Rebel Cities-David Harvey

THE URBAN ROOTS OF CAPITALIST CRISES 41"productive state expenditures:' When the hospital or university becomesthe site for innovation and design of new drugs, equipment, and the like,it becomes a site of production. Marx would not be fazed by these caveatsat all. As he says of fixed capital, whether something functions as fixedcapital or not depends upon its use and not upon its physical qualities. 16Fixed capital declines when textile lofts are converted into condominiums,while micro-finance converts peasant huts into (far cheaper) fixedcapital of production!Much of the value and surplus value created in production is siphonedoff to pass, by all manner of complicated paths, through fictitious channels.And when banks lend to other banks, even leverage on each other,then it is clear that all manner of both socially unnecessary side-paymentsand speculative movements become possible, built upon the perpetuallyshifting terrain of fluctuating asset values. Those asset values dependupon a critical process of "capitalization;' which Marx views as a form offictitious capital formation:Any regular periodic income can be capitalized by reckoning it up, on thebasis of the average rate of interest as that sum that a capital lent out atthis interest rate would yield ... For the person who buys this ownershiptitle the annual [money received) does actually represent the conversionof the capital he has invested into interest. In this way, all connection withthe actual process of capital's valorization is lost, right down to the lasttrace, confirming the notion that capital is automatically valorized by itsown powers. 17A revenue stream from some asset, such as land, property, a stock, orwhatever, is assigned a capital value at which it can be traded, dependingupon the interest and discount rates determined by supply and demandconditions in the money market. How to value such assets when thereis no market for them became a huge problem in 2008, and it has notgone away. The question of how toxic the toxic assets held by Fannie Maereally are gives almost everyone a headache. (What is the real value of aforeclosed house for which there is no market?) There is an importantecho here of the capital value controversy that erupted and was promptlyburied, like all manner of other inconvenient truths, in conventionaleconomic theory in the early 1970s.