The Creditor and the Debtor
By Roxane van Hoof
The concept of finance is most easily explained as a relationship between the creditor and the debtor. This relationship is central to the workings of the finance and banking system. Changes to financing processes mean changes in the creditor-debtor relationship. For the debtor, debt is finance; for the creditor, the benefits of debt–in the form of retrieved interest–are finance. The existence of contemporary capitalism depends on a continuous creation of debts.
Finance and banking are ubiquitous within contemporary institutions. The power of the bank and the business of the bank are entirely based on the immaterial. Banking is based on confidence and creditworthiness. Intangible qualities and agreements, trust and discretion, have always had a special significance in the banking business, even more so than in other sectors of trade. With processing tasks increasingly carried out by machines, the bank today survives and thrives on its ability to communicate - to persuade, assure, impress, and convince.
Architecture and planning do not transcend the financial; they are disciplines wholly contained within finance, reflections of the creditor-debtor relation. In cities, life is disciplined through space. Architecture and urban, regional and spatial planning contribute to the governing of space and how space is used. Municipal governments have shaped cities to facilitate the accumulation and circulation of capital in service of constant economic expansion. Finance permeates the accumulation and circulation of capital from start to finish. Each round of financialization needs to involve other spheres of life to enable a continuous expansion of accumulation. Housing, in particular, has been appropriated, monetized and financialized.
In the debt economy, the future takes on a special significance. Debt is about predicting the future, owning it, controlling time and minimizing uncertainties. The realms of calculability, efficiency and predictability are expanded to manage uncertainties; it is all premised on an unwavering belief in the supposed self-regulating and free market. When all controls and constraints on flows are removed and the mythological market beast is unleashed it will find an ideal mix of land use, maximize profit and land value and sort citizens in the most efficient manner. Free-market urbanism applies logics of economic growth to entire neighbourhoods and cities.
Within this context, urban governance increasingly takes on the tasks of corporate management, as public and private sectors are restructured to put profit first. Creating more property tax revenue dominates decisions and is the basis for land-use policies. The city as a corporation applies rational principles and unbiased facts; it follows the market and evaluates data. Policies are focused on the demands of the market and real estate developers rather than citizens. The city is a product, a mere vehicle for investment, to be branded, marketed, developed and sold with the label of a sustainable, innovative, creative or globally competitive city. The entrepreneurial approach prioritizes the competitiveness of a city. Economic expansion is equated to progress and prosperity and real estate development is considered a prime indicator of progress and generator of profit.
To satisfy the mythological market beast, the city needs to continue its economic growth, to continue attracting investors, to create more and new economic opportunities from which the real estate sector can profit. Justified with trickle-down economics the entrepreneur is lured with tax incentives, the investor with attractive urban projects, portrayed as maximum benefit, minimum risk in convincing images and numbers. The expansion of existing firms, the creation of new firms and attracting investors are paramount to foster more economic growth in the globally competitive city.
Market-led economic development results in developer-led architecture and planning. With design-build contracts and public-private partnerships, power is transferred from architects to businesses and developers. Public space is privatized when the corporate takes charge of the urban. The realization of amenities and spaces depends on whether or not they can produce a profit. In the competitive city, architecture produces endlessly flexible environments, touting freedom, spontaneity and innovation. The market is the final arbiter of freedom and the ability to follow the market–to remove all constraints–is considered a final goal. Architecture, like the city, needs to be branded and marketed, explained in terms of profit. Attractive images boast new concepts that sell houses without kitchens as ‘the new communal living’ and for-rent shared office spaces as ‘incubators’.
Corporate cities create an environment in which the private interest of some take control of the lives of all to maximize private profits and minimize private risk. The urban is reduced to a financial abstraction, a product to generate more investment. Cities are increasingly privatized, financialized and polarized as the market-driven city gains dominance. Neighbourhoods are upgraded, providing security and certitude, problems are fixed and order is restored, cities are revitalized and regenerated. The result is well-planned, liveable, sustainable, globally competitive, innovative and creative cities. Regenerate, revitalize and repeat. That these new developments displace the poor, and show absolute disregard for the city’s indigenous population, existing communities and social sustainability goes unnoticed in the free-market city. We are willing to annihilate social housing and displace local communities in the name of regeneration and mixed-income neighbourhoods.
Resistance is easily minimized with platitudes, it is just the way the market works or what the market wants. The insistence on the market, and the supposed power it has over us, our cities and our architecture, largely obscures that the changing nature of our cities is, in fact, not controlled by a mythical market beast that calculates, processes and creates cities at will, but rather the result of structural forces of power, politics, policy, capital and class. The persistence of the myth of the market that the debt economy has created confines us in what we do, and what we think is possible to do. If we do not resist, our cities will turn into broken and fragmented spaces, segregated urban enclaves, available to some, unavailable to many others. We need to start questioning the mythological market beast and destroy the supposed polarity between endless progress and disinvestment. We need to understand the systems of finance and financialization and the creditor-debtor relation that feeds it. We need to separate the market from the myth.
Roxane van Hoof is an architect and researcher currently practicing in Belgium and the Netherlands. She is a co-founder of Studio Verter. She started her on-going research into the architecture of debt with her graduation at the TU Delft. The project examined the changing role of the bank in relation to its architecture. The resulting design addressed the Dutch Central Bank and the banking system, with the intention to make its now almost entirely representational function explicit.
