Steven Dale on ‘Gradual money and cataclysmic money’ – One and the same?

A 1936 map showing redlined or blacklisted neighbourhoods in Philadelphia.

In the early 1980’s my mother was a single mom in her mid-thirties raising an incredibly clumsy son with a habit of accidentally breaking things – himself included. Prudent woman that she was, she thought obtaining a credit card was a wise idea to provide a fallback in the event of any emergencies.

Trouble was, she was as single mother and banks weren’t in the habit of giving out Visa cards to that ‘blacklisted’ demographic. Though she was always frugal, employed and completely without debt, it still took her a couple of years and multiple applications to finally be granted entry into the world of consumer credit.

Fifteen years later and at the age of nineteen, I too, would be admitted to that world. And like my mother before me, my motivation for a credit card was motivated solely to protect myself in the event of an emergency – during a five month long trip to Spain.

“No, you don’t understand, this IS an emergency – I NEED another cerveza.” CC image by flickr user landahlauts.

The application process took roughly 15 minutes.

Nowadays, 16 year olds are solicited by mail with offers of pre-approved, high interest credit cards.

Chapter 16 of D&L is initially hard reading because of that very dichotomy. So much of the chapter revolves around the antiquated idea of blacklisting (and its unmentioned, more nefarious cousin, redlining) districts such that anyone within the district can’t obtain credit to gradually improve their lot in life (and by extension, improving the surrounding district and city). The chapter’s focus on hard-to-obtain credit is a bizarre concept for contemporary readers.

This kind of credit is what Jacobs calls “gradual money” and she theorizes that the kind of gradual improvement and change that comes of it is essential to the growth and viability of cities.

Trouble is, 50 years ago the idea that a successful business owner would be unable to obtain said “gradual money” (in the form of a loan) to improve his company solely because of the neighborhood he was located in was common. Today, the concept is completely foreign. Today you can use an Amex card to buy a $0.99 virtual whoopee cushion for your iPhone – instantly.

(Actually that’s incorrect, I’ve misspoken. It’s not that you can use a credit card to pay for said whoopee cushion; as there are no other payment options allowed, you must use one. That’s how far the credit pendulum has swung in the opposite direction.)

Today gradual money’s everywhere. And that should be a good thing. But, as always, there’s a catch.

On the flip side is what Jacobs calls “cataclysmic money.” That is, the kind of large scale investments and developments driven by heavy duty investors, funds and government renewal schemes. Cataclysmic money is, in Jacobs’ view, one of the fundamental reasons we have what she derisively calls Radiant Garden City Beautiful planning. 

That money we’re all too familiar with and it’s only gotten more extreme, rather than less. It’s the kind of money that gives us Las Vegas CityCenter, Dubai’s The World archipelago and Disney’s Celebration, Florida. It’s money detached from time and place brought to bear upon whatever investment seems most ripe for the picking.

Rumour has it the islands shaped like Iceland and Greece can be had for next to nothing.

This is where chapter 16 becomes relevant for contemporary readers.

The existence of so much gradual money (read: cheap credit for everyone) translates into even greater amounts of cataclysmic money. Rather, however, than have a handful of investors or government agencies directing a few large pools of money at a project, now we have developers and investors funneling massive numbers of small pools of money at a project.

Think about it: Downtown condo towers or tract suburban bungalows are only enabled by the ability of a few hundred reasonably employed yuppies and/or families to obtain a cheap mortgage. All those hundreds of mortgages are pooled together to allow developments to happen. In our world, the gradual money that’s been democratized for everyone has been co-opted by the barons of cataclysmic money.

It would be easy at this point to direct our collective anger and resentment at this end result towards the development industry, the banks and the mortgage underwriters. After all, those are the people that got us into the mess and largely undermined the entire world’s global financial system through the standard tools and instruments of cataclysmic money.

But that would be misplaced anger. Like the mortgage crisis today, Jacobs was spot on when she observed 50 years ago that “private investment shapes cities, but social ideas (and laws) shape private investment. First comes the image of what we want, then the machinery is adapted to turn out that image.”

Just as the redevelopments of the 1940’s, 50’s and 60’s were largely catalyzed by government policy. Our cheap credit and housing boom was largely catalyzed by North American governments addicted to growth at all costs (in the former case), and a misdirected policy of homeownership for everyone (in the latter case).

All this is to say that while chapter 16 of D&L may seem dated to some, there are nuggets of truth in there that allow us to understand our contemporary urban surroundings. Jacobs shows us that money isn’t one singular entity but rather a family of differing typologies that have vastly different impacts on our cities.

Money doesn’t guarantee a successful city, but a successful city cannot exist without it.

Random Thoughts

  • Jacobs’ concept of a “third kind of money from a shadow world” confuses me. Her invocations of 80 percent interest rates and slumlords conspiring with government come off as paranoid and her lack of examples and evidence make it all the more problematic. I’m not saying such things didn’t exist (or still do), but her discussion of them isn’t nearly as intellectually rigorous as the rest of the book, thereby casting doubt on the reality of the situations she describes. I actually would’ve liked her to delve more into these issues.
  • When Jacobs writes “I hope we disburse foreign aid abroad more intelligently than we disburse it at home” I could only think of John Perkins’ shocking memoir Confessions of an Economic Hitman. Read it.
  • “We, the people, will work out our own destiny.” Love it.

4 Comments Add yours

  1. Matthew says:

    I don’t think credit cards are a good example. If anything, with their high interest rates, they are closer to resembling “shadow world money” than “gradual money.”

    If you want an example of how “shadow money” still exists openly, just think about all the “check cashing / payday loan” joints that spring up in disinvested neighborhoods.

    Although usage of eminent domain has changed since her time, the tax incentives that drive slumlord housing still exist. One of my friends used to live in such a house, about ten years ago, and we all knew that the landlord was just biding his time, waiting for the nearby university to buy up the land.

    1. Steven Dale says:

      Remember, however, that mortgage and interest rates were significantly higher a generation ago. So much so that one could almost compare them to today’s credit card rates.

      As for payday loan and check-cashing “services,” I totally agree.

  2. I haven’t read Confessions of an Economic Hitman, but based on the dust jacket description, I think Jacobs goes into many similar issues in her later books — especially Cities and the Wealth of Nations, I believe. She talks at length about foreign aid and other failed infrastructure projects abroad.

    1. Steven Dale says:

      I’ve read Cities and the Wealth of Nations but it doesn’t come anywhere near to being the jaw-dropping exposé that Confessions is. That’s not to say Cities isn’t a good book, it just deals with different things.

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