Seventeen Contradictions and the End of Capitalism (23 page)

When local costs rise rapidly, capitalists look for other spaces in the global economy to ply their trade. This is particularly so when new technological and production mixes are emerging and labour struggles are acute. From the late 1960s onwards, for example, Silicon Valley steadily displaced Detroit as an epicentre of the US capitalist economy. Bavaria likewise displaced the Ruhr in Germany and Tuscany displaced Turin in Italy, while new global players like Singapore, Hong Kong, Taiwan, South Korea and, eventually, China moved far ahead in the global stakes for competitive pre-eminence in certain lines of production. These moves generated crises of devaluation that reverberated throughout other regions of the global
economy. The Midwest ‘rust belt’ that was once the heart of industrial capital in the USA contrasts with a rising ‘sun belt’. Regional crises of employment and production typically signal crucial moments when power shifts are occurring within the forces producing the geographical landscape of capital. This, in turn, usually signals a radical shift in the evolution of capital itself.

Capital must be able to withstand the shock of the destruction of the old and stand ready to build a new geographical landscape on its ashes. Surpluses of capital and labour must be available for this purpose. Fortunately, capital, by its very nature, perpetually creates such surpluses, often in the form of mass unemployment of labour and an overaccumulation of capital. The absorption of these surpluses through geographical expansion and spatial reorganisation helps resolve the problem of surpluses lacking profitable outlets. Urbanisation and regional development become autonomous spheres of capitalist activity, requiring large investments (usually debt-financed) that take many years to mature.

Capital typically turns to these avenues for the absorption of capital and labour surpluses at times of crisis. State-funded infrastructural projects are set in motion during crises to re-kindle economic growth. The US government tried to mop up surplus capital and unemployed labour in the 1930s by setting up future-oriented public works projects in hitherto undeveloped locations. Some 8 million people were employed in the WPA programmes in the 1930s in the United States. The Nazis built the autobahns in Germany for similar reasons at the same time. The Chinese, after the financial crash of 2008, spent billions on urban and infrastructural projects to absorb surpluses of both capital and labour in order to compensate for the crash in export markets. Whole new cities were designed and built. The Chinese landscape has been radically and dramatically transformed as a result.

In this way, capital develops what I call ‘spatio-temporal fixes’ to the capital and labour surplus absorption problem.
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‘Fix’ here has a double meaning. A certain portion of the total capital gets fixed literally and physically in and on the land for a relatively long period
of time. But ‘fix’ also refers metaphorically to how long-term investments in geographical expansions provide a solution (a ‘fix’) for crises of overaccumulation of capital. So how and when do these two meanings collide?

The organisation of new territorial divisions of labour, of new resource complexes and of new regions as dynamic spaces of capital accumulation all provide new opportunities to generate profits and to absorb surpluses of capital and labour. Such geographical expansions often threaten, however, the values already fixed in place elsewhere. This contradiction is inescapable. Either capital moves out and leaves behind a trail of devastation and devaluation (for example, Detroit). Or it stays put only to drown in the capital surpluses it inevitably produces but cannot find profitable outlets for.

Resort to credit financing heightens this contradiction at the same time as it purports to solve it. Credit makes territories vulnerable to flows of speculative capital that can both stimulate and undermine capitalist development. Territorial indebtedness became a global problem after 1980 or so, and many of the poorer countries (and even some major powers, like Russia in 1998 and Argentina after 2001) found it impossible to repay their debts. Many poor countries, like Ecuador and even Poland (behind the Iron Curtain), were lured into becoming ‘sinks’ for surplus capitals for which they were then held liable. The indebted country has to bear the cost of any subsequent devaluation of capital while the creditor country is protected. The resources of indebted countries can then be plundered under the draconian rules of debt repayment. The current case of Greece is a horrible example of this process carried to extremes. The bondholders are prepared to rip to shreds and feed relentlessly upon whole states that have been rash enough to fall into their clutches.

The export of capital typically has longer-term effects relative to the movement of ‘hot’ credit moneys. Surpluses of capital and labour are sent elsewhere to set capital accumulation in motion in the new regional space. Surpluses of British capital and labour generated in the nineteenth century found their way to the United States and to the settler colonies, like South Africa, Australia and Canada, creating
new and dynamic centres of accumulation which generated a demand for goods from Britain.

Since it may take many years for capitalism to mature in these new territories (if it ever does) to the point where they too begin to produce surpluses of capital, the originating country can hope to benefit from this process for a not inconsiderable period of time. This is particularly the case with investments in railways, roads, ports, dams and other infrastructures that mature slowly. But the rate of return on these investments eventually depends upon the evolution of a strong dynamic of accumulation in the receiving region. Britain lent to the United States in this way during the nineteenth century. Much later, the United States, via the Marshall Plan for Europe (West Germany in particular) and Japan, clearly saw that its own economic security (leaving aside the military aspect of the Cold War) rested on the active revival of capitalist activity in these other spaces.

Contradictions arise because these new dynamic spaces of capital accumulation ultimately generate surpluses and need to find ways to absorb them through further geographical expansions. This can spark geopolitical conflicts and tensions. In recent times we have witnessed cascading and proliferating spatio-temporal fixes primarily throughout East and South-East Asia. Surplus capital from Japan started to course around the world in the 1970s in search of profitable outlets, followed shortly thereafter by surplus capital from South Korea and then Taiwan in the mid-1980s. While these cascading spatio-temporal fixes are recorded as relationships between territories, they are in fact material and social relations between regions within territories. The formal territorial difficulties between Taiwan and mainland China appear anachronistic beside the growing integration of the industrial regions of Taipei and Shanghai.

Capital flows from time to time get redirected from one space to another. The capitalist system remains relatively stable as a whole, even though the parts experience periodic difficulties (such as deindustrialisation here or partial devaluations there). The overall effect of such interregional volatility is to temporarily reduce the aggregate dangers of overaccumulation and devaluation even though localised
distress may be acute. The regional volatility experienced since 1980 or so seems to have largely been of this type. At each step, of course, the issue arises as to which will be the next space into which capital can profitably flow and why and which will be the next space to be abandoned and devalued. The general effect can be misleading: since capital is always doing well somewhere, the illusion arises that all will be well everywhere if we only readjust the form of capital to that predominant in Japan and West Germany (the 1980s), the United States (the 1990s) or China (after 2000). Capital never has to address its systemic failings because it moves them around geographically.

A second possible outcome, however, is increasingly fierce international competition within the international division of labour as multiple dynamic centres of capital accumulation compete on the world stage in the midst of strong currents of overaccumulation (lack of markets for realisation) or under conditions of competing scarcities for raw materials and other key means of production. Since they cannot all succeed, either the weakest succumb and fall into serious crises of localised devaluation or geopolitical struggles arise between regions and states. The latter take the form of trade wars, currency and resource wars, with the ever-present danger of military confrontations (of the sort that gave us two world wars between capitalist powers in the twentieth century). In this case, the spatio-temporal fix takes on a much more sinister meaning as it transmutes into the export of localised and regional devaluations and destruction of capital (of the sort that occurred on a massive scale in East and South-East Asia and in Russia in 1997–8). How and when this occurs will depend, however, just as much upon the explicit forms of political action on the part of state powers as it does upon the molecular processes of capital accumulation in space and time. The dialectic between the territorial logic and the capitalistic logic is then fully engaged.

So how does the relative spatial fixity and distinctive logic of territorial power (as manifest in the state) fit with the fluid dynamics of capital accumulation in space and time? Is this not the locus of an acute and abiding contradiction for capital, perhaps the apogee
of the contradiction between fixity (the state) and motion (capital)? Recall: ‘In order for capital to circulate freely in space and time, physical infrastructures and built environments must be created that are fixed in space.’ The mass of all this fixed capital increases over time relative to the capital that is continuously flowing. Capital has periodically to break out of the constraints imposed by the world it has constructed. It is in mortal danger of becoming sclerotic. The building of a geographical landscape favourable to capital accumulation in one era becomes, in short, a fetter upon accumulation in the next. Capital has therefore to devalue much of the fixed capital in the existing geographical landscape in order to build a wholly new landscape in a different image. This sparks intense and destructive localised crises. The most obvious contemporary example of such devaluation in the USA is Detroit. But many older industrial cities in all the advanced capitalist countries and beyond (even north China and Mumbai) have had to remake themselves as their economic bases have been eroded by competition from elsewhere. The principle here is this: capital creates a geographical landscape that meets its needs at one point in time only to have to destroy it at a later point in time to facilitate capital’s further expansion and qualitative transformation. Capital unleashes the powers of ‘creative destruction’ upon the land. Some factions benefit from the creativity, while others suffer the brunt of the destruction. Invariably, this involves a class disparity.

So where is state power in all of this and by what distinctive logic does it intervene in processes of landscape formation? The state is a bounded territorial entity formed under conditions that had little to do with capital but which is a fundamental feature of the geographical landscape. Within its territory it has a monopoly of the legitimate use of violence, sovereignty over the law and the currency, and regulatory authority over institutions (including private property), and it is blessed with the power to tax and redistribute incomes and assets. It organises structures of administration and governance that at the very minimum address the collective needs of both capital and, more diffusely, the state’s citizens. Among its sovereign powers perhaps the most important is defining and conferring rights of citizenship under
the law upon its inhabitants and thereby introducing the category of illegal alien or ‘
sans-papiers
’ into the equation. This creates a separate population vulnerable to unthinkable and unrestricted exploitation by capital. As a bounded entity, the question of how the state’s borders were established and how they are patrolled in relation to the movements of people, commodities and money becomes paramount. The two spatialities of state and capital sit awkwardly with and frequently contradict each other. This is very clear in the case, for example, of migration policies.

The interests of the capitalist state are not the same as those of capital. The state is not a simple thing and its various branches do not always cohere, although key institutions within the state do typically play a directly supportive role in the management of capital’s economy (with treasury departments usually in alliance with central banks to constitute the state–finance nexus). The governance of the state depends upon the nature of its political system, which sometimes pretends to be democratic and is often influenced by the dynamics of class and other social struggles. The practices that constitute the exercise of state powers are far from monolithic or even coherent, which means that the state cannot be construed as a solid ‘thing’ exercising distinctive powers. It is a bundle of practices and processes assembled together in unbounded ways since the distinction between the state and civil society (for example, in a field like education, health care or housing) is highly porous. Capital is not the only interest to which the state must respond and the pressures upon it come from a variety of interests. Furthermore, the ruling ideology behind state interventions (usually expressed as an economic and policy orthodoxy) can vary considerably. There is, also, an interstate system. Relations among states can be hostile or collaborative as the case may be, but there are always geo-economic and geopolitical relations and conflicts that reflect the state’s distinctive interests and lead state practices into forms of action that may or may not be consistent with capital’s interests.

The logic that attaches to the territoriality of state power is very different from the logic of capital. The state is, among other things,
interested in the accumulation of wealth and power on a territorial basis and it was Adam Smith’s genius to advise and generally persuade statesmen that the best way to do this was to unleash and rationalise the forces of capital and the free market within its territory and open its doors to free trade with others. The capitalist state is one that broadly follows pro-business policies, albeit tempered by ruling ideologies and the innumerable and divergent social pressures mobilised through the organisation of its citizens. But it also seeks to rationalise and use the forces of capital to support its own powers of governmentality over potentially restive populations, all the while enhancing its own wealth, power and standing within a highly competitive interstate system. This rationality contrasts with that of capital, which is primarily concerned with the private appropriation and accumulation of social wealth. The constructed loyalty of citizens to their states conflicts in principle with capital’s singular loyalty to making money and nothing else.