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‘Not Relevant to the System’: The Crisis in the Backyards

‘Not Relevant to the System’: The Crisis in the Backyards

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Published by: bowssen on Jul 10, 2010
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‘Not Relevant to the System’:The Crisis in the Backyards
ijur_985 1..8
This essay provides insights into the crisis unfolding in the ‘backyards’of globalization,that is, in regions that are largely abandoned in terms of capital and are characterized by de-industrialization and depopulation. We take Eastern Germany as an example toexamine how the crisis manifests itself in this context. We look at the turmoil around the failed sale of the Opel car company, the acquisition of pre-fab housing estates by globalinvestors and risky financial transactions by municipal companies to show how crucialdecisions about the fate of urban regions have become widely disembedded from localdemocratic structures. We argue that regions that are ‘not relevant to the system’are not only particularly hard hit by the current crisis, but are also at considerable disadvantagewhen attempting to mobilize power to achieve solutions that are adequate to solve their  problems.
How does the current financial crisis affect urban development? Whatever the answermight be, it is obvious that this question cannot be answered in a ‘one-size-fits-all’manner. Moreover, an appropriate answer implies the clarification of what the term‘crisis’ refers to in this instance, and how the relationship between economic and urbandevelopment might be conceptualized.First, it is important to distinguish the everyday use of the term ‘crisis’as a synonymfor decline, crash, doom or failure from the concept of ‘crisis’that implies the dialecticalmoment at which the inherent contradictions of a system break free and cause thetransformation of the existing totality into a new one. This moment has found particularattention during the ongoing global financial crisis. In the wake of current turmoil, manycommentators seem to pin their hopes on the impending end of neoliberalism, in somecases even of capitalism, and augur the dawn of a renewed ‘New Dealof stateinterventionism. While it is still too early to ascertain whether these predictions maycome true, we find that too often arguments overemphasize the moment of disruption,which is implied in the meaning of ‘crisis’. The dialectical meaning of the Hegelian term
(which concurrently means abolishment, preservation and raising to a higherlevel) is not very clear. By contrast, we understand a crisis as the moment at whichinstitutionalized forms of regulation fail, yet at the same time are preserved and replacedin a way that builds on what already exists.Acrisis thus reveals the central contradictionsof the form that is in crisis and also opens the way to new forms of regulation — but itdoes so on the basis of existing forces. As a consequence, new forms that need to bedeveloped as a solution to the crisis are not predetermined. Rather, they are an outcomeof political struggles, ‘
une trouvaille
’ (Lipietz, 1985), in which certain alternatives winthrough against others. A number of crisis solutions are thus conceivable, ranging froma disruption of existing forms to their intensification (see Brenner
et al
., 2010).
International Journal of Urban and Regional ResearchDOI:10.1111/j.1468-2427.2010.00985.x
© 2010 The Authors. Journal Compilation © 2010 Joint Editors and Blackwell Publishing Ltd. Published by BlackwellPublishing. 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main St, Malden, MA 02148, USA
Secondly, we conceptualize urban development as being largely determined bycontradictory movements of capital that is invested in, or withdrawn from, existingspatial configurations. David Harvey (1982; 1985) and others have pointed out howurban and regional development in capitalism is characterized by uneven geographicaldevelopment and a see-saw movement of de- and reterritorialization as a means toovercoming problems of over-accumulation. Thus, whatever developments take place, incapitalism they can be expected to be articulated unevenly across localities, places andscales. Against this background we argue that the current crisis should be understood asa crisis of the actually existing mode of a capitalist production of space, that is, an urbancrisis, which is exercised in regionally specific and different ways at the same time andwill presumably lead to geographically diverse solutions.In summary, we conceptualize the recent crisis as being not only rooted in the existingforms of regulation, and opening the way to new forms, but moreover we expect that theestablishment of these new forms is (1) not predetermined and (2) spatially uneven. Weargue that regionally diverse forms of regulation can emerge from the crisis, dependingboth on the political struggles and the way in which a region is embedded in the globaleconomy. Thus, very different scenarios are conceivable, ranging from increasedredistribution and ecological interventionism to intensified forms of exploitation.While this view might seem self-evident to many urban scholars, it is not yet veryprominent in the German discussion about the current crisis. Discussions that relateeconomic developments and urban issues are still largely absent here, and there is adominant tendency to see the crisis mainly as a turmoil of financial markets that isresulting in problems for the economy. As a consequence, public intervention hasconcentrated on rescuing financial institutions and supporting certain branches (namelycar producers with car-scrapping schemes); the government’s position is that this flurryof state intervention should be the exception and not be replicated in other sectors.German chancellor Angela Merkel summarized this succinctly when she declared in aparliamentary debate: ‘There are financial institutions which are relevant to the systemand must be rescued. But there is no such thing as industrial institutions relevant to thesystem’.In this essay we argue that the notion of sectors being ‘relevant to the system’and theimplication therefore that other sectors are irrelevant to the system does not only applyto different economic sectors but also to urban regions. We use Merkel’s distinction todiscuss the implications of the crisis for various East German regions characterized byde-industrialization, depopulation and abandonment in terms of capital and expose howthe idea of sectors being ‘relevant’or ‘irrelevant’to the system intensifies problems there.We concentrate on various ‘hotspotsin which developments illuminate currentconstellations. However, it should be noted that, as the crisis is still unfolding, thisexamination can only be preliminary and far from comprehensive.
Hotspot 1: Postfordist
in Eisenach
The first place we examine is Eisenach, a city of 44,000 inhabitants in southernThuringia. Eisenach has had a car-manufacturing tradition since 1896 and was one of theleading car producers in the Eastern Bloc, employing more than 9,000 workers in the‘VEB Automobilwerke Eisenach’alone. After the reunification of Germany, the factory,like nearly all former East German industrial companies, was closed and sold to the OpelCorporation, which is itself a traditional German car producer and a subsidiary of General Motors (GM). Opel invested heavily and, with the support of massive publicsubsidies, opened a super-modern car-production plant in 1992 in which compact carssuch as the Opel Vectra and Opel Corsa were assembled. This investment developmentled to the rise of the southern Thuringian region as an economic cluster based on moderntechnologies and wage differentials between Eastern and Western Germany. In stark 
2 Debate
International Journal of Urban and Regional Research© 2010 The Authors. Journal Compilation © 2010 Joint Editors and Blackwell Publishing Ltd.
contrast to most of Eastern Germany, which was widely de-industrialized (see Bernt,2009), Eisenach gained a reputation as a kind of ‘model student’and was considered oneof the few examples of towns that had thus far managed the transformation from asocialist to a capitalist economy successfully. Opel is pivotal to the region, providing1,800 jobs at its main factory, in addition to 7,000 jobs with subcontractors and anunknown number of casual staff. As a result, Eisenach became a regional cluster for carproduction. It offered the highest concentration of industrial jobs in all of Germany. Theimportance of Opel’s car-production factory for the entire regional economy can hardlybe overstated; in fact, Opel Eisenach yields about a fifth of the total industrial productionof the federal state of Thuringia.The current crisis has dramatically challenged this situation — not so much as a resultof lack of demand for the Opel Corsa, but as a consequence of the malaise of GM inDetroit.ThelogicofGM’s involvementinOpelEisenachis interesting.As itis theparentcompany of Opel, the patent rights for vital components of Opel cars lie with GM. As aconsequence, Opel is obliged to transfer patent licence fees to Detroit in triple-digitmillion amounts annually. Moreover, GM instead of Opel is the holder of all assetsconnected to Opel, and the parent company has used these assets as financial securities.Thus when GM got into trouble in the wake of the financial crisis, there was animmediate danger that Opel might be drawn into the maelstrom too. If GM were to gobankrupt, the consequences for the regional economy ofThuringia would be devastating.In order to cover the debts of GM, Opel would need to cut costs through wage cuts, masslay-offs and factory closures, and eventually by selling the valuable parts of itscorporation to financial investors. The suppliers situated around the Opel productionplant in Eisenach would be hardest hit, as their operations are totally dependent on Opel.Most likely, this would lead to a disintegration of regional supply chains in which evenprofitable companies would be seriously affected. The result of GM’s problems inDetroit would thus be a razing of industrial structures in Thuringia.From this perspective, the fate of Opel has been arguably one of the top issues inGermany’s politics in the past two years, and the course of debates and the alternativesdiscussed provide interesting insights into the realities and power balances of capitalismtoday.It is a fact that, although all political parties widely agreed about the disastrous social,economic and regional consequences of the possible ruin of Opel, the issue of whetherthe state should intervene at all was strongly contested throughout 2009. Whereas theGerman government reacted immediately when the German bank Hypo Real Estate gotinto trouble, providing a deficiency guarantee of 52 billion euros overnight, proposedgovernment support for one of the few remaining industrial cores in Eastern Germanyencountered enormous opposition. A major part of resistance towards state interventiontherefore was purely ideological and indicated the extent to which a neoliberal worldview has become the dominant ideology of political discourse: the leading argumentagainst state intervention, brought forward on a myriad of occasions (and disregardingthe realities of public involvement in all kinds of private enterprises) was that the stateshould refrain from intervention to prevent the ruin of Opel because ‘the state is only thesecond best entrepreneur’, public subsidies are ‘poison’ to the market economy and a‘downward spiral’that will lead to socialism. Even in the current crisis,
wasportrayed as the best solution from which government should deviate only inextraordinary, closely defined situations.Thus, in stark contrast to the immediacy of government intervention when banks gotinto trouble, it took from autumn 2008 until spring 2009 before the German governmentreally became involved. Government support for Opel was strongly contested and manycommentators argue that it was only the pre-election situation that led to the fate of Opelbecoming a top issue in German politics. As a result, the German federal governmenteventually decided to support the separation of Opel from GM and to assist in selling thecompany to a new investor by means of a state-run rescue company, extensive subsidiesfor the purchaser and a bridging credit for GM.After extensive quarrelling about whether
Debates and Developments 3
International Journal of Urban and Regional Research© 2010 The Authors. Journal Compilation © 2010 Joint Editors and Blackwell Publishing Ltd.

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