real estate bubbles

Image: Vlad Shu


Real estate production and consumption are structural components of national economies under the domain of the globalized circulation of fictitious capital

The liquidity crisis of Evergrande – the second largest real estate developer in China and owner of the most valuable share in the real estate sector in the world – is widely known. The world financial market quoted in dollars has been shaken by the inability to honor its liabilities listed in three hundred billion dollars in titles owned by the State, national and international investment funds, millions of individuals in the country who bought pre-sold properties , in addition to debts with employees of the company itself.

In addition to the tension of international creditors due to their rights over debts and securities and the clear chain effect that the crisis exerts, the debacle of the company reveals an important symptom of the slowdown (and possible stagnation) of the Chinese economy in the next period. Plans for a new cycle of state regulation of the country's economy are running with more force now, especially in sectors of monopoly prominence of private capital – such as real estate, which today corresponds to more than a quarter of Chinese GDP.

Evergrande, as a complex that concentrates and centralizes capital, owns a vast land bank throughout China, has articulated, over the years, its immense amount of fixed assets to investments by regional governments in infrastructure (fixed capital) throughout the territory of the country (built housing on a large scale accompanied by the investments that were being made for the production of highways, railways, airports, etc.). It is precisely this geographic dynamic of decentralized and dispersive urbanization that marks, with great participation in this century, the Chinese national economic growth, with expressive leverage of these monopoly capitals[I].

In the last decade, Chinese growth continued to be unmatched by other countries and effectively sustained capital appreciation in the world after the financial crisis in 2008, which began in the real estate securitization markets of the south and southeast of the United States. It manifests itself in the bankruptcy of Lehmann Bank and effectively installed from the insolvency of the debt securities of subprime mortgages linked to the expansion of housing finance in the United States, the 2008 event is the product of a long historical stage of migration of interest-bearing capital to the real estate and land market, that is, the capitalization of low-liquidity assets, transforming them in highly liquid securities.

Although there are considerable differences between the crisis in the United States of 2008 and that of Evergrande now, especially the state control of financial policy and the Chinese banking system, this text points to the progressive importance of real estate production and consumption as a structural component of national economies under the domain of the globalized circulation of fictitious capital. The current crisis of the Chinese giant makes explicit, even more strongly, that the overcoming of the world crisis in 2008 thanks to the growth of China has to do, contradictorily, with the replication of the same real estate roots of the previous crisis, since the expansion without historical parameters of the Chinese indebtedness is what made possible the high rates of appreciation through the tree of construction in the country in the decade following 2008.

The process of urbanization of capital then, on the one hand, presents itself as a character of the structural capitalist crisis of this century and, on the other hand, enlists the contradiction between living work – humans dispossessed of their means of life – and capital, which progressively concentrates private ownership of terrestrial soil under increasingly fetishistic forms of income through the urban.

The urban roots of struggles

It is possible to say that conflicts between owners and the dispossessed have been intensified around the world since the real estate-financial crisis of 2008. They also seem to have multiplied in their diversity. The political and economic defeat imposed on living labor by neoliberal policies, which institutionalized the restructuring of surplus value production in the world and more serious levels of social fragmentation, went hand in hand with the critical urbanization of capital, with this specific form of lowering the parameters of social reproduction[ii].

The plurality of contemporary social struggles – the “new movements” (not so new today) – form a vast, but unclear field of contradictions that need to be pursued from the point of view of capturing their movement. It is assumed here that these are social and political reactions to the real subsumption promoted by the urbanization of capital. In other words, cities and urban life restructure the contradiction between capital and labor. While the urban form dictates how the flows of valorization of value unfold, at the same time it advances predatorily on the forms of reproduction of life in capitalism.

Ourban it is the hegemonic form that supports and subordinates the productive forces and the relations of production. The concrete world of capitalist sociability in the 2008st century is increasingly the social relations around the built environment of cities; even conflicts that do not occur through this mediation are indirectly subordinated to it, such as the social, social security and labor counter-reforms of the fiscal austerity cycle that followed XNUMX around the globe through the indebtedness of countries, precisely because of the imposition of the crisis real estate root.

In this vein of our historical time, shortly after 2008, came the emblematic wave of popular revolts from 2011, the international political process that is now exactly a decade old. Mass mobilizations began to occur in Tunisia, Libya, Egypt, where there was a demand for the fall of dictatorial governments; in Greece, Turkey, Spain, Portugal, France, England, United States, Chile, among others, where the movements collided with counter-reform packages and the situation of social crisis due to the austerity policy that was bequeathed by the crisis.

Although they have been repeatedly analyzed for their spatial aesthetics – squares as tangible spaces of democratic political participation or networks as virtual spaces that massified struggles – the critique of the political economy of space can explain how the conflict that inaugurated the last decade expressed with the urban form is stronger, especially when analyzing the enormous social crisis arising from the growth of real estate capital in these same countries, starting with the United States itself, where millions of families (especially from black communities) lost their homes in the tsunami of mortgage foreclosures ( the occupation of Wall Street was precisely aimed at denouncing financial capital also considering this experience of violence and large-scale dispossession). evictions, a process denounced by the strong movement that was formed around the right to housing in the country, with repercussions to this day.

As said, other parts of the world were also taken by struggles related to the production of cities and real estate infrastructure; among them, notably Brazil. In June 2013, the mass revolt that took over the country was installed by the intensification of the levels of exploitation that restrict circulation in the cities, due to the prices of fares controlled by the private cartels that control municipal public funds and the public transport service.

We also saw confrontations against violent removals of popular communities for the production of infrastructure that hosted the World Cup in 2014, another process of expropriation of public funds in favor of the large private capital of contractors, developers and real estate investment funds. Still under the same context, it is worth remembering the wave of wildcat strikes by workers at large construction sites, especially in the north of the country, which also marked the immediate conflicts between capital and labor in this period involving the production of space.

The processes of urban struggle that have followed in this last decade are multiple, but it is worth mentioning the most recent ones, such as the popular revolt in Chile against the capitalization of the means of life (transport, health, education, housing) and its growing inaccessibility to the working population in the “neoliberal laboratory” in the southern cone; and the anti-racist struggle in the United States, led by the movement Black Lives Matter after the murder of George Floyd, which also expressed the contours of the spatial control which operates the extermination of black people in everyday scenes of urban life.

In these examples, aspects of the urban form of the struggle are clear: concentrations in public spaces (city centers); circulation stoppage; burning of public buildings (such as police stations, buildings that symbolize militarized and racist control of urban territories); self-organized occupations in streets and neighborhoods; knocking down statues dating back to colonial and neocolonial domination that monumentalized cities.

Finally, but still in line with what we propose to reflect here, it is worth remembering the recent example of the elections in Berlin, which stood out in the international news due to the popular and left-wing campaign that permeated the electoral process due to the real estate crisis in city. The drastic increase in rents in the last decade has general effects because more than half of the German population lives on rent and 84% in this situation in the Berlin capital; more than 20 evictions of poor families are estimated to have taken place during the pandemic.

The interesting debate that took place within German politics seems to express, on the one hand, a political program of greens, social democrats, liberal democrats and Christian democracy, who defend the production of new private housing on a large scale (1,5 million apartments by 2025), it being no coincidence that they are parties financed by real estate capital; on the other, a more radical project with proposals to limit and control this big capital and the price of rents in the city, defended above all by the more radical party Die Linke. In any case, it won numerically and morally the public consultation in the city, with a vote of more than 1,5 million people, to limit the centralization of properties in the hands of a few capitals (with a ceiling of 3 thousand real estate units per owner capital).

As can be seen, the urban roots of capitalist crises and the mutual implications that this historical nature shares with social conflicts are prolonged and branched out, so that the permanent task of understanding them in their manifestations and trends is imposed, considering the urban as a specific form that determines and is determined by the class struggle. Against the destructive creation of urban globalization, of a life made in the image and likeness of an immense contingent of built dead work, one must think of a XNUMXst century based on the strategy of its creative destruction for the revolutionary possibility of expanding the future of human life.

* Carolina Freitas inMaster in Urban and Regional Planning at the Faculty of Architecture and Urbanism at the University of São Paulo.


[I] From the point of view of the socio-historical consequences of this urbanization process, it is worth noting the radical nature of the proletarianization of hundreds of millions of people in the country, that is, of the massive transition from the countryside to the cities while China became “the factory”, the center of appreciation in the world. Cities are general conditions for productive capital and, at the same time, a new form of life that is profoundly different from what the Chinese population was used to before the rural exodus. At the same time that cities figure as “productive consumption”, they are also commodity capitals in circulation, they are businesses to be carried out. The ghost towns produced in the 2010s in the country are able to denote how the cities themselves are the product that strategically leveraged Chinese growth.

[ii] In this regard, it is worth following the debates that have been taking place since 2018 between Michael Roberts and David Harvey regarding the labor theory of value and the nature of capitalist crises. It is curious to note how, in this debate, the problem of the production of infrastructure (fixed capital) is described, but it does not necessarily serve as a central argumentative merit both in the position of one author and another. The controversy between the authors can be found on their respective blogs: e

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