The Enigma of Capital and the Crises of Capitalism

Author: David Harvey
Year: 2010 (Oxford University Press / Profile)
Source type: book
Raw file: raw/books/harvey-2010.md

Summary

Harvey's account of the 2008 financial crisis begins from the premise that "this book is about capital flow" — the circulation of capital that sustains daily life under capitalism. He narrates the subprime/foreclosure crisis as rooted in the built environment and property markets, and explains it through his theory of the "capital surplus absorption problem": capital must continuously find new profitable outlets, and when productive outlets are exhausted it flees into the built environment, asset inflation, and finance — with class power consolidated behind the "privatize profits, socialize risks" principle.

Key Claims

• Capital flow and systemic blindness: "Capital is the lifeblood that flows through the body politic"; the 2008 crisis exposed a mass failure to understand "the systemic character of capital flow" — the economists' confession that they "had lost sight of ... 'systemic risks.'"
• The crisis rooted in urban development and property: foreclosures spread from low-income Black/Hispanic neighborhoods (1998–2006, ~$71–93bn lost) to the white middle class in 2007; "there is ... nothing unusual about its rootedness in urban development and property markets." "Crises associated with problems in property markets tend to threaten ... banks directly ... because ... investments in the built environment are typically credit-based, high-risk and long in the making."
• Neoliberalism as a class project: "it refers to a class project that coalesced in the crisis of the 1970s," legitimizing "draconian policies designed to restore and consolidate capitalist class power"; "privatise profits and socialise risks; save the banks and put the screws on the people."
• The capital surplus absorption problem: "Capitalists are always producing surpluses in the form of profit" and "are then forced by competition to ... reinvest a part of that surplus in expansion"; the problem of absorbing surplus was "bridged" via debt, the credit-card industry, housing (buying houses "as rising value ATM machines"), and financial innovation/securitization — "Everyone had acted as if property prices could rise for a while."
• Finance as discipline and the cultural industries: investment in "cultural capital through sponsorship of museums and all manner of cultural activities" became "a favoured strategy for urban economic development" (when Lehman failed, MoMA lost a third of its sponsorship income); wage repression made the rich invest in "asset values."
• The political question: whether the crisis ends in a further consolidation of capitalist class power or in a different path "depends very much upon the balance of class forces" and on the emergence of an alternative political movement.

Connections

Concepts: Neoliberal Metropolis · Gentrification · Ideology · Capitalist Realism
Authors: David Harvey
Debates: (capitalism, urbanization & gentrification)
Related source notes: The Urban Process under Capitalism (Harvey 1981) · The Architecture of the City (Bismarck)

Direct Quotes

"This book is about capital flow. Capital is the lifeblood that flows through the body politic of all those societies we call capitalist."

"[T]here is ... nothing unusual about its rootedness in urban development and property markets."

"[N]eoliberalism ... refers to a class project that coalesced in the crisis of the 1970s ... legitimized draconian policies designed to restore and consolidate capitalist class power."

"[T]he policy was: privatise profits and socialise risks; save the banks and put the screws on the people."

Open Questions

• How do Harvey's circuits-of-capital and the "capital surplus absorption problem" explain both the iconic architecture "Bilbao effect" and the speculative financialization of the built environment?