Cities in Global Capitalism

Ugo Rossi

• Publisher: Polity
• Year: 2017
• Print ISBN: 9780745689678, 9780745689661
• eBook ISBN: 9780745689708
• Edition: 1
• Topic: Social Sciences
• Subtopic: Urban Sociology
• Index: Social Sciences

In what ways are cities central to the evolution of contemporary global capitalism? And in what ways is global capitalism forged by the urban experience? This book provides a response to these questions, exploring the multifaceted dimensions of the city-capitalism nexus.

Drawing on a wide range of conceptual approaches, including political economy, neo-institutionalism and radical political theory, this insightful book examines the complex relationships between contemporary capitalist cities and key forces of our times, such as globalization and neoliberalism. Taking a truly global perspective, Ugo Rossi offers a comparative analysis of the ways in which urban economies and societies reflect and at the same time act as engines of global capitalism.

Ultimately, this book shows how over the past three decades capitalism has shifted a gear – no longer merely incorporating key aspects of society into its system, but encompassing everything, including life itself – and illustrates how cities play a central role within this life-oriented construction of global capitalism.

1
Emergences

Cities in Capitalism: A History of the Present

Despite having been marginally included in standard economic analysis, it is widely recognized now that urbanism (i.e., the way of life of city dwellers) and urbanization (i.e., the expansion of urban environments) are essential components of the capitalist process. This chapter focuses on the long-term interdependence between cities and capitalism; a link that has become increasingly inextricable in present-day societies. Certainly, capitalism could not exist without cities, as over the centuries its rise, consolidation and evolution have been intimately associated with the functioning of urban societies, their distinctive characteristics and changing trajectories. Contrary to the conventional wisdom that has long viewed cities merely as manufacturing centres and reservoirs of the workforce, it is now widely acknowledged that cities have provided a far more decisive contribution to capitalism, particularly to its pre-industrial stages as well as to the current globalization era.

In the era of globalization the importance of cities is reasserted in different ways, as the second chapter of this book will show in greater detail. Globalization, particularly in the multicentric forms characterized by the relentless expansion of urbanization and the coexistence of different hegemonies across the planet, has led historical emergences to re-surface with unprecedented intensity. In particular, this chapter identifies three historical ‘emergences’: financial power, entrepreneurialism and cognitive capital. These are the key forces – this book maintains – that have been brought to the fore within the contemporary round of capitalist globalization. Capitalism today is simultaneously based on the multiplication of financial activities, on the entrepreneurialization of society and on the incorporation of knowledge and affects into the circuit of production. This combination of finance, entrepreneurialism and knowledge is at the heart of the leading role played by cities in today's capitalist world: cities' relationship with finance is particularly epitomized by the prominence of real-estate and mortgage sectors; cities' entrepreneurialism is expressed in the form of entrepreneurial governance, but also of wider entrepreneurialization of the self within advanced liberal societies; and, finally, in an advanced era of knowledge-based capitalism, characterized by the adoption of information and communication devices based on social interaction (the so-called Web 2.0), cities become central sites of knowledge creation. This centrality is due in large part to the intensity of socio-affective relations which exceed the boundaries of the institutions formally dedicated to the process of innovation, such as a firm's research and development division.

This chapter will look at the ascendancy of these forces, with the purpose of interrogating the current urban condition in its intimate association with global capitalism. In doing so, the chapter will show how the present age of neoliberal globalization has widened the reach of these three long-standing forces. The chapter is divided into three sections. The first section will look at how the phenomenon of financialization, whose roots date back to proto-capitalist European cities, has expanded socially, permeating every aspect of social life and, ultimately, life itself. The second section will show how urban entrepreneurialism has capitalized on long-standing socio-cultural features of urban environments, enabling cities to engage with the local–global dialectic in the early stages of contemporary globalization and a larger set of socio-spatial relations in the more recent context of multicentric globalization. The third section will discuss how in contemporary knowledge-based economies the cognitive capital that is historically associated with the succession of capitalism's socio-technical paradigms exceeds the confines of the capitalist firm and other formalized economies entities, becoming a ubiquitous social dynamic rooted in a variety of urban environments. Finally, the concluding section of the chapter will further clarify the use of the notion of ‘emergences’.

In short, this chapter is not intended to provide a history of the capitalist city in the conventional sense, but should be understood as a ‘history of the present’ in the Foucauldian sense, whose purpose is to prepare the ground for the deeper exploration of ‘cities in global capitalism’ that will be offered in the subsequent chapters of the book.

Financial power

While the appearance of the urban phenomenon precedes that of capitalism, as urban forms of coexistence have marked the history of mankind since the time of the ancient Greek polis, capitalism cannot exist without cities. This mutual relation of dependence has long-standing roots. As Belgian historian Henri Pirenne first contended, the formation of capitalism was originally associated with the ascent of cities in Western Europe and their entrepreneurial classes in the Middle Ages. In particular, Pirenne thought that the essential features of capitalism – such as individual enterprise, credit, commercial profits, speculation, etc. – could already be found from the twelfth century onwards in the Italian city-republics of Florence, Genoa and Venice, as well as in other economically leading European cities, particularly those of the Low Countries, such as Ghent and Bruges in today's Flanders (Pirenne, 1956).

In subsequent decades, Pirenne's long-term perspective was revived by scholars – particularly interdisciplinary historians and sociologists – embracing the so-called longue durée approach to the study of human societies: first, the exponents of the French Annales school of social and economic history and, in more recent times, the proponents of world-systems analysis in the USA. Amongst the former, Fernand Braudel systematized Pirenne's thesis, arguing that capitalist forms of accumulation started in thirteenth-century Italy with the rise of city-states. In putting forward this thesis, Braudel has been the first scholar to introduce the idea that capitalism is not just a mode of production, as the conventional Marxists had hitherto maintained. Rather, capitalism has to be understood as a mode of rule and accumulation, most notably as a monopoly power over market forces and as a historically evolving economic process based on the realization of profit and the accumulation of wealth. In his view, during the modern age cities played a central role in the formation of market economies and related forms of civilization across the Mediterranean (Braudel, 1983). This view has exerted strong influence over the contemporary understanding of global or world cities. In particular, drawing inspiration from Braudel, geographer Peter Taylor – a leading proponent of world-city research in the last two decades – has argued that, as concentrations of business services, contemporary world cities are crucial to the reproduction of capitalist monopoly powers based on the generation of knowledge and expertise necessary for the functioning of the world economy (Taylor, 2000). In a previous writing, reflecting on London's renaissance since the late 1980s as a global financial centre within a national context marked by the economic decline of the United Kingdom, Taylor saw the ascendancy of world cities in the contemporary era of globalization as another chapter in the long-term ‘cities vs states’ rivalry. In the modern age, Taylor noted, the rise of territorial states since the late sixteenth century has occurred in response to the decline of Antwerp and Genoa, at that time the two leading trade and financial centres of the international economy, whose destiny became dependent on that of the Spanish Empire. However, the dominance of Amsterdam took shape under the protective umbrella of the newly established United Provinces (the independent ‘Dutch Republic’), which gave rise not only to the ‘Dutch golden age’ in economic terms, but also to the lasting pre-eminence gained by the sovereign nation-state after the peace of Westphalia in the mid-seventeenth century (Taylor, 1995). In the 1990s, the advent of the era of globalization, characterized by powerful world cities and apparently disempowered nation-states, has been widely perceived as a return to a pre-Westphalian era (see chapter 2).

An interpretation of the city–capitalism long-term relationship predicated on the idea of financial hegemonies is particularly due to the work of Giovanni Arrighi. Drawing on Pirenne and Braudel, and more directly inspired by the work on world-systems theory by Immanuel Wallerstein with whom he collaborated in the Fernand Braudel Research Centre in the USA, Arrighi further developed the idea that the rise of capitalism is not to be associated with that of nation-states, as the conventional wisdom has long held, but with that of city-states as condensations of powerful financial institutions. In his book, Arrighi identified ‘four systemic cycles of accumulation’: namely:

a Genoese cycle, from the fifteenth to the early seventeenth centuries; a Dutch cycle, from the late sixteenth century through most of the eighteenth century; a British cycle, from the latter half of the eighteenth century through the early twentieth century; and a US cycle, which began in the late nineteenth century and has continued into the current phase of financial expansion.

(Arrighi, 1994: 6)

According to Arrighi, each cycle of accumulation consists of the alternation of a phase of material expansion, when trade and production expand in search of new geographical routes and economic sectors, and a subsequent phase of financial reinvestment, which takes place when profitable opportunities in the trade and industrial sectors are shrinking. In particular, Arrighi believes that city-states have played a central role in the first two cycles of capital accumulation, before the advent of the nation-state and what is customarily known as the Industrial Revolution of the eighteenth and nineteenth centuries, when cities became manufacturing centres and reservoirs of the industrial proletariat.

While having already pointed to the 1980s as a phase of financialization following the crisis of over-accumulation in the previous decade, which affected Western capitalism and particularly the US-centred regime of accumulation, in subsequent writings Arrighi has confronted his interpretation of historical capitalism with David Harvey's conceptualization of post-Keynesian capitalism and the changing trajectories of capital accumulation after the economic crisis of the 1970s, particularly with his theses about the three circuits of capital, about capital's need for new spatio-temporal fixes, and with his more recent idea of accumulation by dispossession (Arrighi, 2004 and 2009). Harvey's theory of the three circuits of capital builds on the assumption that conditions of over-accumulation in the production and trade sectors (the primary circuit of capital) lead to flows of capital into the secondary circuit (real estate, physical infrastructure and the built environment) and the third circuit (research, higher education and development), mediated by the state (through large-scale real-estate projects and the increase of social expenditure) and financial institutions (through financial investment) (Harvey, 1978). In his theory of the secondary circuit of capital, David Harvey elaborated on an original formulation provided by Henri Lefebvre a few years earlier in his pathbreaking La Révolution Urbaine:

As the principal circuit – current industrial production and the movable property that results – begins to slow down, capital shifts to the second sector, real estate. It can even happen that real-estate speculation becomes the principal source for the formation of capital, that is, the realization of surplus value. As the percentage of overall surplus value formed and realized by industry begins to decline, the percentage created and realized by real-estate speculation and construction increases. The second circuit supplants the first, becomes essential.

(Lefebvre, 2003: 160)

In Harvey's view, over-accumulation crises are dealt with not only through switching flows of capital (from production and trade to the built environment and knowledge-intensive sectors) but also through new spatio-temporal fixes (originally defined only as ‘spatial fix’: Harvey, 1982), allowing better conditions for investment and profitability via a spatial and temporal deferral (Harvey, 2003).

Harvey's theory of over-accumulation has become largely dominant in Marxist-oriented human geography and urban studies: an uncontested orthodoxy, according to a sympathetic critic (Holgersen, 2015). This theory, originally formulated between the second half of the 1970s and the first half of the 1980s, has witnessed a revival in recent years, in the context of the global financial crisis that impacted capitalist economies in 2008, leading to the so-called ‘great contraction’: the first truly global crisis since the advent of globalization. Prior to the financial crash, the housing sector acted as a catalyst of an otherwise slow-growth capitalist economy, in the USA as well as in more peripheral and smaller, but also growing, economies such as the Baltic countries, Spain and Ireland. Since the early 2000s, shortly after the burst of the Internet bubble and the shock of the terrorist attacks in the USA, the continuation of capital accumulation has become increasingly dependent on a wave of financial speculation closely linked to the real-estate sector. The deregulation of the mortgage sector led the property sector to expand, becoming one of the main factors in the larger process of financialization that the world economy has witnessed in the last three decades, as well as a major source of household indebtedness (Marazzi, 2010). David Harvey and the scholars embracing his theoretical framework have repeatedly underlined the ‘urban roots’ of the recent global economic crisis, stressing the intimate link between cities and financialization in neoliberalized capitalist societies: the definition of ‘subprime cities’ (derived from the subprime mortgages whose default initially caused the financial crash in the USA) is particularly illustrative of the finance-city isomorphism in contemporary societies (Aalbers, 2012).

Financialization has therefore become a distinguishing trait of the contemporary stage of capitalist development in the USA and elsewhere in the world economy, particularly from the 1970s onwards after the end of the post-war golden age of capitalism and with the shift towards neoliberal globalization (Krippner, 2005). The financialization phenomenon can be observed from at least three different perspectives: first, as in Arrighi's work, as a regime of capital accumulation, sustained by the recurrent increase of profits derived from financial activities rather than from productive investment; second, as a mechanism underlying the fun...

Table of contents

• Cover
• Table of Contents
• Epigraph
• Series page
• Title page
• Copyright page
• Acknowledgements
• Introduction
• 1: Emergences
• 2: Extensions
• 3: Continuities
• 4: Diffusions
• 5: Variations
• Living in the Age of Ambivalence
• References
• Index
• End User License Agreement