The contradictions of capital investment in the built environment.

While not everyone might associate the work of David Harvey or Neil Smith, two Marxist geographers, with poetry, I must say that while reading their work, I was very often struck by its poetic quality. Consider this quote:

“Capital represents itself in the form of a physical landscape created in its own image” (Harvey, 1978, p. 124)

How did these geographers end up with sentences that carried such literary quality?

Both Harvey and Smith, Harvey’s PhD-student, tried to understand the relationship between capital and space from a Marxist perspective, and focused especially on the built environment. As it turns out, the built environment presents capitalists with an inherent contradiction: they need it, but once it has been created, it presents barriers to further accumulation.

Harvey’s work on the urbanization of capital and Neil Smith’s uneven development thesis state that the urban process, and more widely the production of space, reflects and constitutes the relations and contradictions of the capitalist system. The production of space is what made capitalism possible in the first place: in order to free up workers’ bodies for the production of commodities and hence surplus value, they had to be separated from their means of subsistence so they would be forced to sell their labor power in order to survive. This was done through taking their land, by introducing private property laws, and other means of primitive accumulation such as colonialism.

Subsequently, the production of space took place within the capitalist system itself, because ‘in order to produce surplus value it is necessary that vast quantities of productive capital be spatially immobilized for relatively long periods in the form of factories, machinery, transport routes, warehouses and a host of other facilities’ (Smith, 1984, p. 88). This logically happened in cities, where a concentration of labor power was present and distance (thus time) constraints to capital accumulation could be overcome. The urban environment was also used to absorb capital surpluses and free them up again or engage in their creative destruction in times of crises and overaccumulation. With the rising deindustrialization of many cities around the globe, the so-called secondary circuit of capital, i.e. the built environment, has increasingly become the recipient of capital surplus investment and a means of making profit or temporarily resolving crises of overaccumulation (Harvey, 2010, p. 85), as a “spatial fix”.

However, the built environment also presents capitalists with a central contradiction: capital invested in it (whether as aide to the production or consumption process or a spatial fix) needs to be recouped by keeping its physical use value fully employed over its lifetime (what Harvey, 1978, p. 123 calls its “amortization time”). The invested capital returns its value as the investor receives returns on the investment by keeping the physical structure in use (Smith, 1982). But this use value cannot easily be altered, so the “productivity” of the building freezes at a certain level, as new and more productive fixed capital comes into being before the amortization of the old (and a similar structure can be built with less capital as the productivity of labor advances). The exchange value tied up in the building devalues while it also presents a barrier to further accumulation, as the capital “trapped” in the building completes its economic lifetime.

When they run out of other profitable sectors with shorter turnover times to invest in, capitalists are forced by the laws of competition to destroy what is left of the capital in the built environment in order to invest it in more advanced production methods, so as not to fall behind their competitors (Smith, 1979). As a result of this contradiction, capitalists have to walk a thin line, a ‘knife-edge path between preserving the exchange values of past capital investments in the built environment and destroying the value of these investments in order to open up fresh room for accumulation’ (Harvey, 1978, p. 124).

The built landscape we see is thus a reflection of capitalism’s past, created to overcome spatial or temporal limits and functioning as an aide to the production or consumption process, but at the same time presenting barriers to further accumulation. This means that capital creates geographies, and these geographies change over time, following the cycle of capital accumulation as well as the investment, amortization and devaluation of capital in the built environment.

Neil Smith has specified how the logic of investment, amortization and devaluation operates at the urban scale. The urban scale is where capital is most mobile (as compared to the national or global scale where moving capital encounters regulatory and spatial limitations) and hence where it has a chance to stay ahead of the falling rate of profit by “see-sawing” from one devalued area to the next. This see-sawing movement creates the urban landscapes we see. It is driven by the contradiction explained above: capital has to be immobilized as fixed capital where it can produce the highest rate of profit (and fixed capital is increasingly crucial because of technological innovations that are needed to stay ahead of competitors), but capital also needs to be circulated as value because it has to be able to move around geographically to where the profit rate is highest (differentiation).

Circulation then becomes a means of geographical differentiation. And urban development is always uneven, at any time reflecting this logic of investment and disinvestment: ‘capital attempts to see-saw from a developed to an underdeveloped area, then at a later point back to the first area which is by now underdeveloped, and so forth’ (Smith, 1984, p. 149). If capital manages to ‘jump’ these landscapes effectively, it can stay ahead of the falling rate of profit. And in its wake, it leaves imprints of its own making, overcoming obstacles by creating new ones.

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