Our Challenge, David Harvey

One of its basic principles that was set up in the 1970s was that state power should protect financial institutions at all costs. This is the principle that was worked out in the New York City crisis in the mid-1970s, and was first defined internationally when Mexico threatened to go bankrupt in 1982. That would have destroyed the New York investment banks, so the US Treasury and the IMF combined to bail Mexico out. But in so doing they mandated austerity for the Mexican population. In other words, they protected the banks and destroyed the people – and this has been the standard practice in the IMF ever since. The current bailout is the same old story, one more time, except bigger.

What happened in the US was that eight men gave us a three-page document, which pointed a gun at everybody and said ‘give us $700 billion or else’. This to me was like a financial coup against the government and the population of the US. Which means you’re not going to come out of this crisis with a crisis of the capitalist class; you’re going to come out of this with a far greater consolidation of the capitalist class than there has been in the past. We’re going to end up with four or five major banking institutions in the United States and nothing else.

Whether we can get out of this crisis in a different way depends very much upon the balance of class forces. It depends upon the degree to which the entire population says ‘enough is enough, let’s change this system’.

One of the major barriers to continuous capital accumulation back in the 1960s and early 1970s was the labour question. There were scarcities of labour both in Europe and the US, and labour was well-organised, with political clout. So one of the big barriers to capital accumulation during that period was: how can capital get access to cheaper and more docile labour supplies? There were a number of answers.

The second thing you go for is rapid technological change, which throws people out of work. Thirdly, you had people like Reagan and Thatcher and Pinochet to crush organised labour. And finally capital goes to where the surplus labour is by off-shoring. This was facilitated by technical reorganisation of the transport systems: one of the biggest revolutions that happened during this period is containerisation, which allowed you to make auto parts in Brazil and ship them for very low cost to Detroit or wherever. And the new communications systems allowed the tight organisation of commodity chain production.

All of these solved the labour problem for capital, so by 1985 capital has no labour problem any more. It may have specific problems in particular areas but globally it has plenty of labour available to it. The sudden collapse of the Soviet Union and the transformation of much of China added something like two billion people to the global proletariat in 20 years. So labour availability is no problem now and the result of that is that labour has been disempowered for the last 30 years. But when labour is disempowered it gets low wages, and if you engage in wage repression this limits markets. So capital was beginning to face problems with its market, and there were two things that happened then.

The second thing that happened was that from the 1980s onwards the rich are getting far richer because of that wage repression. The story we are told is that they will invest in new activity, but they don’t; most of them start to invest in assets i.e. they put money in the stock market, the stock market goes up, so they think it is a good investment, so they put more money in the stock market, and you get these stock market bubbles.

There has always been the problem of the relationship between representation and reality. Debt is about the assumed future value of goods and services, so it assumes the economy is going to continue to grow over the next 20 or 30 years. It always involves a guess, which is then set by the interest rate, discounting into the future. This growth of the financial area after the 1970s has a lot to do with what I think is another key problem: what I would call the capitalist surplus absorption problem.

As surplus theory tells us, capitalists produce a surplus, which they then have to take a part of, recapitalise it, and reinvest it in expansion. Which means they always have to find somewhere else to expand into. My argument would be that even if we came out of this crisis right now, and there’s going to be capital accumulation at a 3 per cent rate of growth, we’ve got a hell of a lot of problems on our hands. Capitalism is running into serious environmental constraints, as well as market constraints, profitability constraints. The recent turn to financialisation is a turn of necessity, as a way of dealing with the surplus absorption problem; but one that cannot possibly work without periodic devaluations. That’s what’s happening now, with the losses of several trillion dollars of asset value.

The term ‘national bail-out’ is therefore inaccurate, because they’re not bailing out the whole of the existing financial system – they’re bailing out the banks, the capitalist class, forgiving them their debts, their transgressions, and only theirs. The money goes to the banks, but not to the homeowners who’ve been foreclosed on, which is beginning to create anger. And the banks are using the money not to lend to anybody but to buy other banks. They are consolidating their power.

What I think is happening at the moment is that they are looking for a new financial set-up that can solve the problem not for working people but for the capitalist class. I think they are going to find a solution for the capitalist class and if the rest of us get screwed, too bad. The only thing they would care about is if we rose up in revolt. And until we rise up in revolt they are going to redesign the system according to their own class interests.

We need, in fact, to begin to exercise our right to the city. We have to ask the question: which is more important, the value of the banks or the value of humanity? The banking system should serve the people, not live off the people. And the only way in which we are really going to be able to exert the right to the city is to take command of the capitalist surplus absorption problem. We have to socialise the capital surplus, and to get out of the problem of 3 per cent accumulation forever.

I think we are headed into a legitimation crisis. Over the past 30 years we have been told, to quote Margaret Thatcher, that ‘there is no alternative’ to a neoliberal free market, privatised world, and that if we didn’t succeed in that world it’s our own fault. I think it’s very difficult to say that when faced with a foreclosure crisis you support the banks but not the people who are being foreclosed upon.

You can accuse the people being foreclosed upon of irresponsibility, and in the US there is a strong racist element in this argument. When the first wave of foreclosures hit places like Cleveland and Ohio they were devastating to the black communities there, but some people’s response was basically ‘Well, what do you expect, black people are irresponsible.’ We are seeing right-wing explanations of the crisis that explain it in terms of the personal greed of those who borrowed money to buy houses. So they attempt to blame the crisis on the victims. One of our tasks must be to say ‘no, you absolutely cannot do that’ and to try to create a consolidated explanation of this crisis as a class event in which a certain structure of exploitation broke down and is about to be displaced by an even deeper structure of exploitation. It’s very important this alternative explanation of the crisis is discussed and conveyed publicly.

There is also the big problem on the left that many think the capturing of state power has no role to play in political transformations. I think they’re crazy. Incredible power is located there and you can’t walk away from it as though it doesn’t matter.

Social movements have to define what strategies and policies they want to adopt. We academics should never view ourselves as having some missionary role in relation to social movements; what we should do is get into conversation. Having said that, I would want us to propose ideas. An interesting idea in the US right now is to get municipal governments to pass anti-eviction ordinances. I think there are a couple of places in France which have done that. Then we could set up a municipal housing corporation which would assume the mortgage and pay off the bank at a partial rate – the banks have been given a lot of money to supposedly deal with this, but they’re not.

But I also have a problem with some Marxists, who seem to think, ‘Yes! It’s a crisis; the contradictions of capitalism will now be solved somehow!’ This is not a moment for triumphalism, this is a moment for problematising. First of all, I think there are problems with the way Marx set up those problems. Marxists are not very good at understanding the state-financial complex or urbanisation, although they are terrific at understanding some other things. We have to rethink our theoretical posture and political possibilities.