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Marxist Geographer David Harvey on the G20, the Financial Crisis and Neoliberalism

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For some analysis on the G20 summit and the financial crisis, we speak to a leading thinker on the global economy. David Harvey is a Marxist geographer and distinguished professor of anthropology at the Graduate Center of the City University of New York. He is the author of several books, including The Limits to Capital and A Brief History of Neoliberalism. [includes rush transcript]

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: For some analysis on the G20 summit in London and the financial crisis overall, I’m joined now by a leading thinker on the global economy, David Harvey. He’s a Marxist geographer and distinguished professor of anthropology at the Graduate Center of the City University of New York. He’s author of several books, including The Limits to Capital and A Brief History of Neoliberalism. He has a lengthy interview on the financial crisis in the latest issue of n+1 magazine, David Harvey joins us now on Democracy Now!

We welcome you to Democracy Now!

DAVID HARVEY: Thank you.

AMY GOODMAN: What do you think is the — what is being proposed by the G20 leaders? And what needs to be done in this country?

DAVID HARVEY: I think Tony Benn was exactly right in the earlier segment, and it’s a great pleasure to be here after him. I was always an admirer of his.

What they’re trying to do is to reinvent the same system. And I think this is a collective concern, and there’s a lot of squabbling on the details, as it were. But the fundamental argument they are making is, how can we actually reconstitute the same sort of capitalism we had and have had over the last thirty years in a slightly more regulated, benevolent form, but don’t challenge the fundamentals? And I think it’s time we challenge the fundamentals.

AMY GOODMAN: What are those fundamentals?

DAVID HARVEY: The fundamentals have to do with the incredible increase in consolidation, if you like, of class power. I mean, since the 1970s, we’ve seen a tremendous increase in inequality, not just simply in this country, but worldwide. And in effect, the assets of the world have been accumulated more and more and more in few hands. And I think when you look at the nature of the bailout programs, the stimulus programs and all the rest of it, what it really does is to, in effect, try to keep those assets intact while making the rest of us pay. And so, I think it’s time we stopped that and kind of said, well, actually, we should actually be getting more of the assets and, you know, much greater equality.

AMY GOODMAN: And how would we get more of the assets? How would there be greater equality?

DAVID HARVEY: I think, for example, the nature of the bailout of the banks and the sort of restructuring that is going on is, in effect, about saving the banks and saving the bankers, while actually sticking it to the people. I mean, we’re the ones who are going to have to pay for this in the long run. So what I’m kind of arguing for is a political awareness that that is happening.

In fact, it has been happening over the last thirty years, sort of step by step. It’s been disguised in this kind of rhetoric about individual liberty and freedom of markets and all those kinds of things. But if you look backwards, you will see that this is not the first financial crisis we’ve had. We’ve had many of them over the last thirty years, and they all have the same character. We had our own savings and loan crisis back in the 1980s. There was a Mexican debt crisis back in 1982, when, in effect, Mexico was going to go bankrupt. And if they had gone bankrupt, then the New York investment banks would have gone under. So what did they do? They bailed out Mexico, therefore bailing out the New York investment bankers, and then they made the Mexican people pay.

AMY GOODMAN: Why would the banks in New York have gone under?

DAVID HARVEY: Because they had lent the money to Mexico in the first place. And if Mexico had just defaulted on its debt, what would the — you know, what would the bankers have done? They would have lost a tremendous amount.

AMY GOODMAN: If you were Timothy Geithner, if you were the Treasury Secretary —-

DAVID HARVEY: Yes, if I was Treasury Secretary.

AMY GOODMAN: —- what exactly would you be doing?

DAVID HARVEY: Oh, I would take a lot of that money, and I would put it into some kind of a national reconstruction corporation. And I would say, “Look, your first duty is to take care of the foreclosure crisis and the people who have been foreclosed upon. So go into cities like Cleveland and so on that have been devastated, and go into sort of areas in California and so on and take care of the foreclosure crisis.”

AMY GOODMAN: How would you do that?

DAVID HARVEY: Well, I think one of the ways you could do that is to start to buy out all of those houses that are about to be foreclosed on and put them into some kind of, I don’t know, municipal housing association or some collective form of that kind, and then allow people to remain in those houses, even though they’re no longer necessarily owners. So the ownership rights would shift.

I mean, we have a myth in this country that homeownership is the gospel, as it were. But for a lot of people, homeownership is not a good idea. And I think, actually, it’s not a good idea in general.


DAVID HARVEY: For two reasons. One is, it makes you actually very vulnerable if you’re a heavily debt-encumbered homeowner. And actually, the initial legislation was kind of interesting, the debate around it back in the 1930s, when it kind of said debt-encumbered homeowners don’t go on strike, and because it’s — you know, you’ve got to pay your mortgage. And so, this becomes, as it were, a millstone around your neck. And that then makes you very vulnerable to fluctuations in the market like we’re seeing right now, particularly if you have variable rate mortgages, things of that kind, and you can really easily get caught out. So, in effect, what we’ve seen in the housing market is a tremendous plundering of the assets of some of the most vulnerable people in the country. I mean, this has been the biggest loss of asset wealth to the African American population that there’s ever been.

AMY GOODMAN: And the response of some that, well, they should never have bought houses to begin with, because they couldn’t afford them?

DAVID HARVEY: Well, some of them, so that’s right, you know, but this is a familiar story. The first wave of foreclosures was really in impoverished neighborhoods, African American, immigrant and very often single-headed household women. And, yeah, they probably should not have become homeowners. But on the other hand, they were taking a risk. But who took the real big risks in this economy, if it wasn’t the bankers? So, in a sense, they’re being made to pay, while the bankers are still walking away with a tremendous amount of money.

AMY GOODMAN: What is the connection between gentrification and the mortgage crisis?

DAVID HARVEY: The gentrification process in here in New York and the like was again about kind of reconstructing urban environments in such a way, and a lot of that reconstruction entailed, particularly when it was corporate-led, entailed a big investment in housing. You then have the problem of who’s going to buy the housing. And it’s not only gentrification, it’s also a lot of that new development, new condominiums and all the rest of it.

And it’s kind of interesting. Finance controls both the creation of housing, the production of housing, and also its consumption. You lend money to the developers. They go in and gentrify a neighborhood. You lend them money to the people who are going to occupy it. And even if they don’t have — you’ve got to find that market for the gentrification once that process goes on. And so, the connection there in this, the financial operators are working on both ends of this game, if you like.

AMY GOODMAN: Can you talk about what you mean by “the right to the city”?

DAVID HARVEY: What I mean by the right to the city is that we have, I think, a real need right now to democratize decisions as to how a city shall be and what it should be about, so that we can actually have, if you like, a collective project about reshaping urban — the urban world. I mean, here in this city, effectively, the right to the city has been held by the mayor and the Development Office and the developers and the financiers. Most of us don’t really have a very strong say. I mean, there are kind of community organizations and so on. So I think the democratization of the city, of city decision making, is crucial. And I think we want to reclaim the right to the city for all of us, so that we can all actually not only have access to what exists in the city, but also be able to reshape the city in a different image, in a different way, which is more socially just, more environmentally sustainable and so on.

AMY GOODMAN: What does this current crisis mean for the future of capitalism, David Harvey?

DAVID HARVEY: You know, crises are terribly important in the history of capitalism. They are what I would call the kind of irrational rationalizers of the system. What happens is that capitalism develops in a certain way, has real problems, then it goes into crisis, and it comes phoenix-like out of it in another form. We went through a long crisis in the 1970s. There was a long crisis in the 1930s. So a crisis, then, is a moment of reconfiguration of what capitalism is going to be about. And right now, as I’ve said, the powers that be are more about trying to reconstruct the pre-existing power structure or save the pre-existing power structure without intervening in it in any way.

The way I see it right now is, however, we may be in a different kind of world. Put it this way. Capitalism historically has grown at a 2.5 percent compound rate of growth since 1750. OK. And in good years, it’s growing at three percent. Obama, the other day, said, “Well, in a couple of years, we’ll be back to three percent growth.” Gordon Brown says, “Well, actually, the economy will double in the next few years.” Now, when capitalism was constituted by everything going on around Manchester and a few other hot spots in 1750, three percent compound growth rate was no problem. You’re now looking at a situation where you’re going to say three percent compound rate of growth on everything that’s going on in East and Southeast Asia, Europe, North America and everywhere in the world. We’re looking at a different kind of world.

The total economy back in, say, 1750 was about $135 billion. It was $4 trillion by the time you get to 1950. It’s $40 trillion by the time you get to 2000. It’s now $56 trillion. If it doubles in the next year, we’re talking about $100 trillion. And by 2030, you’re going to have to find three trillion employment, if you like, profitable opportunities for capital to operate at that point.

Now, there are limits, if you like, and I think we’re hitting those limits environmentally, socially, politically. And I think it’s time we started really thinking about an alternative. In other words, we have to think about a zero-growth economy.

AMY GOODMAN: What does that mean?

DAVID HARVEY: It means that instead of growing at three percent per year, you just keep it constant.

AMY GOODMAN: And how do you do that?

DAVID HARVEY: And that means a completely — it means it has to be non-capitalist, because that means there’s not going to be any profit around for anybody to have. In effect, you’re going to have to have a nonprofit economy. And how you do that, of course, is a big, big question. I’m not — I don’t have the blueprint for it. But I think that this is one of the key questions we should be thinking about right now. And what disturbs me is we’re going through this crisis right now, and we’re not asking those kinds of big questions that we should be asking.

AMY GOODMAN: What do you make of the massive protest against the, well, smallest percentage of the bailout money, which is going to the executives, certainly something people can identify with?

DAVID HARVEY: Well, I got — actually, I got upset about all this fuss about the AIG. I mean, we’re talking about $165 million in bonuses or 220? Last January 2008, the Wall Street bonuses collectively came in at $32 billion. OK. And at that time, two million people had already lost their houses. Figure, two million people have lost their houses; Wall Street rewards itself $32 billion. Nobody got angry about that. And I was extremely angry about that. It seemed to me this was class robbery. This is like the bankers going down into the hold of a sinking ship and grabbing all the gold and going up and getting on a lifeboat and then disappearing and then leaving everybody else on this sinking ship. And at that time, I thought that was outrageous. And that’s $32 billion instead of this $165 or $235 million we’re talking about.

That money is already gone. I mean, when this guy wrote in to the New York Times

, kind of saying, “I’m not going to — I’m just going to give mine away” —- he’s going to give away $740,000 or something. And he said, “But my family is not affected.” But there are people starving right now in many parts of the world. Children are starving because of this. Nothing’s happening about that. And that seems to me -—

AMY GOODMAN: So what’s the difference between last year and now?

DAVID HARVEY: The difference between last year and now is that, actually, the thing has got much worse. I mean, the toxic assets, if you like, become more and more apparent. And we’ve had, of course, the destruction of the investment banks, Lehman going bankrupt and the others merging, and so on. So I think the difference right now is that Wall Street is clearly having to completely reconstitute itself.

But I don’t think we should kid ourselves into thinking that actually there’s not a lot of money — people are still making good money on Wall Street.


DAVID HARVEY: It’s just it’s consolidated now, as it were. We’ve got four major banks left in this country. And it’s a tremendous centralization and consolidation of class power.

AMY GOODMAN: Professor Harvey, what is neoliberalism?

DAVID HARVEY: Neoliberalism, for me, was a political project, which formed in the 1970s. And it was a political project to try to consolidate and reconstruct class power. And it did it, if you like, through a whole kind of set of mechanisms about privatization, about free markets, individual responsibility, withdrawal of the state from social provision. But the state never withdrew from the economy. I mean, that’s a myth. The state has been bailing people out all along. Actually, the savings and loan crisis, I mentioned earlier.

But as soon as the big guns get into trouble, the state bails them out. And this is what we call moral hazard, that actually because you’re bailing out Wall Street all of the time, then Wall Street will take high risks. And they’ve taken immensely high risks over the last thirty years and again and again and again being caught out. And each time they get caught out, the state steps in and saves them. That’s the connection, if you like, between the state and Wall Street. That’s the connection that has to be broken.

AMY GOODMAN: What do you see as the role of social movements?

DAVID HARVEY: I think right now it’s a desperate moment, in the sense that if we’re going to come out of this crisis in any different kind of way, it’s going to be because of the formation of very strong social movements that say enough is enough. We’ve got to change the world in a very, very different way.

Now, social movements of this kind don’t sort of form overnight. They take a little while. I mean, it’s interesting when you look back. In 1929, there’s the stock market crash. The social movements didn’t really start getting into motion until 1932, ’33. It took about three years. Right now, I think we’re in a legitimation crisis. They’re trying to rescue the system as is. And I think more and more people are beginning to say this is an illegitimate system, and therefore we have to think about doing something different.

Out of that, likely to come, all kinds of different social movements. We have this movement, which is a relatively new movement, called the Right to the City movement. It’s here in New York City, and it’s several other cities in the United States. There’s a national coalition. It’s small right now, and it’s getting its act together. But these kinds of things can grow very fast, very quickly. So there is likely to be many movements of that kind.

In other countries, there are already quite massive social movements. This country is a little bit behind on that trajectory.

AMY GOODMAN: And what would you identify as those massive social movements elsewhere?

DAVID HARVEY: In Brazil, for example, there are — there is a Right to the City movement in Brazil around housing provision and dwelling and so on. There’s a landless peasants’ movement in Brazil, which is very, very active and very successful in many of the things that it does. So, those movements are really very strong. There’s a peasant movement in India, too, which is actually really quite, quite strong.

And so, I think there’s a real moment here, where we also have to think about these things getting together globally, which is, of course, where the World Social Forum originated. And so, there are ways in which we can start to think about coordination between different parts of the world.

AMY GOODMAN: Professor Harvey, how does war fit into this? US is still pursuing the war in Iraq, though President Obama says that we will eventually withdraw there, but expanding the war now in Afghanistan, not just 17,000 more troops, then another 4,000 — that made it 21,000 — today the Pentagon asking for another 10,000 troops?

DAVID HARVEY: Right, right. Well, interestingly, there’s two aspects to this. First, you know, since 1945, what you call the military-industrial complex, it’s been a terribly important vehicle in American development. It has been the center of what we call military Keynesianism. I mean, it’s the one sector where deficit financing was thoroughly permitted, and it was the one sector under Reagan that expanded immensely and has never been let go, in spite of the end of the Cold War. So there’s been a very important economic function to what the military is about.

The second thing is that, as we’ve seen over the last couple of years, commodity prices are very unstable. And command over commodities and resources becomes absolutely crucial. So, in my view, a lot of the interventionism in the Middle East and elsewhere has been clearly built around US interest in controlling oil supplies. And it’s not only about that, but it’s very strongly connected with that, so that then arguments are made about, well, we’ve got to get rid of a dictator. Well, there have been plenty of dictators around the world the United States has not taken any notice of, because it didn’t control oil. And so, the kind of war machine, if you like, and the covert machines starts to become very important in terms of maintaining corporate access to the resources of the world and, at some point, also to the labor resources of the world, not only the natural resources.

AMY GOODMAN: How do you see the US in relation to the rest of the world, the balance of power? US versus Europe, US and China — do you see China emerging as the major dominant economic power?

DAVID HARVEY: No, I don’t see it becoming the major dominant economic power. I think there was this National Intelligence Council report, which came out last year. It kind of said, basically, the US is no longer going to be the dominant power in the world. It’s going to be a very important player in the world, but we have to look forward to a multi-polar world, in which East and Southeast Asia, for example, is economically as powerful as the United States. The European Union, if it gets its act together, is likely to be as powerful as the United States. So the United States has to look towards a multi-polar world.

That’s actually both unstable and potentially rather dangerous. Whether we like what the US has done with its domination, at least there was only the US versus the Soviet Union kind of world. When you start to look at the multi-polar world, you start to think back to what happened to the 1930s, when the groups decided they were going to go it alone and got into economic conflict between each other. And I worry about the future —-

AMY GOODMAN: What do you mean, “the groups”?

DAVID HARVEY: At that time, the Japanese Co-Prosperity Sphere; Germany, with its own kind of interests; the British. And, you know, everybody was going it alone. And I think the threat of the G20 is what we’re going to see as sort of a fracturing of the global economy along those lines. And that could be a good thing, in the sense that if there is fracturing and coalitions emerging at the same time, that’s one thing, but if it turns into fracturing and then rivalries between the power blocs, I think that would be very dangerous.

AMY GOODMAN: Your assessment of President Obama?

DAVID HARVEY: I think he needs a really, really strong, powerful social movement behind him to do the things he really needs to do. Right now, he has to deal with Congress. And, you know, there’s a group in Congress I would call the party of Wall Street, that is deeply implanted in the Democratic Party, it’s deeply implanted in the Republican Party. And so, he can’t do battle with Wall Street, given the significance of the party of Wall Street in Congress. I mean, for example, our New York senator, Charles Schumer, has raised immense moneys from Wall Street, and he’s a great friend of Wall Street. And so, the Democrats are not going to go against Wall Street. And one way or another, the Republicans are not going to go against Wall Street. So. I don’t know exactly where Obama would like to go, but certainly he can’t go against Wall Street, unless a whole bunch of people really force him to.

AMY GOODMAN: Do you see neoliberalism as dead? And what gives you the most hope?

DAVID HARVEY: I don’t see the neoliberalism as dead, if you say that neoliberalism is about consolidation of class power, because actually we’re seeing the further consolidation of it right now, rather than the lessening of it. And that’s what I -— when I talk about the bank bailout, that’s what it was doing. So I’m kind of concerned.

AMY GOODMAN: Were you for no bank bailouts?

DAVID HARVEY: Well, I was in favor of solving the foreclosure crisis. You see, if you’ve solved the housing crisis, the banks wouldn’t be holding any toxic assets. If you had gone in and bailed out all of the people, there would be no problem on Wall Street. They wouldn’t be sitting there with all the toxic assets. You wouldn’t have the foreclosures. So we should have gone in there right at the beginning and actually held down the foreclosure crisis.

AMY GOODMAN: And why didn’t they?

DAVID HARVEY: Because that would mean bailing out poor African Americans and people of that sort, and they’re not concerned with that. They’re concerned with protecting the bankers, not with protecting the people.

This then gives me hope, you see, because I think now that people might see it, that that is actually what’s been happening over the last thirty years and is really highlighted now — I mean, it hits you in the face straightaway. You know, this is what’s happening. And something different has to happen. Some sort of movement has to come out and say, “Look, enough is enough. We’re not going to continue in this particular way.”

AMY GOODMAN: Professor David Harvey, I want to thank you very much for being with us.

DAVID HARVEY: I thank you.

AMY GOODMAN: David Harvey is a Marxist geographer and distinguished professor of anthropology at the CUNY Grad Center. That’s the City University of New York. The Limits to Capital, one of his books, A Brief History of Neoliberalism.

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