Roepke Lecture in Economic Geography

Crises, Geographic Disruptions and the

Uneven Development of Political Responses
David Harvey
The CUNY Graduate
Center
365 Fifth Avenue,
NewYork, NY 10016-4309
dharvey@gc.cuny.edu
Key words:
crises
economic growth
globalization
uneven geographical
development
theory of capital
accumulation
contradictions of capitalism
dialectics of social change
The Roepke Lecture in
Economic Geography was
established to honor the
late Professor Howard G.
Roepke, who served on
the faculty of the University
of Illinois at Urbana-
Champaign from 1952
1985. The original lecture
series ran at the annual
meetings of the Association
of American Geographers
(AAG) from 19861994.
Economic Geography, the
University of Illinois, and
the AAG Economic
Geography Specialty Group
decided to resurrect and
cosponsor the lecture
series in 2007.
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The current nancial crisis may be deeper and more
far reaching than earlier ones except the Great
Depression, but it ts into an all-too-common pattern
of capitalist development experienced over the past
40 years. What can Marxian theory, with its focus
on crisis formation and the internal contradictions of
capital accumulation, teach us about the nature of
capitalist crises, and what can the actual experience
of the crisis teach us about Marxian theory? In what
ways has the distinctive geographic unfolding of
the crisisall the way from subprime lending in
specic locations to disruptions and spatial xes in
patterns of nancial, commodity, capital, and labor
owscontributed either to the deepening of the
crisis or to its partial resolution? How, nally, can
adequate responses to the crisis tendencies of capital-
ism and the stresses of endless compound growth be
articulated in these times?ecge_1105 1..22
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There are many explanations for the crisis of capital
that began in 2007. Some see it as rooted in human
nature: greed, hubris, the lust for mastery and power,
the predatory instincts of entrepreneurs, and the delu-
sional behavior of investors and nanciers have
all been invoked. More systemic versions focus on
expectations and the animal spirits that are so
vital to drive growth and innovation but inevitably
produce speculative waves of creative destruction
(Partnoy 2003; Akerlof and Shiller 2009). Others
see the crisis as rooted in institutional failures,
particularly failures of state regulation of the nancial
sector (sometimes represented as regulatory
capture); of nancial innovations that led to the
loss of both internal and external controls over a
shadow banking system; and of policy failures
that encouraged moral hazard, particularly in
institutions that were deemed too big to fail (Book-
staber 2007; Authers 2010). Then there are those
who attribute the crisis to blind belief in erroneous
theory. The Chicago legal economics scholar Victor
Posner (2010) now readily admits (along with Alan
Greenspan), for example, that the free markets that
he once believed to be immaculate can indeed fail,
that they do not automatically self-correct and
clear, and that the efcient market hypothesis to
which many blindly adhered needs to be reassessed.
We should, some now even say, have listened to
Hyman Minskys theories of inherent nancial
instability all along and taken seriously the early
warnings of those, such as Warren Buffet and Paul
Volcker, that derivative and collateralized debt obliga-
tions may be weapons of mass nancial destruction
(Barbera 2009). More conventional economists
gloomily survey global imbalances in trade, indebted-
ness, lagging employment, and shallow demand;
they see the crisis as a violent but necessary correction
to imbalances in a world economy that had long been
straying from balanced growth (see International
Monetary Fund, 2009; Rajan 2010). In this story, the
trade imbalances between the United States and
China play a central role. Maladroit policies and
perverse state interventionismeverything from the
Chinas manipulation of its currency to welfare state
planninglie at the heart of the problem. The impli-
cation is (as both the World Bank and Tea Party
activists claim) that we need more, not less, of the free
market to get true capitalist development back on
track (World Bank 2009, Harvey 2009b). Libertarians
even go so far as to suggest that the abolition of the
ECONOMIC GEOGRAPHY
2
Federal Reserve and the International Monetary Fund is a necessary precondition to exit
from the crisis.
1
Finally, there are those who see the crisis in cultural or even nationalist terms.
Politicians and the popular press in Germany and France depicted the crisis as a distinctive
Anglo-Saxon disease, rooted in a culture of nancial speculation on Wall Street and in
the City of London (practices that German bankers would supposedly not tolerate).
The culture of proigate debt-fueled personal consumption in the United States and
Britaincompared to high personal saving rates in Germanyplayed a distinctive role.
The Greek sovereign debt crisis of 2010 was attributed to defects in the Greek national
character. Many Latin Americans chortled at the sight of the United States having to go
through the equivalent of an International Monetary Fund (IMF) structural adjustment
program of the sort they had become all too familiar with over the preceding three
decades. It is your problem, not ours, President Luis Igncio Lula da Silva of Brazil
initially opined, incorrectly surmising that it was a product of the white, blue-eyed and
out-of-touch male world of Wall Street (Merkel Criticizes US 2008; Blueeyed
Bankers to Blame for Crash 2009; Stuttaford 2010).
Each of these explanations contains a grain of truth. Each can be woven by skillful
writers into a persuasive, but profoundly misleading, narrative of how and, more impor-
tant, why we got into the current mess. Of course, there was delusional behavior and
insatiable greed along with regulatory failures. But these traits have been around a long
time. So why did they break loose from all social, political, cultural, and regulatory
constraints in the way they did? And, of course, public policies distort markets. But it is
not only the perdious Chinese who play such tricks. What, to take just one example, has
been the role of the mortgage interest tax deduction in the United States that not only costs
about $100 billion a year in foregone tax revenues but also gives an obscene subsidy to the
rich? This tax deduction biases the housing market toward home ownership, which then
becomes a supposedly unquestionable cultural value, the essence of the American dream
(the United States had close to 70 percent homeownership in 2007, compared to Swit-
zerland, which had merely 20 percent). Such tax policies have underpinned the lucrative
business of mortgage nance in the United States with a permanent incentive to overex-
tend (as happened in the subprime mortgage market) and to unload the risks. About 40
percent of the total debt in the United States lies in the mortgage market, and much of it
was sold worldwide in those collateralized debt obligations that have now gone toxic.
Given that the crisis had its origins in the United States housing market, then surely
the cult of home ownership had something to do with it (see Rajan 2010, chap. 1, for a
succinct overviewof howpublic policy pushed housing markets and mortgage credit over
the years in the United States).
But for the Germans to contend that their highly protable export trade did not depend
on the debt-fueled proigacy of the American consumer is a bit much. Furthermore, the
German and northern European desire for second homes around the Mediterranean
littoral has had a lot to do with what is now happening to the sovereign debt in Greece,
Portugal, and Spain (go to the Balearics or to southern Spain and see the urban
disaster that has been sown by this trade in access to sunny locations through the
construction of condominiums). And if the German banks were above it all, how come
Deutsche Bank received such a huge payout fromtheAIGbailout, and howcome a goodly
percentage of the foreclosed properties in Cleveland are in the hands of Deutsche Bank?
1
The petition to abolish the Federal Reserve sponsored by Rand Paul can be found online at http://
www.PetitionOnline.com/mod_perl/signed.cgi?fedres
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While the pegging of the Chinese currency is a problem, the Chinese purchases of U.S.
Treasury bonds to keep the exchange rate down have helped fund U.S. debt, have kept
long-term dollar interest rates stable, and have thereby constituted a critical support for
global capital at a time when everything else seemed to be falling apart.
In all this there is something missing. The best clue as to what arose when Queen
Elizabeth visited the London School of Economics and asked the prestigious economists
there how come they had not seen the crisis coming. Since Queen Elizabeth is a feudal
monarch rather than an ordinary mortal, the British academic establishment felt impelled
to answer. After six months of reection, the economic gurus of the British Academy
submitted their conclusions. The gist was that many intelligent and dedicated economists
had worked assiduously and hard to understand the microprocesses at work. But everyone
had somehow missed systemic risk. A year later, a former chief economist of the IMF
said, We sort of know vaguely what systemic risk is and what factors might relate to it.
But to argue that it is a well-developed science at this point is overstating the fact. In a
formal paper, the IMF described the study of systemic risk as in its infancy (Systemic
Risk Is the New Buzz Word 2010).
In Marxian theory, systemic risk translates into the fundamental contradictions of
capital accumulation. The IMF may save itself a lot of trouble by studying them. In what
ways, then, can these contradictions provide a deeper understanding not only of the
particularities of the current crisis but also of the general role of crises in the long
historical geography of capitalist development?
A HistoricalGeographic Perspective
The current crisis originated in the steps that were taken to resolve the crisis of
stagation and the political threat to capitalist class power in the 1970s in the core regions
of capitalism (North America and Western Europe). Since I have laid out an account of
these steps elsewhere (Harvey 2005; Harvey 2010a), I simply summarize the argument
here. The steps taken to resolve that crisis included the following:
1. The successful political assault (led by Ronald Reagan and Margaret Thatcher and
military takeovers in Latin America) upon organized labor and its political institu-
tions while mobilizing global labor surpluses (through in-migration and offshoring),
instituting labor-saving technological changes, and heightening intercapitalist com-
petition. Labor markets (always geographically fragmented) were largely organized
on a national basis in the period 19451980 and were insulated from international
competition by constraints on the ow of international capital. Nation-states could
design their own scal policies, and these policies could be inuenced politically by
organized labor and left political parties. After the collapse of the Bretton Woods
system in the early 1970s and the subsequent deregulation of nance, constraints on
the ow of international capital were loosened, and capital began to exercise greater
discipline over the scal policies of nation-states. Welfare states were undermined,
real wages stagnated or declined, and the share of wages in the total gross domestic
product (GDP) in the OECDcountries and in China fell (Pollin 2003). Capital gained
access to a vast disposable labor reserve living under marginal conditions. By the
mid-1980s, the labor problem (both in the market and on the shop oor) that capital
had earlier faced in the core regions had disappeared. Wage repression was experi-
enced almost everywhere.
2. Nation-state-based monopoly capitalism (as exemplied in the Detroit-based U.S.
auto industry in the 1960s) was dismantled by opening up the automobile industry to
ECONOMIC GEOGRAPHY
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far ercer international competition (e.g., the invasion of the U.S. auto market by
Japanese and German competitors in the 1980s). Intensifying global competition
translated into lower nonnancial corporate prots (Bellamy Foster and Magdoff
2009). This situation ultimately created a low prot-margin regime in almost all lines
of conventional production even as real wages stagnated. With the dismantling of
capital controls over international movement, uneven geographic development and
interterritorial competition became key features in capitalist development, further
undermining the scal autonomy of nation-states. This also marked the beginning of
a shift of power toward East Asia.
3. Deregulating and empowering the most uid and highly mobile form of
capitalmoney capitalto reallocate capital resources globally (eventually through
electronic markets and a shadow unregulated banking system) sparked deindustri-
alization in traditional core regions. Capital accelerated its reliance on a series of
spatial xes to absorb overaccumulated capital (Harvey 2001, chap. 14). These
geographical shifts were accompanied by new forms of (ultra-oppressive) industri-
alization and extractions of natural resources and agricultural raw materials in
emerging markets. Two corollaries then followed. One was to enhance the protabil-
ity of nancial corporations relative to industrial capital and to nd new ways to
globalize and supposedly absorb risks through the creation of ctitious capital
markets (the leveraging ratio of banks in the United States rose from about 3 to 30).
Nonnancial corporations (such as auto companies) often made more money from
nancial manipulations than from making things. The other impact was heightened
reliance on accumulation by dispossession as a means to augment the power of the
capitalist class. The new rounds of primitive accumulation against indigenous and
peasant populations (particularly in Asia and Latin America) were augmented by the
losses of the assets of the lower classes in the core economies, as witnessed by the
losses of pension rights as well as, eventually, huge losses of assets in the subprime
housing market in the United States.
4. Wage repression threatened effective demand, particularly in those economies such
as the United States where about 70 percent of the driving force of capitalist
development lies in consumerism(as opposed to half that in China). The gap between
declining wages and increasing effective demand was covered by pushing the debt
economy to its limits. Household debt in the United States tripled in three decades:
hence the hidden Keynesianism of debt-nanced consumerism within the practice
of neoliberalism.
5. Bubbles in the asset market compensated for the lack of other investment opportu-
nities. These bubbles were fueled by nance (ctitious) capital and facilitated by
extensive nancial innovations (e.g., derivatives and collateralized debt obligations).
Several of these bubbles were associated with property markets and urban develop-
ment. The Japanese land market crashed in 1990, followed by a decade or more of
economic stagnation; the Nordic banking system went under when the property
market fell in 1992 (Sweden had to nationalize its banks); the savings and loan crisis
in the United States and the housing market crash in the United Kingdom of
19861992 caused great distress and demanded bailouts; the East and Southeast
Asian crisis of 19971998 began with property problems in Thailand. The collapse
that began with the foreclosures on homes in 2007 in the United States and in the
distress in the British housing market was therefore not unusual.
The political forces that coalesced and mobilized behind these transitions had a
distinctive class character and clothed themselves in neoliberal theory. The theory rested
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on the idea that free markets, free trade, personal initiative, and entrepreneurialism were
the best guarantors of individual liberty and freedom and that the nanny state should be
dismantled and replaced by personal responsibility. But neoliberal practice mandated
that the state guarantee the integrity of nancial institutions, thus introducing (beginning
with the Mexican debt crisis of 1982) moral hazard into the nancial system. State
power (local and national) also became increasingly committed to providing a good
business climate to attract investments in a highly competitive environment. In the event
of a conict between the interests of capital (nance in particular) and the interests of the
people, the latter had to be sacriced (as became standard practice in IMF structural
adjustments programs from the early 1980s onward). The upper echelons of the capitalist
class thereby consolidated enormous wealth and power, and social inequality dramatically
increased.
2
Conditions varied considerably, of course, depending on which part of the world one
inhabited, the class relations prevailing there, the political and cultural traditions, and how
the balance of political-economic power was shifting. The spatial and geographic dynam-
ics of these recalibrations in the global economy is a matter to which I will return.
Theoretical Perspectives
Capital, Marx insisted, is a process of circulation, not a thing. It is fundamentally about
putting money into circulation to make more money. There are various ways to do so.
Financiers lend money in return for interest; merchants buy cheap to sell dear; and rentiers
buy up land, resources, patents, and the like, which they release to others in return for rent.
But the primary form of capital circulation in Marxs view was that of production capital.
This capital begins with money that is used to buy labor power and means of production
that are then brought together in a labor process, under a given technological and
organizational form, that results in a new commodity to be sold on the market for the
initial money plus a prot.
A part of the prot then has to be capitalized and launched into circulation to seek even
more prot. Capital is thereby committed to a compounding rate of growth. The quantity
of global goods and services that are traded through the market (which now stands at
about $55 trillion) has grown at an average rate of about 2.25 percent since 1750 or so
(Maddison 2007). In some places and times, it has been much higher and elsewhere much
lower. This historical record ts with the conventional wisdom that a growth rate of 3
percent is the minimum acceptable level at which a healthy capitalism can operate
satisfactorily. Coincidentally the average global growth rate from 2000 to 2008 was
exactly 3 percent (with a good deal of local variation). Anything less that 3 percent is
problematic, while zero or negative growth denes a crisis that, if prolonged, as in the
1930s, denes a depression. So the problem for capital is to nd a path to a minimum
compound 3 percent growth forever.
In the Grundrisse, Marx (1973) pointed out that capital cannot abide limits to accu-
mulation (see also Harvey 2010a, chap. 24). When it encounters limits, he suggested, it
converts them into barriers that can then be transcended or circumvented. So where, then,
are the potential limits to this compounding rate of growth? Since capital is a process, not
a thing, the continuity of the process (along with its speed and geographic adaptability and
mobility) becomes a crucial feature for sustaining compounding growth. Any blockage
in the ow of capital will produce a crisis. If our blood ow stops, we die. If the ow of
2
Social inequality in the United States is systematically tracked by Tomas Piketty and Emmanuel Saez
(see http://elsa.berkeley.edu/~saez).
ECONOMIC GEOGRAPHY
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capital stops, the body politic of capitalist society dies. This simple rule was most
dramatically demonstrated in the wake of the events of September 11, 2001. At that time,
normal processes of circulation were stopped dead in and around New York City, with
huge ramications for the global economy. Within ve days, Mayor Rudy Guiliani was
pleading with everyone to get out their credit cards and go shopping and go to the
restaurants and Broadway shows (seats are now available!), and shortly thereafter U.S.
president George W. Bush did an unprecedented thing: he appeared in a collective
commercial for the airlines pleading with people to start ying again. When the banks
stopped lending and credit froze in the wake of the collapse of Lehman Brothers on
September 15, 2008, the survival of capitalism was threatened, and political power went
to extraordinary lengths to loosen the constrictions. It was a matter of life or death for
capital, as everyone in power recognized.
An inspection of the circulation of capital reveals, however, a series of potential
blockage points, any one of which could induce a crisis by constricting the owof capital.
Each point is delineated next.
Potential Blockage Points
Assemblage of the Initial Capital
Capital accumulation presumes that adequate amounts of money can be brought
together in the right place at the right time to launch that money into circulation as capital.
Marx, for the most part, treated this problem of the initial capital in terms of primitive
accumulation (the robbery of money from the rest of the world). This view is inadequate
because, as Henri de Saint-Simon pointed out earlier, the association of many capitals
(eventually achieved via the corporate form, stock markets, and so forth) is required to
undertake large-scale projects, such as railways, canals, and even large-scale industrial
undertakings. It is the job of the nancial systemalmost invariably incorporating state
powersto assemble small-scale savings and redistribute the money so assembled across
a range of potentially protable projects. The Pereire brothers, for example, schooled in
the ways of thought of Saint-Simon, created new credit institutions to facilitate the
rebuilding of Paris in the wake of the crisis of 1848 to mop up surpluses of both capital
and labor. They soon found that they did not need to engage with production, that
leveraging (borrowing at 3 percent and lending at 5 percent) could yield themhefty prots
(Harvey 2003). The creation of a modern mortgage nance system in the United States
dates back to the 1930s (when a third of the unemployment was attributable to depression
in the construction trades), and this system laid the basis for the post-World War II
suburban boomthat played such a crucial role in preventing the United States fromsliding
back into depression.
Continuous nancial innovation has been crucial to the survival of capitalism. But
nance and money capitalists also demand their cut of the surplus value that is pro-
duced. Excessive power within the nancial system can then become a problem, gen-
erating a conict between nance and production capital. Financial institutions,
furthermore, have always integrated with the state apparatus to form what I call a
state-nance nexus (Bonney 1999). This nexus usually stays in the background except
in a crisis, as happened in the United States in the wake of the collapse of Lehman
Brothers: the secretary of the Treasury (Henry Paulson) and the chair of the Federal
Reserve (Ben Bernanke) were making all the key decisions (President Bush was rarely
seen). To the degree that state power favored City of London nance over production
capital in Britain after the World War I, so it contributed to the malaise of industrial
production in the same way that Wall Street nance connived at the deindustrialization
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of the United States after the mid-1970s. Crises have frequently centered on the nancial
sector and associated state powers either because nance is overregulated or not inno-
vative enough, producing what is called nancial repression (McKinnon 1973)a
term that was often used in the 1970s to depict a serious point of blockage for the
accumulation of capitalor because it is too powerful and too uncontrollable for the
good of the system (as is often argued now).
The Labor Market
When labor is scarce or too well organized, it can forma blockage to the free circulation
of capital. Wages rise at the expense of prots. The long history of class struggle over
wage rates, conditions of contract (length of the working day, the working week, and the
working life), along with struggles over levels of social provision (the social wage), is
testimony to the importance of this potential limit to the accumulation of capital. This
constriction was marked in the core regions of capitalism in the late 1960s, and I have
already noted the means by which it was overcome by the mid-1980s. There is, however,
one point to be reemphasized from that account: the labor problem for capital could not
be overcome without the nancial innovations that served to dismantle the barriers to
cross-border ows of capital.
The Availability of the Means of Production
Several technical issues arise in relation to access to adequate means of production.
Supply bottlenecks can easily occur, sometimes for systemic reasons that cannot be
elaborated upon here (see Morishima 1973 for a thorough exploration of Marxs theory
of systemic imbalances). But beneath these usually temporary blockages in supply chains
lies the possibility of so-called natural limits to supplies of raw materials and to the
capacity of the environment to absorb wastes. The history of capitalism has been replete
with many phases when nature was supposed to be an ultimate limit to growth. But the
Malthusian scenario has never really grabbed hold. This history is a good example of how
capital, when it encounters limits, exhibits considerable ingenuity in turning them into
barriers that can be transcended or circumvented. Because capital has successfully done
so in the past does not necessarily mean, of course, that it is destined to do so in perpetuity.
Nor does it imply that past episodes of supposed natural limits were negotiated smoothly
and without crises. The contemporary situation with regard to energy supplies and waste
absorption is forcing all manner of adjustments and adaptations. Whether or not this is a
moment when what OConnor (1997) called the second contradiction of capitalism (the
relationship to nature as opposed to the capital-labor relationship that Marxists typically
privilege) comes to the fore as the main barrier to sustained accumulation is a matter for
debate. In the past, solutions to such problems have opened up new venues for accumu-
lation or new and more abundant resource complexes to bypass the shortages attached
to the old.
But in exactly the same way that nanciers have sometimes gained too much power and
produced a general crisis by pursuing their narrow interests, so landlords and rentiers can
do the same thing, as happened when the oil cartel OPEC added fuel (actually subtracted
it!) to the crisis of the 1970s or when speculators drove up the price of oil in the summer
of 2008. Excessive political and price manipulation in raw materials markets, in rents on
intellectual property rights, or in the built environment can threaten the continuous
accumulation of capital. When the rentier is the state (as it often is in the case of oil), then
geopolitical struggles can also produce barriers and limits to the release of so-called
natural resources into the circulation of capital. I write so-called because resources are
always technological, cultural, and economic appraisals and, in the form of the built
ECONOMIC GEOGRAPHY
8
environmentsometimes referred to as second natureare actively produced as a new
landscape for accumulation. Scarcities that threaten compound growth are largely socially
produced.
Technological and Organization Forms
How labor power and means of production are brought together depends on the
technological and organizational forms that are available to capitalists in a given time
and place. The history of capitalism has been deeply affected by the ways in which
gains in productivity are achieved. New organizational forms, such as just-in-
time systems, subcontracting, the use of optimal scheduling, and the like, have been
just as important as new machines, robotization, and automation in achieving increases
in productivity and in disciplining labor on the shop oor. Two general points are
important to note. First, excessive innovation can generate crises by displacing labor
too rapidly or rendering production systems obsolete well before investments have
been amortized. Second, innovation can lag when the coercive laws of competition
slacken because of monopolization (Arrighis 1978 theory of capitalist crises turns on this
point). The balance between monopoly and competition is therefore a crucial factor in
determining the innovation rate, which, in turn, affects the ability of capital to discipline
labor through technologically induced unemployment. Greater competition from the
1970s on unleashed a wave of innovation that improved capitals control over labor. The
Bethlehem Steel plant in Baltimore employed nearly 30,000 workers in 1970 but pro-
duced roughly the same amount of steel with 5,000 workers two decades later (Harvey
2000, 151).
The Labor Process
The labor process is where prot originates and capital is produced. What happens
on the shop oor, in the elds, or on construction sites is therefore crucial. The discipline
and cooperation of the worker is essential to accumulation. The lack of discipline and
cooperation by labor is a perpetual threat that needs to be overcome either by co-optation
and persuasion (the creation of quality circles, the mobilization of company loyalties and
pride in work) or by coercion (threats of job loss or, in some instances, physical violence).
The shop stewards movements, the factory councils, and all manner of other forms of
shop-oor organization empower labor, while the capitalists have to negotiate or ght
their way to achieve a modicum of labor discipline. Capital uses differences in gender,
ethnicity, race, and even religion to great effect to divide and rule in the workplace if it
possibly can. Although such differences have obviously played a crucial role in the labor
market as well, it is at the point of production where they become all important. Toward
the end of the 1960s and well into the 1970s, the problem of labor discipline loomed large
in the core regions of capitalism. Offshoring to more docile labor pastures proved helpful
to capital, as did the availability of immigrants and undocumented workers. But as the
autonomista Marxists insist, labor discipline can never be fully ensured. It is always a
potential point of revolutionary resistance (Cleaver 1979). However, capitalists now hold
a denite advantage over labor precisely because of their easy access to massive labor
reserves.
Demand and Effective Demand
The new commodity produced has to be sold for the original money plus a prot.
Someone, somewhere, must need, want, or desire the product and have enough money to
pay for it. Capitalism exhibits an astonishing history of the production of new needs,
wants, and desires, in part through the production of new lifestyles (consider what
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is needed to maintain a suburban lifestyle) but also through an incessant barrage
of advertisements and other subliminal means to manipulate the human psyche for
commercial reasons. Not all such attempts are successful (history is littered with
new products that never found a market), but in a world where the consumer accounts for
more than two-thirds of the driving force for the accumulation of capital, at least in the
core regions of capital accumulation, then the human limits to wants, needs, and desires
constitute a potential barrier to which capital must perpetually attend in the search for
compound growth. But the other issue here is nding consumers with sufcient money to
pay. Compounding growth supposes that there is more money available at the end of the
day than there was at the beginning, and the big question is this: where does the extra
money come from? There are three basic answers. The rst option is to draw the money
held by noncapitalist factions into the system. The gold reserves of the feudal classes
played an important role in the early years of capitalism. Sucked out by usury and other
forms of indebtedness, as well as by normal marketing practices, this source of effective
demand has much diminished (although the Catholic Church may yet have to melt down
a lot of its gold plate to pay for the sins of its priests). The second option, which Rosa
Luxemburg (1913/2003) emphasized, is to use the gold and silver reserves of countries
largely outside the orbit of capitalist development. Imperialism and colonialism have
played a usually violent role in opening up new markets (e.g., the opium wars in China),
thus draining wealth from the once-rich regions of China, India, Africa, and Latin
America (Luxemburg 1913/2003). But with the integration of many of these regions into
the full circulation of capital, these forms of effective demand are now insufcient to
sustain the compound growth of capital accumulation. The third option is to produce
effective demand from within the capitalist dynamic. The total wage bill is insufcient
and has in any case been falling in relation to the GDP over the past 30 years. Capitalist
consumption, no matter how conspicuous, cannot do it either. The answer is that the
money spent on the expansion of investment tomorrow forms the effective demand to
mop up the expanded product that was created yesterday. Tomorrows growth creates the
effective demand for yesterdays expanded product. The problem of effective demand
today is converted into a problem of nding protable new investment opportunities
tomorrow, which explains why compound growth is now so essential to the perpetuation
of capitalism.
Three issues then arise. First, the time gap between yesterdays product and tomorrows
reinvestment has to be bridged, and it entails the use of money as money of account. The
nance capitalists come back in as crucial players who operate not only at the beginning
of the circulation-of-capital sequence but at the end. For example, nanciers lend to
property developers who hire labor to build houses that are then purchased by the workers
with mortgage loans often from the same nanciers. Such a system is inherently specu-
lative and prone to produce housing bubbles of the sort already noted.
But it is not only the nanciers who do so. Commercial and merchant capitalists
buy from the producers and specialize in marketing to consumers. Merchant capitalists,
like nanciers and rentiers, extract a rate of return from their own efforts and can
come to exert an independent class factional power, which has often played a signicant
role in crisis formation. The pressures put on producers by merchant capitalist organi-
zations like Walmart, Carrefour, and a whole host of supermarket chains, along
with merchant organizations like Benneton, the Gap, and Nike, comes to the forefront
of what capital circulation is about, both smoothing out potential barriers and creating
potentially dangerous concentrations of economic power. As with the landlords
and rentiers, the self-interest of the merchant capitalist class is not necessarily concor-
dant with that of the entire capitalist class. When one tracks what happens to the price
ECONOMIC GEOGRAPHY
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of sugar, for example, as it moves from the cane elds of the Dominican Republic
to the supermarkets of the United States, one sees that the actual producers receive
less than 5 percent of the nal retail price. Most of the prot is taken by merchant
intermediaries.
The third issue is less easy to identify even as it seems to be assuming more and more
importance in the way capital circulation works. When capital primarily produced long-
lasting things, it was always in danger of satiating markets. I am still using the silver-
plated forks made in Shefeld that graced my grandmothers table. The lifetime of
consumer products has therefore to be shortened if capital is to survive. It does so to some
degree by resort to fashion, by planned obsolescence and making things that break down
easily, by continuous innovation (from iPods to iPads), and so on. This pressure has,
in recent years, produced a shift from the production of things to the production of
spectaclea shift that Guy Debord (1967/2000) presciently understood when he wrote
The Society of the Spectacle in 1967. Just consider what goes into the production of
the Olympic Games, not only the new physical infrastructures, but the vast employment
and resources entailed in opening ceremonies (remember the spectacle of Barcelona
and then the astonishing spectacle of Beijing). More and more capital therefore circulates
in the production of spectacular and ephemeral events with all sorts of consequences
for consumerism as well as for urban life. But productions of this sort are invariably
debt nanced and, as the history of the Olympics clearly demonstrates, nding the money
to pay off the debts afterward is often a problem. It is perhaps no accident that Greece,
which staged the Olympics in 2004, is nowin a leading crisis role because of its sovereign
debt.
Capital Circulation as a Whole
When the circulation of capital is viewed as a whole, one sees a whole series
of potential blockage points to it, any one of which has the potential to be the source
of a crisis. There is no single theory of crisis formation in this system, and it is the task
of historical materialist analysis to wrestle with the question of where the primary
blockage points are this time around and how capitalism may confront such limits and
convert them into barriers that can be transcended or circumvented. It is also the case,
however, that solutions at one point have implications for what happens elsewhere within
the circulation of capital. The labor problem that was central in the late 1960s in the core
regions could not be overcome except by opening up the coercive laws of competition
across a global space, and doing so required a revolution in the architecture of the worlds
nancial system. These solutions then produced constrictions elsewhere in effective
demand and in excessive power concentrated primarily with the nanciers, but also with
the merchants and rentiers. Furthermore, a low-wagelow-prot economy led to the
search for other forms of prot making in the buying and selling of assets. And asset
markets always have a Ponzi character (with no Bernie Madoff at the top): invest in
property and prices go up, which encourages further investments ad innitum until the
bubble pops.
The fundamental theoretical conclusion is this: capital never solves its crisis tenden-
cies; it merely moves them around. This is what the theory tells us, and this is what the
history of the past 40 years has been about. No one now claims that the excessive power
of labor is the source of the current problem, as it was in the 1970s. If anything, the
problem is that capital, in general, and nance capital, in particular, are far too powerful
and that the state cannot step in to rebalance affairs because it is captive, politically and
economically, to the nancial, rentier, producer, and commercial interest of the capitalist
class.
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Geographic Disruptions
Capital moves its crisis tendencies around geographically as well as systemically. How
it has done so over the past 40 years ought, surely, to be the focus of collective work in
economic geography. Here I pause a moment to applaud Peter Dickens (1986/2010)
magnicent achievement in the six updated editions of Global Shift. Dicken has, in these
volumes, compiled an astonishingly rich record of the geographic transformations that
have occurred in capitalist activity over the past quarter century. They form the best raw
materials we have for analyzing the role of uneven geographic development in both
perpetuating and transforming capitalism as a socioeconomic system.
Unfortunately, as I think Dicken would be the rst to agree, the current speed of spatial
adaptation is outpacing the snapshots. If we could map the continuous movement of
capital across the globe, the picture would probably look something like the satellite
images taken from outer space of the weather systems swirling across planet Earth. The
motion appears chaotic and unpredictable. But careful observation and analysis have
revealed patterns within the swirling chaos. Long-term changes in climatic signals are
also detectable. Climatologists and meteorologists can grasp the underlying uid dynamic
forces, heat budgets, and the like that impel much of the movement even as they turn to
chaos theory to frame their thinking on the details. They can even gain some traction,
although never perfect, over forecasting weather patterns short term and predicting
longer-term shifts, such as global warming. They have certainly arrived at a point where
retrospective understandings of what happened are pretty convincing.
The economic geographer is faced with analogous problems of nding within the
swirling chaos of social, economic, and political activity some distinctive patterns and
longer-term signals of change. A synoptic map of economic activity in the 1980s, for
example, would have depicted a series of highs building around the Pacic rim of much
of East and Southeast Asia (from Japan to Hong Kong), as well as down the West Coast
of the United States. It would have depicted most of Latin America stagnant but prone to
violent political and economic upheavals and a series of deep depressions passing across
the OhioValley and Pennsylvania, through the British industrial heartlands, and across the
Ruhr Valley of Germany. But the sun would be shining on Bavaria, Tuscany, Silicon
Valley, and all manner of smaller industrial production districts. In the misty dawn of an
East Asian renaissance, the heat island of China would just be visible. The big difference
to the study of weather and climate, however, is that whereas the laws of uid dynamics
can be presumed to remain constant over time, the laws of capital accumulation
are constantly evolving as human behaviors and institutions adapt reexively to new
circumstances.
The art and science of geographic analysis and forecasting of economic evolution
remain lamentably underdeveloped relative to, say, the effort put into understanding the
worlds weather and climate. The social sciences often collectively turn their back on this
problem. By and large (and there are, of course, always exceptions), anthropologists
prefer to view the messiness of the global as intractable to justify an exclusive focus on
local ethnographies, most sociologists (with the exception of those working in the world
systems tradition or those inspired by Giovanni Arrighis 1994 outstanding work) focus
on something called community or conne their studies within state borders, and econo-
mists typically place economic activity on the head of a pin. The complex geography of
it all, from local to global, is for the most part either ignored or reduced to some banal
version of physical geographic determinism (of the sort peddled recently by Jared
Diamond 1997 in Guns, Germs and Steel or, on an occasional opportunistic basis, by the
economist Jeffrey Sachs, with Gallup and Mellinger 1999). Even worse, international
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relations experts like Robert Kaplan (2009) revive dangerous (because sometimes self-
fullling) theories of Darwinian struggles between states for geopolitical domination in a
context of old-style geographic determinism. Paul Krugman (1991) at least tried to bring
an understanding of economic dynamics into his version of the new economic geography
and, in so doing, persuaded regular economists, who seem rmly to believe that if
something cannot be mathematically modeled it does not exist, that geographic syner-
gisms and agglomeration economies were actually important and capable of being
modeled. But, as the most recent World Bank Development Report on economic geog-
raphy (2009) showed, this has now been converted into formulaic neoliberal dogma.
Urbanization, in general, and land and resource uses, in particular, should be left to
supposedly free-market forces, they say, ignoring entirely the impact on social inequal-
ity or environmental degradation while neglecting to notice that capitalist crises have
frequently arisen out of unregulated speculative booms in real estate and urban develop-
ment (Harvey 2010a).
The result of all this is a doubly serious lacuna. We do not well understand what
happenswhere, why, and how events here affect conditions elsewhere. Nor can we
easily assess how dependent the reproduction of capital is upon the seemingly chaotic
forms of uneven geographic development. As a result, we have even less idea what to do
about it all in the midst of a crisis, even though we are collectively in a potential position
to change the laws of social reproduction and capital accumulation through conscious
action. During the 1980s, regional economists (such as Bennett Harrison) were actively
collaborating with many economic geographers in a collective effort to understand these
dynamics. It was from this ferment that Peter Dickens (1986/2010) work rst emerged
(Bluestone and Harrison 1988; Scott and Storper 1992; Harrison 1997). But, sadly, that
collective effort faded in the 1990s. Yet another depressing account of the impacts of an
increasingly inevitable deindustrialization seemed redundant. Even worse were puff-jobs
of the Richard Florida sort for a new economic geography based on the supposedly
rising cultural or knowledge-based industries. As research funding drifted to support
works of the latter sort, catastrophes throughout the urban system elsewhere simply
became grist for cultural products, such as The Wire. It is high time for the earlier
collective effort to be revived.
So what, then, is the geographic story of this crisis? We know that the crisis for
capital (as opposed to that for many homeowners and workers who had long
been distressed) began in the housing markets of southern California, Arizona,
Nevada, and Florida in 2007. This was the primary epicenter of the crisis (Bardhan
and Walker 2010). But why there and why then? The crisis then quickly spread through
the mortgage nance companies (like Countrywide in the United States) to the major
nancial institutions (like Bear Stearns) that still held a goodly amount of what became
toxic securitized mortgage debt. It then spread to other institutions that either held
the debt (like Fannie Mae and Freddie Mac), invested in the debt (everyone that invested
in collateralized debt obligations), or insured the debt or other nancial transactions
(like AIG). The parallel crash of Northern Rock in Britain indicated that there
were problems lurking in property markets elsewhere (as ultimately became apparent in
Spain and Ireland in particular). The nancial institutions located in New York and
London then became the epicenter of the crisis. It largely fell to the U.S. and British
governments, along with the U.S. Federal Reserve and the Bank of England, to stabilize
the situation.
The crash of Lehman Brothers in September 2008 sent the contagion global (was this
a deliberate move to transform the crisis from the local to global scale, a cave-in to
populist pressure to punish the sinners on Wall Street, or just a huge mistake?). The crisis
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was probably bound to go global anyway, given the interdependence within global
nancial networks. Banks elsewhere (e.g., in Germany and France) had bought into the
toxic debt, as had municipal and state governments and pension funds from Norway to
Florida. All of themfelt the distress. No matter where they were located, the holders of the
toxic debt were in difculty. Canadian and East Asian nancial institutions, on the other
hand, remained unaffected because they had little exposure.
But after the crash of Lehman Brothers, the whole global credit system (in which
interbank lending is crucial) froze, which formed the immediate primary blockage to the
continuity of ows of capital. Perfectly good enterprises suddenly found themselves in
difculty because they could not roll over their debt. Many rms rescued themselves by
laying off workers by the droves and intensifying wage repression. Debt-fueled consum-
erism and effective demand were halted, consumer condence fell off a cliff, and
unemployment surged although at radically different rates both within and between
countries: compare, for example, Minnesota and Ohio in the United States or Spain (19
percent) and the Netherlands (4 percent) in Europe as of February 2010 (Saltmarsh,
2010). The major export economies then took a hit as world trade contracted by one-third
in early 2009 (Norris, 2009), sparking huge difculties for businesses and emphatic
surges in unemployment in East Asia as well as in Germany, Brazil, and elsewhere. An
earlier boom in the prices of raw materials (oil in particular), which turned out to be
largely speculative, likewise collapsed in the face of declining growth. Producers of
raw materials were in trouble. The global economy was clearly headed toward a huge
depression, unless governments acted.
The Search for Solutions
What then followed depended crucially upon the imperatives, ability, and willingness
of different governments to use their powers within the state-nance nexus (either
individually or collectively) to confront the crisis. Given the threat of a depression
on the scale of the 1930s, there was a growing clamor to resurrect Keynesian-
style solutions. The immediate response after the debacle of Lehman Brothers was to
rescue, stabilize, and eventually reform the nancial architecture (both locally and
globally) and to construct a debt-nanced stimulus to deal with the collapse of effective
demand. The United States could not, however, act alone, so the G8 was replaced by the
G20, a coalition of leading states that accounted for most of the worlds market-based
economic activity. The search for a systemic exit from the crisis was hindered, however,
by a number of overwhelming difculties, not the least of which were the different
political ideologies, needs, and congurations of class forces and special interests within
the G20 states.
The United States, for example, was already deeply in debt to the rest of the world.
3
While the safe haven of dollar-denominated assets would likely sustain inows of
dollars into the foreseeable future, it was nevertheless dangerous for the United States to
attempt a stimulus on a large-enough scale to work internally, let alone entrain the rest of
the world back onto a compound growth path (as it had done after 1945). In the United
States, there were also strong political objections from a Republican Party that pandered
to the hysterical populist right-wing fears of excessive government intervention and saw
opposing further decit nancing as a means to prevent any recovery that might redound
to President Barack Obamas and the Democratic Partys electoral advantage. Whatever
stimulus could be had was also pushed, for ideological reasons, toward tax cuts to a class
3
The following argument, now updated, was rst laid out in early 2009 (Harvey 2009a).
ECONOMIC GEOGRAPHY
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that might not spend as opposed to needy population groups that would. Finally, the best
forms of stimulus lie in the provision of social and physical infrastructures that would
raise productivity and improve efciency within the national space. But the United States
had no clear projects of either sort in mind. The refusal of the Republicans to support aid
for state and local nances indicated a determination to cut social services, rather than to
expand them (a determination that was partly offset by the provision of short-term
stimulus funds to education). And the physical infrastructures had to be shovel ready,
which meant they were, for the most part, a continuation of investments in urban and
suburban development that had led to the crisis, rather than an innovative move toward a
national urban development policy that would help the country exit the crisis in the long
term (such as by saving on energy, rather than expanding the demand for it). The only
innovation was weak support for alternative energy sources. Finally, many key aspects of
a full Keynesian program were kept off the table, chief of which was the greater
empowerment of labor as a way to reverse chronic income inequalities. Mitigating the
huge social inequalities that had arisen in the 1920s was viewed in the 1930s as a way to
stimulate effective demand. The neoliberal politics of the 1980s and 1990s had produced
inequalities in wealth and income not seen since the 1920s and needed a similar reversal.
But the imbalance of power between capital and labor could not be addressed for fear of
being dubbed and damned as socialist or communist by a powerful right-wing
propaganda machine. Dominant class forces (the Party of Wall Street) with a strong
inuence within both political parties refused point-blank to accept a state-led recalibra-
tion of the relative powers of capital and labor. The power imbalance that lay at the root
of the crisis was to remain untouched.
After an early phase of recovery in which green shoots were spied all over the
economic landscape, the U.S. economy lapsed back into slow growth and high unem-
ployment in the spring of 2010, with little prospect of any dramatic revival. Corporate
prots and the stock market began to revive, but under conditions of lower turnover and
savage cost cutting, particularly with respect to wages. What revival there was came at the
expense of increasing, rather than alleviating, wage repression and had negative effects on
consumer condence and internal effective demand (the wage concession taken from the
auto workers in the GM bailout is a prime example). This was not a path toward
sustainable growth. If it pointed anywhere, it was toward deation. Revival of a more
robust sort would have to come from elsewhere.
Possessed of huge surpluses and an untroubled banking system easily manipulated by
the central government, China had the means to act in a more full-blooded Keynesian way.
The crash of export-oriented industries and the threat of mass unemployment and unrest
in early 2009 forced the governments hand. The stimulus package that was devised had
two forks. Close to $600 billion were put largely into infrastructural projectshighway
building on a scale that dwarfs that of the U.S. interstate highway system of the 1960s,
new airports, vast water projects, high-speed rail lines, and even whole new cities
(Richburg 2010). Second, the central government forced the banks to loosen credit for
local state and private projects.
The big question is whether these investments will increase national productivity.
Given that the spatial integration of the Chinese economy is far from complete, there are
reasons to believe it will do so. But whether the debts can be paid off when due or whether
China will later be the epicenter of yet another global capitalist crisis is an open question.
One negative effect has been a renewal of speculation in housing markets with a doubling
of property prices in Shanghai in 2009. There are other troubling signs of overcapacity in
manufacturing and infrastructures, and many banks are rumored to be overextended. But
the Chinese have dealt with nonperforming loans before, as high as 40 percent of assets
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in the late 1990s. They then used their foreign exchange reserves to erase nonperforming
loans. Unlike the TARP program in the United States, which was passed by a reluctant
Congress and that promoted much public resentment, the Chinese can take immediate
action to recapitalize their banking system.
The Chinese also embraced other aspects of a Keynesian program: the stimulation of
the internal market by increasing the empowerment of labor and addressing social
inequality. The central government suddenly appeared willing to tolerate or unable to
resist spontaneous strikes (not organized by the ofcial unions controlled by the Com-
munist Party) at major producers such as Toyota, Honda, and FoxConn. These strikes
resulted in signicant wage increases (in the range of 20 percent or 30 percent or so). The
politics of wage repression was being reversed. The government increased investments in
health care and social services and pushed hard on the development of environmental
technologies to the point where China is now a global leader. The fear of being called a
socialist or a communist that bedevils political action in the United States obviously
sounds comical to the Chinese. But there are dangerous signs of ination and serious
pressures (both internal and external) to revalue the remnimbi. As wages rise, so capital
is moving offshore to lower-wage locations in Bangladesh, Cambodia, and other parts of
Southeast Asia.
China has emerged fromthe crisis faster and more successfully than anywhere else with
growth rates quickly reviving toward 8 percent or even 10 percent (Arora and Vamvakidis
2010). The increase in internal effective demand has not only worked within China but has
entrained other economies, particularly producers of raw materials. Australia has our-
ished, for example. General Motors makes more cars and prots in China than anywhere
else. China had stimulated a partial revival in international trade and of demand for its
own export goods (trade with Latin America has increased tenfold since 2000, for
example). The export-oriented economies in general, particularly throughout much of
East and Southeast Asia, along with Latin America, have revived faster than others.
Chinas investments in U.S. debt have helped sustain an effective demand for its low-cost
products there. The effect has been to alter the balance of economic power, to produce a
hegemonic shift within the global economy.
The revival of the export-oriented economies has extended to Germany. But this revival
brings us to the problemof the fractious responses to the crisis across the European Union.
After an initial burst of stimulus politics, Germany took the lead, dragging a reluctant
France along with it, in turning the Eurozone to a monetary policy of decit reduction
through draconian reductions in public expenditures. This policy is now echoed by the
new Conservative-led coalition in Britain. This politics coincided with the sudden dete-
rioration in public nances elsewhere. The so-called PIGS (Portugal, Ireland, Greece, and
Spain) found themselves in dire nancial straights, in part through their own misman-
agement but, even more signicantly, because their economies were particularly vulner-
able to the credit collapse and the sudden decline in property markets and tourism.
Lacking the industrial base of countries like Germany, they could not respond adequately
to the scal crisis that threatened them.
The big question then is this: has the nancial crisis been stabilized at the expense of
creating a scal crisis of the capitalist states (with California looking more and more like
one of the biggest failed states in the world)? Rumors ew as to the state of Britains
nances, and the fact that many other weaker states, such as Latvia and Hungary, were
already on the ropes suggested serious underlying problems in state nances that could
even focus, at some point, on the sustainability of the U.S. decit. It was in this climate
that much of the capitalist world shifted its focus to decit reductions rather than to decit
stimulus nancing of the Keynesian sort. Once the crisis shifted from being a nancial
ECONOMIC GEOGRAPHY
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crisis in the banking sector to being a scal crisis of the state, then the political
opportunity immediately arose to take another savage cut at what remained of the welfare
state. The banks had been saved, and it was, in classic neoliberal fashion, evidently time
to sock it to the people by draconian austerity, rather than stimulus measures. As a result,
the political fault lines shifted in many places back toward the more classic forms of class
struggle as unions (particularly in the public sector) and affected populations such as
students and retirees from California to Greece fought back against the austerity. Why
should the people pay for the errors and corruptions of a capitalist class that continued to
consolidate its wealth and power?
But there were and are abundant variations both in impacts and responses. Lebanon was
so busy reconstructing from the Israeli bombardment of 2006 that it scarcely noticed the
onset of the global nancial crisis (although it had political crises of its own galore).
Brazil quickly recovered, partly on the back of the China trade but also because of the
surge of internal demand based on Lulas redistributive policies toward the poor (the
bolsa familia). India was relatively insulated from the crisis, since its main export of
services was less affected and its nancial system relatively sound. Certain states, like
Kerala, suffered from the loss of remittances from the Gulf states, but elsewhere a
gathering boom, particularly in construction, underpinned high rates of growth. The
number of Indian billionaires doubled in 2009 alone. Haiti, on the other hand, suffered a
serious loss of remittances from the United States and then collapsed entirely as a result
of the 2010 earthquake and its appalling aftermath.
The shifting of the crisis around the world in both its form and in its intensity created
a dynamic of cascading geographic effects to the point where nothing could easily be
predicted. From an epicenter in the U.S. Southwest and Florida to the collapse of Dubai
World to the Greek sovereign debt crisis, no one could easily predict or anticipate where
the next aftershock would hit and how severe the shock or what the political response
would be. By the same token, the rapid recovery of China, India, and Brazil has been
surprising. The geography of it all can, with a lot of effort, be tracked but not easily
predicted. Yet the vulnerabilities within the global system are clear. A collapse of the
property market and surging ination in China, a fall in oil prices that will hit Russia hard,
along with Venezuela and the Gulf states; a surge of political protests from Greece to
Spain, France, Britain, and California; or simply a sudden further collapse of consumer
condence in the United States or of foreign investors in the viability of U.S. debt will
likely send the whole system into either a downward tailspin or a lurch into a different
conguration of global power that sees one half the world (almost certainly Asia) grow
rapidly at the expense of the other half.
The Left Alternative
Many have long dreamed that an alternative to capitalist (ir)rationality can be rationally
arrived at through the mobilization of human passions in the collective search for a better
life for all. These alternativeshistorically called socialism or communismhave, in
various times and places, been tried. In former times, such as the 1930s, the vision of one
or the other of them provided a beacon of hope. The practices that owed from this source
arguably saved capitalism in the post-World War II period. But in recent times, such
alternatives have both lost their luster, not only because of the failure of historical
experiments with communism to make good on their promises and the penchant for
communist regimes to cover over their mistakes by repression, but because of supposedly
awed presuppositions concerning human nature and the potential perfectibility of
human institutions. Political protest of a left persuasion has been spotty but in some
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instances vociferous. The demand for an alternative can be heard, raising the question of
how best it can be articulated (Harvey 2010b).
The difference between socialism and communism is worth noting. Socialism aims
to manage and regulate capitalism democratically in ways that calm its excesses
and redistribute its benets for the common good. It is about spreading the wealth around
through progressive taxation arrangements, while basic needssuch as education, health
care, and even housingare socially provided out of reach of market forces.
Many of the key achievements of redistributive socialism in the period after 1945, not
only in Europe but beyond, have become so socially embedded as to be deeply resistant
to neoliberal assault. Even in the United States, social security and Medicare are
extremely popular programs that right-wing forces nd hard to dislodge. The Thatcherites
in Britain could not touch national health care except at the margins. Social provision in
Scandinavia and most of Western Europe still seems to be an unshakable bedrock of the
social order.
Communism, on the other hand, seeks to displace capitalism by creating an entirely
different mode of both production and distribution of goods and services. In the history
of actually existing communism, social control over production, exchange, and distribu-
tion meant state control and systematic state planning. In the long run, this system proved
to be unsuccessful, although it is interesting to note that its conversion in China (and its
earlier adoption in places like Singapore) has proved far more successful than the pure
neoliberal model in generating capitalist growth. Contemporary attempts to revive the
communist hypothesis typically abjure state control and look to other forms of collective
social organization to displace market forces and capital accumulation as the bases for
organizing production and distribution (Badiou 2010). Horizontally networked, as
opposed to hierarchically commanded, systems of coordination between autonomously
organized and self-governing collectives of producers and consumers are envisaged
as lying at the core of a new form of communism. Contemporary technologies
of communication make such a system seem feasible (Hart 2000). All manner of small-
scale experiments around the world can be found in which such economic and political
forms are being constructed. In this, there is a possible convergence of some sort between
the Marxist and anarchist traditions (although hindered, as usual, by ideological purism)
that harks back to the broadly collaborative situation between them in the 1860s in
Europe.
It could be that 2009 marked the beginning of a prolonged shake-out in which the
question of grand and far-reaching alternatives to capitalism will step by step bubble up
to the surface in one part of the world or another. The longer the uncertainty and the
misery is prolonged, the more the legitimacy of the existing way of doing business will be
questioned and the more the demand to build something different will escalate. Radical
as opposed to Band-Aid reforms to patch up the nancial system may seem more
necessary. In the aggregate, however, there is no sign of a resolute and sufciently unied
anticapitalist movement to challenge adequately the reproduction of the capitalist class
and the perpetuation of its power. Neither is there any obvious way to attack the bastions
of privilege for capitalist elites or to curb their inordinate money power, military might,
and ideological and repressive power.
Lenins famous question what is to be done? cannot be answered without some sense
of who it is may do it where.
4
Unfortunately, a global anticapitalist movement is unlikely
to emerge without some animating vision of what is to be done and why. A double
4
What follows is based on Harvey (2010a, chap. 8).
ECONOMIC GEOGRAPHY
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blockage exists: the lack of an alternative vision prevents the formation of an oppositional
movement, while the absence of such a movement precludes the articulation of an
alternative. How, then, can this blockage be circumvented or transcended?
The central problem to be addressed is clear enough: compound growth forever is not
possible. The troubles that have beset the world these past 30 years signal that a limit is
looming to continuous capital accumulation that cannot be transcended except by creating
ctions that cannot last. Add to this situation the fact that so many people in the world live
in conditions of abject poverty, that environmental degradations are spiraling out of
control, and that human dignities are everywhere being offended, even as the rich are
piling up more wealth at the expense of everyone else. Meanwhile, the levers of political,
institutional, judicial, military, and media power are under such tight political control
as to be incapable of doing much more than perpetuating the status quo and frustrating
discontent.
A revolutionary politics that can grasp the nettle of endless compound capital accu-
mulation and eventually shut down the class power that propels it as the prime motor of
human history requires a sophisticated understanding of how social change occurs. The
failings of past endeavors to build a lasting socialism or communism have to be avoided.
But the absolute necessity for a coherent anticapitalist revolutionary movement must also
be recognized. The fundamental aim of that movement has to be to assume social
command over both the production and distribution of surpluses and to abolish class
power.
So what would be an explicit revolutionary theory suited to our times? Marxs account
of how capitalism arose out of feudalism embodies a corevolutionary theory (Harvey
2010a, chap. 5). Social change arises, Marx argued, through the dialectical unfolding of
relations between seven moments within the body politic of capitalism:
1. technological and organizational forms of production, exchange, and consumption;
2. relationship to nature;
3. social relationships between people;
4. mental conceptions of the world embracing knowledges and cultural understandings
and beliefs;
5. labor processes and the production of specic goods, geographies, services, or affects
6. institutional, legal, and governmental arrangements; and
7. the conduct of daily life and the activities of social reproduction.
Each one of these moments is internally dynamic, marked by tensions and contradic-
tions (just think of our mental conceptions of the world), but all of them are codependent
and coevolve in relation to each other within a totality, understood as a Lefebvrian
ensemble or Deleuzian assemblage of moments. The transition to capitalism entailed
a mutually supporting movement across all seven moments within the totality. New
technologies could not be identied and applied without new mental conceptions of the
world (including that of the relation to nature and of social relations).
Social theorists have the habit of taking just one of these moments and viewing it as the
silver bullet that causes all change. We have technological determinists (Tom Fried-
man), environmental determinists (Jared Diamond), daily life determinists (Paul
Hawken), labor process determinists (the autonomistas), class struggle determinists
(most Marxist political parties), institutionalists, and so on (Held 1995; Diamond 1997;
Holloway 2005; Friedman 2006; Hawken 2007). They are all wrong. It is the dialectical
motion across all these moments that really counts, even as there is uneven development
in that motion.
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When capitalism itself undergoes one of its phases of renewal, it does so precisely by
coevolving all moments, obviously not without tensions, struggles, ghts, and contradic-
tions. But consider how these seven moments were congured around 1970 before the
neoliberal surge and consider how they look now, and you will see they have all changed
in ways that redene the operative characteristics of capitalism as a whole.
An anticapitalist political movement can and does start anywhere (in labor processes,
around mental conceptions, in relation to nature, in class or other social relations, in the
design of revolutionary technologies and organizational forms, out of daily life, or
through attempts to reform institutional and administrative structures including the
reconguration of state powers). The trick is to keep the political movement moving from
one moment to another in mutually reinforcing ways. This was how capitalism arose out
of feudalism, and this is how something radically different called communism, socialism,
or whatever can arise out of capitalism. Previous attempts to create a communist or
socialist alternative fatally failed to keep the dialectic between the different moments in
motion and failed to embrace the unpredictabilities and uncertainties in the dialectical
movement between them. Capitalism has survived precisely by keeping the dialectical
movement between the moments going and constructively embracing the inevitable
tensions, including crises, that result.
There have to be, however, some loosely agreed-on common objectives in any transi-
tional movement. Some general guiding norms can be set down. These norms may include
respect for nature, radical egalitarianism in social relations, institutional arrangements
based on some sense of common interests and common property, democratic adminis-
trative procedures (as opposed to the monetized shams that now exist), labor processes
that are organized by the direct producers, daily life as the free exploration of new kinds
of social relations and living arrangements, mental conceptions that focus on self-
realization in service to others, and technological and organizational innovations that are
oriented to the pursuit of the common good rather than to supporting militarized power,
surveillance, and corporate greed. These could be the corevolutionary points around
which social action could converge and rotate.
Of course, this idea is utopian! But so what! We cannot afford not to be. Marx, while
not in any way inclined to embrace philosophical idealism, held that ideas are a material
force in history. The challenge to academics is to work on mental conceptions and to gain
a better understanding of the current potentialities in the world, in alliance with those who
are able and willing to work across the other moments. The deeply entrenched mental
conceptions that are associated with neoliberal theories and the neoliberalization and
corporatization of the universities and the media have played more than a trivial role in the
production of the present crisis. They have to be rebutted and dismantled.
Communists, Marx and Engels averred in The Communist Manifesto, have no political
party (Harvey 2008). They simply constitute themselves at all times and in all places as
those who understand the limits, failings, and destructive tendencies of the capitalist
order, as well as the innumerable ideological masks and false legitimations that capitalists
and their apologists (particularly in the media) produce to perpetuate their singular class
power. Communists are all those who work incessantly to produce a different future to that
which capitalism portends. While traditional institutionalized communism is as good as
dead and buried, there are, by this denition, millions of de facto communists active
among us, willing to act upon their understandings, ready to pursue anticapitalist impera-
tives creatively. If, as the alternative globalization movement of the late 1990s declared,
another world is possible, then why not also say another communism is possible? The
current circumstances of capitalist development demand something of this sort if funda-
mental change is to be achieved.
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