Short course description: Principal theories and debates in contemporary political-economic geography, with particular emphasis on global and regional transformations.
This course is divided into two modules. In the first half, we'll examine some foundational themes in geographical political economic theory. Our focus will be on deconstructing several approaches that have been influential in geography. Our goal here is both to understand political economic theory and to think about how to apply this theory to help explain contemporary capitalist systems in which we live our everyday lives. The first half of the course will consist of mini-lectures, in-class discussion, and a few in-class writing activities. In the second module, we'll use the theoretical tools and critiques developed in the first half of the course to read several books concerning contemporary geographies of capitalist crisis. The second half of the course will consist of seminar-style discussions based on weekly reading. In both modules, we consider how difference - including race, gender, and class - intersects with and is implicated in the production of inequality in contemporary capitalism.
A story of contemporary capitalism: It might seem impossible to imagine right now, but only a few years ago some of the most powerful and influential managers of the global financial system were forced to confront the very real possibility of capitalist collapse. The rhetoric became panicked and often violent. In the Summer of 2008, U.S. Treasury Secretary Henry Paulson appeared before the U.S. Senate to seek authorization for a government guarantee of "Fannie Mae" and "Freddie Mac," two giant but obscure quasi-governmental corporations nicknamed for their cumbersome acroynms, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Fannie and Freddie were on the edge of collapse, embroiled in a worsening U.S. home mortgage lending crisis that was threatening financial markets around the world. The initial sign of crisis in the world's banking systems had come more than a year earlier, when HSBC, the giant Hong Kong and Shanghai Banking Corporation, issued an unprecedented earnings warning to shocked investors in a simultaneous announcement from London and Hong Kong, blaming the problems on rising default rates in one of their divisions that specialized in lending to low-income homeowners in the U.S. Now, in the Summer of 2008, Paulson told the panel of angry Senators that reassuring the world's large institutional investors with interests in Fannie and Freddie would require the unlimited power and resources of the U.S. government; he drove the point home with a provocative metaphor:
"If you've got a squirt gun in your pocket, you may have to take it out. If you've got a bazooka, and people know you have it, you may not have to take it out. By making [the government guarantee] unspecified, it will greatly expand the likelihood it will not have to be used."
Paulson got his bazooka, but the weapon proved useless as investor panic drove down stock markets around the world. In the Fall, some of the world's largest financial institutions collapsed, and others only survived thanks to almost 50 separate government programs to "stabilize" the financial system; the Federal Reserve used more than 21,000 separate transactions to rescue exactly the same institutions responsible for the crisis -- including more than 100 repeated infusions of several trillions of dollars to giant banks like Citigroup, Merrill Lynch, and Morgan Stanley. Ben Bernanke, chair of the U.S. Federal Reserve, later testified to the Financial Crisis Inquiry Commission, "As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression." Yet even as Paulson's bazooka metaphor began a long period of desperate meetings of powerful bankers and politicians (nearly all of them White men) committing trillions of dollars to bail out banks and investors, it was a small-caliber handgun wielded by an elderly woman of color that exposed another, forgotten side of the capitalist world's harsh, unequal political-economic geographies.
In the late 1990s, a low-income African American woman in the deindustrialized city of Akron, Ohio named Addie Polk agreed to a series of mortgage loans on a small house she had purchased with her husband Robert back in 1970. Addie and Robert had paid off the loan in 1982, but then Robert, retired after many years of working at the local tire-making company, died in 1995. Addie found it more difficult to keep up with expenses. But this was a period when mortgage lenders and investors had, paradoxically, found ways to make billions of dollars of profits by aggressively pushing high-cost, high-risk loans packed with deceptive, hidden fees and penalties into low-income and racially-marginalized communities. Lenders tricked vulnerable consumers, and then earned quick fees by selling the mortgage obligations into a fast-expanding, worldwide "securitization" market of speculative debt investments with obtuse names like Residential Mortgage-Backed Securities (MBS), Collateralized Debt Obligations (CDOs), re-bundled packages of Collateralized Debt Obligations (CDO-squared), and Credit Default Swaps (CDS). Many of these obscure, confusing financial instruments were devised by Wall Street executives, working closely with highly-paid lawyers as well as mathematicians and physicists with Ph.D.s, to find ever more creative, sophisticated ways of measuring, 'monetizing,' and trading every aspect of consumers' interactions with financial institutions. Wall Street's obscure, confusing new instruments were explicitly designed to be obscure for anyone not 'in the know.' Unfortunately, these dangerous instruments proliferated in an ideological climate of de-regulation, thanks to the longstanding dominance of economic theories favoring self-correcting markets, market innovation, and the rationality of consumer choice. Elizabeth Warren, the leading analyst of America's worsening household bankruptcy crisis from the 1980s through to present times, used a telling metaphor to warn of the risks of de-regulation: thanks to the Consumer Products Safety Commission and similar policies, it's illegal for a company to sell you a toaster that's likely to burn down your house. But it was entirely legal -- and celebrated as "innovation" -- for a bank to lure you into a loan that will burn through your family's savings and accumulated home equity, eventually forcing you out of your house.
Brokers and lenders thus aggressively pursued millions of customers like Addie. The last loan she got, when she was in her mid-eighties, was a thirty-year mortgage that put her in debt for 180 percent of the assessed value of her home (which was worth about $32,000). Addie eventually fell behind on the payments, and the lender -- Countrywide Home Loans, then the nation's largest home-loan originator -- began foreclosure proceedings. The loan was then transferred to Fannie Mae (one of those obscure giants Paulson was trying to rescue with his metaphorical bazooka) which acquired the home at sheriff's auction. Addie, who was by then 90 years old, began receiving a series of foreclosure notices, while many miles away in California, Angelo Mozilo, CEO of Countrywide, delivered a speech to the right-wing Milken Institute in which he blamed the worsening crisis on "special pressure from minority advocates to help people buy homes," which forced lenders to "lower their mortgage standards." In fact, journalists later documented, Mozilo had aggressively pressured the reluctant chief executive Fannie Mae to purchase the increasingly dangerous loans Countrywide was churning out. Later, as the crisis worsened and Countrywide was taken over by one of the nation's few surviving large banks -- in a transaction that analysts later dubbed "the deal from hell" in light of the legal liabilities for Countrywide's years of deception -- Mozilo was negotiating to retire with a $112 million bonus package, culminating a decade in which he had already received some $410 million in compensation. Back in Akron, two sheriff's deputies arrived to enforce an eviction order against Addie. There was no answer when the deputies pounded on the door, but then they heard loud banging noises from the second floor. A neighbor grabbed a stepladder to investigate. He found her on the bed in a pool of blood. Wracked with guilt for getting deeply into debt and falling behind on her payments, lying alone in bed upstairs while the deputies pounded on the door to kick her out of her and Robert's home, she shot herself with a small handgun.
This story highlights some of the themes we'll explore in this course. Our purpose is to analyze contemporary theories and debates in political-economic geographies -- the study of political struggles and decisions over economic practices, as they reflect and reinforce geographical processes, inequalities, and uneven development. Henry Paulson's bazooka, and Addie Polk's small handgun, draw attention to the relationship between the local scale of a low-income neighborhood in a deindustrializing city, and the transnational scale of investment markets and political centers from Hong Kong and London to Washington DC and New York City. They remind us that inequalities of race also involve other aspects of identity and social position -- Addie was a single, elderly widow of a working-class man. They remind us that economic processes -- how people promise their homes in return for loans from banks, and the rules of the game when things go bad -- are always subject to political decisions. The world's largest banks got bailed out, while Addie Polk blamed herself for getting into debt -- the same debt that made Wall Street bankers and brokers wealthy. It's a heartbreaking story, but it is crucially important to analyze the full complexity and theoretical implications of these kinds of processes; to learn more about these dynamics from the perspectives of your instructors in this course, see Wyly, Elvin K. and C.S. Ponder (2011), "Gender, Age, and Race in Subprime America," Housing Policy Debate 21(4), 529-564, and Rosenman, Emily, Samuel Walker, and Elvin Wyly (2014). "The Shrinkage Machine: Race, Class, and the Renewal of Urban Capital." In Horace R. Hall, Cynthia Cole Robinson, and Amor Kohli, eds., Uprooting Urban America: Multidisciplinary Perspectives on Race, Class, & Gentrification. New York: Peter Lang, pp. 41-73.
Addie survived the gunshot wound, but she died just a few months later in a nursing home. Mozilo was ensnared in ongoing litigation, and was eventually forced to give back a few of the millions of his bonus package -- but only a few. And the financial practices symbolized by Addie's experience with Mozilo's Countrywide sent shock waves of unemployment, foreclosure, and family distress across many parts of the world, and exacerbated America's entrenched inequalities of race and class. Between 2005 and 2009, African American and Latina/Latino households in the United States endured losses in household wealth of 52 percent and 66 percent, respectively, compared to 16 percent for Whites.