ancient cities

744 Social Production of Space
accumulation and urban development become a
source of its legitimacy. Lefebvre grasps the active
role of the state in facilitating capital accumulation
in terms of the “state mode of accumulation.”
The role of the state in the production of space
is multifaceted and extensive. In conjunction
with the movement of capital, the modus operandi
of the state is centrifugal. The geographical
expansion of capitalism, such as the organization
of new spatial divisions of labor and the opening
of new markets, is usually backed by the political,
economic, and military power of the state.
With the controlling power over global financial
institutions (e.g., the International Monetary
Fund), the United States forced Indonesia,
Singapore, South Korea, and Taiwan to open
their financial markets during the Asian crisis in
the late 1990s.
The state intervenes in space and creates the conditions
for capital accumulation in a variety of
ways. The state fabricates urban space as a force of
production through direct expenses and regulatory
practices, including the construction of social infrastructures,
the provision of public services, and the
subsidization of business enterprises. In addition,
the state attracts and channels investment into the
built environment by providing fiscal incentives
such as land grants, low interest loans, tax breaks,
utility discounts, and other public subsidies.
Furthermore, the state plays an entrepreneurial role
in place marketing: It dramatizes the locational
advantages by lifting the regulatory barriers to private
profit making and by projecting a good business
climate.
The production of space is most discernable in
the context of the crisis tendencies of capitalism.
The falling rate of profits is precipitated by the
chronic problem of overaccumulation and underconsumption.
Sponsored by financial and state
institutions, capital has battled with the falling rate
of profit by implementing new production systems
and opening new markets. These spatial practices
of capital and the state leave marks on space:
Woven by an ensemble of exchange networks,
infrastructure linkages, and institutional arrangements,
the urban fabric is part of the means of
production. The geographical extension of capital
is not the whole story of crisis-induced restructuring,
however. The switching of investment into the
built environment is another aspect of what David
Harvey called the “spatio-temporal fix” as a
response to the crisis tendencies of capitalism.
The Role of Real Estate
The flow of investment into the built environment
is a cardinal moment in the production of space.
Real estate, along with construction, is a separate
source of profit: Driven by real estate interests,
capitalists transform land into the exchange value
of abstract space. During the economic downturns,
in particular, surplus money and capital find an
outlet for investment in real estate. According to
Lefebvre, such a second circuit of capital in the real
estate sector has become an active part of capital
accumulation and has played a leading role in
urban (uneven) development.
The operation of the real estate sector is orchestrated
by land-based interest groups (e.g., developers,
speculators, investors, government officials),
financial institutions (e.g., banks, mortgage companies,
insurance companies, pension funds), and
government-sponsored programs (e.g., loan guarantees,
subsidies, tax deferrals). These various
actors are coalesced into growth networks that
influence land development decisions, channel
investment into certain directions, and determine
land-use patterns. The actual composition of
growth networks may differ from place to place,
and a local area may have various competing
growth networks; yet, they are deeply involved
in the production of the built environment and
major real estate development projects, such as the
construction of industrial parks, office towers,
malls, master-planned communities, and resort
complexes.
The metropolitan real estate market is huge and
growing. The globalization of the real estate market
is an emerging trend: Land and the built environment
on it are immobile but are converted into
a fluid commodity like other commodities in the
global market. The key to the globalization of real
estate is state intervention; the liquidity of real
estate has increased with the medium of state-
sponsored financing mechanisms, including secondary
mortgage markets, mortgage-backed security
markets, and real estate investment trusts. With
these mediating schemes, real estate can be tied to
the global capital market, and the second circuit
of capital becomes a global process. Increase in