Almost all the analyses of the recent financial crisis, that started in the US but pretty much affects most of the world, lays the blame on the recklessness of financial institutions, miscalculation of value and the basic problems endemic to the act of speculation itself. Political critiques blame the US squarely for riding on a credit-based economy that asserted itself in the Reagan era and more or less set crazy standards for financial institutions everywhere.

Some even blame the emergence of stock market software and the spread of the web as a prime mover of financial opaqueness that eventually grew to monstrous proportions. You could shave profits off stock – markets situated across time zones calculated at fractions of seconds and make capital theoretically available for investment in any which way to anyone, anywhere in the world – for a price calculated on the cost of communication and not on concrete value.

However – at the end of the day you can’t really blame the logical extension of manipulating economic interests to its extreme, using technology or whatever, as long as the systems in place support the broad logic – of making profits. But sometimes, even in the toughest of capitalist skin, there is feeling. Especially if you find yourself hacking at the very branch that you are sitting on. That’s when it makes sense to say that the profit logic needs some qualification.

However, such a qualification should well apply to all dimensions of the game. If financial institutions need to become more transparent, if governments need to be a tad more intrusive, if credit has to become more sensibly priced then value too needs to be evaluated critically.

The heart of the problem does lie at the question of real value. We find it difficult to believe that most analysts skip over this issue or make fleeting mention before going back to blaming old demons – laissez faire on one hand and bad fiscal management by the state on the other – even though these may well be symptoms than the real causes.

The fact is that speculation around real – estate, as a specific mode of speculation and transforming value follows quite distinct rules. It is at once related to concrete, quantifiable assets as it is to asserting an abstract value around these assets by changing the terms of its supply and demand. In other words, you can always claim legitimacy for the act of construction even when there is no real market. You can simulate demand quite literally when none exists – based on a different kind of projected speculation – in the hope that people will keep exchanging, moving up, aspiring towards better lifestyles. That governments will always invest in improving infrastructure, so on and so forth. While this applies to all basic acts of consumption (and we can see the effects of this on other realms of our lives – environmental degradation, the expensive business of waste disposal), the specific way in which this happens in the realm of construction needs to be isolated.

The industry’s ability of evaluating terms based not on real needs but on an abstract sense of general needs is a special mode of simulating demand. We are told we need buildings, roads, infrastructure and homes. Since no one actually questions that – these general needs can be evoked to raise and justify investments and capital re-cycling without it tallying with the ground level needs in real terms. In an advanced economy such as the US – the crisis was triggered off by an over-supply that pushed down the value of mortgages making the interest rates redundant. What’s happening in China is slightly different. The building and construction industry has been investing in the name of abstract and general needs and borrowing heavily from a financial market that has lost its focus behind the frenzy of globalized speculation. But the effects will be more or less the same. A major crisis of credit.

The fact is that the construction industry has played a crucial but largely ignored and even invisible role in producing a fog around the idea of value, credit and financial investment while muddying the waters extensively on the ground.

In many parts of the world – housing has been framed as a need to be financed and supplied by construction companies with massive access to capital. Construction companies have built cities afresh or re-built and destroyed habitats without paying any attention to the way in which the configuration of real needs of people, their livelihoods, ability to pay have been factored in sensibly.

Yet – their role is never in the forefront of discussions and debates. Once more the world of built-form is relegated to being the stage in which dramas take place, the context in which life is lived, an invisible casing in which capitalism operates. In reality, built-forms, as Linda Clarke informs us in ‘Building Capitalism’ are themselves production sites. Cities are living financial worlds that produce, consume, exchange and re-arrange resources of labour, capital and the environment and have been doing that for centuries.
Its like discovering that the inanimate world of rocks are actually living breathing entities that wield a massive influence on people living in their proximity.

These world makers have always worked from behind the scenes – fully supported by the local kings, aristocratic lords or the religious elite.

Today, they are the hidden arbitrators of a certain kind of value that energizes one significant part of the market.

Its easy to blame specific acts of mismanagement, the ability of technology to create confusion or pass judgments on entire ideologies by completely ignoring this point. Something similar happened during the Cold-war. While the world was quibbling over grand narratives of capitalism and communism; builders, engineers, construction companies and architects flowed easily through iron curtains and concrete walls in the name of being neutral agents.

We are only building, creating, doing good – they would smile, we are not quite ideological.

Yet they had immense powers to channelize huge resources in the name of development and construction. In countries like India – they built massive cities in the name of modernization while most urban enclaves lost their traditional skills and legitimate rights to make their own homes to eventually get transformed into degraded infrastructure deprived environments, quickly labeled slums.

In rich countries, their ability of creating general needs – redefining what makes modern lifestyles and spawning a whole new industry by creating and destroying habitats ensured that they constantly borrowed, made profits and moved on to new territories. Their economies were elegantly constructed on building and borrowing.

Eventually – when simple laws of economics kicked into place – when supply over stripped demand in some quarters, it tripped the whole system.

Unfortunately there is enough reason to believe that they will get away scot-free once again – while regimes will contain and control and regulate the market in other ways.