Realization Crises and the Transformation of Daily Life

I want to start with a simple fact that astonished me and continues to astonish me. Between 1900 and 1999, the United States consumed, according to the U.S. Geological Survey, 4,500 million tons of cement. Between 2011 and 2013, China consumed 6,500 million tons of cement. In 3 years, the Chinese used around 40% more cement than the United States had in the whole of the preceding century. That is a scale of magnitude of spreading cement around which is quite unprecedented. Those of us who live in the United States have seen plenty of cement used over our lifetimes, but what has happened in China is extraordinary. And you can just imagine what some of the environmental, political, and social consequences might be. So the question I want to ask is, “Why did this happen?”

I should first make clear that if this fact elicits some critical commentary on my part then this does not mean I am anti-Chinese. In these times there is a tendency to explain what is happening in the world in terms of national rivalries and the good and bad of national behaviors and policies. In the political world of the United States, China is frequently blamed for many of our problems (unemployment, loss of good jobs, and the like). The fact that this huge use of cement occurs in China is incidental to my argument. Though I do not exculpate state policies entirely, the problems that arise are primarily those generated out of the contradictions of capital. I am anti-capital but not anti-Chinese.

I also want to critique how the social sciences work these days. When I first got into academia, we were obsessed with the question, why? We spent a lot of time on that question, and we often made some speculative guesses, which were sometimes totally unsubstantiated and, in some instances, arising out of a rather dogmatic Marxist reading of capitalism’s history. Since the 1970s, there has been a gradual shift of emphasis. Less and less do researchers ask “why?” and instead they ask, “how and where?”

Concentrating on how and where has helped deepen our understanding. It equips us to unravel the intricacies of how things actually happen. It frees us from the chains of dogmatic assertions. We no longer presume some grand explanation, like the compelling force of class struggle or crude functionalist theories of state action. Instead, we describe in detail how it is that, say, the developers get together with the lawyers and the construction companies, with the financiers, landowners, and state officials to launch fantastic megaprojects that require a lot of cement even as they spark protests from evicted homeowners and tenants from this or that space in the city, as well as from citizens in general who believe it would be better to spend the money and resources on more socially beneficial investments. We pay far closer attention to local conditions. We are much more sensitive to cultural and environmental differences. The “where” matters. This also has some perverse consequences. It introduces a national character into the debate (e.g., in the case of Greece) in ways that can mask what the underlying dynamic of endless capital accumulation is about and the social consequences it produces. None of this, furthermore, requires a grasp of grand theories. Indeed, attachment to such theories might seem to get in the way of pursuing the details of the how and why. Following Foucault, we become sceptics of all metatheories.

But maybe we have gone too far in this direction, concentrating a bit too much on “how?” and “where?” to the point where we forget to ask “why?” entirely. We ignore the power of metatheory on principle rather than as a convenient practice in certain research situations. Whenever I ask somebody who has been very deeply involved in a “how and where?” story “why did it happen?” then the answer nearly always comes back: “it is complicated” as if that in itself is an adequate answer. My answer is,

Yes, I know it is complicated, but you also have to tell me why. If you cannot do that because you are so totally wrapped up in the complications of the how and where then maybe you should rethink your research strategy.

Exploring metatheories in relation to particular instances might help ask deeper questions. And those questions, thoughtfully pursued, may lead to deeper understandings. I hope in what follows to show how this might be so.

So why has all of that cement been spread around in China? Cement is used in construction. This obviously means a massive investment in the creation of built environments, in urbanization, and the construction of physical infrastructures. There has been an immense amount of that worldwide in recent times—I see evidence of it in almost every city I have visited in the last few years—but China stands out in the data as by far the most spectacular example.

It is not only cement that is involved in construction. There has been an enormous expansion of steel production and use in China. More than half of the world’s steel output and use has taken place in China in recent years. That required a vast amount of iron ore to make the steel. Many other materials, like copper, sand, and minerals of all sorts, are being consumed at unprecedented rates worldwide. China has consumed at least half and in some instances 60% or 70% of the world’s key mineral resources over the last few years.

Raw material prices have, until recently, tended to soar. Mining activity has been accelerating everywhere. The terms of trade for raw material producers have tended to turn positive over the last 20 years or so, for the first time in many a year. From India to Latin America and Australia, whole mountains are being moved in the search for minerals, with all sorts of political, economic, and environmental consequences. Therefore, the question of why China has been involved in such a huge expansion of its urbanization and infrastructural investment has global ramifications. It is undoubtedly, however, one of the reasons that a troubled global capitalism has survived as well as it has these last few years. I am certain that the leadership in Beijing did not set out to save global capitalism from a great depression, but this is a result of what happened in China, particularly since 2008 when the global economy went into a tail spin.

To explain this, I must discuss the how and where of what happened. In 2007-2008, there was a financial crisis that originated in the United States. Since it originated in the United States, it was defined as a global crisis. Other crises could occur in Southeast Asia in 1997-1998. They were defined as regional crises. In the same way, the United States likes to call its baseball championships a World Series, so it likes to refer to its crises as world crises too. There is a certain truth to this. The United States still has one of the largest and most influential economies in the world. It is certainly the case that major disruptions emanating from the United States have far-reaching global consequences. There is considerable evidence also, that faced with crisis conditions, U.S. institutions and policy makers actively sought to disperse their effects around the world by globalizing it. In so doing, they used many of the multilateral financial institutions and financial interrelations to do their bidding.

The crisis of 2007-2008 was at first quite localized. It originated particularly in the South and the Southwest United States, and it largely arose out of intense speculation in housing and property markets in those regions. Speculative money poured into U.S. property markets (as it also did in a few other places such as Ireland and Spain) when the stock market crashed in 2001. The world was awash with surplus liquidity at that time and much of it was absorbed in property markets forcing prices higher. When the speculative housing bubble burst, there was a foreclosure crisis on housing loans. A “fictitious demand” had been created by offering sub-prime mortgage finance to people who had little credit. Property values collapsed in these regions in 2007 and many people lost their homes. People who have been foreclosed upon and who are unemployed do not buy things, so the consumer market in the United States collapsed and many people lost their jobs. The primary supplier to that consumer market was China, which was one link whereby the local crisis went global. The other link was through the financial system. The financial institutions had structured the mortgage debt on housing to pass it on to others as an investment yielding good returns that were supposedly as “safe as houses.” However, many of the mortgages were not secured by the ability to pay. Anyone who had been gulled into investing in the new financial instruments lost money. The banks who held a serious part of the debt were threatened with failure and tightened credit including credit to consumers everywhere. Consumers who have just lost a lot of money and their jobs, and who cannot get credit certainly do not go out and buy things. The weakness in the U.S. consumer goods market spread and deepened. The downward spiral threatened to engulf the whole world in depression.

China suddenly found its export industries contracting if not collapsing in 2008. A 20% or more drop in exports occurred in a matter of months. Chinese statistics are notoriously unreliable, but by some accounts, approximately 30 million jobs were lost in China through the collapse of export markets in 2008-2009. The Chinese government has traditionally been nervous about potential social unrest, and with 30 million unemployed workers, this situation was rather dangerous. I believe the Chinese government did what it did mainly to avert that obvious danger.

By the end of 2009, a joint report from the IMF (International Monetary Fund) and the ILO (International Labor Organization) tallied up estimates of the global net job losses from the crisis. The United States had the largest losses. China only had a net job loss of about 3 million. Somehow China managed to absorb 27 million people in the labor market in the space of about 1 year. This is an astounding and totally unprecedented performance.

How did they absorb such vast amounts of surplus labor so fast? It seems the central government told everyone to lend and create as many projects and megaprojects as possible. Everything from regional to local to national endeavors was put to work. The banks were told to lend without restraint. In the United States, when Federal Reserve and the U.S. Treasury gave money to the banks to lend, the banks ignored the instruction. The U.S. government does not have power over the banks. The banks used much of the money they were given to retire their bad debts and even buy back their own stock. The Chinese banking system does not work in the same way. If the bankers are told by the central government to lend, they lend, incidentally making a lot of people extremely wealthy in the process.

China absorbed a massive amount of labor by launching a huge urbanization and infrastructure development program, building whole new cities, integrating the space economy of the nation with highways and high-speed rail networks, connecting southern and northern markets in a much stronger way, developing the interior of China so that the coast and the interior were much more matched together. While clearly, the central government had wanted to do something like this for some time (plans were laid for the high-speed rail network during the 1990s), the Chinese government mobilized all their resources to absorb the surplus and potentially restive labor force to survive politically. In 2007, there were zero miles of high-speed rail, but by 2015 there were 12,000 miles or so linking all the major cities together at 300 km an hour. This, by any standard, was a phenomenal performance.

I am here reminded of what the United States did after World War 2. The U.S. economy needed to absorb a huge increase in productive capacity created during World War 2 and create well-paying jobs for a large number of veterans returning from the war. If the veterans returned to the United States to be faced with unemployment on the scale of the 1930s, then there would surely be serious political and economic consequences. The problem for the U.S. capitalist state and class was: How do we not go back into Depression? How do we absorb all of that productive capacity in ways which are going to be profitable and satisfy the wants and needs of a vast army of demobilized military? What would happen if the returning veterans returned to depression conditions when the war against fascism had been fought in alliance with the Soviet Union?

One answer was the repression of all left-wing thinking through a fierce anti-communist movement known as McCarthyism. However, that in itself could not have succeeded as well as it did without solving the economic problem. The U.S. economy had to expand rapidly enough to absorb the surpluses of capital and labor. This was done partly through U.S. imperialism, the Cold War (also anti-communist), and a vast expansion of militarism. These all certainly played a role, but these themselves were not enough. The United States was a largely self-contained economy not that much dependent on foreign trade. The expansion had to be internal to the United States itself.

After 1945, the United States accomplished a huge wave of investments in the built environment, in urbanization and in physical, and, to some extent, social infrastructures (e.g., the higher education system). The interstate highway system pulled together the West Coast and the South and spatially integrated the U.S. economy in new ways. Los Angeles was an ordinarily sized city in 1945, but by 1970 it had become a huge megalopolis. Metropolitan areas were completely reengineered with transport, highways, automobiles, suburbs, and the development of a whole new suburban lifestyle (celebrated in popular TV sitcoms like The Brady Bunch and I Love Lucy). Well-paid jobs were required to support the demand for a suburban lifestyle. Labor and capital came to an uneasy compromise at the urging of the state apparatus in which a White working class made economic gains even as minorities (e.g., African Americans) were denied these advantages. As a result, the 1950s and 1960s were, in many respects, the golden years of capital accumulation in the United States. Very high rates of growth, a satisfactory situation for a White working class even as a powerful civil rights movement and uprisings in the central cities showed that all was not well for the African American and immigrant populations left behind. However, the aggregate effect was to solve the overaccumulation problem through urbanization and investments in the built environment. As a Federal Reserve report later put it, the United States has the habit of “getting out of crises by building houses and filling them with things.” My point, as we shall see, is that this is also how capital gets into crises as well.

In response to the crisis of employment in 2008, the Chinese acted similarly to how the United States acted after World War 2 but did it much faster and at a far higher rate. This change of scale is very important to remark. I have come across this same strategy of using urbanization to solve economic and political problems several times before. The economic crisis of 1848 prompted working class and bourgeois revolutions in Paris. Both failed and Louis Napoleon took absolute power in a coup d’état in 1852 and declared himself Emperor in 1854. Napoleon knew that he would not last unless he put labor and capital back to work. A fan of the utopian theories of Saint Simon, he initiated numerous public works projects to be funded by associated capital. To this end, he brought Haussmann to Paris to plan and rebuild the city. This was one way in which the surplus labor and surplus capital was profitably absorbed. The French economy flourished. Capital and labor were fully and profitably employed creating the new boulevards, department stores, and the like. Daily life in the city was transformed into the consumerism of the city of light. The crisis of overaccumulation of both capital and labor in the period after 1848 was solved by transformations in lifestyle as well as transformations in the built environment. We still see the consequences of this effort when we walk Haussmann’s boulevards today. The scale at which this was done was nowhere near that accomplished in the United States after 1945, which was in turn nowhere near the scale and speed of transformation that recently occurred in China.

In all this, there was an underlying problem. The new constructions had to be debt-financed. New institutions and methods of financing had to be created to sustain the effort in each case. A new kind of credit-driven banking became more prominent in Paris. At a certain point, however, debt creation and skepticism as to the value that stood behind the debt came to the fore. The debt crisis of 1867-1868 in Paris engulfed the speculative financial institutions and the finances of the city, and Haussmann was forced to resign. The city was mired in debt and close to bankruptcy. Unemployment and unrest ensued in Paris. Louis Bonaparte sought to save himself by a nationalist strategy that led into the Franco-Prussian War of 1870-1871. He lost the war and fled to England. In the wake of the war and the German siege of Paris, the inhabitants made their own revolution—the Paris Commune of 1871—one of the greatest urban uprisings in human history. The people took back “their” city from the bourgeoisie and the capitalists who had plundered it.

Solving the overaccumulation problem through rapid urbanization comes at a certain cost. In both the Paris and the U.S. cases, it meant relying heavily upon debt finance and the deployment of fictitious capitals. In the United States, new mortgage finance and other institutions had been put in place in the 1930s but even greater levels of state intervention occurred after 1945. The system worked well for a time but stresses on the system were evident as early as 1967. The whole process came to a crashing halt with the property market collapse and the technical bankruptcy of New York City (one of the largest public budgets in the capitalist world at that time) in 1973-1975. This initiated a period of serious recession and capitalist restructuring in the United States. The general crisis of the 1970s affected Britain, Europe, North America, as well as many other countries such as Australia and Latin America. In a somewhat similar fashion, the crash of the U.S. stock market in 2001 led money to flee the stock market and produce the property market boom that helped sustain global capitalism up until the Lehmann Brothers collapse of 2008. The Lehman Brothers collapse had effect throughout the global financial system.

China likewise debt-financed its way out of its difficulties in 2008. Unlike Greece and other places, China did not debt-finance using dollars or euros. It had enough foreign exchange surplus from the United States to be insulated from foreign pressures. China could borrow in its own currency. The great advantage of this is you can always issue more money and, if necessary, inflate away the debt and recapitalize the banking system (as happened at the end of the 1990s). China moved from a fairly low debt to GDP (gross domestic product) ratio to one of the highest in the world by 2015. A hidden banking system came into being to cover over many of the gaps in finance and hide many of the debt obligations. It doubled its ratio of debt to GDP in about 6 years through this huge urbanization and infrastructural investment surge. Reports circulated suggesting many municipal and local governments were effectively bankrupt by 2013 and the condition of some lending institutions was dire. Nevertheless, it was still the case that about a quarter of Chinese GDP was taken up by housing construction alone. When all the other investments in the built environment were added in, about half of Chinese economic activity and growth was arising out of reshaping the built environment. Hence all that production and consumption of cement and steel. The China, like the United States before it, avoided recession and a potential depression along with the political threat of widespread unemployment “by building houses and filling them with things.”

This was the Chinese answer to what might have been a very serious depression in 2008. This was not an answer, however, unique to China. There were attempts to emulate it elsewhere. Turkey, for example, which went through a crisis in 2001, avoided the problems of 2007-2008 through the same kind of huge expansion in its urbanization. A new airport, a third bridge over the Bosphorus, and the urbanization of the northern part of the Bosphorus were built to create a city of some 45 million people. Every city in Turkey showed evidence of a strong building boom. Turkey, largely as a result of this, was little affected by the crash of 2008 (although it, too, saw its export industries suffer). Turkey had the second highest growth rate, after China during this post-2008 period. Spectacular urbanization in the Gulf States also absorbed a lot of surplus capital. In the main urban centers property markets quickly revived for the upper-income brackets after 2009. New York City and London soon experienced property revivals in high-end construction even in the absence of any investment in affordable housing for the less well off.

Anyone who supplied China with the necessary raw materials, like copper, iron ore, and the like, came out of the crisis of 2008 fairly well. Most of Latin America, which was full of raw materials, recovered relatively quickly from the 2007-2008 crisis. In addition, Latin America turned itself into one vast soybean plantation basically for Chinese trade. It switched its allegiances in terms of global trade to the Pacific and to Asia. The depression, which affected the United States and elsewhere, did not affect Latin America to the same degree. It was relatively mild. Mineral-rich Australia likewise thrived.

In Brazil, besides having raw materials, they also did the same thing as the Chinese. President Lula, when the crisis hit, said they were going to build a million houses, low-income houses for the poor. That program, Mi Casa Mi Vida, became a part of the Brazilian answer to what was a rather shallow depression in 2007-2008. Unfortunately, as often happens, Brazilians basically gave the money to the construction companies. They did not ask them to urbanize in any sensible kind of way, so construction companies just built shoddy housing in bad environments without any kind of infrastructures. They did not build a city. They did not build a livable urbanization. They just built houses wherever they could find a place to put them. Of course, that did absorb capital and labor, but it did not actually create a decent living environment for anybody.

When we step back and look at this world in aggregate during this period then a strange dichotomy becomes apparent. There is a vast urban and infrastructural expansion occurring in China, with outliers in other countries like Turkey or in other sectors (like high-end condo construction for the rich in major urban centers around the world). These strategies enabled many countries to recover quickly from the effects of the crisis of 2007-2008. In the United States and Europe, however, we find a commitment to the politics of austerity that locked their economies into no growth. In this part of the world, the politics of neoliberal orthodoxy and austerity were, for the most part for ideological reasons, tightened. This contrasted with a Keynesian style expansion of China. The world effectively divided into two camps. The Chinese camp expanded through broadly Keynesian practices that depended upon demand creation led by the state and the West contracted through its dedication to supplying side management that focused on fiscal practices of debt reduction. Public policies and politics were differentially shaped accordingly. The Chinese camp effectively rescued capitalism from a deep depression threat through massive urbanization and investment in infrastructures.

Similarly to what happened to Haussmann in 1867 to the grand suburbanization spree at the end of the 1960s in the United States, all good things come to an end. China in the years since 2013 increasingly exhibits signs that its solution is running out of steam, that there is chronic overproduction and overaccumulation in the built environment, that its economy is burdened by vast holdings of nonearning assets, and that the returns from the undoubted improvements in productivity are just not there. It may no longer be possible to continue down the path of endless expansion of investments in housing and other physical infrastructures (as happened in the United States after 1968 and to Haussmann in Paris after 1867). Since 2013, China has pursued an “on again and off again” approach to its expansionary ambitions, sometimes curbing infrastructural investments only to switch them back on again when conditions look bad. The simplest (an undoubtedly crude) way to look at the problem is that in the early stages of the investment wave when a third of Chinese GDP went into fixed capital infrastructures then the growth rate stood well above 10% (sometimes as high as 12%), but as conditions became more fraught after 2007 the expansion of the allocation to fixed capital investments to half of GDP has generated a falling growth rate down according to official statistics closer to 6% (with some outside analysts suggesting it is far lower). The rate of return is falling fast and the level of debt is rising faster.

Ventures of this sort have also run into difficulties elsewhere. Dubai World went bankrupt and had to be bailed out. The Turkish boom has been cut short, foreign investors are bailing out, and empty apartment blocks litter the land.

It simply is not possible to continue such strategies forever, and the volatility in fortunes is marked. As the construction boom recedes, surplus productive capacity in, for example, cement and steel production, becomes a problem. The global demand for raw materials slackens and the terms of trade for raw material producers becomes unfavorable. Two or 3 years ago Brazil was flush with money. Now it is in recession. The money has dried up. Everything is also falling apart politically. Ecuador was doing great until a couple of years ago. They were building highways, shopping malls, and high-rise condominiums along with a new airport on the back of high prices in extractive industries. I could not figure out how this related to their great vision to pursue “Buen Vivir” rather than economic growth. But no matter, that was what they were doing. All that has now come to an end. Since 2014 most of Latin America has seen deepening economic distress. This is partly because the Chinese market is not as vigorous as it once was. The slackening of demand from China has had negative effects elsewhere. Even Germany, which exports high-tech machine tools and equipment to China, has felt the draught.

In this way, the crisis tendencies of capital have been shifting. This is where the macro-theory proves helpful. It helps us understand why crisis tendencies necessarily move around geographically, from one part of the world to another and from one industry to another. A housing crisis in the American South and West creates a financial crisis in New York and London, which becomes a credit crunch across Europe and North America. This is solved by the proliferation of sovereign debt crises that produce cascading crises in the living standards of the people. At the end of the day, it is the people who pay and the people who suffer while capital is rescued. This is the case with Greece.

As crises get moved around, they are subject to interpretation by the media and by popular explanations as having different causalities. In the Greek crisis, the fight with the Germans occurred because many Germans believed the Greeks were lazy and culturally backward. Very simplistic explanations circulate, for example, the crisis is due to immigrants (a common belief in Europe and the United States) or lazy welfare cheats and unfair foreign competition (e.g., from China). Scapegoat and blame everyone and everything, except capital!

The thesis I propose not only that crises get moved around, but that crises are embedded in the very structure of capital accumulation. This is where some consideration of macro-theory is helpful. My thinking here is guided in part by a reconsideration of Marx’s theory of value. In going back over this, I find that Marx is interested not only in value but also in anti-value. The idea of anti-value is simple. A capitalist invests in producing a commodity and the commodity has a potential value. However, if nobody wants, needs, or desires the commodity then it has no value. The history of capital is, therefore, about the production of new wants, needs, and desires. This is what the transformation of Paris and the building of the suburbs in the United States entailed, and it is what is happening so dramatically in contemporary China. The cultural and psychological jump from peasant life in a village without any mobility to whizzing around the country at 300 km an hour is huge. Without this, what seemed like socially necessary labor time becomes socially unnecessary labor time. From this also derives a theory of devaluation of capital as an answer to overaccumulation. Surplus capital and labor may be absorbed by investments in infrastructures and the built environment but the result may be the creation of excess productive capacity. The result is devaluation. This is the problem that clearly haunts China right now. Anti-value is everywhere. If it cannot be redeemed by new value production, the result is devaluation.

I am struck here by a powerful analogy. The physicists explain the birth of the universe in terms of the clash of matter and antimatter. Marx explains the dynamics of capitalism in terms of the dynamic relationalities of value and anti-value. This may be also what Schumpeter meant by the term “creative destruction” as an essential feature of capitalism.

Capital systematically creates anti-value in the form of debt that can be redeemed only through future value production. This is a fascinating aspect of Marx’s theory that has not been looked at closely enough. The anti-value is fundamental to the value. You cannot do without it. The theory of this awaits proper elaboration. But recent events illustrate the relations involved. The crisis of 2007-2008, for example, had its roots in the way that the earlier crisis of 2001, which was focused on the U.S. stock market, was resolved. When the dot-com economy crashed, money rushed out of stock markets. The world was awash with surplus liquidity (as the IMF repeatedly complained). But where was this money to go? Alan Greenspan, head of the Federal Reserve, dropped the interest rates. Property investments looked attractive. Money was lent to producers of housing at the same time as it was lent to consumers on easy terms. Finance supported both the supply and even more important the burgeoning demand for housing. Prices of property assets rose rapidly. Investing in property looked even more attractive. Unfortunately, debt requires the creation of value to redeem it. If this new value does not materialize, then the system crashes. In this way, credit and debt dictate future value production. Either that or devaluation or even destruction of capital ensues.

This disciplining effect of debt encumbrance is important. Debt means we are no long “free to choose” as Milton Freidman in his paeon of praise to capitalism supposes. Capital does not forgive us our debts as the Bible asks but insists we redeem them through future value production. The future is already foretold and foreclosed (ask any student who has $100,000 student loans). Debt imprisons us within certain structures of future value production.

This was well understood back in the 1930s when all of those reforms occurred in the mortgage market for housing in the United States. The prize of homeownership could be achieved by resort to the 30-year mortgage. It was said that debt-encumbered homeowners do not go on strike. After World War 2, the strategy was to debt encumber as many homeowners as possible. They then have to support the capitalist system to pay off their debts. Furthermore, these homeowners will live in the suburbs, out there where revolution is hardly going to be on the agenda. They have to have a car and a lawn mower. They increasingly aspire to a nice home and a swimming pool. Suburbanization contributed enormously to social stability and fostered certain mental conceptions of the world and political subjectivities to support rather than challenge the status quo of a rampant capitalism.

The World Bank and the IMF promote individual home ownership worldwide because, they say, it assures social stability. However, this does not solve the overaccumulation problem, which has now produced the foreclosure wave, which has in turn destabilized whole populations and communities. Foreclosed homeowners and those who feel threatened by increasing insecurities are unsurprisingly doing all kinds of crazy things politically, both on the left and the right. Hence, Trump and the Tea Party and Bernie Sanders and his quest for a political revolution. What has traditionally been a solution becomes the problem. Saddling whole populations with massive debts they cannot possibly repay (as in the case of Greece and to some extent as in the case of student debt in the United States) is a contradictory recipe for social stability.

I lived in Baltimore for many years. When the riots and burnings broke out there in 2015, I was reminded of what happened back in 1968, just after the assassination of Martin Luther King. Baltimore burned down back then. Many years later we received a repeat performance. In between lies three decades of de-industrialization and a decade of sub-prime lending in the housing market primarily for African Americans and single-headed households. The foreclosure wave recreated social instability with asset value losses concentrated in marginalized minority populations. The difficulty is to formulate response that avoids the obvious risk of repetition of such disasters.

This then raises an interesting question as to what options exist for China. What is it that the Chinese are going to do, given their current difficulties of grumbling overcapacity? Here I find the idea of “the spatial fix” is useful. When there are surpluses of capital and labor somewhere, and when prospects for profitable use in a particular territory are negligible because the market is saturated, then capitalists start to export their surplus capital (and sometimes surplus labor) to build elsewhere.

This was the basis of economic imperialism from the mid-19th century onwards. Surplus capital and labor from Britain came to the United States or went to Australia, South Africa, and Argentina. Where did these places get their money from to buy up the surplus capital in commodity form? Surplus money capital was lent to those countries so they could build their railroads and infrastructures and this created a demand for British surplus capacity in steel and locomotive production. This ultimately led to the creation of new and dynamic capitalist economies elsewhere, particularly in the United States. This was the creative economic side of British imperialism.

The other strategy was more negative. Britain tried, for example, to keep India as a captive market to which they could send their surplus product after destroying indigenous productive capacity. This did not help resolve the problems of overaccumulation of capital and surplus labor in Britain because the demand from India was not strong or expansive. The Indians were therefore forced to produce all kinds of things, including opium, to sell to China in return for the silver, which was then shipped back to Britain. Britain drained wealth from India and China in this way but did not help create much wealth. This was a nondynamic form imperialism.

Britain could not suppress industrial development in the United States like they did in India. The surplus capital and labor that came from Britain to the United States helped create a new and expansive center of capitalist development. This created an ever-increasing demand that could absorb British goods. This was a much better solution to Britain’s overaccumulation problems than the exploitation of Indian wealth ever was. The only problem was, at some point or other, the United States became a stronger, larger, and more competitive economy than Britain. But then the United States began to generate surplus capital and in turn had to figure out what to do with it. Thus, it too began to export capital and to develop imperialist-style practices.

This process of creating “spatial fixes” to deal with the tendency of overaccumulation is apparent everywhere. The Japanese turned toward the export of surplus capital toward the end of the 1960s. South Korea followed suit in the late 1970s and Taiwan in the early 1980s. The flow of surplus capital from these territories went all over the world but were particularly important in building productive capacity in China. Now it is the turn of the Chinese. They have a lot of overcapacity in many sectors such as cement and steel production. So how is this to be absorbed? The state is attempting to reduce capacity in these sectors a bit through plant closures. China is also looking for opportunities to spread this surplus cement and steel around. This is what is scary. They have come up with a number of answers. One of them is internal. The Financial Times reports that the Chinese are now proposing to create one city of something like 130 million people, which is equivalent to the total population of Britain and France. It will be centered on Beijing. Investments will be centered on high-speed transport and communications. This will absorb a lot of steel and concrete. Yet what kind of daily life would be possible in such a city?

In fact, this is not really a city in the conventional sense. What is being planned is the rationalization of not one but three major urban regions—one centered on Beijing, the second on Shanghai, and the third in Guangdong province. Several multimillion cities already exist in each of these regions. The plan seemingly is to seek a higher order rationalization of relations between these rapidly expanding cities so that they knit together more efficiently. Planners will doubtlessly play with and mine large data sets on, for example, existing movement patterns and put the concept of “smart cities” into overdrive in the cause of this hyper-rationalization of space relations. The rationalizations will doubtless entail much use of surplus cement and steel capacity.

This will not be enough to absorb all the surplus capacity. China is attempting to dispose of its surplus cement and steel everywhere by exporting as much as it can at low cost. This means that higher cost steel plants elsewhere (e.g., in Britain) are forced to close. China is being challenged by the United States and others before the WTO (World Trade Organization) for dumping subsidized steel on the world market and may be forced to stop this trade. Chinese corporations are also building railroads, highways, and physical infrastructures in East Africa using Chinese cement and steel as well as surplus Chinese labor, even though there is plenty of surplus local labor. The same is happening in Latin America. Proposals exist to build a competitor to the Panama Canal through Nicaragua and transcontinental rail lines running from Pacific to Atlantic coasts. We will be able to get from a port in Peru to Sao Paolo in one and a half days or so. Several proposals of this kind were laid out some time ago. No one took them seriously until the Chinese came along and said they had plenty of cement and steel and that they would lend the money to purchase these materials and to build the infrastructures.

Other business press reports show how China is rebuilding the Silk Road route from Shanghai to Istanbul (and into Europe) via Tehran. A fast high-capacity rail network (using a lot of cement and steel) is planned through Central Asia into Europe. Central Asian cities along the route already experience building booms. This program probably would not occur were it not for the fact that the Chinese have a surplus capacity in cement and steel production. This is one of the ways in which they hope to stabilize what might otherwise be a “rough landing” in a Chinese economy suffering from overcapacity. The surplus capital overaccumulation problem can be resolved for a time by a “spatial fix.”

This has happened many times before. But there is something different this time around. If you look at the scale of Haussmann’s project in Paris, it was about the city. If you look at what went on in the United States after World War 2, it was at the metropolitan region level across the whole nation. Robert Moses was the iconic figure. You move from Haussmann to Moses. The figures of cement use with which I began, is, however, indicative of another dramatic change of scale that appears global in reach. It is the enormity of this that I find deeply troubling.

It is at this point we should step back and ask the question, why this dramatic change of scale? Is this really necessary? Why does it seem so inevitable? Why is it that it seems so impossible to say, “no, no, we do not want that”? Why can we not make something different? If capital is about freedom of choice why is it that this future is foretold?

The answer has a lot to do with the nature of capital accumulation. Capital accumulation is, of course, about expansion. It has to be about growth. And this for a very simple reason. The capitalist starts the day with a certain amount of money, goes into the market, buys labor power and means of production, creates a commodity, and sells it at the end of the day for more money than at the beginning of the day. That is, value has to increase. In a healthy capitalist economy, all capitalists possess more value at the end of the day than they had at the beginning. Thus, when we look at the history of capital accumulation, we see that it has grown at a compound rate.

Compound growth rates produce exponential curves. These exponential curves dawdle along and then suddenly take off upwards at an alarming rate. There is an inflection point in exponential curves when the upward sweep starts.

It is similar to the famous story of the person who invented chess and asked the king to give him a reward. He asked the king to put one grain of rice on the first square and double it for every square. By the time he reaches the 46th square, all the rice in the world has been used.

This is the nature of compound growth.

Compound growth is built into the capitalist accumulation process. Alas, there is no law to stop it. All of us involve ourselves in urbanization projects organized around the question how best to make things grow. We want growth. But why do we want growth? Why do we particularly want compounding growth when we know it will likely spiral out of control?

Limitless growth is not currently the solution. We are on that inflection point in global accumulation. If we actually double or triple the amount of cement we have to pour in 30-years’ time, which is implicit in what compounding growth is about, our grandchildren will be overwhelmed with cement.

This is not a feasible project. Right now, environmental problems are serious enough to compel us to do something about this senseless commitment to growth. There exists an irony here. For all the wrong reasons, we recently have seen low growth in Europe and the United States, and that is environmentally friendly.

The places that have not seen slow growth have experienced great environmental stress. This has spilled over to wherever surplus capital moves. More than half of foreign investment in Ecuador is Chinese. When the oil prices collapsed, Ecuador had to borrow from China. They borrowed to build things such as a huge hydroelectric project that will provide about 60% or 70% of the electricity needed in Ecuador. This is a huge project. Of course, they also want to support a highway over the Andes. These megaprojects are built with Chinese steel and cement, and they are happening because of the necessarily endless growth of capitalist accumulation.

At this point, we need to consider how and why such growth can be controlled and reduced. The compounding rate of growth since about 1780 onwards, according to Angus Madisson who has spent many years on the data, is something like a 2.25% compound growth. That is to what history of capital accumulation points. A 2.25% compound growth in 1780 was not a problem. By the time you get to 1900, it still is not really a problem. Much of the world had not yet been incorporated within capital accumulation. This has changed since 1970. China has come into the system. The Soviet empire has collapsed and joined the capitalist global economy. India and Indonesia are far more integrated. The world’s wage labor force has increased by a billion or more (to a total of 3 billion) over the last 30 years. And we are talking about a 3% compound growth on all of this from here on out? Peering just a little bit into this future reveals some strange and troubling signs, beyond that implied by the cement and steel data.

In light of this, there are a number of things about which we should start to think seriously. We need to organize the economy in such a way that it is not dedicated solely to economic growth. There are hints of this in many places. Ecuadorians and others have this notion of building a future around something called Buen Vivir, and they have enshrined that objective in their constitution. The UN Development Reports try to separate economic growth from the development of human capacities and powers and seem to focus policies on the latter. There are many initiatives to promote social entrepreneurialism and the sharing economy in conventional circles and more far-reaching pushes on the left to foster cooperatives and solidarity economies. In practice, most of these initiatives turned out to be either mere rhetoric or masks for the continuation of capital accumulation by other means. There is widespread recognition of the need to reorganize and re-orchestrate the use of the world’s resources. Here, too, the realities are vastly different from the rhetoric. Ecuador enshrines the indigenous idea of the rights of Mother Nature into its constitution. However, as China pursues its own spatial fix spending spree on a global basis, it needs, as we have seen, a lot of mineral resources. Ecuador is in serious financial difficulty because of the collapse of oil prices. So what does Ecuador do? It borrows from China. What do the Chinese want in return? They want open access to all the mineral resources of southern Ecuador, which happens to be where many indigenous populations live. These indigenous populations are not liking what is happening. A political struggle ensues and indigenous leaders are killed. This is an all too familiar story. You all have heard it often in the past and you will hear more of it in due course. This is the foundation of compounding growth. We need to find ways to manage and eventually contain it. Within the urban process we can see something else that is going on that requires careful attention.

Urban growth is increasingly about creating possibilities for investment of surplus capital and surplus savings. It is only incidentally, if at all, that it creates a decent urban life. I mentioned the Brazilian case because it was about feeding the construction interests and employing surplus labor and capital in construction. Unfortunately, it was not about creating decent urban environments for people to inhabit. There was no commitment to that in the process. It was simply about absorbing surplus capital and labor. The urban property market has also become a market for investors of surplus savings. We are, it seems, less and less interested in creating cities in which people can live. Instead, we create cities in which people can invest.

Why is this? And why do I see it even in Palestine and Turkey, as well as in New York, London, Shanghai, and all the other major cities I have visited recently? It arises because some people have surplus money that they are looking to invest and save for their future and for their family’s future—this is where the individualism and private property relations begins, but where do you put your savings in these times? Where is a safe place? Do you put it in the stock market? Do you keep it in monetary instruments of some kind, bonds, now earning 0% or even negative rates of interest? Or do you put it in purchasing property assets? A lot of capital has been flying into this last option since the 1970s. This trend seemingly accelerates as other options either offer very low rates of return or appear, like the stock market, to be more and more volatile and high risk.

The housing market and property market went through a crash in 2007-2008 in many parts of the world after nearly a decade of speculative activity. One of the primary objectives of people right now is to invest in property and land because this seems a safer choice to preserve and enhance value in a generally weak and insecure investment climate. Land and property are now referred destinations for absorbing surplus liquidity and protecting savings.

I have seen this both in Turkey and in Palestine. You have this incredible situation, particularly in Palestine. Around Ramallah, they are building these high-rise apartment blocks. The people building them are some of the people employed by the Palestinian Authority, which is notoriously corrupt. These employees are taking their money, and they are putting it into property and land if they can because that offers some security.

China recently loosened its regulations over export of private capital. One of the primary buyers of property in New York right now is private Chinese investors who get their money out of the country and buy property elsewhere. A few years ago, during the Irish boom, a lot of investment came from Ireland into the New York property market. Of course, the Russians, the Saudis, the Australians do the same, and now the Chinese are doing the same in London. It is not only the billionaires who do it. It is actually upper-middle-class people who engage in the equivalent of a property and land grab wherever they can. Most pension funds likewise increasingly invest in this direction as they have always done. My own pension fund, TIAA-CREF, is into doing this stirring up some controversy. They are involved in some pretty ghastly things in Latin America in terms of land grabs.

What we are seeing since 2008 is a redirection of capital flow away from creating a livable environment for the mass of the citizens of any place to creating investment opportunities for people who want to store their money and keep their wealth in some form which they perceive as safe. Property markets again become a target for hedge funds (e.g., buying up the foreclosed houses and speculating on a revival of values). Of course, if you had tried this in Syria, you would have lost out badly. But in other parts of the world, land and property are judged still to be a primary form of secure and safe investment. The financiers and developers oblige by building up-scale investment properties in situations where there is a crying need for affordable housing for the mass of the population.

This raises the question: What should planners do? Should they spend their time trying to figure out how to create investment opportunities for middle and upper-class people for investment purposes? Or should they seek to create an alternative urbanization which responds to what the mass of the people need, want, and desire?

There is, I sense, a tremendous alienation right now in terms of what the urban process is. It is therefore absolutely no surprise that over the last 15 years or so, some of the major outbreaks of discontent in the world have an urban base. Gezi Park was not a working-class uprising. This was a cultural and popular uprising against the diminished and degraded qualities of urban life, and the authoritarianism and lack of democracy in decision making in the city. The recent crazy course of politics in the United States has a lot to do with the impact of the foreclosure crisis and a spiraling sense of anger and anguish within the population as a whole that nothing can be done about the declining qualities of urban services and urban life.

Through the foreclosure crisis, many people lost their houses—their primary form of saving and their future financial security. They are angry at their dispossession. They need somebody to blame. They cannot blame capital that would be perceived as a socialist, or even communist, position. The great thing about Bernie Sanders is he has made socialism partially respectable, particularly with people under 35. He says we should do away with student debt and higher education and health care should be free and open to all. Such ideas sound good to the younger generation. If that is socialism, why not?

It is at this point where we have to think more carefully about the “why,” which is, in essence, very simple. Accumulation for accumulation’s sake, as Marx points out, is the center of capital. That means production for production’s sake, which either means pouring more and more cement everywhere until we are up to our necks in the stuff. We should at least consider getting off the capitalist treadmill of limitless and endless accumulation and think about ways to organize our economy along totally different lines.

I am a great admirer of many of the things that capital has created. Marx was too. We have a lot of useful and wonderful things we can use in a completely different way if only we put our minds to it. In order to do that, we have to get out of the ideological mess we are in where certain things can be said and studied, and certain things cannot be said and studied. The boundaries between acceptable and unacceptable research and thinking are as firmly fixed in universities as they are anywhere else. Anti-capitalism is not, by and large, considered an acceptable perspective from which to work. Yet it is the only perspective that makes real sense for these times.

That is one of the more horrific things about our current situation. The problems and processes I describe here are not debated and discussed in the way they should be debated and discussed in those institutions which should be discussing them. The universities in the United States and elsewhere have been corporatized. They have become neo-liberalized. They have become bastions of knowledge dedicated to the perpetuation of endless capital accumulation, capitalist growth without limits, even as they channel innovation into supposedly solving the problems of, for example, social inequality and environmental degradation.

There is some resistance, of course. Universities are to some degree still open and they will probably always be hard to tie down. However, the resistance is weak because the money power increasingly lies on one side of this struggle as universities face public funding cuts in favor of private and corporate support or debt-financed tuitions. Debt-encumbered students tend not to rock the boat. This trend is becoming stronger and stronger. It could be reversed, of course, but at this time the political prospects for such a shift are rather bleak.

At the same time, the political base for radical movements and social change has also shifted. Contemporary discontents in many parts of the world now emanate from a rather different class configuration to that which the left has traditionally favored. This question of class configuration to political struggle must be approached from a rather different direction. These reconfigurations have much to do with the paths of contemporary urbanization. I find myself at this point somewhat at odds with much of the traditional Marxist fraternity.

Marx put a great deal of emphasis on the production of value and surplus value through the exploitation of living labor in the labor process. Volume 1 of Capital focuses exclusively on this. Volume 2 is about circulation of capital as a whole with particular emphasis upon the realization of value and surplus value in the market. Volume 3 is about the distribution of value and surplus value—a topic that is assumed away in the other two volumes, apart from the obvious distribution relation between the wages of labor and the profit (surplus value) that accrues to capital in general. Marx is very clear, in Grundrisse and elsewhere, that in order to understand capital, you have to understand what he called the contradictory unity between production and realization.

Now Volume 1 is read in Marxist circles and revered, quite rightly, because it is a magnificent book. Volume 2 is hardly read at all because it is not only incomplete but also very dry while some of it is basically unreadable, but if you do not study it, you will not understand how capital circulates. Therefore, unfortunately, a lot of Marxist thinkers have not understood capital because they have ignored Volume 2.

At the end of the first section of Volume 1, Chapter 1, Marx tells us that the potential value created in production comes to nothing if it is not realized through a sale in the market. This is where anti-value is useful. That means we need to study the processes of realization carefully. For most of Volume 1, Marx assumes that all commodities exchange at their value, which means that there are no problems of realization. This is not a realistic assumption though it is understandable why Marx might appeal to it to study other aspects of capital accumulation. In practice, the realization of values under conditions of accumulation rests upon the production of new wants, needs, and desires backed by the ability to pay. The politics of the production of such wants, needs, and desires has been a tortured and intriguing history beset with all manner of social struggles that have often passed by unobserved and unremarked. Without them, capital would have collapsed long ago. This then poses the problem of how to imagine a world of perpetually escalating wants, needs, and desires frequently not backed by the ability to pay (except through escalating personal and corporate debt). In any case, they cannot be satisfied or fulfilled because if they were, then that would mean the end of further capital accumulation. The production of unsatisfied needs is fundamental. We have already encountered a major example of this in the production of suburbanization as a new way of life for the mass of the population in the United States after 1945 and how this rescued global capitalism from collapse.

Furthermore, as we have seen, capital can extract wealth as much from the realization process as from the production process. The worker may earn more but is no better off than if they go home and pay higher rent due to the inflated living costs imposed by price-gouging merchants and service providers. What workers may gain in the form of higher wages through work-based struggles may be recuperated by capital at the point of realization.

When people are asked what are the major forms of exploitation experienced in the United States today they mention the fees of credit-card companies. They mention landlords and rents and property speculators. They mention what telephone companies do to their telephone bills by adding charges that say you were roaming somewhere where you never were. They mention health insurance companies, local taxes, transport costs, and so on. There is an immense amount of racketeering (sometimes akin to robbery) that goes on at the point of realization. The politics of struggles over realization are apparent everywhere.

It is also important to recognize that realization of value does not necessarily occur at the same geographical space as production of value. My Mac computer contains value produced in China by Foxconn, but its value was realized in the United States by Apple. The bulk of the value is realized by Apple (or Wal-Mart or the Banana Republic) when most of the value is created by the direct producers in China. Merchant capitalists realize much of the value that is created by the activities of industrial capital elsewhere.

A lot of wealth is being extracted from the realization process, and a lot of that wealth extraction occurs in the course of daily life on the streets of the city. It is, therefore, no accident that most of the uprisings we have seen in recent times, such as those in Brazil and in Turkey in 2013, were more about the politics of realization than they were about the politics of production. Discontent with the qualities of urban life has loomed large in such struggles. This is where a lot of contemporary politics now lies. We need to pay attention to it both theoretically and practically as well as politically. To understand that we need to undertake a careful study of Volumes 2 and 3 of Capital and not remain content with a reading of Volume 1.

Realization struggles are difficult to theorize and organize for a number of reasons. First, the class configuration that is involved in the extraction of wealth through realization is different from that which is involved in production. It is not capital versus labor in the realization process. It is capital versus everybody else affected by the thievery and racketeering that goes on. The struggle is between buyers and sellers rather than between labor and capital. Upper-middle-class populations are buyers and struggle (sometimes of the not in my backyard sort) against racketeering merchants. Do we seek them out as allies against the property speculators?

Go to a small family restaurant owner in New York City and ask why they pay their workers so badly. The immediate response would be,

You do not understand. I am exploiting myself at a huge rate. I get in here at six in the morning. I do not go home till ten at night. I work my ass off. How can I possibly afford to pay anybody very much more than I get?

Then ask, “Where does all the money you make go?” The answer is,

To the bank to pay interest on the loan, to the landlord to pay the rent, to the electricity company to pay the bill, and to the taxman. By the way, the landlord also raised the rent by 25% just last year and there was nothing I could do about it.

A lot of family businesses close down because of the rapidly rising rents in New York City. If I were to say to that person: “Hey, let us have an alliance against the banks and the landlords and the tax man,” I think the answer would be, “Yes, that sounds a great idea.” However, this is rather far from the conventional vision of a proletariat as a primary agent of political change.

These are the sorts of frustrations that can produce political movements to the right as well as to the left. This is, to some degree, the discontent that Trump and the Tea Party capture. This deep and complicated discontentment with the qualities of daily urban life needs to be addressed. We should not dismiss them as secondary.

We have to understand why and how the discontents with daily life in the city are escalating, and they might be reconfigured around a political movement dedicated to the idea that we need and want to create cities that are fit for people to live in. In practice, as we have seen, we are more likely to create cities that are fit for people to invest in rather than cities in which people can live.

This has to be reversed. We not only want to create cities that are about non-growth but cities that address social needs, reduce inequalities, and improve environmental qualities.

Marx deploys an interesting idea, which comes I think from Hegel. Hegel talked about the difference between what he called a “bad infinity” and a “good infinity.” A good infinity is something that continues to reproduce itself over time forever and ever and ever. A circle is a mathematical depiction of the virtuous infinity.

It is when the circle becomes a spiral that problems start. Things spiral out of control. Capital is spiraling out of control. That spiraling out of control is represented by the fact that the infinity is not contained in any way. It just goes further and further. The number system is a bad infinity. For every number you make, there is always one more you can add to it. It goes on and on, and there can be no telling where it will go because it will never come to a close. It is like pi in the other direction. How many decimal points do you put on pi?

A bad infinity is what capital is. We have to get back to a good infinity. Marx understood that very well. He is passionate about the nature of reproduction, reproduction of the social order, and how we can think about the reproduction. In both Volumes 1 and 2 of Capital, Marx describes in detail the virtuous infinity of simple reproduction. It is reproduction on an expanded scale where the problems really start. We have to think about the good infinity, as opposed to the bad infinity of things spiraling out of control. The metaphor of spiraling out of control is something that is, I think, very meaningful to what is happening globally and locally. Until we can find means to control endless accumulation for accumulation sake, there will be no amount of tinkering and doing good things on the margins of society that will solve what is a huge but compelling macroeconomic problem. This is how the anti-capitalist perspective becomes crucial to defining the nature of the problem of contemporary urbanization.