Capital Switching and the Role of Ground Rent: 2 Switching between Circuits and Switching between Submarkets

Abstract

In the first paper of this series of three, Harvey's ‘circuits of capital’ argument was discussed, and was linked first to ground rent theory, and second to forms of social change and crisis in advanced, Western-style economies. In the present paper these various theoretical insights are used to reflect upon the urban housing market in Melbourne from the 1930s to the 1980s. It is concluded (1) that average rent (average annual cost relative to wages), and thereby housing-related accumulation, rose virtually uninterrupted from 1932 to 1977, providing the incentive to the suburbanisation boom of the 1950s and 1960s; (2) that an extraordinary rise in average rent in 1973 – 74 (to be viewed as ‘absolute rent’) created an affordability barrier, inhibiting the ability of the housing sector to provide an outlet for speculative investment in the current ‘global crisis’; and (3) that differentiated shifts in monopoly ground rent (that is, price rises in some submarkets and falls in others) thereby became increasingly important in providing incentive for both speculative and productive investment in housing. The third paper will extend this empirical exploration to the social conditions enabling these processes, and in turn affected by them.