Overpopulation, slum conditions, and poverty are not always issues created simply by lack of resources or capital. As such, straightforward technical solutions cannot sufficiently address them. These wicked problems or “intractable social ills” are political and frequently a result of misappropriation. The neoliberal structuring of our global economy has brought its share of both wealth and wickedness. Despite an evidential progressive and gainful side, what are the collateral damages concomitant with the benefits of neoliberal capitalism? The following will examine global capitalism and its role in artificially producing slum housing and poverty.
The United Nations’ Population Division predicts that our planet will hold 9.3 billion human beings by the year 2050.This issue produces a whole host of problems concerning sustainability, scarcity, conflict and not the least of which where all of these people will live. In particular, the growing population patterns will contribute to the growth of slums. Not only are the numbers of slums rapidly rising, but we are experiencing increasing settlement concentration into cities, or urbanization. In 2007, UN-Habitat estimated that over half of the world’s population now live in urban cities, rather than in rural zones. In many developing countries, this process brought with it the development of slums. A slum is any dwelling that lacks one of five elements: improved water access, improved sanitation access, tenure security, housing durability, and sufficient living area (UN-Habitat). One-third of the world’s urban population inhabits slums; by 2030 that number will amount to over two billion people (UN-Habitat). Poverty is concentrating in urban areas. According to Beall, from 1993 to 2002, people below the poverty line ($1/day) increased by 50 million in urban areas, but decreased by 150 million in rural areas. Most of the population growth towards 2050 will be seen in developing countries, the top five contenders being India, Pakistan, Nigeria, Democratic Republic of the Congo, and Bangladesh (UN-Habitat). These countries also have some of the world’s highest levels of population living in slums: 55.5% of the population in India (158.4 million people), 73.6% in Pakistan (35.6 mil), 79.2% in Nigeria (41.6 mil), and 84.7% in Bangladesh (30.4 mil) (Davis, 24).
What is the role that globalization plays in creating slums? This paper will investigate the larger historical-economic forces that has directed this pattern of intense urbanization. The growth of cities and population coincides with globalization. But especially in the developing countries, this urbanization has come with a large-scale creation of slums. The growth of slums was not a wholly organic development that occurred within the domestic conditions of a country. Instead, they were exacerbated and perpetuated by globalized neoliberal capitalism, particularly from the free-flowing capital and speculative investment of the 1980s-90s.
The neoliberal incarnation of capitalism in developing countries emphasized financialization at the cost of productive manufacturing, privatization at the cost of public investment and infrastructure, and made their economies dependent on its placement in the global marketplace. This paper will give a brief overview of 1) the economic structural foundations of increasing world urbanization, 2) the concurrent explosion of slums in the developing world, and 3) how this created a situation in which billions of people suffer exclusion from the formal sectors of the economy and society. Slums are a manufactured result of a global economic system based on neoliberal principles that induced the formation of large cities but without concurrently creating substantial economic development in ‘Third World’ countries.
Capitalism and the Rise of Cities
Why cities? The process of global capitalism is an essential driver of urbanization. Cities arose from a concentration of surplus, the essence of capitalism, and capitalism in turn is perpetuated by cities (Harvey). According to Sassen, global relationships are manifest and conducted through the city, in which technology and resources concentrate and form command nodes (i.e. places like New York, Hong Kong, London, Tokyo, etc.). Although capitalism necessarily creates inequalities, it was a particularly stringent version of capitalism (known as neoliberalism or market fundamentalism) in combination with increasing global integration that exacerbated unequal and exclusionary development, giving rise to slums. After the Cold War, the Western capitalist/neoliberal model of economic development dominated the global system. The cornerstone of this ideology is an institutional framework of privatization, deregulation, free markets, free trade, and minimal state interference and regulation (Harvey). The way neoliberal globalization has been implemented has tended to favor developed countries at the expense of developing countries. The emphasis on capital flows, investment, and high-skilled labor and the export protection of developed countries ensured that only a small elite in developing countries would be successful in the world economy (Stiglitz). This had important repercussions on spatial and social order in developing countries, and ultimately helped to generate slums.
With the globalization of economic capital transactions, long-term productive investment was eschewed for high turnover financial capital flows, that is, speculation. Over 80 percent of global capital is part of speculative flows, rather than put into productive (that is, employment or efficiency increasing) investment (Kenna). In order to attract investment, developing countries had to reduce taxation and public expenditure lest foreign capital chooses to locate elsewhere. Beginning in the 1980s, a disproportionate emphasis in global economic relations was placed on financialization or securitization – highly volatile processes which are vulnerable to speculation but offer substantially more profits than trade. This meant that international economies were pushed to open to short term capital flows (by way of foreign direct investment and portfolio investment). Foreign direct investment (FDI) grew three times faster in the 1980s than did regular manufacturing or productive trade and establishing a core of services and finance was required to draw in investment (Sassen). As finance and capital grew to dominate economic relationships between countries, the dominant mode of human settlement tended towards urbanization. Large core cities became the optimal arrangement as ‘strategic sites’ for a globalized economy based on capital flows. A global network focused on these activities requires financial markets, banks, corporate services, and transnational corporations (TNCs) to concentrate together in a process called ‘agglomeration’ (Sassen). This facilitated global economic relations by producing a centralized capability for infrastructure, servicing, and control. As developing countries attempted the move from rural-agricultural to urban-industrial, they commercialized, deregulated, and privatized their economies for the global market. Transnational corporations accounted for 80% of international trade in the 1980s and local financial credit markets served their needs to a disproportionate extent (Sassen). Deregulation and a market-oriented economy are key institutions to organize massive financial flows and the city was to function as a central node of command and control. The transnational corporations of the industrialized world wield the decision-making power and implement control through the cities of the developing world. With globalization, development became heavily dependent on the financing powers of corporations in other countries. For example, the property market in Mumbai was largely financed by Goldman Sachs and the oil-rich countries in the Middle East such as Saudi Arabia enlisted foreign construction corporations to build enormous urbanization projects rather than training and utilizing unskilled domestic (Harvey, 30). Urbanization became essential to participate in the global economy.
In addition, the process of economic globalization induced competition among cities to attract foreign investment. Accordingly, rural lands, domestic infrastructure, and other public improvements are secondary to “industrial parks for international firms and ‘Euro-American’ style gated residential enclaves for social and economic elites” (Kenna, 108). These processes of global competition frequently came about at the expense of the poor. To create a ‘world-class’ city, the urban poor are mass evicted or otherwise marginalized and the rural areas remain ignored. Thus both spatial and social inequality result from globalization. Some regions or groups receive a disproportionate amount of investment at the expense of the larger collective country and population. Capital owners and other large business (particularly corporations from the developed world) have the resources and ability to develop, while people in poverty in the developing world do not have a say in development patterns. Global capital investment can “create or reinforce patterns of uneven development, as investors prefer some locations to others” (Vliet, 36). An economy dependent on global investment contributes to social and spatial differentiation within countries by necessitating a marketing mindset (Vliet). The city must manifest itself in a way that is appealing to foreign investment (high speed rail, convention centers, shopping malls, etc.), and locations without sufficient resources to do so remain underdeveloped. Rather than broad development for the population, those with a sector advantage in globalization (finance, communications, high industry) receive most of the profits. The fact that many of the underclass do not benefit from such city-marketing construction and are not part of the economic industrial elite is disregarded. Thus the centrality of global investment prohibits the formal participation of asset-poor locations and people in the economy.
In the Philippines, the process of land conversion from agricultural to urban uses has resulted in a mass displacement of rural inhabitants and deprived them of agricultural productivity and food security. A study by Kelly showed how urbanization processes of the rice bowl provinces in Central Luzon and Southern Tagalog near the urban core of Manila created a situation of deprivation for rural society from opportunity and livelihood. Since the 1990s over 50,000 hectares of land in this region was appropriated to build urban developments (industrial parks, export zones, theme parks, residential subdivisions) that rural workers (who do not have urban-industrial experience or education) are unable to participate in (Kelly). These new high end developments escalate land values and makes living near these places unaffordable to the lower-income population (Sajor). In addition, urban industries are unable to absorb this excess labor, thus leaving them deprived of viable agriculture land to subsist on and also the ability to participate in the manufacturing sector (Kelly). The focus on city development has taken a toll on the regions agriculture. Conversion of rural land on the country’s most productive rice lands has forced the Philippines to import (over 800,000 tons in 1999) when they could easily produce domestically (Kelly, 178). These impoverished landless peasants are pushed to relocate in slums near the periphery of Manila where they confront social marginalization and the threat of eviction in an effort to promote the city’s image. Symbolically, at the 2012 Asian Development Bank conference in Manila, the government erected a temporary wall that hid urban slums from conference attendees. Likewise, similar walls were put up to hide the city’s impoverished conditions for the Miss Universe Contest in 1974 (Associated Press). As Kenna argues “attracting international capital takes precedence over other social objectives…the conflicting forces between investment capital needed for long term investment with international, unfettered, high-turnover financial capital creates major problems for the management of national economies and state policies” (Kenna, 119).
The conditions of urban favoritism gave rise to a theory known as “urban bias” (Lipton). This theory states that although over 65% of people in less developed countries and 80% of those in extreme poverty relied on agriculture, policy and investment were allocated towards urban priorities. Government policies such as tariffs, subsidies, and pricing tended to favor the urban manufacturing sector at the expense of the agriculture industry (Ploeg). This perpetuated poverty and underdevelopment in ‘Third World’ countries because rather than developing their comparative advantage in low-cost labor and agriculture, scarce capital was put into industrial production. In addition, cities would attract significantly more foreign investment. High levels of human capital, large pools of labor and points of international trade attract significantly more FDI (Ploeg). Lipton argues that this was an inefficient use of resources because it distorted the natural domestic market. Rural resources (agriculture, people) are more ample in developing countries and thus, can be more efficiently produced and profitable. If the majority of investment went into urban activities, the bulk of the population is excluded. An urban bias creates inequality and perpetual underdevelopment by excluding these rural masses from effective participation in the economy. Lipton argues that “developed mass agriculture is normally needed before widespread successful development in other sectors. Small farming is the part of the economy in which a given amount of scarce investible resources will be supported by the most human effort” (Lipton, 15). Before a developing country can sustain urban activities, it needs to have a developed and productive agricultural sector upon which a stable economy can develop from surplus, and also supply the urban workforce with food. This meant that directing investment into the urban sector was a misguided use of developing countries resources. Thus, the integration of developing countries into the world economy was not based on real growth (driven by factors such as increasing employment, production, or manufacturing by which capital could be accumulated) but rather on the openness to speculative finance concentrated in urban cities, which gave high profits to a few elite, but minimal employment and no broadly generated growth.
The Formation of Slums
For already developed countries, a mass explosion in population and urbanization was a result of the Industrial Revolution in which economic growth occurred alongside industrialization. On the other hand, the ‘Third World’ has experienced urbanization and population growth, but without economic development. This has created urban cities in the developing world that lack the capacities to sustain an ever increasing amount of people. Scarcity of employment and lack of access to basic services and housing creates an informal sector defined by improvised slum dwellings and black market commerce. Slums are a result of the economic forces that pulled people towards cities. Global neoliberalism structured the market such that previously subsistence agricultural land became privatized and dominated by a few large farm producers (Lipton). Small-scale producers “lack land, water, or capital and are unable to intensify and switch to higher value crops” (Tacoli, 2). Looking for employment after declining rural prospects, the masses made up of peasants and landless tenants moved to the cities. Because industrialization in developing countries did not grow in proportion to urbanization, the economy was unable to absorb all the people creating increasing levels of poverty (Beall).
A study by Bloom, et al. demonstrates the decoupling of urbanization with economic growth. Comparing Asia and Africa between 1960 and 2000, both countries urbanized to about 36%. However, per capita income increased 340% in Asia whereas Africa only 50% (Bloom, et al., 10). Contrary to the experience of Western Europe, urbanization does not definitely necessitate or signal economic growth. Therefore, urbanites must frequently turn towards the informal sector for employment, housing, and services. Since mainstream housing is unaffordable, the poor in the cities resides in slums. People choose to remain close to the city despite slum conditions because development and job opportunities are concentrated in urban areas. Even menial or informal work (collecting recyclables or selling cheap goods) would have greater returns than remaining in rural land. In addition, slums are cost effective. As Ploeg states “after the point where formal cost of living surpasses slum cost of living, the squatter settlements remain relatively affordable and population increases” (Ploeg, 481).
The failures of the urban employment sector created exclusion and necessitated slums. The concentration of urbanization in one city (called primacy) explains the informal sector that clusters around cities. Market imperfections and inefficiencies of the city obstruct broad growth and employment potential (Ploeg). Agglomeration forces attract workers and drive wages up. Eventually an excess of workers migrate to the city, land prices go up but at the same time private wages go down by increasing the supply of labor. Thus the cost of living and the cost of wages have to be in balance for the most efficient growth of cities. In reality, however, a city usually becomes too large (overurbanization). This creates congestion, pollution, and slums without providing the formal employment capacity to sustain the new population influx (Ploeg). Housing prices go up around the economic core and informal settlements sprout up in the periphery or in undesirable land. In Ghana, over 80% of all FDI in the 1980s had been concentrated in the Accra region, the capital city. This influx of money increased migration and subsequently skyrocketed Accra’s land value prices (Owusu). As a result, housing stock fell far short of demand (65-70% require housing) and many were forced into informal housing. Only economic elites (including wealthy Ghanaians and foreign expatriates, corporations, etc.) can afford property in Accra and the rest (about 60% of the urban population) live in poverty (Owusu). As a result of concentration and subsequent high land values, the slum dwellers in highly precarious conditions. In Mumbai, India many households are forced to settle on small spaces on pavements (Mitlin). It is estimated that 1 million people live on these pavements, who must reside near the for work in low-paying manual labor jobs (Davis, 36). In addition, the land upon which the Dharavi slum is located is increasing in value as the city grows. Estimated at 2 billion dollars, the inhabitants of the slum face pressure (sometimes violent) for slum clearance by powerful financial interests and real estate developers who want to develop (Harvey, 35). And not having any legal claim to the land, they have little option but to move.
The neoliberal policy of state withdrawal from the economy has contributed to primacy and uneven development. In prosperous Asian “Tiger” countries, state involvement actually improved their economy. The creation of government designated special economic zones (of regulation relaxation or tax incentives) helped overcome the coordination failure of primacy by distributing FDI more evenly across regions (Ploeg). But in an unregulated market, investment became imbalanced.
Another reason slums were produced was because urbanization and global capital flows frequently resulted in the mass dispossession or displacement of the poor. Sajor examines the property and real estate boom brought on by the increase in the 1980s international capital flows and its effects in metropolitan Cebu in the Philippines. The aggressive property development by the government and speculative land buying made housing even more unaffordable near the Cebu core. According to Sajor, powerful real estate interest groups pushed for pro-growth policies despite its adverse effects on the poor and the environment. Investments grew at an annual rate of 156% from 1987 to 1992, the amount of transnational firms tripled, and exports increased 217% from 1991 to 1998 (Sajor, 719). Between 1986 and 1996, capital flows went from 1 to 20 percent of GNP (Sajor, 720). In the midst of all this development and money, the affordable housing sector (as opposed to market price) comprised only 20% of new developments (Sajor, 722). Land is scarce in Cebu, which has high slopes and uninhabitable mountain ranges. At the same time capital interests focused on more profitable “prestigious” and “upper-end” (low density, high land use) categories of housing projects. These took up 67% of available land during the property boom, leaving little room left for lower-income households that require less land or higher density (Sajor, 724). High housing and land prices and the need to attract investment effectively edge out the interests of the poor, who then have little recourse but to create and inhabit slums.
Neoliberal Causes of Mass Exclusion: Shelter as Commodity
A complex set of economic processes has interacted to generate the growth of slums. Globalization of neoliberal market economics created the tendency towards cities and growth was concentrated in cities. Urban bias and overurbanization created an unbalanced and ultimately stagnating economy in which much of the population does not have access to formal employment. The core principles of neoliberalism was expanded to its height in the 1990s with worldwide structural adjustment policies (SAPs). SAPs are a set of policies based upon neoliberal ideology that were mandated by the IMF to restructure the economies of highly indebted countries in the 1980s and 1990s. Some requirements including the shrinkage of government programs, state deregulation, and privatization of housing markets effectively worsened slums (Davis).
In 1982, the world experienced a global debt crisis due to the oil shocks of 1973-74, high interest rates of the 1980s, declining export prices and volume, and an adverse credit market (Ferraro & Rosser). It was in these conditions that the developing world turned towards the policies of the World Bank (WB) and the International Monetary Fund (IMF). These international institutions were created for world development and global financial stability, respectively. However, they were largely aligned with neoliberal interests of the Washington Consensus, a model based on Western capitalism. Therefore one of the primary motivations of these institutions was to reduce barriers to international capital flow (in which the West had a comparative advantage). Neoliberal policies were imposed upon developing countries as conditionalities for debt obligation assistance. These prescriptions were the structural adjustment programs which restructured economies in accordance with neoliberal principles – open markets, minimal state programs, privatization, etc. It was during this debt crisis that much of the world turned towards neoliberalism. Yet despite implementing these conditions, poverty and inequality ballooned and 46 countries became poorer than they were in 1990, when the SAPs were implemented (Davis, 163). According to Davis, these SAPs were singlehandedly responsible for the explosion of slums. In Latin America alone urban poverty rose by 50% between 1986-1990 after the implementation of SAPs (Davis, 156). In the following sections, this paper will describe two key elements of neoliberalism and how they have exacerbated slums. Neoliberalism advocates: 1) privatization and property rights and 2) minimal state role in provision and public services. But rather than improving the lot of impoverished classes and being a force to lift them out of slum conditions, these factors aggravated poverty and slums.
Since most slums are informal/squatter settlements, proponents of neoliberalism argue that slums can be explained by the failure of a strong property rights regime in developing countries. Yet other literature demonstrates that this perspective ignores the macroeconomic policies which produced the extreme poverty that necessitated slums in these countries in the first place. Privatization is one of the key concepts for a neoliberal capitalist economy. It is the means by which physical and human resources worldwide can be patented, controlled, appropriated, and commoditized (Kenna, 52). Since the 1970s, private companies rather than state governments began to take over the development of infrastructure (Likosky). And according to the World Bank, “clear and enforceable legally defined property rights provide the necessary infrastructure for the global economy” and are essential for the functioning of exchange (Kenna, 51). Pro-neoliberalists would argue that weak property rights are the crucial factor in explaining slums. According to Hernando de Soto, the primary explanation for underdevelopment in the Third World is the lack of enforceable property rights. He argues that the reason that neoliberalism has failed in developing countries is not because of any inherent flaw, but because of a weak system of formalized titles to property in the Third World. Formalized titles are “standardized instruments of exchange registered in a central system governed by legal rules…proof of ownership and protection from uncertainty and fraud” (de Soto, 3). This lays the foundation for exchange by creating entities by which capital can be extracted from and exchanged. De Soto adds that formalization incentivizes investment into land. Slums should improve when squatters have titles to their homes which allows security of tenure and thus provides an incentive to invest in it. The ownership of land is a fundamental resource by which to extract capital. By functioning as collateral, the owner can use the titles of property to receive credit or loans. Property rights for land can be an important source for personal wealth (in the U.S. they represent 40% of family assets) (de Soto, 3). Once the process of formalization of property rights is resolved, the market economy can prosper. He argues that Western nations have confronted this same issue of slums and underdevelopment but have resolved it over time with a successful property rights regime: for example, only after formal property rights to homesteaders and squatters in 19th century North America or the formalization of farmland in South Korea, Taiwan, and Japan after World War II did these countries’ economies really take off (de Soto, 4).
However, unlike in the countries de Soto mentions, in Third World countries land was acquired before legal tenure was secured. The homesteaders of the United States were given rights to land before occupation, therefore having an original source of capital to leverage and extract resources from. Property rights will exclude those on subsistence level, that is, those whose resources go entirely into survival. Slum dwellers do not have enough wealth to participate in the housing market economy and the formal incorporation of slum properties will exclude extremely poor tenants from housing access altogether. Formalization of their slum settlements would necessitates taxes and other fees to establish ownership. By privatizing their slum settlements, instituting property rights, the most impoverished of all would not have any sort of shelter. And access to shelter would be increasingly unattainable (Davis). Further, according to Kenna, title registration allows the exploitation of those without education and awareness of law, whose property can be easily appropriated from them as communal land and housing management system are destroyed in favor of exclusionary private property (Kenna). Harvey states that impoverished people, in conditions of insecurity, would frequently give up their title in an emergency in exchange for a undervalued payment. This sort of financial difficulties of slum dwellers largely accounted for the failure of a land titling experiment in Rio De Janeiro (Harvey, 36).
The promotion of property rights as a solution to slums and poverty is also complicated by the history of colonialism. The process of colonialism means that the ownership of land in the Third World has been frequently expropriated from its original owners and subsequent efforts at land reform have only exacerbated maldistribution. In Zimbabwe, at independence in 1980, only 5,000 white large-scale owners owned 46% of all farming land and most of President Mugabe’s land reform efforts have gone to favor his neopatrimonial networks (Andreasson, 10). Andreasson argues that the property regime defining neoliberalism is necessarily a violent process by turning human and natural resources into property results inequalities in ownership and wealth (Andreasson, 5). And land through property rights is utilized as a political tool for economic elites rather than benefitting those who need it. In Zimbabwe, from colonialism to dictatorship, property rights did little to alleviate underdevelopment. The neoliberal emphasis on property rights promotes ‘efficient use’ of land to generate profit or investment, but this has only benefitted elites. Private property and enclosure movements exclude peasants from access to land but also reduce the profitability and viability of small-scale agriculture in favor of the larger landowners resulting in further landlessness, displacement, and forced migration to cities (Kenna, 58). In addition, slums are located in the least desirable territories (near pollution, infertile land, remote locations, etc.) whose land value is unlikely to be significant. Thus, this proposed neoliberal prescription of establishing a property rights regime is ineffective because it is unable to address the historical imbalances of wealth nor the marginalization and exclusion of slum dwellers.
Secondly the neoliberal approach to housing finance, that is the emphasis of the role of the market in housing access and provision through the commercial arena, also fails to address the obstacles of poverty. Finance strategies that align with neoliberal principles have proven to exclude the poorer classes. Although neoliberal commercial housing finance and market purchases have helped some improve their shelter, evidence suggests that these are not effective options for those in the informal economy and with very low incomes. Due to overpopulation from primacy and urbanization, the costs of land is too high and formal employment is scarce. Meanwhile, an application for a mortgage typically requires formal employment, which many slum dwellers do not have (Mitlin). Neoliberal solutions have supported the use of vouchers and microfinance in order to facilitate demand in the housing sector. In Chile, the government took a ‘capital subsidy’ approach in which buyers would receive a subsidy for the purchasing of homes. However, in order to cut costs, contractors located on cheaper land and cut back on costly large scale infrastructure. Because the costs are according to the market, these programs for accessible housing have to be located either far from the urban center where land values or cheaper, or on areas with inadequate public infrastructure. The capital subsidy approach excludes the lowest-income households, those on subsistence levels, who are unable to accumulate enough savings. Therefore shelter financing based on neoliberal markets will not do much to relieve slums, being that slum-dwellers are among the poorest in the population and frequently make their living on the black market.
Finally, the dominant rhetoric among neoliberal advocates rely on privatization to solve poverty. In 2003, James Wolfensohn former president of the World Bank claimed that a public-private partnership and transnational corporations are the key to end urban poverty (Likosky, 1). For Wolfensohn, globalization creates the incentive to eradicate poverty because investors find urban poverty unsuitable for their business interests. He claims that “when potential investors look out the window of their fancy hotel and see slums stretching away for miles”, they will go elsewhere (Likosky, 4). In addition, privatization can allow for a sense of citizenship. Like de Soto’s argument for property rights, privatization can open the door for other economic opportunities. Wolfensohn cites a women in a Rio de Janeira favela who paid for water and was able to secure a bank loan using a receipt that proved her residency (Likosky, 19).
Again, despite these instances of success, privatization will impose further costs on the urban poor. Under privatization, public services such as education, health care, sanitation and water are commercial commodities whose primary aim is in recouping costs and creating profits. Poverty and inequality is exacerbated because poorer classes with meager income must devote more of their money for these basic necessities of survival and many times are unable to afford them at all. Privatization is only advantageous to those who can afford to pay for it resulting in social stratification by wealth (Beall). The wealthy do not need to concern themselves with public access and conditions because they are allowed to be “disconnected from public space and local governance, privately providing for their own services and failing to address collective concerns” (Beall, 7). Under a neoliberal regime private profit, rather than public welfare dominates and those without substantial resources for basic necessities, such as food and shelter, are at “the mercy of market forces” (Vliet, 36). The poor must endure substandard conditions and standards of living in the slums because of their original resource disadvantage. Privatization and commodification will only make housing and property inaccessible to the very poor who cannot afford to pay market price. Thus privatization and property rights cannot solve the problem of slums without first addressing what caused such initial impoverished conditions.
Deprivation & Marginalization: Rollback of the State
UN-Habitat claims that “the main single cause of increases in poverty and inequality during the 1980s and 1990s was the retreat of the state” (UN-Habitat, 43). The debt burdens of developing countries in the 1980s meant that the state would spend less money on social services and physical infrastructure (Low, et al.). Income inequality was highest in countries with a neoliberal political economy. The debt crisis further aggravated the income gap. As a result of structural adjustment policies, debt-ridden developing countries were required to completely align with market fundamentalist policies, and relinquish all state guided economic planning and services. A majority of revenue was used to service their debt to lending countries at the expense of the development of their own populations. As a result of structural adjustment, unemployment continued to be high, poverty increased, and wealth became more concentrated (Low, et al.). Since public services and utilities were to be privatized, access for the marginalized urban population became increasingly problematic. The provision of public infrastructure and resources was withheld and “greater inequality of access to basic urban services, locational disadvantage and social exclusion” became entrenched (Low).
This decline in public services and social programs contributed to the wretched health conditions of slums. The lack of access to services means that slum-dwellers must contend with services of a lesser quality or at a higher rate. From exploitation or travel charges, slum dwellers can pay up to fifty times more for clean water than a resident living in formally serviced areas (Beall). Many residents of Bangladeshi slums are unwilling to invest scarce funds in water and sanitation, and electricity is three times higher for a slum resident (Rashid, 579). A study by Khan and Kraemer describes the health conditions in a Bangladesh slum. Adverse health conditions are more likely to occur under slum conditions. The concentrated poverty, poor housing, and high density combine with environment conditions facilitate the spread of communicable diseases (tuberculosis, etc.) and infection is exacerbated by malnutrition and inadequate sanitation. (Khan, et al.). According to Rashid, state neglect and a harsh political economy effect the distribution of health and diseases. The actual roots of disease are “political and economic forces which are present in the local health conditions” (Rashid, 576). That is, structural inequalities increase or decrease one’s susceptibility to a particular disease and therefore, deprivation and illness are largely a result of socio-economic forces. For example, in South Africa, a structural adjustment plan enacted in 1995 made water a commodity, restricting access to those who could pay. “Cities then began charging higher rates for the lower consumption blocks”, meaning those who were poor had to pay more for water (UN-Habitat, 44). Eventually, a cholera epidemic of 106,000 infected broke out originating in a community who could not afford water. In Phulbari, a slum in Bangladesh, water is free but is frequently unreliable being only available for half an hour every day (Rashid, 579).
To sum, globalization spurred the growth of cities through foreign investment and capital industries which relied on cities to function as a node in a larger global capitalist network. Capitalism in the neoliberal form emphasized high industry (communication, technology, finance, banking, etc.), neglecting the rural hinterland and agricultural industries. The support of high industry required increasing concentration into cities, that is, urbanization. Employment, investment, and development were concentrated into the city and the population (being deprived of opportunity elsewhere due to lack of work, displaced by private property exclusion, or seeking economic opportunity) moved to the cities in increasing numbers. This drove up land values, lowered wages, and frequently the very poor had no option but to settle in slums or in underserviced conditions. Furthermore, privatization and minimal public infrastructure made basic infrastructure and services (housing, utilities) financially out of reach for those inhabiting slum settlements. Consequently, billions of people are excluded from formal employment and housing. Many live in unsanitary and crowded conditions, lack clean water or plumbing, and have no legal rights to the land they occupy. The forces of globalization are one factor that explains the prevalence of such slum conditions in the developing world. Signs of great development such as skyscrapers exist alongside shantytowns. Neoliberal economic policies creates inequitable outcomes. It prioritized capital flows and services that typically advantaged only developed countries and the urban elite in developing countries and did not translate into broad or comprehensive growth. Progress and investment was focused on cities and the development of elite industries. The rural poor, lacking access to privatized land for subsistence living or driven by opportunity expectation, migrated to cities in search of work. Scarcity of employment and the inability to afford formal housing necessitated informal housing and employment sectors, that is, the slum community. Privatization and the rollback of the state, exacerbated the condition of urban poverty. The problem of slums is a problem of poverty, unequal distribution, and social marginalization. Neoliberal capitalism, despite its best intentions, has been a contributing factor to these problems.
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