Gary A. Dymski

Financial Transformation and the Metropolis: Booms, Busts, and Banking in Los Angeles

In this paper the implications of the two eras of financial transformation in the 20th century—that of the 1930s and that of the 1980s and 1990s—for urban growth and inequality in Southern California are examined. It is argued that financial structures have profound effects on the pace and distributional consequences of urban growth, in large part because urban development is characterized by widespread spatial spillover effects. The contemporary era of financial transformation has widened gaps between urban communities and banking customer markets. Banking markets that were once segmented by regulation are now segmented by market dynamics. In consequence, a financial system which once facilitated wealth building for households and communities now deepens social inequality and spatial separation. In this paper the historical and contemporary experience of Los Angeles is used to both develop and illustrate the arguments made.

Racial Exclusion and the Political Economy of the Subprime Crisis

This paper develops a political economic explanation of the 2007-09 US subprime crisis which focuses on one of its central causes: the transformation of racial exclusion in US mortgage markets. Until the early 1990s, racial minorities were systematically excluded from mortgage finance due to bank redlining and discrimination. But then racial exclusion in credit markets was transformed: racial minorities were increasingly given access to housing credit under terms far more adverse than were offered to non-minority borrowers. This paper shows that the emergence of the subprime loan is linked, in turn, to the strategic transformation of banking in the 1980s, and to the unique global circumstances of the US macroeconomy. Thus, subprime lending emerged from a combination of the long US history of racial exclusion in credit markets, the crisis of US banking, and the position of the US within the global economy. From the viewpoint of the capitalist accumulation process, these loans increased the depth of the financial expropriation of the working class by financial capital. The crisis in subprime lending then emerged when subprime loans with exploitative terms became more widespread and were made increasingly on an under-collateralized basis-that is, when housing loans became not just extortionary but speculative.

Discrimination in the Credit and Housing Markets: Findings and Challenges

Discriminations dynamic nature means that no single theory, method, data or study should be relied upon to assess its magnitude, causes, or remedies. Despite some gains in our understanding, these remain active areas of debate among researchers, practitioners and policymakers. The specially commissioned papers in this volume, all by distinguished contributors, present the full range of issues related to this complex and challenging problem.

Financial Globalization, Social Exclusion and Financial Crisis

Abstract This paper suggests one set of mechanisms that ties financial globalization processes to local dynamics of financial inclusion or exclusion. Specifically, this paper explores the worldwide reconsideration of financial firms’ strategies that has accompanied financial globalization. It is shown that the neoliberal and asymmetric‐information approaches to credit markets and financial crises in developing economies overlook these dimensions of financial globalization because of their tendency to focus on representative credit markets. Banks’ strategic shift has led to the global homogenization and stratification of financial practices—and this in turn has been a key driver of processes of financial exclusion. Financial exclusion then involves bifurcation within financial markets, so that different markets serve different portions of the household and business population. This analysis suggests a reconstruction of Minsky’s microfoundational model of the origins of financial fragility and crisis, which shifts from Minsky’s emphasis on a representative borrower–lender relationship to a situation of borrower–lender relationships in bifurcated markets.

Financial Crisis, Gender, and Power: An Analytical Framework

This paper begins to remedy the neglect of gender aspects of financial crises by exploring a suggestive microfoundational model of unequal gender power and cost-bearing in a borrower household. This model shows that financial-market liberalization can assess womens access to formal sector employment and encourage the growth of household credit, both for a household enterprise and for the acquisition of labor-saving household assets. The price of these gains, however, is greater household risk because of greater cash-flow dependence and financial fragility. A financial crisis can force the household to bear heavier adjustment costs than would otherwise be felt; and these costs may well be borne disproportionately by women, who become more economically vulnerable as a result.

Chinese-American Banking and Community Development in Los Angeles County

Given the rapid increase of immigrant populations and ethnic communities in the U.S., it is surprising that so little attention has been paid to the role of ethnically owned banks in community development. Analyses of banking usually focus on developments such as mergers and consolidations within the mainstream financial sector. The academic literature on financial geography and the ethnic economy has established that the discriminatory and exclusionary practices of mainstream banks and other financial institutions play a significant role in impoverishing urban, low-income ghettos. Research on minority financial services largely focuses on the dynamics of informal financial establishments in ethnic neighborhoods. With the exception of research on African-American banks, there has been remarkably little scholarship on or even acknowledgement of ethnically owned formal financial institutions in minority communities. This article examines the parallel, co-respective growth of Chinese-American residents, businesses, and bank branches in Los Angeles, with special attention to spatial and temporal correlation. In particular, we explore the role of Chinese ethnic banks in altering commercial infrastructures and residential landscapes in Los Angeles Countys Chinatown and the San Gabriel Valley ethnoburb area. This article is based on extensive quantitative data and on twenty-seven multilingual interviews conducted in 1999 with officers of Chinese-American banks.

On Krugman's model of economic geography

Abstract This essay evaluates the evolution of Paul Krugmans ideas about economic geography between 1989 and 1996, focusing on the scope and intention of his work. While Krugmans geographical writings have acknowledged diverse research traditions, he has increasingly focused his efforts on formal spatial models that embody the methods of mainstream economic modeling. This emphasis reflects Krugmans view that formal modeling holds the most promise for understanding spatial aspects of urbanization. Krugmans interventions into economic geography have in turn allowed him to develop and articulate his own view of the future of social science: that is, the explanation of self-organizing behaviour should be the focal point of research, and formal modelling is the key means of advancing this agenda.

The theory of bank redlining and discrimination: An exploration

This article addresses a gap in the economic literature on race and credit markets: the theoretical basis of lending discrimination and redlining. It provides a unified model for exploring why discrimination and redlining exist in credit markets. This model is first used to examine three explanations offered by other authors—bigotry, differential risk, and market segmentation. The article then suggests several new explanations of race effects. These emphasize the interlinkage between labor and credit markets; market spillovers due to housing liquidity, refurbishment, and branch location effects; and strategic interaction among lenders.

Roemer's “General” Theory of Exploitation Is a Special Case: The Limits of Walrasian Marxism

In a series of recent writings, John Roemer (1982a, 1982b, 1985, 1988) has made a provocative claim: exploitation and class are merely second-order concepts within Marxian theory, because both phenomena derive directly from differential ownership of productive assets (DOPA); indeed, exploitation remains a consistent index of economic injustice only if a “property relations†conception of exploitation replaces the common “labor-value†view. In sum, property relations, not the labor exchange, the labor proces, labor values, or even capitalist accumlation should be the central concern of Marxian theory.

Money and Credit in Radical Political Economy: A Survey of Contemporary Perspectives

This article reviews radical political economic (RPE) analyses written since 1970 in which money or credit relations are centrally important. Contemporary authors within RPE differ on how important money and credit are in economic dynamics because they have very different ideas about whether money and credit perform essential economic functions. This paper argues that these essential functions arise only if financing constraints, uncertainty, and information asymmetry are elements of an authors analytical framework.