I had a serious aha moment two weeks ago at the TEDx Berlin during Melanie Rieback‘s talk about sustainable entrepreneurship. In her talk, she examined the principles of “normal” start-up culture: finding investors, scaling up and then exiting. Her proposal was a shift to more organic, slow growth without investors and without the exit – both of which result in extraction of profits from the system. In her view, it’s not about a short-term financial win, but building on a good idea long-term.
This got me thinking about two of the topics that I have been working on extensively over the last few years: affordable housing and urban commons. I realized that there is, in fact, one topic which links them (and “normal” start-up culture): the concept of profit extraction. Things really gelled after I read this article about Richard Florida’s new book, The New Urban Crisis.
Put succinctly, since the beginning of the industrial revolution, urban centers have been the location and apparatus for wealth creation and concentration. Over time, the physical structures of urban centers themselves have also been subverted to the logic of capitalism – high demand for limited resources in an unregulated market usually yields high prices, all other factors held equal.
If we treat urban resources such as housing, dockless bike sharing and water utilities following the usual capitalist business model, then somewhere along the line, someone – independent of whether that person is an investor, manager or owner – is going to extract profits (i.e. capital) from the system. Because they remove value from the system, the prices have to rise in order to “refill” the value that was extracted. The user is not just paying for using the resource and the management and maintenance of whatever it happens to be, but also always paying some added extra so that someone higher up the line can get a payout, usually at regular intervals.
So what do urban commons and affordable housing have in common? They stop treating urban resources as commodities which are intended to generate profit for owners and investors and instead treat them as basic needs for the survival of the urban population.
I am not suggesting the abolition of capitalism by any means. On the contrary, as I discussed in my last article, I believe that commons and non-profit-oriented resource organization should become a bigger part of the offer in cities in addition to traditional market-based offers.
However, the crisis that threatens affordable housing stocks and wants to enclose urban commons is in part the result of the absolute dominance of the capitalist paradigm. Happily, the development and maintenance of commons and affordable alternatives not only create more diversity but, in so doing, also help reduce the dominance and seeming self-evidence of capitalism-driven urbanism.