Notesale: Turn your study into money

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Financialisation, Global Cities and Housing
Section 1 - Global Cities
Global Cities?

• World cities — Global Cities — Network Approach

• Or, an approach of the 'world of cities’?

World Cities

• Rise of TNCs and the NIDL — emergence of the city as the fundamental geographical
unit around which the economy was organised

• For Friedman (1955) cities became ‘centres through which flow money, workers,
information, commodities’

• Basing points

• Control centres

Global Cities

• Saskia Sassen built on World Cities literature to make two further key contributions:

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Brought to the fore the dual tendency towards decentralisation and agglomeration

• Investigated why a number of cities (New York, London, Tokyo) had similar
transformations into world cities, despite being so different

Advanced Producer Services (APS)

• Things which allow the process of production to function:

• Insurance

• Banking

• Financial service

• Legal Services

• Consulting

• Advertising

• Role of APS in enabling and enhancing the global capacity of TNCs

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Decentralisation and Agglomeration

• Decentralisation across the world, except for these nodes of clustered APS

• APS are highly concentrated because of:

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The benefits of clustering

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Access to infrastructure

•

Two key points:

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‘the more globalised the economy becomes, the higher the agglomeration of central
functions in…global cities’ (Sassen, 2001)

Networked approach

• Spaces of flows = dominant spatial logic of the informational society

• Spaces of flows connects places with specific functions [nodes]

• Not just cities at the top of the hierarchy but many cities, all with different functions to
play - can’t only focus on the global cities

• Sometime she work on global cities can be idealistic (almost like a brand, sweeps
social/environmental issues under the carpet)

Global cities and inequality

• All three theories challenge the idea that globalisation:

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That this hyper-mobile economic activity benefits everyone equally:

• Dual City (Castells)

• Polarisation (Sassen)

• Uneven globalisation (GaWC)

• All three argue that as cities globalise, levels of inequality increase

Polarisation

• ‘Almost half the jobs in the producer services are lower-income jobs, and half are in the
two highest earnings classes
...
’ (Sassen, 2001)

• So we have moved from a large proportion of middle-income jobs to extreme highs
and lows of income

• The service industry needs highly educated staff and is willing to pay for it

• Growth in part-time and temporary contracts and other forms of insecure work

• The service sector and demand for low-paid, low-skilled service work

• Gentrified and Super-gentrified and spatial concentration of poverty are often ‘cheek
by jowl’, sitting side by side

‘World Cities’?

• It is a view that:

• Foregrounds financial and corporate activity

• Emphasised hierarchy and competition

• Makes globalisation look very Western

• And focuses on specific cities and on specific districts within those cities (such as
Canary Wharf within London)

• By foregrounding this view, other possible understandings of what constitutes world or
global ‘cityness’ are obscured

‘World of cities’?

• Peck (2015) highlights two main reactions to this hierarchical, competition focused
approach:
• The reintroduction of the ‘ordinary city’ into urban theory
• e
...
Amin A
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(1997)
• Postcolonial turn - realisation that the global south is incredibly important in all
this

• e
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Robinson, J
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7%

Financial Motives

• Increasing role of financial motives in non-financial firms:

• The increasing role of shareholder value in shaping the production of tangibles
goods and services — jeopardising long-term integrity in favour of short-term
returns

• Increased investment in financial assets as source of revenue and profit

• Establishment of ‘financial arm’ as a means to make money

• For example, Tesco makes more money from being a bank than a supermarket
and Ford makes more money from Ford Credit than selling cars

Financialisation of everyday life

• Placed new-demands on individuals and households to accept risks

• Created ‘investor subjectives and financially self-disciplined subjects’ (French et al,
2011)

• This has gone hand in hand with the retreat of Keynesian welfare state and
replacement with private-sector alternative - privileging of shareholders over labour
and consumers

Financialisation and inequality

• The increased demand to take risks and the redirection of profits towards investors:

• The vast majority of people are pushed into a more precarious position, while
those able to invest become more wealthy

• Financial firms tends to cluster in elect locations — large portion of financial activity
concentrates within a relatively small number of financial centres (these places see
positive deindustrialisation - voting remain?)

• Financial exclusion: ‘those processes by which individuals and households face
difficulties in accessing financial services’ (Leyshon et al
...


• Exchange value is singular, but can vary

• In tension with each other

• Exchange value = no use value (cannot have both simultaneously)

• Reflects structures of capitalism

Financialisation and the urban

• Urban growth relied on finance

• Large-scale infrastructure

• Skyscrapers

• (Luxury) housing

• Complex public/private relationships

• Land purchases

• National debt

• Finance is central to building and buying housing

• Ultimate ‘big ticket’ purchase

• Very few people can buy a house with no mortgage

• Related benefits to suburbanisation

• Absorbs surplus capital and supports the car industry

• Limits labour unrest (people won't strike if they might lose their jobs ad therefore
can’t pay their mortgages and so lose their homes)

• Nuclear family and Cold War

• Housing becomes a commodity

• Tensions between use and exchange value

• Creates ‘financial subjectives’

Mortgage

• Loan of money to someone who wants to buy a house or flat, that then they pay back
with interest added, and that is secured by the value of the property (the asset) - i
...
if
you cannot pay your mortgage, your house can/will be taken from you

• Mortgages in the 1980s

• Money was lent to people living and buying a house in the same geographical
location as the lender - lending from local building societies (simple transaction)

• Issues: what happens if there aren’t enough savings to meet demand? Or lots of
savings but few houses for sale? Or lots of people lose jobs and house prices
slump?

Local to National Lending

• Solution: link local lending markets up to create a national lending system

• Reduced risk - lack of savings/houses in one area is compensated for by another

• Savings used to meet mortgage demands in another place


National to Global Lending

• Problem = what about when there are limits to national lending?

• Solution = link mortgages to other financial markets

• Mortgages offer investors low-risk investment:

• Make it easier for mortgage lenders to get money to lend

• Further reduce interest rates, making mortgages even more attractive

• (Supposedly) good for investors, and good for buyers

Securities

• Securitisation enables mortgage lenders to sell their mortgage portfolio on the
secondary mortgage markets to investors

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Meant that lenders could take mortgages (and other loans) off their books and
therefore free up equity to make more loans

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g
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7 trillion; 1999: €13
...
2

• Individuals encouraged to release equity (re-mortgage) and invest (buy another house)

• Multiple high-interest mortgages

• Tension of exchange and use value - attempt to have the use value of their own
house and exchange value of a second

• Creates bubbles in Sunbelt, Spain, Ireland, etc
...
higher interest/fees;

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fails to account  for borrower’s ability to repay loans;

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• Supposedly liberatory and democratising

• ‘Secured’ within tranches to ‘eliminate risk’ - mortgages sold as bundles,
contained as ‘good’ and ‘bad’ loans, both secure (low risk, low yield) mortgages
and insecure (high high, high yield) mortgages

• Known as ‘collateralized debt obligation’ (CDO)

• Their growth increases the size of the bubble:
• In US subprime mortgages went from $35 billion (5% of total) in 1994, to $600
billion (20%) in 2006
• Creates two-tiers of financial subjects
• In the US this was massively linked to race & ‘subprime debtors’

• While African-Americans were able to own homes, their mortgages were very
high-interest
• Falling house prices, credit crunch, missed payments, foreclosure
• “Underestimated risks, overestimated returns” (Aalbers, 2009)

Consequences of financial crisis

• Subprime areas/debtors hit hardest 

• ‘Global processes, localised impacts’ (Martin, 2011)

• Think within and across cities

• Drives payday loans (e
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loaning from Wonga) – financial subjectivities

• Loss of homes and assets

• Search for exchange values costs use value

• Banks and lenders bailed out

• Liquidity retained at individuals’ expense

• Sets scene for next phase…

Post-Crisis Trajectories

• Mass foreclosure reduces ownership & asset prices

• Exchange & use values decline together

• BUT, financialisation not stopped

• Mass-asset ownership increased as individuals default

• Birth of ‘Global Corporate Landlords’ (Beswick et al
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g

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