______________ ___________________

The Spatiality of The Limits to Capital

Eric Sheppard
Department of Geography, University of Minnesota, MN, USA;
shepp001@umn.edu
In The Limits to Capital, David Harvey (1982) sets himself three goals.
First, he offers a dialectical reading of Das Kapital, together with Die
Grundrisse (Marx 1972; 1983), replicating the spirit of Marxs own
analysis in opposition to the more analytical and methodologically
individualist readings of rational choice Marxism prevailing at the
time (Barnes and Sheppard 1992). Second, he extends Marxs analysis
to pay explicit attention to space, in order to demonstrate that the
geographical nature of capitalism fundamentally shapes its evolution.
Third, he seeks to explain why capitalism cannot transcend its own
limits, despite its flexibility and inventiveness (hence the books title).
With respect to the first goal, he succeeds brilliantly. Of the many
accounts of Capital that I have read, Harvey comes closest to replicat-
ing the spirit and scope of Marx. It is a sad commentary on radical
political economy, and on the status of economic geography among
economists of all ideological persuasions, that the book never
received the attention it deserves outside geography.
1
His geographical
extension of Marx has been enormously influential, however, among
geographers and others interested in the geographical dynamics
of capitalism. A whole lexicon of concepts, now widely used and
discussed, is articulated for the first time in Limits. These include
uneven geographical development; the spatial fix; the built environ-
ment as a barrier to capital accumulation; the three circuits of invest-
ment capital; territorial regulation; spacetime compression; local
entrepreneurialism and inter-place competition; the production of
place, space and scale; finance, fixed and fictitious capital; rent and
urban redevelopment; and the instability of the capitalist space-
economy. When I sat down to re-read Limits for this symposium, I
was surprised to find him developing concepts that received little
attention until even a decade later. This prescience is further tribute
to how much the efflorescence of radical geography owes homage to
Harvey, also among those who have become vocal critics.
In this brief essay, I seek to summarize how Harvey spatializes
Capital; to assess this achievement in light of subsequent research
2004 Editorial Board of Antipode.
Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street,
Malden, MA 02148, USA
along these lines; and to discuss the implications of this research for
Harveys analysis, and for our understanding of the economic
dynamics of capitalism. In this sense I offer an internal assessment
and critique: to what extent did Harveys treatment of space enable
him to make good on his second and third goals?
2
Spatializing Marx
Marxs economics can be distinguished from that of most of the grand
theories in economics, particularly his contemporaries and neoclassical
economics, by the close attention he pays to time. Production and the
realization of profits take time: capital is invested prior to production,
and profits can only be realized after production has been completed
and the product brought to market. In short, there is a time lag between
investment and payoffs. In addition, payoffs are not automatic.
Whereas mainstream economics assumes the existence of a market-
clearing equilibrium, where supply matches demand and all products
are sold, Marx saw the economy as what we would today call a complex
dynamic system. As a result, whereas harmony, balance, and optimiza-
tion are at the center of mainstream economics, disequilibrium and
crisis are at the center of Marxs analysis. Marx makes some vital
observations about space, but does not make it central to his analysis.
In seeking to clarify the fundamental importance of the geography of
capitalism, Harvey organizes his analysis around three cuts at a theory
of crisis, beginning with the conventional Marxian position, and pro-
gressively complicating it by paying attention to time and space. His
first cut at crisis theory, like Marx, emphasizes that cyclical dynamics
of overaccumulation and devalorization are endemic to capitalism. In
this account, capitalists profits are gained by paying labor less than the
(labor) value contributed by the worker. In addition, capitalists seek to
out-compete one another by introducing new labor-saving technologies
that enhance productivity by reducing the labor force. The result is an
economic boom: more output is brought to market. Yet there is less
money in the hands of consumers (workers) to purchase these goods.
Capitalists produce too much, and sooner or later this overaccumulation
results in a realization crisis (an inability to sell and make a profit).
There is, in short, a tendency towards a falling rate of profit, as a
consequence of the operation of the law of value (discussed in more
detail below). The result is economic restructuring and an economic
bust: firms close, and machinery and equipment are abandoned. This
devalorization of fixed capital eventually writes off enough of the pre-
vious overaccumulation for production to initiate a new cycle of boom
and bust. (For a similar contemporary analysis, see Brenner 2002.)
Harveys second cut at crisis theory examines the institutions
developed under capitalism to smooth out disruptions due to the
The Spatiality of The Limits to Capital 471
2004 Editorial Board of Antipode.
time that production takes. He notes that large-scale production
requires investment in large pieces of fixed capital. Thus large sums
of money must be raised up front to pay for equipment that may not
make a profit for years, if at all. He notes that finance institutions and
the credit system are essential institutions for dealing with this prob-
lemfor assembling the resources necessary for large purchases and
managing the variable and sometimes long time lags between invest-
ment and payoffs. Finance markets also make it easier for capital to
flow from less profitable to more profitable areas of the economy,
smoothing out cycles of overaccumulation and devaluation. Fictitious
capital (ie derivatives etc) also emerges, multiplying investors options
and flexibility. In all these ways, the financial credit system offers the
promise of a temporal fix to capitalisms crises. Yet Harvey argues
that this is a false promise. Large pieces of equipment ease efficient
production in the short term, but they can become a barrier once new
technologies emerge that result in the older fixed capital rapidly
losing its economic value. By easing the flow of capital around the
economy, finance markets accelerate accumulation and technical
change, and the speed at which old equipment needs to be replaced.
In times of crisis, fictitious capital also can lose its value overnight as it
is rooted in nothing more solid than investors confidenceas the
recent stock market crashes and bankruptcies have demonstrated.
Thus cycles of boom and bust may be temporally displaced, but do
not disappear.
The possibility that crises can be managed through spatial fixes is
the subject of Harveys third cut. He identifies four kinds of spatial
fixes. First, the land market helps reconfigure the built environment
and makes it more flexible by directing investments in land to highest
and best (ie differential rent maximizing) uses. Whereas many
analyses of land under capitalism, based on Ricardo or von Thunen,
conceptualize rents as a drain on profits and thus on the accumulation
of capital, Harvey develops Marxs theory of differential rent to argue
that rents can in fact contribute to profit-making (especially when the
built environment becomes fictitious capital). Land markets thus
mediate space in the same way that finance markets mediate time.
Second, the global diffusion of capitalism mitigates accumulation
problems at home by creating new markets for investment abroad.
Third, spatial barriers to profit realizationbecause the geographical
separation of places of production (where investments are made)
from places of consumption (where revenues are generated) increases
the time lag between investment and payoffscan be mitigated by
developing communications technologies to accelerate the movement
of commodities and capital. This is what Marx and Harvey mean by
the annihilation of space by time (Harvey 1985).
3
Fourth, territorial
governance structures emerge to facilitate local capital accumulation;
472 Antipode
2004 Editorial Board of Antipode.
a theme subsequently picked up by regulation theory and research on
industrial districts and local entrepreneurialism.
As in his analysis of the second cut theory, Harvey argues that
such spatial fixes are at best temporary. Mechanisms smoothing the
reinvestment of capital across space into highest and best uses, accel-
erating the global diffusion of capitalism, annihilating space through
time, and underwriting territorial accumulation strategies all end up
promoting capital accumulation and competition. This allows the law
of value (the first cut crisis theory) to operate more freely, returning
capitalism to the boom and bust dynamics of the first cut theory of
crisis.
Harveys spatialization of Marx has two important elements.
First, he argues that spatiality is a social construct. In this view,
space (like time) is not an exogenously given, absolute coordinate
system within which phenomena can be located, as in Newtons view
of the universe. Instead, as detailed in the third cut theory of crisis,
space is a product of the political economic system (see also Smith
1984; Swyngedouw 1992). Second, he is successful in showing how
space and place also have an active influence over profit rates, and
thereby the dynamics of capitalism. In spirit, this parallels the argu-
ments made by first generation neoclassical location theorists that
space matters in the economy (Harvey 1999). Taken together, these
two arguments constitute a relational theory of space (a position
initially developed by Leibnitz in his critique of Newton): different
economic, social and political processes . . . produce their own spaces.
But, in turn, space . . . is also considered constitutive of {these} pro-
cesses (Harvey 1997) (Castree 2002:191). The significance of the
latter, constitutive, process was at times lost when Marxist geographers,
seeking to avoid spatial fetishism, conceptualized space as only a
product of capitalism (Sheppard 1990a). Harvey never made this error.
Assessing Harveys Spatialization
Harveys relational analysis of the spatiality of capitalism is a major
contribution, both to Marxian political economy and to economic
geography more generally. It demonstrates that a full consideration
of space requires us to rethink economic theory, in turn implying
that economic geography cannot be dismissed as a special interest of
little concern to most economists. Limits did not develop fully the
implications of this insight, but catalyzed a research program on the
role of space in the dynamics of capitalist development. Yet Harvey
did shape the direction that research into space and place took within
this research program, through the example he paid most attention to.
Harvey stressed the urban built environment, showing how urban
built environments are shaped to meet the requirements of capital
accumulation, only later to become a barrier once technological
The Spatiality of The Limits to Capital 473
2004 Editorial Board of Antipode.
change alters those requirements. Thus cities, like capitalism,
undergo cycles of construction and devalorization, and urban spatial
restructuring. This focus on how places are shaped by and shape
capitalist dynamics was taken up in a number of the most influential
Marxian-influenced economic geography monographs of the 1980s
(Massey 1984; Scott 1989; Storper and Walker 1989).
By contrast, although Harvey fully recognizes the importance of
how distance also is continually reshaped by the transportation and
communication technologies developed to overcome barriers of geo-
graphic separation, he pays little attention to this in Limits. This also
became a minority interest in subsequent Marxian economic geography.
To this day transportation and communications geography remain
largely outside radical economic geography (but see Graham and
Marvin 2001; Hanson and Pratt 1995; Sheppard 1990b. My research
with Trevor Barnes into the role of transportation in the capitalist
space economy confirms Harveys insight about the importance of
distance as a relational aspect of capitalism. Moreover, it implies that
the spatiality of capitalism has even more far-ranging implications for
Marxian economic theory than Harvey suggests.
To see this, recall Harveys arguments about capitalist crises. In his
account, the second and third cut crises cannot prevent a capital-
ist economy from eventually experiencing overaccumulation. Fixed
capital and the built environment may stabilize investment dynamics
and slow accumulation down, but credit and land markets, fictitious
capital and communications technologies also smooth over temporal
and spatial barriers and accelerate accumulation and competition.
Thus the limits to capital, expressed in the first cut crisis theory, are
at best delayed.
What accounts for the inevitability of such a crisis? I read Harveys
explanation as based on three arguments. First, in a pinch, his analysis
relies on labor values. Initially, he calls for a dialectical treatment of
exchange and labor values, writing that exchange value and labor
value are relational categories, and neither . . . can be treated as
a[n] immutable building block (Harvey 1982:4). At times, however,
he treats labor value as a sufficient and independent determinant of
capitalist dynamics.
4
For example, his important modification of the
law of the falling rate of profit is developed in labor value calculus
(pp 176189), despite the fact that capitalists decisions on new technolo-
gies are, in the first instance, based on their guestimated impact on
monetary profits. Second, and consistent with this tendency, he places
Marxs law of value at the center of his analysis. As described by
Harvey, the law of value states that under full capitalist competition
the rate of profit (in labor value terms) will be equalized across the
economy, as investment flows from less to more profitable opportun-
ities (p 142). He also associates with this an economy-wide warranted
474 Antipode
2004 Editorial Board of Antipode.
rate of accumulation (determined by the average rate of surplus value
in the economy) that, if maintained, enables all profits (net of luxury
consumption) to be reinvested in capital accumulation (pp 159160).
Third, however, Harvey argues that this warranted rate of accumulation
cannot be maintained: it is, as he writes, an unstable equilibrium (p 176).
In this, he follows Marx in denying Says Law, ie that supply creates its
own demand. Instead, overaccumulation is inevitable.
It then follows that anything promoting competition and accumula-
tioneg credit and land markets, improved communications technolo-
gies, territorial governance systemsbrings into force the law of value
and its corresponding cycles of overaccumulation and devalorization.
A second implication of the centrality of the law of value in Limits
is that the warranted rate of accumulation, around which cycles of
overaccumulation and devalorization fluctuate, is an external deter-
minant of the unstable dynamic equilibrium (p 159). Harvey repeat-
edly stresses that accumulation is the driving force of the economy. By
contrast, he rejects class struggle as playing any determining role over
accumulation (pp 255256), although interestingly he accepts it as a
determinant of the equilibrium share of rents (p 362). It is such
arguments that have led a number of analysts to dub Harvey a capital
logic Marxist: ie a Marxist who argues that economic considerations
rather than social ones drive capitalist accumulation.
Our research on the capitalist space economy, taking into account the
constitutive role of distance as produced through the transportation and
communications sectors, suggests, however, that Harveys explanation
of the first cut crisis and its foundational role for capitalist dynamics is
problematic (Sheppard and Barnes 1986; 1990). First, labor values are
not more foundational than exchange values; the two indeed exist in a
dialectical relation with one another. Second, the warranted accumula-
tion rate is not an exogenous determinant of capital accumulation, but
depends, inter alia, on technological change, on the spatial configuration
of production and, crucially, on social forces of class struggle fixing the
prevailing wage rate relative to the rate of profit. Third, while Says Law
is not generally valid, there do exist conditions under which future
demand matches current supply. For any given warranted rate of accu-
mulation, a social division of labor can be constructed that allows output
to match future demand, making unlimited extended accumulation pos-
sible (cf Capital, volume 2).
5
This growth path is indeed unstable, as
Harvey notes, but not simply for the reason he gives: Overaccumula-
tion driven by the law of value. Any technological change, geographical
restructuring, or successful move by organized labor or capitalists to
enhance their share of the surplus can undermine this balance between
future demand and current supply. This implies, for example, that
social and political struggles, played out in space and time, also may
have substantial influence over capitalist spatial dynamics.
The Spatiality of The Limits to Capital 475
2004 Editorial Board of Antipode.
In short, fuller consideration of the constitutive role of space leads
to a much more complex narrative of capitalist crisis, in which labor
values, the law of value and the warranted rate of accumulation each
play a less determinant role than Harvey suggests in Limits. Capital-
ism is indeed an unstable and crisis-prone system, but those crises are
dependent on more than the dynamics of capital accumulation. The
spatiality of capitalism creates all kinds of unintended consequences
that capitalists (and workers) must negotiate; capitalist dynamics
depend on class struggles, and class conflicts themselves (as Harvey
notes) are profoundly complicated by space (Sheppard and Barnes
1986). This implies a more complex and nuanced dynamic than that
suggested by Harvey.
A second aspect of Harveys spatialization of Marx is worthy of
note. Although Harveys discussion of space stresses continual cycles
of spatial differentiation and restructuring, at times there is also a
theme of spacetime compression and integration. This occurs in
discussions of how increased mobility of capital and labor enhances
spatial competition (p 165); how spatial integration is key to the
abstraction of abstract labor value from concrete individual labors
(p 375); the errors of Emmanuels (1972) unequal exchange thesis
(p 63); and the concluding discussion of how local crises build up to
a global crisis (and the end of capitalism). Careful attention to the
spatiality of capitalist production, however, leads to the conclusion
that labor values vary across space (Sheppard and Barnes 1990;
Webber 1996). It is also far from clear that the production of space
is resulting in a straightforward spacetime compression, even under
the influence of telecommunications (Sheppard 2002).
6
While the
world is undoubtedly becoming smaller in absolute terms, it does
not follow that relative differences in positionality, or locational
advantage, are diminishing.
Conclusion
Many of Harveys insights are durable, and this book remains a vital
resource for understanding capitalisms spatial dynamics: the produc-
tion and constitutive role of space; the spatio-temporal instability and
unpredictability of capitalism; the complexity of class struggles under
spatial competition; and the relevance of labor values as part of our
analytical toolkit (cf Webber and Rigby 1999). Marxs analysis is as
relevant as ever (Desai 2002), and Harveys insights resonate today.
The current dependence of the global economy on flagging First
World consumer confidence and on the dubious dynamism of the
US economy is evidence of an overaccumulation crisis, in which the
worlds poor cannot afford the products of first world capitalism and
the worlds middle classes withhold spending in times of uncertainty.
The third Gulf War (after the IranIraq war and Iraqs invasion of
476 Antipode
2004 Editorial Board of Antipode.
Kuwait) shows how global military might remains a means for the
homelands of capitalist production to gain access to strategic natural
resources, and for disciplining those unwilling to play by the economic
and political rules of capitalism.
7
Harveys analysis in Limits operates in different registers. It is
dominated by a resolutely dialectical analysis of the highest quality,
but at key points suggests a foundational role for both the abstracted
calculus of labor value and the first cut theory of crisis, which implies
the existence of clearly demarcated limits to capitalism. Subsequent
research into the spatiality of capitalism offers a somewhat different
analysis, that capitalist dynamics are subject to an even more complex
set of forces, requiring a more socially and geographically nuanced
account. The irreducibly complex spatio-temporality of capitalism, the
inability of economic agents to determine the consequences of their
actions, and the difficulties of grounding analysis in any universal
value calculus, together suggest that the economy (like space) needs
to be treated dialectically and relationallyas both a consequence
and constitutive of society, nature, space and time. Interestingly, this
creates room within the critical analysis of capitalism for the kinds of
insights emerging in critical human geography that are erroneously
situated in opposition to Harvey, both by him and his critics, because
of their skepticism that value and class are determinant in the final
instance.
Acknowledgement
I wish to thank, without implicating, Helga Leitner and George
Henderson for comments on an earlier draft.
Endnotes
1
Its recent republication by Verso, and the accompanying interview published in New
Left Review, was catalyzed by cultural theorist Frederic Jameson, who became aware
of it as a result of reading Harveys (1989) The Condition of Postmodernity. Thus the
popularity of one of Harveys weaker books led to a rediscovery of his most magisterial
to date.
2
There are, of course, many absences in Harveys analysis that others have commen-
ted onthemes such as naturesociety relations, gender, and the state. I eschew this
kind of external critique here. Harveys purpose, as I see it, was not to provide a
comprehensive understanding of capitalism, but to summarize and assess Marxs own
economic analysis, which also bracketed these topics. I also will not summarize the
significant developments in Harveys own thinking since 1982. These have been, of
course, considerable, but have limited implications for the arguments presented here.
3
Marx (1983) stresses die Vernichtung des Raums durch die Zeit, d.h. die Zeit, die
die Bewegung von einem Ort zum anderen kostet, auf ein Minimum zu reduzieren
(The annihilation of space through time, ie to reduce to a minimum the time that it
costs for movement from one place to another; authors translation). As Harvey notes,
these arguments imply that the spatial circulation of capital is productive, ie it affects
profits. This effectively denies the claim often made in Marxist economics that all
circulation activities are unproductive, ie they are a drain on profits.
The Spatiality of The Limits to Capital 477
2004 Editorial Board of Antipode.
4
Harvey stresses, of course, that labor values are socially determined; the issue here is
their role within the economic theory of accumulation.
5
This socially necessary division of labor is not determined by labor values (contra
Rubin 1972)
6
Also worthy of note is the argument of Gibson-Graham (1996) that there are spaces
close to the heart of capitalism which it has not penetrated.
7
The point is not to deny the oppressive nature of the Saddam regime in Iraq, of
course, but to highlight the neocolonial attitude that democratic capitalism encapsu-
lates the ideal social system to be imposed by force, if necessary, in the name of human
progress.
References
Barnes T and Sheppard E (1992) Is there a place for the rational actor? A geograph-
ical critique of the rational choice paradigm. Economic Geography 68:121
Brenner R (2002) The Boom and the Bubble: The US in the World Economy. London:
Verso
Castree N (2002) From spaces of antagonism to spaces of engagement. In A Brown,
S Fleetwood and J M Roberts (eds) Critical Realism and Marxism (pp 187214).
London: Routledge
Desai M (2002) Marxs Revenge: The Resurgence of Capitalism and the Death of Statist
Socialism. London: Verso
Emmanuel A G (1972) Unequal Exchange. New York: Monthly Review Press
Gibson-Graham J K (1996) The End of Capitalism (As We Know It). Oxford: Basil
Blackwell
Graham S and Marvin S (2001) Splintering Urbanism: Networked Infrastructures,
Technological Mobilities and the Urban Condition. London: Routledge
Hanson S and Pratt G (1995) Gender, Work, and Space. New York: Routledge
Harvey D (1982) The Limits to Capital. Oxford: Basil Blackwell
Harvey D (1985) Money, space, time and the city. In Consciousness and the Urban
Experience (pp 135). Oxford: Basil Blackwell
Harvey D (1989) The Condition of Postmodernity. Oxford: Basil Blackwell
Harvey D (1997) Contested cities: Social process and spatial form. In N Jewson and
S MacGregor (eds) Transforming Cities (pp 1927). London: Routledge
Harvey D (1999) Introduction to the Verso edition. In The Limits to Capital
(pp xiiixxviii). London: Verso
Marx K (1972) [186796] Capital. Penguin: Harmondsworth
Marx K (1983) [18578] Grundrisse der Kritik der Politischen O

konomie. In Institut
fur Marxismus-Leninismus beim Zentralkommittee der SED (ed) Karl Marx,
Friedrich Engels: Werke (pp 47768). Berlin: Dietz Verlag
Massey D (1984) Spatial Divisions of Labour: Social Structure and the Geography of
Production. London: Methuen
Rubin I I (1972) Essays on Marxs Theory of Value. Detroit: Black and Red
Scott A J (1989) Metropolis: From the Division of Labor to Urban Form. Berkeley, CA:
University of California Press
Sheppard E (1990a) Modeling the capitalist space economy: Bringing society and
space back. Economic Geography 66:201228
Sheppard E (1990b) Transportation in a capitalist space economy: Transportation
demand, circulation time and transportation innovations. Environment and Plan-
ning A 22:10071024
Sheppard E (2002) The spaces and times of globalization: Place, scale, networks, and
positionality. Economic Geography 78:307330
478 Antipode
2004 Editorial Board of Antipode.
Sheppard E and Barnes T (1986) Instabilities in the geography of capitalist produc-
tion: Collective vs. individual profit maximization. Annals of the Association of
American Geographers 76:493507
Sheppard E and Barnes T J (1990) The Capitalist Space Economy: Geographical
Analysis after Ricardo, Marx and Sraffa. London: Unwin Hyman
Smith N (1984) Uneven Development: Nature, Capital and the Production of Space.
Oxford: Basil Blackwell
Storper M and Walker R (1989) The Capitalist Imperative: Territory, Technology and
Industrial Growth. Oxford: Basil Blackwell
Swyngedouw E A (1992) Territorial organization and the space/technology nexus.
Transactions of the Institute of British Geographers NS 17:417433
Webber M (1996) Profitability and growth in multiregional systems: Theory and a
model. Economic Geography 72:335352
Webber M J and Rigby D (1999) Accumulation and the rate of profit: Regulating the
macroeconomy. Environment and Planning A 31:141164
The Spatiality of The Limits to Capital 479
2004 Editorial Board of Antipode.