The city through the prism of finance

How does neoliberalism modify our space? For half a century, a new geography of capital has led to competition between territories, the financialization of real estate, the gentrification of cities and the eviction of the working classes.

Neoliberalism has profoundly altered the way in which large cities and territories are made and experienced over the past fifty years. The transition from a Fordist and Keynesian society to a world under the influence of Milton Friedman and the monetarists has not been without effect on the living environment. Gilles Pinson has set out to decipher this new system in his book, focusing more on the theoretical economic frameworks of production than on architectural form.

Large groups and single-functional territories

The work first returns to the differences between liberalism, ordo-liberalism and neoliberalism. While Adam Smith and the first liberals saw public and private monopolies as the greatest threat to the flourishing of economic activities, ordo-liberals consider that the market must be embedded in a higher political order that protects it from its own excess and contains it in the economic sphere.

Neoliberals, on the contrary, make the market the basic principle of organization of society and push for its extension to all areas of life, from education to justice, from cultural activities to those of the family. To do this, they put in place a certain number of tools stripping the State and politicians of their means of action, in particular by removing their control of the currency and by making the economic order pass over the political order, as we have seen in the monetarist repressions exercised on countries like Greece or Argentina, when they tried to put in place an alternative order to these neoliberal policies.

Gilles Pinson first sets out to recount the historical evolution that will lead from Keynesian Fordism to neoliberalism in France and around the world, and the way in which it will lead to gentrification and the eviction of the working classes from cities through soaring prices and the progressive financialization of real estate and land.

At the end of the war, the dominant term was that of planning, with the desire to balance the territories among themselves to correct economic and spatial inequalities, while assertive social housing policies, particularly in Northern Europe, made it possible to house significant parts of the population with dignity. But these models found their limits in the 1960s and 1970s, when competition from emerging countries ruined the economic model of many territories with an industrial mono-economy (steel industry, mining, shipyards, automobile construction, textiles), while the model of large complexes and monofunctional territories was increasingly criticized, particularly by many left-wing thinkers (Henry Lefebvre, Thierry Godard, Manuel Castells, the situationists, etc.).

With the end of Fordism, a “new geography of capital” is emerging, the winners of which are the territories with light and diffuse industry with “flexible specialization” (Silicon Valley, Veneto, Lyon-Grenoble axis) and the large metropolises whose model economic will evolve towards models based on the “informational and relational economy”.

The policies implemented from the 1970s and 1980s (by Giscard and Barre in France, then, in a much more radical manner, by Thatcher, Reagan and their successors) will resolutely turn their backs on the model of planning and public management of social housing, preferring instead the establishment of competition between territories, through tax attractiveness and climates most “favorable to economic activity”. With regard to housing, policies for access to ownership of individual houses are implemented.

Competition between cities and soaring prices

After this historical perspective, the author analyzes the way in which neoliberalism has transformed the way in which the city is made today, moving, as for economic policies, from an urban policy of demand to a policy of ‘offer :

For neoliberals, the increased mobility of capital exposes cities to increasing competition to attract business and investment. Town planning must therefore no longer be a matter of hindering the market, but more of creating an attractive territorial offer.

Urban planning policies based on major urban projects are being implemented, projects in which, following large, emblematic public buildings designed by renowned architects, the constraints are minimal for developers in the context of international competition between cities. This is how we see the emergence of the Euralille projects, the London docklands, Euroméditerranée in Marseille, the Île de Nantes, Lyon Confluences, etc. The list is long.

In this new model, territories are in competition with each other, in order to attract investors of all kinds, while certain territories remain landlocked in their downgrading.

With regard to social housing, one of the most successful facets of urban Keynesianism has been the decommodification of housing, seen as the best way to control rents and ensure a minimum of socio-spatial diversity, through major public policies for the construction of social housing. It is this principle of universality that neoliberal housing reforms attack: the neoliberal doctrine reverses the reasoning to affirm that the market is the natural order and that public regulation of housing can only be done. ‘at the margins and as a last resort.

It also exercises a process of residualization of social housing, consisting of reserving it for the most deprived sections of the population, which leads to a stigmatization of those who live there. The idea is that ownership must become the normal, majority and legitimate form of relationship to housing. In France, we are moving from aid for property to aid for the person (mechanism of “personalized housing aid” or APL), while the production of social housing is de facto privatized through tax relief schemes (Périssol, Robien, Pinel) and the location of this housing is left to the free choice of the market.

This double tax incentive will lead to a surge in prices on rental markets, as well as land prices, which will continue to drive the working classes out of large urban centers.

The author could have specified how, in the mid-2000s, the Public Offices ofHLM pass legislatively from the status of public administrative establishment to that of public establishments of an industrial and commercial nature (EPIC), imposing financial profitability on them and allowing a certain increase in the salaries of the teams. From then on, profitability becomes the rule. Social housing is built by private developers through the mechanisms of “sales in the future state of completion” (VEFA), previously reserved for private sale. This results in a certain drop in the quality of housing produced.

The new decision-makers in space production

More fundamentally, urban neoliberalism transforms land into an increasingly volatile financial asset. Whereas, until the 1970s, the city and space constituted only a “secondary circuit of capitalism” (Lefebvre), neoliberalism makes them the object of the wildest speculations, regardless of their real capacity for use or production.

While construction players are concentrating in giant oligopolies (Bouygues and Vinci in France), the same is true for those in real estate development (Nexity, Unibail-Rodamco) who are positioning themselves as the new decision-makers in the production of space, while we are seeing a rapprochement between the banking and development sectors. Public-private partnerships (PPP) mark the supreme form of this model, when very large public buildings (Paris Palace of Justice, Ministry of Defense, Brussels Parliament) are designed, financed and built by private actors to then be rented to the State.

At the same time, land becomes an object subject to financialization and securitization from which new players, such as pension funds, expect certain profitability and from which they are able to turn away at the slightest annoyance. The subprime crisis of 2008 is the most blatant demonstration of this financialization and the decorrelation between the real and financial value of real estate assets. For David Harvey, space and the city have become the raw material for capitalist accumulation strategies.

Gilles Pinson ends up observing the way in which urban neoliberalism has freed itself from democratic models and spatial justice. While the concentration of powers within the new metropolises and other communities of communes has weakened the link between citizens and their elected representatives, local authorities have seen their financial independence gradually reduced by the continuous reduction of state subsidies, the elimination of professional taxes and then of the housing tax, as well as the non-authorization of increases in transfer taxes. Having less direct accounts to render to their voters, de-financialized, they find themselves forced to court financiers of all kinds to insert themselves into the game of economic attractiveness in order to develop, while questions of spatial and social justice take second place.

Expanding on his argument, the author observes that neoliberalism has no use for democratic models, as it has demonstrated in Chile since the 1970s, in China and in many other anti-democratic countries today. He regrets the historical liberalism that had sacralized the separation between political and commercial spaces, “which had served as a bulwark against the horror of a life entirely governed by the market and measured by its values.”