on the city as a terrain of anti-capitalist struggle. The history of urban struggles, from the Paris Commune through the Shanghai Commune, the Seattle General Strike, The Tucuman uprising and the Prague Spring to the more general urban-based movements of 1968 (which we now see faintly echoed in Cairo and Madison) is stunning. But it is a history that is also troubled by political and tactical complications that have led many on the left to underestimate and misunderstand the potential and the potency of urban-based movements, to often see them as separate from class struggle and therefore devoid of revolutionary potential. And when such events do take on iconic status, as in the case of the Paris Commune, they are typically claimed as one of ‘the greatest proletarian uprisings’ in world history, even as they were as much about reclaiming the right to the city as they were about revolutionizing class relations in production.


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). The World Bank report advocates, in short, the kind of free-market fundamentalism that has spawned both macro-economic disruptions such as the crisis of 2007-09 alongside urban social movements of opposition to gentrification, neighbourhood destruction and the eviction of low-income populations 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 neighbourhoods, cities and regions was futile and that resources should instead be channelled 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 did!

The World Bank plainly favours speculative capital and not 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.


Clearly, to try to analyze the dynamics of the recent crisis and its aftermath without reference to the credit system (with mortgages standing at 40 per cent of GDP in the US), consumerism (70 per cent of the driving force in the US economy compared to 35 per cent in China) and the state of competition (monopoly power in financial, real estate, retailing and many other markets) would be a ridiculous enterprise. $1.4 trillion in mortgages, many of them toxic, are sitting on the secondary markets of Fannie Mae and Freddy Mac in the United States thus forcing the government to allocate $400 billion to a potential rescue effort (with around $142 billion already spent). To understand this, we need to unpack what Marx might mean by the category of ‘fictitious capital’ and its connectivity to land and property markets. We need a way to understand how securitization, as Goetzmann and Newman put it, connects ‘capital from a speculative public to building ventures’. For was it not speculation in the values of land and housing prices and rents that played a fundamental role in the formation of this crisis? Fictitious capital, for Marx, is not a figment of some Wall Street trader’s cocaine addled brain. It is a fetish construct which means, given Marx’s characterization of fetishism in volume 1 of Capital, that it is real enough but that it is a surface phenomenon that disguises something important about underlying social relations. When a bank lends to the state and receives interest in return, it appears as if there is something productive going on within the state that is actually producing value when most (but not all, as I shall shortly show) of what goes on within the state (like fighting wars) has nothing to do with value production. When the bank lends to a consumer to buy a house and receives a flow of interest in return, it makes it seem as if something is going on in the house that is directly producing value when that is not the case. When banks take up bond issues to construct hospitals, universities, schools and the like in return for interest it seems as if value is being directly produced in those institutions when it is not. When banks lend to purchase land and property in search of extracting rents, then the distributive category of rent becomes absorbed into the flow of fictitious capital circulation.13 When banks lend to other banks or when the Central Bank lends to the commercial banks who lend to land speculators looking to appropriate rents, then fictitious capital looks more and more like an infinite regression of fictions built upon fictions. These are all examples of fictitious capital flows. And it is these flows that convert real into unreal estate. Marx’s point is that the interest that is paid comes from somewhere else – taxation or direct extractions on surplus value production or levies on revenues (wages and profits). And for Marx, of course, the only place where value and surplus value is created is in the labour process of production. What goes on in fictitious capital circulation may be socially necessary to sustaining capitalism. It may be part of the necessary costs of production and reproduction. Secondary forms of surplus value can be extracted by capitalist enterprises through the exploitation of workers employed by retailers, banks and hedge funds. But Marx’s point is that if there is no value and surplus value being produced in production in general, then these sectors cannot exist by themselves. If no shirts and shoes are produced what would retailers sell?

There is, however, a caveat that is terribly important. Some of the flow of fictitious capital can indeed be associated with value creation. When I
convert my mortgaged house into a sweatshop employing illegal immigrants, the house becomes fixed capital in production. When the state builds roads and other infrastructures that function as collective means of production for capital, then these have to be categorized as ‘productive state expenditures’. When the hospital or university becomes the site for innovation and design of new drugs, equipment and the like, it becomes a site of production. Marx would not be fazed by these caveats at all. As he says of fixed capital, whether something functions as fixed capital or not depends upon its use and not upon its physical qualities.14 Fixed capital declines when textile lofts are converted into condominiums while micro-finance converts peasant huts into (far cheaper) fixed capital of production!

Much of the value and surplus value created in production is siphoned off to pass, by all manner of complicated paths, through fictitious channels. And when banks lend to other banks, it is clear that all manner of both socially unnecessary side-payments and speculative movements become possible, built upon the perpetually shifting terrain of fluctuating asset values. Those asset values depend upon a critical process of ‘capitalization’. A revenue stream from some asset, such as land, property, a stock, or whatever, is assigned a capital value at which it can be traded, depending upon the interest and discount rates determined by supply and demand conditions in the money market. How to value such assets when there is no market for them became a huge problem in 2008 and it has not gone away. The question of how toxic the assets held by Fannie Mae really are gives almost everyone a headache (there is an important echo here of the capital value controversy that erupted and got promptly buried, like all manner of other inconvenient truths, in conventional economic theory in the early 1970s).15 The problem that the credit system poses is that it is vital to the production, circulation and realization of capital flows at the same time as it is the pinnacle of all manner of speculative and other ‘insane forms’. It is this that led Marx to characterize Isaac Pereire, who, with his brother Emile, was one of the masters of the speculative reconstruction of urban Paris under Haussmann, as having ‘the nicely mixed character of swindler and prophet’.16


The city is a terrain where anti-capitalist struggles have always flourished. The history of such struggles, from the Paris Commune through the Shanghai Commune, the Seattle General Strike, The Tucuman uprising and the Prague Spring to the more general urban-based movements of 1968 (which we now see faintly echoed in Cairo and Madison) is stunning. But it is a history that is also troubled by political and tactical complications that have led many on the left to underestimate and misunderstand the potential and the potency of urban-based movements, to often see them as separate from class struggle and therefore devoid of revolutionary potential. And when such events do take on iconic status, as in the case of the Paris Commune, they are typically claimed as one of ‘the greatest proletarian uprisings’ in world history, even as they were as much about reclaiming the right to the city as they were about revolutionizing class relations in production.

Anti-capitalist struggle is about the abolition of that class relation between capital and labour in production that permits the production and appropriation of surplus value by capital. The ultimate aim of anti-capitalist struggle is, quite simply, the abolition of that class relation. Even and particularly when this struggle has to be seen, as it invariably does, through the prisms of race, ethnicity, sexuality and gender, it must eventually reach into the very guts of what a capitalist system is about and wrench out the cancerous tumour of class relations at its very centre. It would be a truthful caricature to say that the Marxist left has long privileged the industrial workers of the world as the vanguard agent that leads class struggle through the dictatorship of the proletariat to a world where state and class whither away. It is also a truthful caricature to say that things have never worked out that way. Marx argued that the class relation of domination had to be displaced by the associated workers controlling their own production processes and protocols. From this derives a long history of political pursuit of worker control, autogestion, worker cooperatives and the like.39 Most attempts of this sort have not proven viable in the long run, in spite of the noble efforts and sacrifices that kept them going in the face of often fierce hostilities and active repressions.40 The main reason for the long-run failure of these initiatives is simple enough. As Marx shows in the second volume of Capital, the circulation of capital comprises three distinctive circulatory processes, those of money, productive and commodity capitals. No one circulatory process can survive or even exist without the others: they intermingle and co-determine each other. By the same token, no one circulation process can be changed without changing the others. Workers control in relatively isolated production units can rarely survive, in spite of all the hopeful autonomista and autogestion rhetoric, in the face of a hostile credit system and the predatory practices of merchant capital. The power of merchant capital (the Wal-Mart phenomena) has been particularly resurgent in recent years (another arena of much neglected analysis in Marxist theory).

Recognizing this difficulty, much of the left came to the view that struggle for proletarian command over the state apparatus was the only other path to communism. The state would be the agent to control the three circuits of capital and to tame the institutions, powers and class agents that managed the flows that supported the perpetuation of the class relation in production. The problem has always been, of course, that the lifeblood of the state comes from facilitating and tapping into the very flows that the state is supposed to control. That is as true for the socialist state as for the capitalist state. Centralized and top-down management does not work except by way of some liberation of the flows (as the Chinese have proven so expert at doing). And once the flows are liberated, all hell breaks loose because the capitalist genie is out of the bottle. So what are the political prospects for finding a middle path between autogestion and centralized state control when neither of them on their own work effectively as antidotes to the power of capital?

The problem with worker control has been that the focus of struggle has been the factory as a privileged site of production of surplus value and the
privileging of the industrial working class as the vanguard of the proletariat, the main revolutionary agent. But it was not factory workers who produced the Paris Commune. So there is a dissident view of that event that says it was not a proletarian uprising or a class-based movement but an urban social movement that was reclaiming the right to the city rather than seeking a revolutionary path towards the building of an anti-capitalist alternative.41 But why could it not be both? Urbanization is itself produced. Thousands of workers are engaged in its production and their work is productive of value and of surplus value. Why not reconceptualize the site of surplus value production as the city rather than as the factory? The Paris Commune can then be reconceptualized in terms of that proletariat that produced the city seeking to claim back the right to have and control that which they had produced. This is (and in the Paris Commune case was) a very different kind of proletariat to that which Marxists have typically favoured. But at this point in the history of those parts of the world characterized as advanced capitalism, the factory proletariat has been radically diminished. So we have a choice: mourn the passing of the possibility of revolution or change our conception of the proletariat to that of the hordes of unorganized urbanization producers and explore their distinctive revolutionary capacities and powers.


It is in this light too that the history of the politics of conventional labour struggles requires a re-write. Most struggles that are depicted as focused solely on the factory-based worker turn out, on inspection, to have had a much broader base. Margaret Kohn complains, for example, how left historians of labour laud the Turin Factory Councils in the early twentieth century while totally ignoring the fact that it was in the ‘Houses of the People’ in the community that much of the politics was shaped and from which much of the logistical support flowed.45 E.P. Thompson depicts how the making of the English working class depended as much upon what happened in chapels and in neighbourhoods as in the work place. How successful would the Flint sit-down strike of 1937 have been were it not for the mass of unemployed people and the neighbourhood organizations outside the gates that unfailingly delivered their support, moral and material? And is it not interesting that in the British miners’ strikes of the 1970s and 1980s, the miners that lived in diffuse urbanized areas such as Nottingham were the first to cave in while the tightly-knit communities of Northumbria remained solidarious to the end? Organizing the community has been just as important in prosecuting labour struggles as has organizing the workplace. And to the degree that conventional workplaces are disappearing in many parts of the so-called advanced capitalist world (though not, of course, in China or Bangladesh), then organizing around work in the community appears to be even more important.


If the Parisian producers in the Commune were reclaiming their right to the city they had produced, then in what sense might we look to a slogan such as ‘the right to city’ as a ‘cry and a demand’ (as Lefebvre put it) around which political forces might rally as a key slogan for anti-capitalist struggle? The slogan is, of course, an empty signifier full of immanent but not transcendent possibilities. This does not mean it is irrelevant or politically impotent. Everything depends on who gets to fill the signifier with revolutionary as opposed to reformist immanent meaning. That is bound to be contested and then, as Marx once put it, ‘between equal rights force decides’.49

It is indeed often difficult to distinguish between reformist and revolutionary initiatives in urban settings. Participatory budgeting in Porto Alegre, ecologically sensitive programmes in Curitiba or living wage campaigns in many US cities, appear on the surface to be merely reformist (and rather marginal at that). The Chongqing initiative may, despite the Maoist rhetoric, more resemble redistributive Nordic social democracy than a revolutionary movement. But as their influence spreads, so the initiatives reveal other deeper layers of possibility for more radical conceptions and actions at the metropolitan scale. A spreading rhetoric (from Zagreb to Hamburg to Los Angeles) over the right to the city, for example, seems to suggest something more revolutionary might be at stake.50 The measure of that possibility appears in the desperate attempts of existing political powers (e.g. the NGOs and international institutions, including the World Bank, assembled at the Rio World Urban Forum in 2010) to co-opt that language to their own purposes.


The right to the city is not an exclusive right but a focused right.51 It is inclusive not only of construction workers but also of all those who facilitate the reproduction of daily life: the care givers and teachers, the sewer and subway repair men, the plumbers and electricians, the hospital
workers and the truck bus and taxi drivers, the restaurant workers and the entertainers, the bank clerks and the city administrators. It seeks a unity from within an incredible diversity of fragmented social spaces. And there are many putative forms of organization – from workers’ centres and regional worker’s assemblies (such as that of Toronto) to alliances (such as the Right to the City alliances and the Excluded Workers Congress and other forms of organization of precarious labour) that have this objective upon their political radar. This is the proletarian force that must be organized if the world is to change. This is how and where we have to begin if we wish to organize the whole city. The urban producers must rise up and reclaim their right to the city they collectively produce. The transformation of urban life and above all the abolition of the class relations in the production of urbanization will have to be one, if not the, path towards an anti-capitalist transition. This is what the left has to imagine as constituting the core of its political strategy in years to come.

Read full article at New Left Project (originally published in Socialist Register nº 48, 2012)




Comments are closed.

%d bloggers like this: