Crisis

A crisis, in the lexicon of contemporary human geography, refers to a period of significant structural change and transformation. Typically, the term and the concept are used in various forms of Marxist analyses of capitalism. However, traditional economists occasionally refer to crises in the contexts of downturns in the business cycle. In both traditions, the notion of crisis speaks to the instability that lies at the core of capitalist development in time and space.

For Marx, capitalism's tendency toward crisis emanated directly from the extraction of surplus value in the production process. Because capitalists must extract surplus value to generate a profit, there is a long-run tendency for the system of production to overwhelm workers' capacity for consumption. The result is a chronic oversupply of goods, leading to declining prices and profits. As profits decline, firms are forced to react by cutting wages, restructuring production, or both. Marx predicted that capitalism's tendency in this regard eventually would so immiserate the proletariat that, in the final crisis, the working class would ultimately destroy that system and replace[Page 64] it with a socialist one better suited to working-class needs.

More recent views of crisis focus on changes that occur during periodic recessions and depressions. Economist Joseph Schumpeter argued famously that capitalist development is characterized by “creative destruction” as new technologies and markets destroy the old ones. In this reading, capitalism is in constant disequilibrium; indeed, much of the vitality and adaptability of the capitalist system arise directly from its continual processes of change. In the same vein, Simon Kuznets examined investment behavior as the motor that drives the business cycle. In his view, each firm must invest or disinvest in anticipation of future profits; thus, each company's individual rationality creates a collective irrationality; that is, the market is inherently unstable. Although crises are devastating for less competitive firms, often driving them into bankruptcy, they often make surviving firms even stronger. During downturns, when firms have relatively little to lose, they may experiment with new forms of production (i.e., technologies), new products, and/or new markets as well as seek out new geographic locations. Thus, crises are useful in reestablishing the conditions of profitability. For this reason, James O'Connor argued that crises are actually useful for capitalists as a whole even though they are fatal for some. Indeed, market-based systems would be deprived of their ingenuity without the periodic need to experiment and restructure; thus, capitalism is not only crisis ridden but also crisis dependent. Increasingly, therefore, as crises are seen as functionally necessary for the survival of capitalism, they have become viewed not as abnormal aberrations but rather as perfectly normal parts of the capitalist machinery.

A central contribution of Marxist geographers was to spatialize the notion of crisis. David Harvey played a profound role in this regard, particularly through his famous notion of the spatial fix. Harvey argued that the processes of competition and the extraction of surplus value led firms to accelerate the turnover rate of capital. Geographically, this process involved the search for more efficient transport systems. Capital tied up in transport is not directly realizing surplus value; therefore, reducing transport times accelerates the process of capital accumulation—what Harvey called time–space compression. However, reducing transport costs is difficult and expensive because the infrastructure needed to shuttle people and goods is expensive, is durable, and has a long depreciation time. Indeed, out-of-date transport systems (or the whole pattern of fixed capital investments in general) will inhibit future rounds of accumulation, eventually becoming a barrier to further accumulation. Thus, the spatial fix—the landscape that capitalism produces during temporary windows of stability—is periodically reworked during periods of crisis.

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