The urban transformation of Beirut: an investigation into the movement of capital
In this dissertation, I set out to answer two main questions: why does circulating capital become fixed in Beirut's built environment, and how does this happen? Through conducting interviews with real estate developers, residents, architects, public officials, bankers and other relevant agents, through site surveys, the consultation of land and commercial registry records, real estate brochures and other primary material, I reconstruct the material and institutional components that explain the urban transformation of Beirut. I argue that this transformation constituted a "spatial fix" where surplus capital was switched into the built environment to temporarily stave off a crisis of overaccumulation, in this case upper middle class to high end real estate, following a significant increase in capital flows to the country in 2008. The first part of the dissertation looks at the reasons for this spatial fix. I argue that the influx of excess liquidity can be explained by the Lebanese banking system escaping the financial crisis, consequently being able to offer higher interest rates than banks in countries that were affected by the crisis. Besides being constrained by conservative lending regulations, the banks had not engaged in risky financial products because they found a profitable outlet in lending to the government, who paid high interest rates, crowding out loans to the private sector. The banks were able to lend such large sums because of remittances and transfers from Lebanon's large expatriate population, as well as funds from the Gulf following the steady rise in oil prices. As public debt increasingly had to be rolled over, however, interest rates declined. When after the crisis a large amount of liquidity found its way to Lebanon's banks, they found an outlet for their capital when the Central Bank provided incentives that encouraged mortgage lending, leading to a major boom in loans to the housing and construction sectors and massive profits for the banks. I argue that these profits should be situated within "networks of accumulation" consisting of persons with overlapping interests in banking, real estate and politics, who direct these capital flows and influence the legal framework that decides the ways in which these can be used to exploit the built environment. These networks are not so much a result of corruption, but of the social relations of capitalism, where the constraints of the laws of competition incentivize agents to concentrate and centralize capital, resulting in a tendency to monopolize. Capitalism in Lebanon was made through alliances and networks such as these, preventing the rise of a welfare or developmentalist state to temper these tendencies. In the second part of the dissertation, I set out to explore the materialization of the spatial fix in Beirut's built environment, more specifically in the neighborhoods of Mar Mikhael, Zokak el Blat and Corniche en Nahr. I show how the legal framework in place created conditions for a large "rent gap" to occur, i.e. the difference between actual ground rent and potential ground rent under a plot's "highest and best use." The existence of rent controls ensured a low actual return from buildings where this was the main form of tenancy. The legal framework related to construction allowed for a much higher exploitation of a plot of land, especially after changes to the Building Law in 2004. This, coupled with the absence of any heritage protection framework, provided a significant incentive for property owners to sell their buildings to developers, who would demolish them, usually merge the plot with some neighboring plots, and construct a high rise to fully profit from the exploitation of the plot as allowed in the Building Law. The ways in which the rent gap was closed, however, varied greatly and were influenced by many factors, some of which have received little attention in the literature on gentrification (i.e. on the process whereby higher income dwellers and uses displace lower income ones) These include the presence of art related activities and creative industries, the legacies of (sectarian) conflict and displacement, the related territorial stigma of an area, and an area's location in terms of accessibility by car or proximity to upmarket shopping and entertainment districts. In Corniche en Nahr, I show how the area's industrial character was used to connect its redevelopment to the redevelopment of brownfields in the United States and Western Europe and became part of an imagined urban world of loft living, shared by investors who referred to their experiences as Lebanese traveling and living abroad, pointing to the ways in which space is always constituted by multiple translocal relations. My findings contribute to theories on the rent gap, gentrification, urban political economy, the production of networks of accumulation, the structure, function and influence of diasporas, the historical development of secondary circuits of accumulation and neoliberalism, postcolonial/Marxist debates, the geographies of the financial crisis and the financialization of housing and land. As a case from the "South" they bring dimensions in that might open up relevant questions on the transformation of cities everywhere and the spatial fix underlying these transformations.