This story starts not with the big issues of globalisation but the local issue of housing affordability, because the two have something in common. Over the last 24 years I've researched many different sides of housing and I often come back to the same thought - changes in housing markets are not incremental, they are more like step-changes, and once each big change is made it is hard to go back. Here are seven examples which come to mind:

Sticky Housing Prices

1. Tax incentives to over-invest in houses attract speculators, and that extra demand drives up prices and makes them "sticky", with resellers reluctant to take a loss; with few properties on the market, prices rarely drop; eventually, prices peak, capital gains end, and renters alone must cover the higher purchase costs of landlords;
2. With rents and purchase costs higher, saving for deposits is harder and more can't buy a first home unless they have wealthy families to help;
3. Large global funds have started buying portfolios of rental homes, loading them with fees and debt then reselling them as a financial package; sold dear, those rents will increase again;
4. Centrist Governments have caved in to developers, no longer requiring large housing developments to include affordable homes; less affordable homes are built; instead, Governments provide tax subsidies for high-end build-to-rent projects, often gated communities, as Labour did in 2021;
5. High housing costs drive New Zealand citizens overseas in record numbers, growth-obsessed Governments compensate with high inward migration from lower-wage countries; both exits and entries are at record highs;
6. Conservative Governments prefer to shift social housing off the Government's books, either by privatisation or to community organisations; once in the community sector they require only annual funding, which is easier to cut;
7. Affordability depends on income: Conservative Governments don't face much public criticism when they lower benefits and minimum wages because the numbers still go up, "increases" are announced, but they are less than inflation; centrist Governments have to play catch-up, delivering real increases while also finding funding to improve the less well-known secondary payments (accommodation supplement, tax credits), which are never increased by conservatives.

Structural

The reason for these hard-to-reverse step-changes are partly A) Structural:

1. Purchase costs climb past competitive market values and stay there;
2. High rents reinforce high purchase costs as barriers to saving for first-home purchase;
3. A new era of even-higher purchase costs and rents will be locked in by corporate landlords;
4. Smaller, simpler affordable housing is not built;
5. House prices aren't falling so most ex-citizens aren't coming back to stay, as covid showed;
6. Government doesn't have to answer for hard decisions like modernising our outdated State housing or finding funding to help complex tenants; community funding can be slowly reduced;
7. Our social support payment system is overly complex.

Social

The other reason these changes are hard to reverse is B) Social, because they alter the complex balance of class relationships which underpins political and economic power:

1. At first many small speculative investors gain from overpricing, believing they are smart investors and good landlords, and voting to continue housing tax concessions for the wealthy; later they'll sell out to large property managers;
2. Home ownership is increasingly only for the wealthy, who then live in comfortable suburbs and lose contact with the tougher world faced by renters, losing empathy for those who need more social assistance;
3. Once sold to investment funds and loaded with extra costs, rent and tenancy decisions are corporatised; small-scale local landlords can't re-enter the market as properties are too dear;
4. All renters are poorer and less secure for life; they pay higher rents so are less likely to achieve the lifetime financial advantages of ownership, including in their retirement;
5. The political result of increasing our proportion of citizens who left their own countries for economic and political advantage are unknown, but clearly undermine their nations of origin;
(see my book review of "Rigged" in this issue; economist Dean Baker recommends more immigration to the US, but only for skilled migrants because protectionist elite professions are paid twice European levels; Baker also recommends compensatory payments to cover more training in their nations of origin);
6. Community housing has community appeal, but has higher cost per dwelling than large-scale public housing, providing justification for later budget cuts or sell-offs;
7. Conservatives fund social media which demonises welfare recipients; rising inequality buys more media for conservatives, so confused voters substitute conservative cliches for thinking.

In short, reversing these policies is harder than making them because the structural and social changes increase both the economic and political costs of returning to more equitable arrangements. I'm retired now and well aware of the difficult choices facing the young and the old. Imagining our future with more and more young people in service jobs to the rich, more and more older people retiring into private rental, and both paying rents that are even higher than today, is deeply disturbing.

Sticky Global Inequality

All these local housing changes are worrying enough, but lately I see this same pattern of "hard-to-live-with" and "hard-to-reverse" changes in the global economy - and in the natural world. Our failure to limit global warming is covered in my review of Greta Thunberg's excellent "The Climate Book" elsewhere in this issue, so here I'll just highlight recent economic step-changes.

I used "Stages" in the article title because it's short and commonly used, but the global economy is and always was more complicated than a series of stages. "Stages of Capitalism" is just too big-picture, e.g. Mercantile->Classical (Competitive)->Keynesian->Global Capitalism, or Colonial->Imperial->Finance->Rentier Capitalism. These labels refer to just one side of a complex whole, and we could add many other critical economic shifts, e.g.:

• Managerialism, where management requires generic organisational skills rather than business knowledge, favouring jobs to the educated children of the rich;
• Corporate boards overpaying CEOs which flows to excessive management and specialist incomes;
• Contracting out, replacing public efficiency with private extraction;
• Tax evasion globalised and normalised;
• Lobbying of Governments legitimised and unrestrained;
• Franchises displacing small local businesses with faceless overseas owners and low wages;
• Monopsony as the standard global business model, controlling supply chains, driving up prices, and taking over local competitors;
• Short term market manipulation replacing investment for productivity;
• "Too Big to Fail" corporations;
• Mega-scale globally-coordinated Government bailouts with low interest rates in every new crisis;
• Legal immunity for US corporations breaking the law (housing derivatives, cryptocurrencies);
• Autocracies' access to globally marketed social media, security and weapons systems.

Sticky Politics

And there are supporting "hard-to-live-with" and "hard-to-reverse" political changes too:

• Union participation and worker power undermined;
• Political party membership and participation declining;
• Party emphasis on leaders and message control;
• Competitive parties rather than collective vision.

Creating New Alternatives

On that last point I was cheered to read about the Swiss approach to democracy recently, where the top level of a three-tier system is the Federal Council. Seven Federal Councillors represent all Switzerland's major political parties and are tasked with making decisions collegially. This sounds like a big improvement on our monarchy at the top, and could contribute to more consistent longer-term policies on critical Government services. Similarly, we should insist our parties are up-front about the policies of their most likely coalition before elections.

On green issues, I finished reading Greta Thunberg's "The Climate Book" both concerned about corporate power and Government inaction, and optimistic that we must see big changes in activism and politics because global warming will force us into action. Things like reforestation, radical reductions in airplane and car use, and shifting to plant based diets suddenly feel not just obvious but likely.

And I believe Dean Baker's book "Rigged", which I've reviewed in this Watchdog, may not have all the right answers yet but he certainly points to the potential for new responses. We can change the way markets work, instead of relying on partial Government redistribution of incomes after they've been misallocated at production. We don't have to put up with more of the same rubbish, and we don't have to rely on unlikely dreams of revolutions backed with violence. New alternatives are both possible and necessary.

Watchdog - 165 April 2024