One of the enduring habits of the news media is giving staff time off at Christmas. This is achieved mainly by padding out space with seasonal filler. Some of this is prepared weeks in advance, such as end-of-year lists and guff about new year resolutions. Some of it is artificial news, such as the honours list, which also produces more guff in turn (Q: what does Sir Wiggo say about us as a nation? A: bugger all). The shift of the start of the sales from January the 1st to Boxing Day has been a godsend in this regard, allowing the dead days of Winterval to be bloated with photos of naked greed at Harrods against a background of retail jeopardy: will shops sell enough reduced-priced goods to drag the economy over the finishing line?
In today's Guardian, Deborah Orr has got into the seasonal spirit by suggesting that capitalism make a new year's resolution to be better at providing jobs, security and fairness. Though generally an astute observer, this reveals her weakness for the sort of liberal sentimentality that lets capitalism off the hook. She claims: "After decades during which we have all been told that we must allow the market to decide, the market is making a pro-social and humane decision. It is choosing to sacrifice profits in order to save itself. This is what the sales are all about – companies slashing their profits in order to keep ticking over, providing jobs, maintaining a presence".
This sort of analysis credits capitalism, the "market", with moral agency: the making of a humane decision. Of course, no such thing is happening, nor could it ever happen. The market does not have a mind, not even in the pop-bollocks sense of a hive-mind. To believe it does is to accept the ideological premise of a supernatural force that we must accommodate: the "invisible hand" of Adam Smith's metaphor which has subsequently been apotheosised into the Old Testament deity of free enterprise. There is no reasoning with capitalism. Both worship and propitiation (the sacrifices of the "strivers") fall on deaf ears. Actually, there aren't any ears - that's just me lapsing into anthropomorphism. Some businesses will take a hit to profits if they think it will grow or maintain market share, and thereby deliver fatter profits later, but others will quite happily asset-strip or lay-off staff now if they think that will be in their best interests. The free-market ideologue may deify the profit motive, but at least he doesn't claim that businesses are primarily driven by ethical considerations. What need of the CSR fig-leaf if every decision you make is ethically-based?
Orr continues: "You could even argue that the recession is teaching businesses that people really are more important than profit (or at least that if people don't have jobs then they don't have customers). The rich are realising that they can't keep getting richer if the poor keep getting poorer". At this time of year we oscillate between extreme perspectives. Thus the Queen will habitually bore on about Christmas being a time for family but also a time for remembering those less fortunate than ourselves (that's everybody, in her case). Orr's focus on the decimation of the high street, and in particular the mismanagement of pubs by the big chains, is a paean to the "local" in all the senses of that word, but this makes her temporarily blind to a fundamental truth of capitalism: there are always more customers, always new markets, elsewhere. Starbucks have not yet exhausted the UK market but are already opening up in India. The growing global middle-class will ensure steadily increasing demand for coffee-as-lifestyle for years to come. The rich know they can keep on getting richer, even as the poor of developed nations get poorer, so long as there are populations in developing countries whose new spending power can grow the overall market.
Orr's optimism, the belief that growing poverty is ultimately bad for the rich, is based on the zero-sum fallacy. While it is true that eventually every population, from Aberdeen to Amazonia, will be incorporated into the market, thus precluding further customer growth (i.e. opening up new territories), this simply shifts the balance of activity towards technological growth. The poor of the world can see absolute growth in terms of material advancement, while experiencing relative decline in terms of the share of wealth. It's all about how the pie is shared out. As it grows, the rich are positioned to appropriate a disproportionate share of that growth, just as they have done over the last 30 years.
New year resolutions are rarely effective as they tend to focus on the aspirational rather than the achievable: losing weight or quitting smoking rather than painting the bedroom or visiting relatives. Asking for a capitalism that "promotes fairness" is just delusional. Unfairness is its very essence and there is no natural limit to its appetite.
Saturday, 29 December 2012
Thursday, 20 December 2012
Living in the Ghetto
The news that an immigrant is going to receive over £2,600 in housing benefits a week has elicited little media comment beyond wry sympathy at his inability to relocate his family to the more select parts of London. Despite the real estate challenge, Mark Carney, the new Governor of the Bank of England, will have little difficulty acclimatising to a city dominated by the global executive elite, and as an English-speaking Canadian he is already as integrated as you can be short of being born and bred in Midsomer.
For those without Carney's advantages, Ed Milliband recently proposed that steps should be taken to ensure that every Briton speaks English. This is an orthodox progressive position, arguing that integration, and therefore the life chances of immigrants themselves, would be helped by actively developing language skills. It's a win-win. In fact, it's an example of passive-aggressive intolerance. Exactly the same argument was once deployed against the public use of Welsh and Gaelic. It also gives quiet encouragement to natives who don't like the gabble of foreign tongues, but without pandering to overt racism. But the real motivation for this intervention has less to do with intolerance or prejudice, which I'm sure Milliband is largely free of, and more to do with economic utility. His plea also implies the neoliberal belief that the state should take measures to better train workers for the benefit of capital. Suggesting that immigrants should speak English is anodyne because no one is suggesting that they shouldn't, least of all immigrants themselves. You might as well advocate breathing.
Jackie Ashley supported Milliband's initiative and even broadened it to talk about the undesirability of ghettoes, that is places where English may not be spoken routinely: "But ghetto communities are always bad news. They increase suspicion on both sides. They gnaw away at common citizenship. If we've learned one thing from the politics of the last century in Europe, surely it's that". This is bad history. Ashley's implied reference is to the Jewish ghettoes of Eastern Europe, with their long experience of pogroms and legalised discrimination. But that is simply not a relevant parallel for Britain. Our ghettoes have been built by economic circumstance, both in terms of available housing and the proximity of work, not by walls and curfews. Imagine if she had claimed that the traditional Irish Catholic areas of Glasgow and Liverpool were "always bad news". This anti-ghetto rhetoric, this intolerance, is sadly reminiscent of New Labour's appallingly stupid policy of dispersing asylum seekers around the country in the early 00s.
In the modern world, ghettoes (as distinct from the housing of the poor) are essentially transient communities providing induction support and access to social and economic networks, not unlike a global corporation's relocation function. Every Polish shop is a mini-job centre and a mini-Citizen's Advice Bureau. The ghetto functions as a decompression chamber, where immigrants can be acclimatised in a hybrid milieu, like fish and chip shops on the Costa del Sol using olive oil instead of lard. Once they find their feet, they push on into the interior in waves of further and deeper integration, like the Jews of Whitechapel moving out to Gants Hill and Golders Green. In ending up in Hampstead, rather than Peckham, Ed Milliband's parents were following a well-trodden path to a particularly genteel ghetto. Of course, we don't tend to classify an area as a ghetto (other than ironically) unless there is visible poverty, or at least lots of fried chicken shops.
Ghettoes are overwhelmingly successful in their job. They do not trap people. The point about the "escape the ghetto" trope is that escape is routine. Consider how Italian-Americans migrated from the Lower East Side of New York, out to New Jersey and Connecticut, leaving "the old neighbourhood" to more recent immigrants from elsewhere. It is ghettoes, and not government diktats about language skills, that are the chief facilitators of integration. But government tends to be suspicious of them, largely because they are autonomous, and is impatient for their dissolution: don't stand out, blend in and be quick about it. Today's planning battles over mosques echo earlier conflicts over synagogues and Catholic churches. Milliband didn't use the G-word, but the negative connotations are implicit in his comments about "slum housing" and "segregated workplaces". Instead, he drew a contrast between assimilation (bad because you lose your cultural identity) and separation (bad because you retain it). Integration is the happy medium where the immigrant can operate like a true Brit (in public) while retaining the solace of her cultural heritage (in private). Diversity then becomes a set of sentimental commodities, to be put on and taken off like your football team's colours.
What is rarely acknowledged by politicians is that the specifics of integration, the "points of non-negotiable conformity", are almost wholly to do with economic utility rather than culture. This reveals the too-often elided truth that immigration policy is deliberate and well-planned, not the series of mistakes and bungles that the press paint it as. Tories berating the incompetence of the Border Agency, like Labour confessing that "we got it wrong", are both simple misdirections. All parties are quite open in their insistence on an immigration policy that facilitates the importation of skilled workers at the request of business, while simultaneously pandering to tabloid prejudices about benefit tourists and hate-preachers. Immigrants are neatly divided into good (Mark Carney) and bad (Abu Qatada). It is naive to believe that had the Tories been in power during the 00s, the influx of cheap Eastern European workers would not have occurred. It was what business wanted at the time, which is why it happened.
Insisting on a proficiency in English is an argument about the economic value of the individual, not a plea for more community singing. The reality is that the vast majority of immigrants are only too keen to learn or improve their English because they anticipate the economic benefits. It is a myth that immigrants come here determined not to learn the language. After all, an ability to read and write English would be most helpful for a career in benefit fraud. Perhaps Milliband should worry less about immigrants who can't speak English and more about an immigrant who appears to think the bankers' gravy-train is still running.
For those without Carney's advantages, Ed Milliband recently proposed that steps should be taken to ensure that every Briton speaks English. This is an orthodox progressive position, arguing that integration, and therefore the life chances of immigrants themselves, would be helped by actively developing language skills. It's a win-win. In fact, it's an example of passive-aggressive intolerance. Exactly the same argument was once deployed against the public use of Welsh and Gaelic. It also gives quiet encouragement to natives who don't like the gabble of foreign tongues, but without pandering to overt racism. But the real motivation for this intervention has less to do with intolerance or prejudice, which I'm sure Milliband is largely free of, and more to do with economic utility. His plea also implies the neoliberal belief that the state should take measures to better train workers for the benefit of capital. Suggesting that immigrants should speak English is anodyne because no one is suggesting that they shouldn't, least of all immigrants themselves. You might as well advocate breathing.
Jackie Ashley supported Milliband's initiative and even broadened it to talk about the undesirability of ghettoes, that is places where English may not be spoken routinely: "But ghetto communities are always bad news. They increase suspicion on both sides. They gnaw away at common citizenship. If we've learned one thing from the politics of the last century in Europe, surely it's that". This is bad history. Ashley's implied reference is to the Jewish ghettoes of Eastern Europe, with their long experience of pogroms and legalised discrimination. But that is simply not a relevant parallel for Britain. Our ghettoes have been built by economic circumstance, both in terms of available housing and the proximity of work, not by walls and curfews. Imagine if she had claimed that the traditional Irish Catholic areas of Glasgow and Liverpool were "always bad news". This anti-ghetto rhetoric, this intolerance, is sadly reminiscent of New Labour's appallingly stupid policy of dispersing asylum seekers around the country in the early 00s.
In the modern world, ghettoes (as distinct from the housing of the poor) are essentially transient communities providing induction support and access to social and economic networks, not unlike a global corporation's relocation function. Every Polish shop is a mini-job centre and a mini-Citizen's Advice Bureau. The ghetto functions as a decompression chamber, where immigrants can be acclimatised in a hybrid milieu, like fish and chip shops on the Costa del Sol using olive oil instead of lard. Once they find their feet, they push on into the interior in waves of further and deeper integration, like the Jews of Whitechapel moving out to Gants Hill and Golders Green. In ending up in Hampstead, rather than Peckham, Ed Milliband's parents were following a well-trodden path to a particularly genteel ghetto. Of course, we don't tend to classify an area as a ghetto (other than ironically) unless there is visible poverty, or at least lots of fried chicken shops.
Ghettoes are overwhelmingly successful in their job. They do not trap people. The point about the "escape the ghetto" trope is that escape is routine. Consider how Italian-Americans migrated from the Lower East Side of New York, out to New Jersey and Connecticut, leaving "the old neighbourhood" to more recent immigrants from elsewhere. It is ghettoes, and not government diktats about language skills, that are the chief facilitators of integration. But government tends to be suspicious of them, largely because they are autonomous, and is impatient for their dissolution: don't stand out, blend in and be quick about it. Today's planning battles over mosques echo earlier conflicts over synagogues and Catholic churches. Milliband didn't use the G-word, but the negative connotations are implicit in his comments about "slum housing" and "segregated workplaces". Instead, he drew a contrast between assimilation (bad because you lose your cultural identity) and separation (bad because you retain it). Integration is the happy medium where the immigrant can operate like a true Brit (in public) while retaining the solace of her cultural heritage (in private). Diversity then becomes a set of sentimental commodities, to be put on and taken off like your football team's colours.
What is rarely acknowledged by politicians is that the specifics of integration, the "points of non-negotiable conformity", are almost wholly to do with economic utility rather than culture. This reveals the too-often elided truth that immigration policy is deliberate and well-planned, not the series of mistakes and bungles that the press paint it as. Tories berating the incompetence of the Border Agency, like Labour confessing that "we got it wrong", are both simple misdirections. All parties are quite open in their insistence on an immigration policy that facilitates the importation of skilled workers at the request of business, while simultaneously pandering to tabloid prejudices about benefit tourists and hate-preachers. Immigrants are neatly divided into good (Mark Carney) and bad (Abu Qatada). It is naive to believe that had the Tories been in power during the 00s, the influx of cheap Eastern European workers would not have occurred. It was what business wanted at the time, which is why it happened.
Insisting on a proficiency in English is an argument about the economic value of the individual, not a plea for more community singing. The reality is that the vast majority of immigrants are only too keen to learn or improve their English because they anticipate the economic benefits. It is a myth that immigrants come here determined not to learn the language. After all, an ability to read and write English would be most helpful for a career in benefit fraud. Perhaps Milliband should worry less about immigrants who can't speak English and more about an immigrant who appears to think the bankers' gravy-train is still running.
Tuesday, 18 December 2012
Shotguns and Weddings
To tolerate something means putting up with it, enduring it. It's an act of forbearance. It does not mean acknowledging or liking something, but essentially ignoring it. It's a refusal to take sides, a "don't know" in pollster-speak. But in political discourse the word is often used to imply a positive act of engagement and acknowledgement, even of limited sanction. If intolerance is a dislike, then tolerance is treated as a qualified like.
An example of this is gay marriage, which is regularly presented in binary terms as something one must either be for or against. As Chris Dillow has noted, the debate is framed as one of equality and therefore something that affects us all, though in reality most people are either wholly indifferent or in the "I don't see why they shouldn't" camp. The Catholic writer Timothy Radcliffe recently provided a good example of how tolerance can be used to defend prejudice: "Many Christians oppose gay marriage not because we are homophobic or reject the equal dignity of gay people, but because 'gay marriage' ultimately, we believe, demeans gay people by forcing them to conform to the straight world". He goes on: "Tolerance means, literally, to engage with other people who are different. It implies an attention to the particularity of the other person, a savouring of how he or she is unlike me, in their faith, their ethnicity, their sexual orientation. A society that flees difference and pretends we are all just the same may have outlawed intolerance in one form, and yet instituted it in other ways". The argument deployed here against gay marriage is not that it is a theological impossibility (something that we cannot tolerate, even if we wished to), or a moral abomination (something that we choose not to tolerate), but that its toleration would obliterate the separateness that gays insist upon. Such sophistry makes you wonder if Father Radcliffe deserves a transfer from the Dominicans to the Jesuits.
An example of the word being used correctly is Barack Obama's insistence, in response to the Sandy Hook Elementary shootings, that: "We can't tolerate this any more. These tragedies must end. And to end them, we must change". In other words, the US can't go on ignoring the consequences of liberal gun laws. "We cannot accept events like this as routine. Are we really prepared to say we are powerless in the face of such carnage? That the violence visited on our children year after year is the price of our freedom?" Obama has already been criticised for not explicitly mentioning "guns" in his speech, as if anybody could honestly infer that he is arguing for teachers to be armed to the teeth, while others have upbraided him for his hypocrisy in tolerating the death of children as the collateral damage of drone strikes, though it is hard to see how a charge of double standards (however legitimate the charge may be) is anything other than a distraction in relation to US gun control. If Obama is open to criticism, it is that he avoided all mention of guns during the presidential election, though you can probably see the tactical logic from his perspective. In other words, he displayed tolerance of the carnage, as a relative political priority, on the hustings.
For that reason, it is doubtful that the current tragedy will lead to major reform unless there is a clear shift in the mood of the US public. For a variety of reasons, excellently outlined by Jill Lepore in the New Yorker back in April, this is likely to be a gradual change, not an overnight conversion. The roots of the gun control debate lie in the 1960s push for civil rights. The conservative reaction to this in the 1970s, the focus on liberty over equality, recast the constitutional requirement to maintain armed states militias as a right of the individual to carry a gun. Pro-gun became a badge of identification for conservatives. Though gun ownership has actually been steadily declining since then, the gun-owning minority have become fiercer in defence of their right because of its political symbolism. The recent post-election predictions of demographic irrelevance for angry white men are likely to make them even more embattled.
Gay marriage will become legal because the majority of the population simply aren't fussed, while those that are passionately in favour have strong arguments (equality, fairness) and those that are passionately against have weak arguments (theology and a too-obvious obsession with sex). The basis of our tolerance is disinterest. In contrast, US gun control is likely to inch forward at best, despite a growing majority in favour of tighter regulation. The emotion over Sandy Hook will dissipate, just as it did after Columbine and similar shootings. Occasional tragedies will be tolerated until gun-ownership goes out of fashion as an identifier of personal liberty. Given how embedded the idea is in American popular culture, and how much spadework the pro-gun lobby groups have put in over the last 40 years, that won't happen on Obama's watch.
An example of this is gay marriage, which is regularly presented in binary terms as something one must either be for or against. As Chris Dillow has noted, the debate is framed as one of equality and therefore something that affects us all, though in reality most people are either wholly indifferent or in the "I don't see why they shouldn't" camp. The Catholic writer Timothy Radcliffe recently provided a good example of how tolerance can be used to defend prejudice: "Many Christians oppose gay marriage not because we are homophobic or reject the equal dignity of gay people, but because 'gay marriage' ultimately, we believe, demeans gay people by forcing them to conform to the straight world". He goes on: "Tolerance means, literally, to engage with other people who are different. It implies an attention to the particularity of the other person, a savouring of how he or she is unlike me, in their faith, their ethnicity, their sexual orientation. A society that flees difference and pretends we are all just the same may have outlawed intolerance in one form, and yet instituted it in other ways". The argument deployed here against gay marriage is not that it is a theological impossibility (something that we cannot tolerate, even if we wished to), or a moral abomination (something that we choose not to tolerate), but that its toleration would obliterate the separateness that gays insist upon. Such sophistry makes you wonder if Father Radcliffe deserves a transfer from the Dominicans to the Jesuits.
An example of the word being used correctly is Barack Obama's insistence, in response to the Sandy Hook Elementary shootings, that: "We can't tolerate this any more. These tragedies must end. And to end them, we must change". In other words, the US can't go on ignoring the consequences of liberal gun laws. "We cannot accept events like this as routine. Are we really prepared to say we are powerless in the face of such carnage? That the violence visited on our children year after year is the price of our freedom?" Obama has already been criticised for not explicitly mentioning "guns" in his speech, as if anybody could honestly infer that he is arguing for teachers to be armed to the teeth, while others have upbraided him for his hypocrisy in tolerating the death of children as the collateral damage of drone strikes, though it is hard to see how a charge of double standards (however legitimate the charge may be) is anything other than a distraction in relation to US gun control. If Obama is open to criticism, it is that he avoided all mention of guns during the presidential election, though you can probably see the tactical logic from his perspective. In other words, he displayed tolerance of the carnage, as a relative political priority, on the hustings.
For that reason, it is doubtful that the current tragedy will lead to major reform unless there is a clear shift in the mood of the US public. For a variety of reasons, excellently outlined by Jill Lepore in the New Yorker back in April, this is likely to be a gradual change, not an overnight conversion. The roots of the gun control debate lie in the 1960s push for civil rights. The conservative reaction to this in the 1970s, the focus on liberty over equality, recast the constitutional requirement to maintain armed states militias as a right of the individual to carry a gun. Pro-gun became a badge of identification for conservatives. Though gun ownership has actually been steadily declining since then, the gun-owning minority have become fiercer in defence of their right because of its political symbolism. The recent post-election predictions of demographic irrelevance for angry white men are likely to make them even more embattled.
Gay marriage will become legal because the majority of the population simply aren't fussed, while those that are passionately in favour have strong arguments (equality, fairness) and those that are passionately against have weak arguments (theology and a too-obvious obsession with sex). The basis of our tolerance is disinterest. In contrast, US gun control is likely to inch forward at best, despite a growing majority in favour of tighter regulation. The emotion over Sandy Hook will dissipate, just as it did after Columbine and similar shootings. Occasional tragedies will be tolerated until gun-ownership goes out of fashion as an identifier of personal liberty. Given how embedded the idea is in American popular culture, and how much spadework the pro-gun lobby groups have put in over the last 40 years, that won't happen on Obama's watch.
Sunday, 16 December 2012
Ten Year Tenure Tips
The headlines greeting the decennial 2011 census have focused on changes in country of origin and religious affiliation, but these simply reflect continuing trends that are either worrying (foreign neighbours!) or thrilling (better restaurants!) depending on your general outlook on life. The ethnic mix is a feature of a world in which labour mobility and international education are increasingly common. What should worry those parts of the UK that remain overwhelmingly white is that their exclusivity is a sign of economic poverty. As for religion, the census figures have always been misleading as they reflect emotional allegiance rather than participation (do the Jedi Knights actually have harvest festivals?), which is why they will continue to gradually but inexorably decline.
The more significant news, I'd suggest, is the change in housing tenure. Even here, most media commentators have focused on the decline in home ownership as the corollary of increased renting, which is hardly news. The huge sums diverted before the 2008 unpleasantness into buy-to-let properties were not a sign that the bottom was falling out of the rental market, while the continuing under-supply of affordable housing has been conscious policy for decades. What is news is that we reached an inflexion point in home ownership ten years ago, round about the time of the last census in 2001. As the HomeOwners Alliance lobby group put it:
The decline in homeownership started well before the financial collapse and housing market crash – it started in the easy credit boom years in London in 2000, and the rest of the country followed. Homeownership levels across the UK have been declining since 2002, five years before the credit crunch of 2007. But the decline has been notably accelerated by the drying up of mortgage credit, as well as rising unemployment, with homeownership levels currently dropping by almost 1% a year.
Parallel to this decline, the number that now own their home outright has increased. Homes owned with a mortgage or loan dropped from 8.4 million (39% of all households) in 2001 to 7.6 million (33%) in 2011. Homes owned outright increased over the same period from 6.4 million (29%) to 7.2 million (31%). Some housing market experts now anticipate that non-mortgaged owners will exceed the mortgaged as soon as 2014. That date will probably also see the number of private renters exceed the number of social renters (i.e. renting from the council or a housing association). The former have increased from 1.9 million homes (9%) in 2001 to 3.6 million homes (15%) in 2011. The next couple of years will therefore witness a watershed in terms of housing tenure composition.
Does this matter? I think it does, for two reasons. First, outside of the super-rich, people who own their homes outright tend to be less willing to sell and trade on. This is largely a factor of age, i.e. that they pay off their mortgage in their 50s or early 60s. After a couple of decades of trading up (in most cases), they're probably happy to sit still once the music stops, certainly since Spanish villas went out of fashion. The problem is that these properties are then less likely to return to the market. Even on death (or when they need funds for a care home), there is now a good chance that the property will be occupied by an inheritor (the destiny of many a baby-boomer's child who could not otherwise afford a mortgage), even where the inheritance is split across multiple children (I suspect open market selling will be a third option after an inter-sibling sale of shares or an agreement to let the property and divide the rental income). In other words, such properties are likely to stay within the family. The second reason is that buy-to-let properties are less likely to to be converted to owner-occupied homes as their revenue stream is a hedge against both inflation and a potential property price crash. Baby-boomers, or even those in their 40s who were able to invest before 2008, have long seen buy-to-let as a pension fund. They are probably going to sweat their assets.
What this means is that, short of a massive housebuilding programme, the supply of properties on the open market for purchase by owner-occupiers via mortgages will remain constrained. The drop in house sale volumes since 2007 is not likely to reverse any time soon. This will keep property prices high, which will please builders (they prefer high margins to high volumes), existing homeowners, and (by extension) certain political parties. It will further limit social mobility and will reinforce the trend towards a rentier mentality. The ideological opposition to higher inheritance or property taxes is likely to grow further on the right, leading to calls for outright reduction or abolition (the freeze on council tax revaluation is a de facto real-terms reduction for the upper bands). The popularity of the mansion tax among LibDems is based on the assumption that it won't catch the majority of homeowners, just rich oligarchs in Kensington and Chipping Norton.
The more I look at the current political establishment, and its knowing acquiescence in this dynamic, the more I see a childish nostalgia for the Edwardian era (Cameron, Clegg, Osborne and Johnson could be transplanted with zero adjustment - Gove would be shown the tradesmens' entrance). The popular resonance of Downton Abbey is perhaps less about the upstairs-downstairs class boundaries and cultural snobbery and more about the attraction of unearned income. The census implies we are losing our faith in religion, but not our faith in property.
The more significant news, I'd suggest, is the change in housing tenure. Even here, most media commentators have focused on the decline in home ownership as the corollary of increased renting, which is hardly news. The huge sums diverted before the 2008 unpleasantness into buy-to-let properties were not a sign that the bottom was falling out of the rental market, while the continuing under-supply of affordable housing has been conscious policy for decades. What is news is that we reached an inflexion point in home ownership ten years ago, round about the time of the last census in 2001. As the HomeOwners Alliance lobby group put it:
The decline in homeownership started well before the financial collapse and housing market crash – it started in the easy credit boom years in London in 2000, and the rest of the country followed. Homeownership levels across the UK have been declining since 2002, five years before the credit crunch of 2007. But the decline has been notably accelerated by the drying up of mortgage credit, as well as rising unemployment, with homeownership levels currently dropping by almost 1% a year.
Parallel to this decline, the number that now own their home outright has increased. Homes owned with a mortgage or loan dropped from 8.4 million (39% of all households) in 2001 to 7.6 million (33%) in 2011. Homes owned outright increased over the same period from 6.4 million (29%) to 7.2 million (31%). Some housing market experts now anticipate that non-mortgaged owners will exceed the mortgaged as soon as 2014. That date will probably also see the number of private renters exceed the number of social renters (i.e. renting from the council or a housing association). The former have increased from 1.9 million homes (9%) in 2001 to 3.6 million homes (15%) in 2011. The next couple of years will therefore witness a watershed in terms of housing tenure composition.
Does this matter? I think it does, for two reasons. First, outside of the super-rich, people who own their homes outright tend to be less willing to sell and trade on. This is largely a factor of age, i.e. that they pay off their mortgage in their 50s or early 60s. After a couple of decades of trading up (in most cases), they're probably happy to sit still once the music stops, certainly since Spanish villas went out of fashion. The problem is that these properties are then less likely to return to the market. Even on death (or when they need funds for a care home), there is now a good chance that the property will be occupied by an inheritor (the destiny of many a baby-boomer's child who could not otherwise afford a mortgage), even where the inheritance is split across multiple children (I suspect open market selling will be a third option after an inter-sibling sale of shares or an agreement to let the property and divide the rental income). In other words, such properties are likely to stay within the family. The second reason is that buy-to-let properties are less likely to to be converted to owner-occupied homes as their revenue stream is a hedge against both inflation and a potential property price crash. Baby-boomers, or even those in their 40s who were able to invest before 2008, have long seen buy-to-let as a pension fund. They are probably going to sweat their assets.
What this means is that, short of a massive housebuilding programme, the supply of properties on the open market for purchase by owner-occupiers via mortgages will remain constrained. The drop in house sale volumes since 2007 is not likely to reverse any time soon. This will keep property prices high, which will please builders (they prefer high margins to high volumes), existing homeowners, and (by extension) certain political parties. It will further limit social mobility and will reinforce the trend towards a rentier mentality. The ideological opposition to higher inheritance or property taxes is likely to grow further on the right, leading to calls for outright reduction or abolition (the freeze on council tax revaluation is a de facto real-terms reduction for the upper bands). The popularity of the mansion tax among LibDems is based on the assumption that it won't catch the majority of homeowners, just rich oligarchs in Kensington and Chipping Norton.
The more I look at the current political establishment, and its knowing acquiescence in this dynamic, the more I see a childish nostalgia for the Edwardian era (Cameron, Clegg, Osborne and Johnson could be transplanted with zero adjustment - Gove would be shown the tradesmens' entrance). The popular resonance of Downton Abbey is perhaps less about the upstairs-downstairs class boundaries and cultural snobbery and more about the attraction of unearned income. The census implies we are losing our faith in religion, but not our faith in property.
Friday, 14 December 2012
Dark Factory
No, not a Joy Division retrospective, but the latest installment of the rise of the machines ...
The techno-pessimism meme has come in for some polite pooh-poohing of late, despite the best efforts of the usual suspects to insist that we've run out of ideas and no longer value innovation. What's prompted this has been two separate observations. First, the rise of the robots has now been given credibility by Apple's announcement that it plans to join the growing band of companies who intend to repatriate some manufacturing (onshore is the new offshore). Details are few, but the suspicion is that this means replacing labour in the Far East with even more advanced fabrication technology in the US, so it certainly doesn't promise an increase in manufacturing jobs outside of a small number of high-wage machine-minders. The second observation is the trend that sees the division of GDP between profit and wages (i.e. capital and labour) shifting in favour of the former. The link between the two is capital-biased technological change - i.e. investment is going on machines, which increase productivity and profit margins, rather than on better-educated workers (skill-biased technological change), which would increase wages.
The profit/wages split is a murky area, partly because it is affected by the other elements of GDP, such as tax and rents, and by the balance of trade. There is also the problem that the categorisation of certain economic activities is questionable and can change over time. For example, bankers' bonuses count as wages while hedge fund managers' bonuses count as profit. Similarly, the income of a contract IT bod, who works through a personal services company, is counted as profit as it is taken in the form of dividends. The rise of the PSC since the 80s has undoubtedly contributed to the growing share of GDP attributed to profit, and, by virtue of this "tax dodge" being biased towards higher-paid workers, has probably also helped depress average wages. A further problem is that an aggregate shift may simply reflect economic activity migrating from sectors with low profit margins to those with higher profit margins, such as (for most of the last 30 years) the financial sector. Even if those sectors have higher than average wages, if the comparative wage advantage is smaller than the comparative profit advantage, then profit will grow relative to wages over all.
Economists traditionally divided production into three factors: capital, labour and land. Capital here is constant capital, that is plant and equipment funded out of profit, plus finance capital, i.e. credit that can be used to create more constant capital. Land represents unimproved natural resources, aka raw materials. Rent, as a production cost, is a charge levied for access to those resources. In the twentieth century, entrepreneurship was separated out as a fourth factor, though it's worth emphasising that in this context a better word would be innovation, i.e. the ability to achieve greater production through better use of the other three factors. This extends from more efficient management techniques through to technological invention. The use of the word "innovation" in respect of financial instruments in recent decades is not mere pretension. In this context, CDOs were genuinely innovative because they allowed for the creation of more credit. The problem was that this was then spunked on existing houses rather than the expansion of production.
Though capital has had the edge over labour since the 80s, the returns to constant capital have actually been in relative decline (this in part explains the attraction of the finance sector before 2008 - i.e. too much capital chasing high yields caused a bubble in high profit debt). The chief reason for the decline is that the cost of technology has plummeted while its impact on production efficiency has been enormous (think of containerisation and ICT). Paradoxically, this fails to expand profits because it makes competition easier - i.e. the cost of entry to an industry is much lower and maintaining a de facto monopoly is that much more difficult. Offshoring can be seen as a defensive move by capital, harnessing the very technology that is driving down prices to maintain profit through wage repression.
As wages rise in China and other developing nations, profit margins are eroded once more. Onshoring is not about "bringing jobs back" but the next stage in the redundancy of labour. It's about dark factories, i.e. production facilities with little or no direct human involvement. If labour is a small factor in your production cost, then it makes sense to site your production as close to your customers as possible, as this reduces transport and storage costs. The eventual logic of this trend is the Star Trek replicator, a universal production facility in every home. Consumption then becomes a transaction in which a royalty is paid for the creation of an object. Capitalists (intellectual capitalists, if you prefer) are then people who own patents rather than the means of production. The creation of profit through competition is replaced by the extraction of rents through monopoly.
The suspicion that monopoly may already account for some of the shift between profit and wages is gaining ground, while the habitual abuse of monopoly power is now taken for granted. It is worth noting that Google and Amazon have declined to follow Starbucks's lead in "making a contribution" in respect of dodged tax. Starbucks operate in a competitive market, while the other two are near-as-damn-it monopolists and presumably feel they have little to fear from Margaret Hodge "putting away" her Kindle (not binning it, you'll note) or trying another search engine. Calling for a boycott is simply a demand that a particular company behave better; it is not an attack on monopoly power. Antitrust initiatives, such as the EU's long-running case against Microsoft, have proved to be little more than an inconvenience. The implicit acceptance of monopoly appears to have reached a watershed with the "new economy" of the last 15 years, in which a single business secures the degree of dominance that a century ago led to the forcible breakup of Standard Oil. Notable too is how often this monopoly is based on intermediation (funny how the Web was once thought to herald disintermediation), such as that of Google, Facebook and Amazon. It seems almost redundant to point out that the advocates of "open" are delivering "closed".
In the modern economy big capital struggles to find enough opportunities to invest in making stuff. Though profit margins can be maintained through automation and offshoring, turnover declines as commodities become cheaper and product cycles briefer (the impending disappearance of the Kindle will solve Margaret Hodge's ethical dilemma). Capital is then increasingly diverted to non-productive but high-yield sectors, such as finance and property, and into the service sector. Labour-intensive services are attractive precisely because they offer scope to repeat the automation and offshoring that have been almost exhausted in manufacturing, hence the neoliberal push to privatise health and education. In those sectors where automation is already high, further productivity gains become more challenging. This encourages a shift towards rent-seeking, which means that land (i.e. natural resources) becomes more dominant as a factor of production. Consider the growing significance of rare-earth metals in discussions about the price of manufactured goods. The geopolitical ramifications of the grab for agricultural land, water, energy and minerals are obvious, but the local implications are just as notable, from the ideological opposition to property, inheritance and land value taxes to disputes over wind turbines.
In such an economy, innovation becomes a more significant factor as well, not simply because it is then the only game in town as far as productivity growth is concerned, but because the patenting of techniques and inventions creates a form of resource that is equivalent to land - i.e. it produces a rent and is a tradable and inheritable asset. Recent years have seen the patenting of things we'd never previously have thought of as inventions, such as gene sequences, and now no one bats an eyelid when Apple seeks to patent a basic geometric shape. The parallel growth of the "patent troll" industry is less an issue of parasitism and more a reflection of the hospitality of the host, i.e. patent law. The recent "smartphone wars" between Apple, Google and Samsung are significant because they show both the speed at which technological advances are adopted by competitors and the determination to enforce patents and thus preserve monopoly power.
The conclusion one can draw from these trends is that labour is becoming less valued. Even if we were not suffering austerity and low growth, we would need less labour year-on-year to maintain production, so high unemployment is here to stay. Though our remaining labour needs will require increasing skills at the top-end of the income scale, the growth of educated labour forces in developing countries means that the wages premium commanded by a college degree in developed countries will erode due to global competition (this, together with increasing fees and large student debts, will return further education to being the preserve of the rich). At the bottom-end, the growing pool of the unemployed, and the erosion of the welfare state, means that wages will fall in real terms.
The winners in such a scenario will be those that already own assets and those that can secure access to rent-extracting jobs, such as government and the law. For a while, this latter camp will include the supernumeraries that occupy the corporate ecosystem, such as accountants and HR types, who are in effect extracting a form of rent as "management overhead", but sooner rather than later they will find their own roles under threat as capital moves from corporations that manage people to trusts that manage assets, and as technology continues to automate labour everywhere. We don't need Star Trek replicators to envisage a future in which HR and Accounts no longer exist. There will be little role for them in dark factories, and those are already being built.
The techno-pessimism meme has come in for some polite pooh-poohing of late, despite the best efforts of the usual suspects to insist that we've run out of ideas and no longer value innovation. What's prompted this has been two separate observations. First, the rise of the robots has now been given credibility by Apple's announcement that it plans to join the growing band of companies who intend to repatriate some manufacturing (onshore is the new offshore). Details are few, but the suspicion is that this means replacing labour in the Far East with even more advanced fabrication technology in the US, so it certainly doesn't promise an increase in manufacturing jobs outside of a small number of high-wage machine-minders. The second observation is the trend that sees the division of GDP between profit and wages (i.e. capital and labour) shifting in favour of the former. The link between the two is capital-biased technological change - i.e. investment is going on machines, which increase productivity and profit margins, rather than on better-educated workers (skill-biased technological change), which would increase wages.
The profit/wages split is a murky area, partly because it is affected by the other elements of GDP, such as tax and rents, and by the balance of trade. There is also the problem that the categorisation of certain economic activities is questionable and can change over time. For example, bankers' bonuses count as wages while hedge fund managers' bonuses count as profit. Similarly, the income of a contract IT bod, who works through a personal services company, is counted as profit as it is taken in the form of dividends. The rise of the PSC since the 80s has undoubtedly contributed to the growing share of GDP attributed to profit, and, by virtue of this "tax dodge" being biased towards higher-paid workers, has probably also helped depress average wages. A further problem is that an aggregate shift may simply reflect economic activity migrating from sectors with low profit margins to those with higher profit margins, such as (for most of the last 30 years) the financial sector. Even if those sectors have higher than average wages, if the comparative wage advantage is smaller than the comparative profit advantage, then profit will grow relative to wages over all.
Economists traditionally divided production into three factors: capital, labour and land. Capital here is constant capital, that is plant and equipment funded out of profit, plus finance capital, i.e. credit that can be used to create more constant capital. Land represents unimproved natural resources, aka raw materials. Rent, as a production cost, is a charge levied for access to those resources. In the twentieth century, entrepreneurship was separated out as a fourth factor, though it's worth emphasising that in this context a better word would be innovation, i.e. the ability to achieve greater production through better use of the other three factors. This extends from more efficient management techniques through to technological invention. The use of the word "innovation" in respect of financial instruments in recent decades is not mere pretension. In this context, CDOs were genuinely innovative because they allowed for the creation of more credit. The problem was that this was then spunked on existing houses rather than the expansion of production.
Though capital has had the edge over labour since the 80s, the returns to constant capital have actually been in relative decline (this in part explains the attraction of the finance sector before 2008 - i.e. too much capital chasing high yields caused a bubble in high profit debt). The chief reason for the decline is that the cost of technology has plummeted while its impact on production efficiency has been enormous (think of containerisation and ICT). Paradoxically, this fails to expand profits because it makes competition easier - i.e. the cost of entry to an industry is much lower and maintaining a de facto monopoly is that much more difficult. Offshoring can be seen as a defensive move by capital, harnessing the very technology that is driving down prices to maintain profit through wage repression.
As wages rise in China and other developing nations, profit margins are eroded once more. Onshoring is not about "bringing jobs back" but the next stage in the redundancy of labour. It's about dark factories, i.e. production facilities with little or no direct human involvement. If labour is a small factor in your production cost, then it makes sense to site your production as close to your customers as possible, as this reduces transport and storage costs. The eventual logic of this trend is the Star Trek replicator, a universal production facility in every home. Consumption then becomes a transaction in which a royalty is paid for the creation of an object. Capitalists (intellectual capitalists, if you prefer) are then people who own patents rather than the means of production. The creation of profit through competition is replaced by the extraction of rents through monopoly.
The suspicion that monopoly may already account for some of the shift between profit and wages is gaining ground, while the habitual abuse of monopoly power is now taken for granted. It is worth noting that Google and Amazon have declined to follow Starbucks's lead in "making a contribution" in respect of dodged tax. Starbucks operate in a competitive market, while the other two are near-as-damn-it monopolists and presumably feel they have little to fear from Margaret Hodge "putting away" her Kindle (not binning it, you'll note) or trying another search engine. Calling for a boycott is simply a demand that a particular company behave better; it is not an attack on monopoly power. Antitrust initiatives, such as the EU's long-running case against Microsoft, have proved to be little more than an inconvenience. The implicit acceptance of monopoly appears to have reached a watershed with the "new economy" of the last 15 years, in which a single business secures the degree of dominance that a century ago led to the forcible breakup of Standard Oil. Notable too is how often this monopoly is based on intermediation (funny how the Web was once thought to herald disintermediation), such as that of Google, Facebook and Amazon. It seems almost redundant to point out that the advocates of "open" are delivering "closed".
In the modern economy big capital struggles to find enough opportunities to invest in making stuff. Though profit margins can be maintained through automation and offshoring, turnover declines as commodities become cheaper and product cycles briefer (the impending disappearance of the Kindle will solve Margaret Hodge's ethical dilemma). Capital is then increasingly diverted to non-productive but high-yield sectors, such as finance and property, and into the service sector. Labour-intensive services are attractive precisely because they offer scope to repeat the automation and offshoring that have been almost exhausted in manufacturing, hence the neoliberal push to privatise health and education. In those sectors where automation is already high, further productivity gains become more challenging. This encourages a shift towards rent-seeking, which means that land (i.e. natural resources) becomes more dominant as a factor of production. Consider the growing significance of rare-earth metals in discussions about the price of manufactured goods. The geopolitical ramifications of the grab for agricultural land, water, energy and minerals are obvious, but the local implications are just as notable, from the ideological opposition to property, inheritance and land value taxes to disputes over wind turbines.
In such an economy, innovation becomes a more significant factor as well, not simply because it is then the only game in town as far as productivity growth is concerned, but because the patenting of techniques and inventions creates a form of resource that is equivalent to land - i.e. it produces a rent and is a tradable and inheritable asset. Recent years have seen the patenting of things we'd never previously have thought of as inventions, such as gene sequences, and now no one bats an eyelid when Apple seeks to patent a basic geometric shape. The parallel growth of the "patent troll" industry is less an issue of parasitism and more a reflection of the hospitality of the host, i.e. patent law. The recent "smartphone wars" between Apple, Google and Samsung are significant because they show both the speed at which technological advances are adopted by competitors and the determination to enforce patents and thus preserve monopoly power.
The conclusion one can draw from these trends is that labour is becoming less valued. Even if we were not suffering austerity and low growth, we would need less labour year-on-year to maintain production, so high unemployment is here to stay. Though our remaining labour needs will require increasing skills at the top-end of the income scale, the growth of educated labour forces in developing countries means that the wages premium commanded by a college degree in developed countries will erode due to global competition (this, together with increasing fees and large student debts, will return further education to being the preserve of the rich). At the bottom-end, the growing pool of the unemployed, and the erosion of the welfare state, means that wages will fall in real terms.
The winners in such a scenario will be those that already own assets and those that can secure access to rent-extracting jobs, such as government and the law. For a while, this latter camp will include the supernumeraries that occupy the corporate ecosystem, such as accountants and HR types, who are in effect extracting a form of rent as "management overhead", but sooner rather than later they will find their own roles under threat as capital moves from corporations that manage people to trusts that manage assets, and as technology continues to automate labour everywhere. We don't need Star Trek replicators to envisage a future in which HR and Accounts no longer exist. There will be little role for them in dark factories, and those are already being built.
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