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DEBATES AND DEVELOPMENTS

Real Estate, the City and Place: The Crisis Unfolds

ROGER KEIL

Introduction The world financial crisis of 2007–09 shook the global economic system at its foundations. As the crisis began to unfold, Michael Harloe presented a proposal to the Editors of IJURR to publish a series of essays on the effects of the current economic crisis on particular places.1 These short interventions were meant to discuss how the property markets, social relationships and the political situation have already begun to change in a particular city or region? At the time, in early 2009, Harloe was wondering ‘what we can understand about the first stages on the impact of the world crisis on urban and regional development’. He expected visibly uneven spatial/geographical incidence of the crisis — at the city, region, national level with concomitantly uneven effects on the class/gender/race dimensions of the crisis fallout. Thinking originally of the crisis as ‘a profound turning point, not (even just a rather serious) blip’, Harloe (and his colleagues Alan Harding and James Rees) put that hypothesis to the test in an essay on Manchester that will be published in our December issue.

Initially, we had asked the following questions: How has the crisis had an effect on certain communities and how does that tell us new things about the city and regions? Who is most affected? How are they affected? What are the new fault lines in urban societies that show immediately?

Some commentators, like Anthony Faiola in the Washington Post, were quick to speculate about ‘The End Of American Capitalism’ (Faiola, 2008). Others, like Richard Florida (2009), viewed the crisis as a true opportunity for change for our cities and regions. Given cities’ core predisposition to be innovative (an idea credited to Jane Jacobs), Florida mused in a highly publicized article in the Atlantic in the spring of 2009 that: ‘In this sense, the financial crisis may ultimately help New York by reenergizing its creative economy’ (ibid.). Florida further noted that:

Economic crises tend to reinforce and accelerate the underlying, long-term trends within an economy. Our economy is in the midst of a fundamental long-term transformation — similar to that of the late 19th century, when people streamed off farms and into new and rising industrial cities. In this case, the economy is shifting away from manufacturing and toward idea-driven creative industries — and that, too, favors America’s talent-rich, fast-metabolizing places (Florida, 2009).

Simplifying very complex and contradictory processes, he considered the crisis as an opportunity to clear the deck of capitalism’s Titanic in order to create the possibilities for an economic reorientation of major proportions built on mega-regions and a non- suburban, non-industrial pattern of regional development in which home ownership, in

1 I thank Michael Harloe for comments on an earlier draft of this introduction and Jeremy Seekings for co-editing this Debate.

Volume 34.3 September 2010 647–51 International Journal of Urban and Regional Research DOI:10.1111/j.1468-2427.2010.01010.x

© 2010 The Author. International Journal of Urban and Regional Research © 2010 Joint Editors and Blackwell Publishing Ltd. Published by Blackwell Publishing. 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main St, Malden, MA 02148, USA

particular the kind of precarious homeownership that triggered the subprime mortgage crisis in the US, must lose its primacy in the economic architecture.

From the vantage point of many cities and regions in the world, such optimism must sound sarcastic. Not only in the industrial heartlands of the West but also in regions that had only recently been celebrated as the growth poles of the new capitalism, such as Ireland or Spain, there is real doom as the economies have contracted, property values have plummeted and employment prospects have been stunted for an entire generation of highly skilled creative workers who were told that education and readiness to be flexible would be rewarded in inner-city economies of technology, talent, tolerance. The waves of disinvestment and devaluation hit hard as Spanish unemployment rates soared by the tens of thousands in 2009 (particularly in the coastal and tourist regions where the construction boom had occurred — a topic taken up in our December issue by Marisol Garcia), one auto plant after the other closed in former manufacturing cities and regions around the world, nations like Japan and Germany experienced sharp declines in their GDP, and small and big development projects were put on hold. In Greece, the most severe effects of the financial crisis led to widespread public protest and demonstrations. Surely, we know now that President Obama’s and other leaders’ infrastructure and public work projects soothed the pain of restructuring for a certain time, but the question is still whether communities can recover and rebuild sustainable economic futures in an environment of systematic upheaval and rapid change as we have experienced it lately. It appears that some countries and cities were better equipped to fend off falling into the abyss than others, a fact that will have to be subject to further research. Thinking about the economic boom that preceded the crisis, a Canadian journalist on assignment in Europe recently ventured the hypothesis that: ‘In the countries that kept a lid on consumer and mortgage lending [he has in mind Canada, France and Germany], the economic boom was worth all the hype. Everywhere else, it was like a bad dream’ (Saunders, 2010: A17). The jury is still out on whether those places that had all the attention or those, like Eastern Germany that perhaps were deemed ‘irrelevant to the system’ (see the contribution by Bernt and Rink, 2010, this issue) will find the resilience to rebound. And it is yet unclear what is the role of the state ultimately in the avoidance, management and overcoming of this crisis in the production of space — Pollard (2010, this issue) in her contribution discusses this point for the French case; Engelen and Musterd (2010, this issue) present the case for Amsterdam.

If the state roared back during the crisis, it is not so clear what the popular reaction really has been. Are the signs of response and contestation already on the wall? Will there be new and sustained social unrest and perhaps a new urban politics? Will the (urban) Left rally or vanish in the crisis as the mainstream parties occupy their traditional political territory of neo-Keynesian and statist proposals? Perhaps, though, this is the dark hour of retrenchment and reaction as governments, employers and labour unions become defensive and cater to the basest of emotions such as chauvinistic calls to ‘Buy American’ or ‘Canadian . . .’ or to save ‘British jobs for British workers’ (cited in Saunders, 2009). More importantly, perhaps, the centre of gravity may have finally moved from America and Europe to East Asia. In February 2009, The Guardian reported on falling house prices in Chinese cities as real estate companies and developers were thinking of innovative ways to market their devalorized products (Branigan, 2009b). But the crisis was most directly experienced and suffered by those who build and produce China’s wealth: the more than 20 millions of migrant workers returning to the countryside after finding no work in the city (Branigan, 2009a). We now know that the crisis effects on these workers were unimaginable and unprecedented in their scale and reach. But we also have learned more recently that Chinese society has begun, ever so slowly, to experience massive social unrest, strike action in factories and civil disobedience for which a window was opened through and after the downturn brought on by the financial crisis. The crisis has thus created the possibility, if not the inevitability, to pose the demand for ‘the right to the city’ in the growing Chinese mega-regions where the migrant workers, as the conservative Canadian newspaper The Globe and Mail

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editorialized, are ‘in but not of the cities’ (The Globe and Mail, 2010). Kam Wing Chan’s insightful essay (2010, this issue) deals with this matter. While China sneezes, the rest of the world might wonder what the consequences may be for the global community.

Critical urbanists will have to monitor and analyse the impacts of crisis and restructuring on urban process and form. Richard Florida, basing his thinking on David Harvey’s idea of the ‘spatial fix’ alerts us to what is now a commonly experienced feature of the current crisis: ‘To a surprising degree, the causes of this crash are geographic in nature, and they point out a whole system of economic organization and growth that has reached its limit’ (Florida, 2009). Florida is not the first one to point out that suburbanization was the specific ‘solution’ to the last major crisis in the early part of the twentieth century, specifically for the regime of accumulation commonly known as Fordism. His perspective is restricted to the United States but it is clear that the Fordist spatial solution was sought, in a variety of ways, also in other places such as the tower bloc peripheries in the UK, Germany and France. In some sense, such suburbanization processes could also be seen at work in the former East where the state produced mass prefabricated housing for its industrial working class in the Fordist-equivalent clusters of mass production. But, of course, in many areas of the world, the wild suburbanizing colonization of the urban periphery, of coastal areas and of remote ‘hinterlands’ was really a process that is associated with the loose lending practices and planning regulations of the post-Fordist age. While it would be silly to confuse the processes that built the suburbs with their (socially and ecologically) unsustainable outcome, and while it would be irresponsible to blame the suburban populations for the latest crisis, urban scholars will, indeed, have to look closely at whether what is now emerging after the crisis is a new socio-spatial constellation that bears different traits from what came before. There is no indication whatsoever, though, that the global trend of suburbanization is waning — despite reurbanization as the slogan du jour.2

The crisis runs deep and is remarkable because it is not the last gasp of the industrial political economy of space but really the first embarrassment of the ‘new metropolitan mainstream’, much of which is lauded by Florida and others as the creative core of the new capitalism (Schmid and Weiss, 2004). And as McDowell demonstrates in her contribution to this debate (2010, this issue), the male dominated, testosterone filled ethos that drives the overheated financial economy may just be the dirty little secret of creative capitalism running rampant in the heart of the global city. While the financial implosion may have been triggered by the butterfly wings of the subprime mortgages, its shockwaves hit the shore at many different locations. In places as diverse as Dubai (on which an essay will follow in this debate at a later point), Dublin or Detroit the financial crisis hit hard and left the land economy in tatters. In the aftermath of the meltdown, Martin Wolff (2010) sounded a stern warning in the Financial Times: ‘Those who do not learn from history are condemned to repeat it. This applies not least to the immense financial and economic crisis into which the world has fallen. So what lay behind it? The answer is the credit-fuelled property cycle. The people of the US, UK, Spain and Ireland became feverish speculators in land. Today, the toxic waste poisons the entire world economy’. It is the metaphor of long term toxicity that matters here most. It points to a palette of challenges ahead for urban researchers and policymakers.

What this short debate (no less this introduction) cannot and did not intend to do was a full-blown discussion of the notion of crisis. Readers of this journal have had the benefit of a symposium on the specific aspects of the crisis of mortgage lending in general and subprime mortgage in particular, guest-edited by Manuel Aalbers (Volume 33.2 2009) and the emerging political crisis in Greece was subject to a debate in Volume 34.1 2010. As Neil Brenner reminded us ‘the category of “crisis” is as broad as that of “restructuring” ’ and a lot more ink will have to be spilled to understand its nature and its trajectory in the urban and regional context (personal communication, January 23, 2009).

2 See the special issue of the Swiss planning journal, DisP: The Planning Review (volume 180.1 2010), on Reurbanization.

Debates and Developments 649

But this crisis clearly triggered a small wave of new crisis analysis where Marxist scholars in particular offered powerful novel ways of seeing the crisis. The French Regulation School’s titans (Boyer, Coriat, Lipetz) raised their voices and offered their assessments. Alain Lipietz in particular, mused on the possibilities of the introduction of a technological paradigm, although it seems now that there will apparently not be a big green conversion any time soon. Canadian Marxists Leo Panitch and Sam Gindin (2008) presented an early and incisive interpretation (see also Albo et al., 2010). Yet in the context of urban and regional scholarship, the most popular and influential thinking has come undoubtedly from David Harvey (2010) whose lectures and publications have gone viral on the internet, especially through the rapid distribution of YouTube videos and lately through a cartoon version of a lecture at the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA). While the crisis is a popular subject and its analysis has attained the attention of bloggers and pundits alike, very little of the initial surge in resistance and political upheaval has been upheld. Instead, the crisis churns slowly through the world capitalist system and faces only local and sometimes regional, rarely national or international skirmishes.

Ultimately, as can be seen in the debate essays that follow, the financial crisis produced a kaleidoscopic image of our reality in which some long-term tendencies were confirmed while others were interrupted, in which some possibilities were closed while others were opened up. Travelling through Western Europe in the World Cup summer of 2010, from Switzerland via Germany to Sweden and Denmark, the urban based tourist economy seemed to be alive in the public viewing areas and impromptu stages set up to accommodate travellers and locals alike. The case of Copenhagen analysed in the December issue by Andersen and Winther bears witness to this phenomenon. A different perspective may present itself from the point of view of Greece and Spain (see the essay by Marisol Garcia in the December issue).

In late June 2010, the summer of festivals and football was punctuated by the protests around the G8/G20 summit in Toronto where the world leaders had gathered to discuss further austerity measures and structural adjustments which they deemed necessary to right the global economy — still seen as fragile and vulnerable. In that case, the state showed presence and force without hesitation as more than 1,000 demonstrators were detained and many charged. The Canadian global city, often celebrated as a creative, multicultural metropolis of a new kind, was turned swiftly into a post-crisis garrison in which clear and intransigent lines were drawn between the heads of the world’s major economies and critics of their late neoliberal intentions. As Harloe had noted in the original sketch for this debate, particular importance lies in the power of finance capital, bailed out by governments. The financial crisis then was represented in essence as a crisis displaced to the ‘real’ economy (where the auto sector appeared as the most visible victim of economic collapse) and to the political level (where governments around the world are struggling to stay on top of ever changing perturbations in the economic and financial spheres).

Of course the publication of these essays is at once an invitation to our readers to partake in an ongoing debate and to submit future assessments of crisis effects on various locales. As we gain further distance from the tumultuous events of the past couple of years, we may want to engage in even more long term and in-depth analysis of structural changes tied to the effects of the crisis.

Toronto, July 2010

References Aalbers, M. (guest ed.) (2009) Symposium on

the sociology and geography of mortgage markets: reflections on the Financial Crisis

[Introduction]. International Journal of Urban and Regional Research 33.2, 281–90.

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Albo, G., S. Gindin and L. Panitch (2010) In and out of crisis: the global financial meltdown and left alternatives. PM Press, Oakland.

Andersen, H.T. and L. Winther (2010) Crisis in the resurgent city? The rise of Copenhagen. International Journal of Urban and Regional Research 34.3, 693–700.

Bernt, M. and D. Rink (2010) ‘Not relevant to the system’: the crisis in the backyards. International Journal of Urban and Regional Research 34.3, 678–85.

Branigan, T. (2009a) Downturn in China leaves 26 million out of work. The Guardian 2 February [WWW document]. URL http://www.guardian.co.uk/business/ 2009/feb/02/china-unemployment-unrest (accessed 26 July 2010).

Branigan, T. (2009b) Buy the flat and we’ll throw in the job to pay for it. The Guardian 9 February [WWW document]. URL http://www.guardian.co.uk/business/ 2009/feb/03/creditcrunch-globalrecession (accessed 25 July 2010).

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Pollard, J. (2010) How the state is handling the property crisis in France: a perspective on recent government measures. International Journal of Urban and Regional Research 34.3, 686–92.

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Wolff, M. (2010) Why we must halt the land cycle. The Financial Times 8 July [WWW document]. URL http://www.ft.com/ comment/columnists/martinwolf (accessed 26 July 2010).

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