Since the 1970s, we’ve seen a tremendous increase in inequality, not just simply in this country, but worldwide. And in effect, the assets of the world have been accumulated more and more and more in few hands. When you look at the nature of the bailout programs, the stimulus programs and all the rest of it, what it really does is to, in effect, try to keep those assets intact while making the rest of us pay. And so, it’s time we stopped that and kind of said, we should actually be getting more of the assets and, much greater equality.
For example, the nature of the bailout of the banks and the sort of restructuring that is going on is, in effect, about saving the banks and saving the bankers, while actually sticking it to the people. We’re the ones who are going to have to pay for this in the long run. So what I’m kind of arguing for is a political awareness that that is happening.
A political awareness has been happening over the last thirty years, sort of step by step. It’s been disguised in this kind of rhetoric about individual liberty and freedom of markets and all those kinds of things. But if you look backwards, you will see that this is not the first financial crisis we’ve had. We’ve had many of them over the last thirty years, and they all have the same character. We had our own savings and loan crisis back in the 1980s. There was a Mexican debt crisis back in 1982, when, in effect, Mexico was going to go bankrupt. And if they had gone bankrupt, then the New York investment banks would have gone under. So what did they do? They bailed out Mexico, therefore bailing out the New York investment bankers, and then they made the Mexican people pay.
They had lent the money to Mexico in the first place. And if Mexico had just defaulted on its debt, what would the, what would the bankers have done? They would have lost a tremendous amount.
Homeownership is not a good idea. For two reasons. One is, it makes you actually very vulnerable if you’re a heavily debt-encumbered homeowner. And actually, the initial legislation was kind of interesting, the debate around it back in the 1930s, when it kind of said debt-encumbered homeowners don’t go on strike, and because you’ve got to pay your mortgage. And so, this becomes, as it were, a millstone around your neck. And that then makes you very vulnerable to fluctuations in the market like we’re seeing right now, particularly if you have variable rate mortgages, things of that kind, and you can really easily get caught out. So, in effect, what we’ve seen in the housing market is a tremendous plundering of the assets of some of the most vulnerable people in the country. This has been the biggest loss of asset wealth to the African American population that there’s ever been.
The first wave of foreclosures was really in impoverished neighborhoods, African American, immigrant and very often single-headed household women. And, yeah, they probably should not have become homeowners. But on the other hand, they were taking a risk. But who took the real big risks in this economy, if it wasn’t the bankers? So, in a sense, they’re being made to pay, while the bankers are still walking away with a tremendous amount of money.
gentrification and the mortgage crisis
The gentrification process in here in New York and the like was again about kind of reconstructing urban environments in such a way, and a lot of that reconstruction entailed, particularly when it was corporate-led, entailed a big investment in housing. You then have the problem of who’s going to buy the housing. And it’s not only gentrification, it’s also a lot of that new development, new condominiums and all the rest of it.
And it’s kind of interesting. Finance controls both the creation of housing, the production of housing, and also its consumption. You lend money to the developers. They go in and gentrify a neighborhood. You lend them money to the people who are going to occupy it. And even if they don’t have—you’ve got to find that market for the gentrification once that process goes on. And so, the connection there in this, the financial operators are working on both ends of this game, if you like.
“the right to the city”
The right to the city is that we have, a real need right now to democratize decisions as to how a city shall be and what it should be about, so that we can actually have, if you like, a collective project about reshaping the urban world. Here in this city, effectively, the right to the city has been held by the mayor and the Development Office and the developers and the financiers. Most of us don’t really have a very strong say. There are kind of community organizations and so on. So I think the democratization of the city, of city decision making, is crucial. And we want to reclaim the right to the city for all of us, so that we can all actually not only have access to what exists in the city, but also be able to reshape the city in a different image, in a different way, which is more socially just, more environmentally sustainable and so on.
Crises are terribly important in the history of capitalism. They are the kind of irrational rationalizers of the system. What happens is that capitalism develops in a certain way, has real problems, then it goes into crisis, and it comes phoenix-like out of it in another form. We went through a long crisis in the 1970s. There was a long crisis in the 1930s. So a crisis, then, is a moment of reconfiguration of what capitalism is going to be about. And right now, the powers that be are more about trying to reconstruct the pre-existing power structure or save the pre-existing power structure without intervening in it in any way.
Capitalism historically has grown at a 2.5 percent compound rate of growth since 1750. And in good years, it’s growing at three percent. Obama, the other day, said, “Well, in a couple of years, we’ll be back to three percent growth.” Gordon Brown says, “Well, actually, the economy will double in the next few years.” Now, when capitalism was constituted by everything going on around Manchester and a few other hot spots in 1750, three percent compound growth rate was no problem. You’re now looking at a situation where you’re going to say three percent compound rate of growth on everything that’s going on in East and Southeast Asia, Europe, North America and everywhere in the world. We’re looking at a different kind of world.
The total economy back in, say, 1750 was about $135 billion. It was $4 trillion by the time you get to 1950. It’s $40 trillion by the time you get to 2000. It’s now $56 trillion. If it doubles in the next year, we’re talking about $100 trillion. And by 2030, you’re going to have to find three trillion employment, profitable opportunities for capital to operate at that point.
Now, there are limits, and we’re hitting those limits environmentally, socially, politically. And it’s time we started really thinking about an alternative. In other words, we have to think about a zero-growth economy. It means that instead of growing at three percent per year, you just keep it constant.
It means it has to be non-capitalist, because that means there’s not going to be any profit around for anybody to have. In effect, you’re going to have to have a nonprofit economy. And how you do that, of course, is a big, big question. But this is one of the key questions we should be thinking about right now. The disturbing thing is that we’re going through this crisis right now, and we’re not asking those kinds of big questions that we should be asking.
Last January 2008, the Wall Street bonuses collectively came in at $32 billion. And at that time, two million people had already lost their houses. Figure, two million people have lost their houses; Wall Street rewards itself $32 billion. Nobody got angry about that. This was class robbery. This is like the bankers going down into the hold of a sinking ship and grabbing all the gold and going up and getting on a lifeboat and then disappearing and then leaving everybody else on this sinking ship. And that’s $32 billion instead of this $165 or $235 million for AIG bonuses.
Neoliberalism, was a political project, which formed in the 1970s. And it was a political project to try to consolidate and reconstruct class power. And it did it, through a whole kind of set of mechanisms about privatization, about free markets, individual responsibility, withdrawal of the state from social provision. But the state never withdrew from the economy. That’s a myth. The state has been bailing people out all along. Actually, the savings and loan crisis.
But as soon as the big guns get into trouble, the state bails them out. And this is what we call moral hazard, that actually because you’re bailing out Wall Street all of the time, then Wall Street will take high risks. And they’ve taken immensely high risks over the last thirty years and again and again and again being caught out. And each time they get caught out, the state steps in and saves them. That’s the connection, between the state and Wall Street. That’s the connection that has to be broken.
If we’re going to come out of this crisis in any different kind of way, it’s going to be because of the formation of very strong social movements that say enough is enough. We’ve got to change the world in a very, very different way.
Now, social movements of this kind don’t sort of form overnight. They take a little while. It’s interesting when you look back. In 1929, there’s the stock market crash. The social movements didn’t really start getting into motion until 1932, ’33. It took about three years. Right now, we’re in a legitimation crisis. They’re trying to rescue the system as is. And more and more people are beginning to say this is an illegitimate system, and therefore we have to think about doing something different.
Out of that, likely to come, all kinds of different social movements. We have this movement, which is a relatively new movement, called the Right to the City movement. It’s here in New York City, and it’s several other cities in the United States. There’s a national coalition. It’s small right now, and it’s getting its act together. But these kinds of things can grow very fast, very quickly. So there is likely to be many movements of that kind.
In other countries, there are already quite massive social movements. This country is a little bit behind on that trajectory.
since 1945, what you call the military-industrial complex, it’s been a terribly important vehicle in American development. It has been the center of what we call military Keynesianism. I mean, it’s the one sector where deficit financing was thoroughly permitted, and it was the one sector under Reagan that expanded immensely and has never been let go, in spite of the end of the Cold War. So there’s been a very important economic function to what the military is about.
As we’ve seen over the last couple of years, commodity prices are very unstable. And command over commodities and resources becomes absolutely crucial. So, a lot of the interventionism in the Middle East and elsewhere has been clearly built around US interest in controlling oil supplies. And it’s not only about that, but it’s very strongly connected with that, so that then arguments are made about, we’ve got to get rid of a dictator. Well, there have been plenty of dictators around the world the United States has not taken any notice of, because it didn’t control oil. And so, the kind of war machine, and the covert machines starts to become very important in terms of maintaining corporate access to the resources of the world and, at some point, also to the labor resources of the world, not only the natural resources.
there was this National Intelligence Council report, which came out last year. It kind of said, basically, the US is no longer going to be the dominant power in the world. It’s going to be a very important player in the world, but we have to look forward to a multi-polar world, in which East and Southeast Asia, for example, is economically as powerful as the United States. The European Union, if it gets its act together, is likely to be as powerful as the United States. So the United States has to look towards a multi-polar world.
That’s actually both unstable and potentially rather dangerous. Whether we like what the US has done with its domination, at least there was only the US versus the Soviet Union kind of world. When you start to look at the multi-polar world, you start to think back to what happened to the 1930s, when the groups decided they were going to go it alone and got into economic conflict between each other.
At that time, the Japanese Co-Prosperity Sphere; Germany, with its own kind of interests; the British. And, everybody was going it alone. And the threat of the G20 is what we’re going to see as sort of a fracturing of the global economy along those lines. And that could be a good thing, in the sense that if there is fracturing and coalitions emerging at the same time, that’s one thing, but if it turns into fracturing and then rivalries between the power blocs, that would be very dangerous.
Obama needs a really, really strong, powerful social movement behind him to do the things he really needs to do. Right now, he has to deal with Congress. And, there’s a group in Congress ‘the party of Wall Street’, that is deeply implanted in the Democratic Party, it’s deeply implanted in the Republican Party. And so, he can’t do battle with Wall Street, given the significance of the party of Wall Street in Congress. for example, our New York senator, Charles Schumer, has raised immense moneys from Wall Street, and he’s a great friend of Wall Street. And so, the Democrats are not going to go against Wall Street. And one way or another, the Republicans are not going to go against Wall Street. So. Obama can’t go against Wall Street, unless a whole bunch of people really force him to.
If you’ve solved the housing crisis, the banks wouldn’t be holding any toxic assets. If you had gone in and bailed out all of the people, there would be no problem on Wall Street. They wouldn’t be sitting there with all the toxic assets. You wouldn’t have the foreclosures. So we should have gone in there right at the beginning and actually held down the foreclosure crisis. They didn’t. Because that would mean bailing out poor African Americans and people of that sort, and they’re not concerned with that. They’re concerned with protecting the bankers, not with protecting the people.
Now that people might see it, that that is actually what’s been happening over the last thirty years and is really highlighted now, it hits you in the face straightaway. This is what’s happening. And something different has to happen. Some sort of movement has to come out and say, “Look, enough is enough. We’re not going to continue in this particular way.”
Professor David Harvey talking
David Harvey, Marxist geographer and distinguished professor of anthropology at the Graduate Center of the City University of New York. He has been teaching Karl Marx’s Capital for nearly forty years and is the author of several books, including The Limits to Capital and A Brief History of Neoliberalism. He has a lengthy discussion of the financial crisis in the latest issue of n+1 magazine.
– from democracynow