A Theory of Housing Provision under Capitalism 3031244702, 9783031244704

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MARX, ENGELS, AND MARXISMS

A Theory of Housing Provision under Capitalism

Mike Berry

Marx, Engels, and Marxisms

Series Editors Marcello Musto, York University, Toronto, ON, Canada Terrell Carver, University of Bristol, Bristol, UK

The Marx renaissance is underway on a global scale. Wherever the critique of capitalism re-emerges, there is an intellectual and political demand for new, critical engagements with Marxism. The peer-reviewed series Marx, Engels and Marxisms (edited by Marcello Musto & Terrell Carver, with Babak Amini, Francesca Antonini, Paula Rauhala & Kohei Saito as Assistant Editors) publishes monographs, edited volumes, critical editions, reprints of old texts, as well as translations of books already published in other languages. Our volumes come from a wide range of political perspectives, subject matters, academic disciplines and geographical areas, producing an eclectic and informative collection that appeals to a diverse and international audience. Our main areas of focus include: the oeuvre of Marx and Engels, Marxist authors and traditions of the 19th and 20th centuries, labour and social movements, Marxist analyses of contemporary issues, and reception of Marxism in the world.

Mike Berry

A Theory of Housing Provision under Capitalism

Mike Berry Center for Urban Research RMIT University Melbourne, VIC, Australia

ISSN 2524-7123 ISSN 2524-7131 (electronic) Marx, Engels, and Marxisms ISBN 978-3-031-24470-4 ISBN 978-3-031-24471-1 (eBook) https://doi.org/10.1007/978-3-031-24471-1 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. McPhoto/Bilderbox / Alamy Stock Photo This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

For a city is an impermanent thing, its surface ever shifting, like the sea. And like the sea, a city has its sharks (Mick Herron, Slough House). For [Adam] Smith, the most pressing dangers to modern commercial societies arose not from the alleged impacts of markets upon morals, but from the way in which power and wealth could come to be reconfigured in ways that opened the door to the renewed domination of the weak by the powerful (Sagar, Adam Smith Reconsidered).

Titles Published

1. Terrell Carver & Daniel Blank, A Political History of the Editions of Marx and Engels’s “German Ideology” Manuscripts, 2014. 2. Terrell Carver & Daniel Blank, Marx and Engels’s “German Ideology” Manuscripts: Presentation and Analysis of the “Feuerbach chapter,” 2014. 3. Alfonso Maurizio Iacono, The History and Theory of Fetishism, 2015. 4. Paresh Chattopadhyay, Marx’s Associated Mode of Production: A Critique of Marxism, 2016. 5. Domenico Losurdo, Class Struggle: A Political and Philosophical History, 2016. 6. Frederick Harry Pitts, Critiquing Capitalism Today: New Ways to Read Marx, 2017. 7. Ranabir Samaddar, Karl Marx and the Postcolonial Age, 2017. 8. George Comninel, Alienation and Emancipation in the Work of Karl Marx, 2018. 9. Jean-Numa Ducange & Razmig Keucheyan (Eds.), The End of the Democratic State: Nicos Poulantzas, a Marxism for the 21st Century, 2018. 10. Robert X. Ware, Marx on Emancipation and Socialist Goals: Retrieving Marx for the Future, 2018. 11. Xavier LaFrance & Charles Post (Eds.), Case Studies in the Origins of Capitalism, 2018.

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TITLES PUBLISHED

12. John Gregson, Marxism, Ethics, and Politics: The Work of Alasdair MacIntyre, 2018. 13. Vladimir Puzone & Luis Felipe Miguel (Eds.), The Brazilian Left in the 21st Century: Conflict and Conciliation in Peripheral Capitalism, 2019. 14. James Muldoon & Gaard Kets (Eds.), The German Revolution and Political Theory, 2019. 15. Michael Brie, Rediscovering Lenin: Dialectics of Revolution and Metaphysics of Domination, 2019. 16. August H. Nimtz, Marxism versus Liberalism: Comparative RealTime Political Analysis, 2019. 17. Gustavo Moura de Cavalcanti Mello and Mauricio de Souza Sabadini (Eds.), Financial Speculation and Fictitious Profits: A Marxist Analysis, 2019. 18. Shaibal Gupta, Marcello Musto & Babak Amini (Eds), Karl Marx’s Life, Ideas, and Influences: A Critical Examination on the Bicentenary, 2019. 19. Igor Shoikhedbrod, Revisiting Marx’s Critique of Liberalism: Rethinking Justice, Legality, and Rights, 2019. 20. Juan Pablo Rodríguez, Resisting Neoliberal Capitalism in Chile: The Possibility of Social Critique, 2019. 21. Kaan Kangal, Friedrich Engels and the Dialectics of Nature, 2020. 22. Victor Wallis, Socialist Practice: Histories and Theories, 2020. 23. Alfonso Maurizio Iacono, The Bourgeois and the Savage: A Marxian Critique of the Image of the Isolated Individual in Defoe, Turgot and Smith, 2020. 24. Terrell Carver, Engels before Marx, 2020. 25. Jean-Numa Ducange, Jules Guesde: The Birth of Socialism and Marxism in France, 2020. 26. Antonio Oliva, Ivan Novara & Angel Oliva (Eds.), Marx and Contemporary Critical Theory: The Philosophy of Real Abstraction, 2020. 27. Francesco Biagi, Henri Lefebvre’s Critical Theory of Space, 2020. 28. Stefano Petrucciani, The Ideas of Karl Marx: A Critical Introduction, 2020. 29. Terrell Carver, The Life and Thought of Friedrich Engels, 30 th Anniversary Edition, 2020. 30. Giuseppe Vacca, Alternative Modernities: Antonio Gramsci’s Twentieth Century, 2020.

TITLES PUBLISHED

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31. Kevin B. Anderson, Kieran Durkin & Heather Brown (Eds.), Raya Dunayevskaya’s Intersectional Marxism: Race, Gender, and the Dialectics of Liberation, 2020. 32. Marco Di Maggio, The Rise and Fall of Communist Parties in France and Italy, 2020. 33. Farhang Rajaee, Presence and the Political, 2021. 34. Ryuji Sasaki, A New Introduction to Karl Marx: New Materialism, Critique of Political Economy, and the Concept of Metabolism, 2021. 35. Kohei Saito (Ed.), Reexamining Engels’s Legacy in the 21st Century, 2021. 36. Paresh Chattopadhyay, Socialism in Marx’s Capital: Towards a Dealienated World, 2021. 37. Marcello Musto, Karl Marx’s Writings on Alienation, 2021. 38. Michael Brie & Jörn Schütrumpf, Rosa Luxemburg: A Revolutionary Marxist at the Limits of Marxism, 2021. 39. Stefano Petrucciani, Theodor W. Adorno’s Philosophy, Society, and Aesthetics, 2021. 40. Miguel Vedda, Siegfried Kracauer, or, The Allegories of Improvisation: Critical Studies, 2021. 41. Ronaldo Munck, Rethinking Development: Marxist Perspectives, 2021. 42. Jean-Numa Ducange & Elisa Marcobelli (Eds.), Selected Writings of Jean Jaurès: On Socialism, Pacifism and Marxism, 2021. 43. Elisa Marcobelli, Internationalism Toward Diplomatic Crisis: The Second International and French, German and Italian Socialists, 2021. 44. James Steinhoff, Automation and Autonomy: Labour, Capital and Machines in the Artificial Intelligence Industry, 2021. 45. Juan Dal Maso, Hegemony and Class Struggle: Trotsky, Gramsci and Marxism, 2021. 46. Gianfranco Ragona & Monica Quirico, Frontier Socialism: Selforganisation and Anti-capitalism, 2021. 47. Tsuyoshi Yuki, Socialism, Markets and the Critique of Money: The Theory of “Labour Notes,” 2021. 48. Gustavo Moura de Cavalcanti Mello & Henrique Pereira Braga (Eds.), Wealth and Poverty in Contemporary Brazilian Capitalism, 2021. 49. Paolo Favilli, Historiography and Marxism: Innovations in MidCentury Italy, 2021.

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TITLES PUBLISHED

50. Levy del Aguila Marchena, Communism, Political Power and Personal Freedom in Marx, 2021. 51. V Geetha, Bhimrao Ramji Ambedkar and the Question of Socialism in India, 2021. 52. Satoshi Matsui, Normative Theories of Liberalism and Socialism: Marxist Analysis of Values, 2022. 53. Kei Ehara (Ed.), Japanese Discourse on the Marxian Theory of Finance, 2022. 54. Achim Szepanski, Financial Capital in the 21st Century, 2022. 55. Stephen Maher, Corporate Capitalism and the Integral State: General Electric and a Century of American Power, 2022. 56. Rémy Herrera, Confronting Mainstream Economics to Overcome Capitalism, 2022. 57. Peter McMylor, Graeme Kirkpatrick & Simin Fadaee (Eds.), Marxism, Religion, and Emancipatory Politics, 2022. 58. Genevieve Ritchie, Sara Carpenter & Shahrzad Mojab (Eds.), Marxism and Migration, 2022. 59. Fabio Perocco (Ed.), Racism in and for the Welfare State, 2022. 60. Dong-Min Rieu, A Mathematical Approach to Marxian Value Theory: Time, Money, and Labor Productivity, 2022. 61. Adriana Petra, Intellectuals and Communist Culture: Itineraries, Problems and Debates in Post-war Argentina, 2022. 62. Kolja Lindner, Marx, Marxism and the Question of Eurocentrism, 2022. 63. Marcello Mustè, Marxism and Philosophy of Praxis: An Italian Perspective from Labriola to Gramsci, 2022. 64. Lelio Demichelis, Marx, Alienation and Techno-capitalism, 2022. 65. Terrell Carver, Smail Rapic (Eds.), Friedrich Engels for the 21st Century: Perspectives and Problems, 2022. 66. Alexandros Chrysis, The Marx of Communism: Setting Limits in the Realm of Communism, 2022. 67. Paul Raekstad, Karl Marx’s Realist Critique of Capitalism: Freedom, Alienation, and Socialism, 2022. 68. Marcello Musto, Rethinking Alternatives with Marx, 2022. 69. José Ricardo Villanueva Lira, Marxism and the Origins of International Relations, 2022. 70. Bertel Nygaard, Marxism, Labor Movements, and Historiography, 2022.

TITLES PUBLISHED

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71. Marcos Del Roio, Gramsci and the Emancipation of the Subaltern Classes, 2022. 72. Marcelo Badaró, The Working Class from Marx to Our Times, 2022. 73. Jean Vigreux, Roger Martelli, & Serge Wolikow, One Hundred Years of History of the French Communist Party, 2022. 74. Vincenzo Mele, City and Modernity in George Simmel and Walter Benjamin: Fragments of Metropolis, 2023.

Titles Forthcoming

Vesa Oittinen, Marx’s Russian Moment Spencer A. Leonard, Marx, the India Question, and the Crisis of Cosmopolitanism Joe Collins, Applying Marx’s Capital to the 21st century Jeong Seongjin, Korean Capitalism in the 21st Century: Marxist Analysis and Alternatives Marcello Mustè, Marxism and Philosophy of Praxis: An Italian Perspective from Labriola to Gramsci Shannon Brincat, Dialectical Dialogues in Contemporary World Politics: A Meeting of Traditions in Global Comparative Philosophy Francesca Antonini, Reassessing Marx’s Eighteenth Brumaire: Dictatorship, State, and Revolution Thomas Kemple, Marx’s Wager: Das Kapital and Classical Sociology Xavier Vigna, A Political History of Factories in France: The Workers’ Insubordination of 1968 Attila Melegh, Anti-Migrant Populism in Eastern Europe and Hungary: A Marxist Analysis Marie-Cecile Bouju, A Political History of the Publishing Houses of the French Communist Party Mauro Buccheri, Radical Humanism for the Left: The Quest for Meaning in Late Capitalism Tamás Krausz, Eszter Bartha (Eds.), Socialist Experiences in Eastern Europe: A Hungarian Perspective

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TITLES FORTHCOMING

Martin Cortés, Marxism, Time and Politics: On the Autonomy of the Political João Antonio de Paula, Huga da Gama Cerqueira, Eduardo da Motta e Albuquer & Leonardo de Deus, Marxian Economics for the 21st Century: Revaluating Marx’s Critique of Political Economy Zhi Li, The Concept of the Individual in the Thought of Karl Marx Lelio Demichelis, Marx, Alienation and Techno-capitalism Salvatore Prinzi, Representation, Expression, and Institution: The Philosophy of Merleau-Ponty and Castoriadis Agon Hamza, Slavoj Žižek and the Reconstruction of Marxism Éric Aunoble, French Views on the Russian Revolution Patrizia Dogliani, A Political History of the International Union of Socialist Youth Alexis Cukier, Democratic Work: Radical Democracy and the Future of Labour Christoph Henning, Theories of Alienation: From Rousseau to the Present Daniel Egan, Capitalism, War, and Revolution: A Marxist Analysis Emanuela Conversano, Capital from Afar: Anthropology and Critique of Political Economy in the Late Marx David Norman Smith, Self-Emancipation: Marx’s Unfinished Theory of the Working Class Tomonaga Tairako, A New Perspective on Marx’s Philosophy and Political Economy Matthias Bohlender, Anna-Sophie Schönfelder, & Matthias Spekker, Truth and Revolution in Marx’s Critique of Society Mauricio Vieira Martins, Marx, Spinoza and Darwin: Materialism, Subjectivity and Critique of Religion Aditya Nigam, Border-Marxisms and Historical Materialism Fred Moseley, Marx’s Theory of Value in Chapter 1 of Capital: A Critique of Heinrich’s Value-Form Interpretation Armando Boito, The State, Politics, and Social Classes: Theory and History Anjan Chakrabarti & Anup Dhar, World of the Third and Hegemonic Capital: Between Marx and Freud Hira Singh, Annihilation of Caste in India: Ambedkar, Ghandi, and Marx Salvatore Engel-Di Mauro, An Introduction to Ecosocialism

TITLES FORTHCOMING

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Maria Chehonadskih, Alexander Bogdanov and Soviet Epistemologies: The Transformation of Knowledge After the October Revolution Peter Lamb, Harold Laski, the Reluctant Marxist: Socialist Democracy for a World in Turmoil Raju Das, Marxism and Revisionism Today: Contours of Marxist Theory for the 21st Century Gary Teeple, The Democracy That Never Was: A Critique of Liberal Democracy Alfonso García Vela & Alberto Bonnet, The Political Thought of John Holloway: Struggle, Critique, Emancipation Erick Omena, Urban Planning as Class Domination: The Games of Land Dispossession

Acknowledgments

I have been fortunate during my academic career to work within a multidisciplinary environment at RMIT University that has actively encouraged its members to develop educational and research programmes aimed at making a difference in the world. I thank the many generations of students who temporarily passed through my classes for forcing me to clarify and transmit the ideas and methods that I hope aided their later personal and professional lives. In the area of housing studies, I have had the privilege of working with many clever and committed people who have helped me to see the vital importance of housing in creating liveable and sustainable lives. For their forbearance and in no particular order, I thank Tony Dalton, Julie Lawson, Jago Dodson, Anitra Nelson, Serena Lim, Benno Engels, Michael Buxton, Robin Goodman, Barbara Norman, Kath Hulse, Terry Burke, Judith Yates, Sharon Parkinson, Norman Blaikie, Margo Huxley, Peter Williams, Michael Harloe, Valarie Karn, Chris Paris, Gordon Clark, Ian Winter, Chris Maher, Owen Donald, Vivienne Milligan, Neil Wilkinson, Anne Haila, Peter Saunders, Anne Gartner, Peter Newton, Joe Flood, Gavin Wood, Susan Smith, Neil Smith, Bob Stimson, Michael Lindfield, Brian Roberts, Bronwyn Meyrick, Jon Hall, Peter Phibbs, Hal Pawson, Bill Randolph, Nicole Gurran, Chris Ryan, Deni Greene, Christine Whitehead, Frank Stilwell, Andrew Beer, Peter Newman, Ray Forrest, Duncan Maclennan, Michael Lennon, Andi Nygaard, Renate Howe and Brian Howe. Unfortunately, not all are still with us. Some of these people I met while visiting the Centre for

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ACKNOWLEDGMENTS

Urban and Regional Studies at the University of Birmingham; alas this centre is also no longer around. I would also like to thank the editorial staff at Palgrave Macmillan, in particular Ananda Kumar Mariappan, Melvin Lourdes and Madison Allums. Alisa Dodge compiled the index with financial support from the Centre for Urban Research at RMIT University. This book originated in the political and intellectual turmoil of the 1970s and 1980s. The key event occurred at the eight World Congress of the International Sociological Association held in Toronto in 1974. At that Congress, a group of young urban scholars from France, Britain, Italy and the United States established a new body within the ISA—the Sociology of Urban and Regional Development Research Committee 32. Among those scholars were, Ray Pahl, David Harvey, Michael Harloe, Manual Castells, Edmond Preteceille, Jean Lojkine, Francois Lamarche, Chris Pickvance and Enzo Mingione. Pickvance later introduced this new approach to ‘the urban problematic’ in an influential edited collection. The new research committee instituted a new journal, The International Journal of Urban and Regional Research, presided over by long-time founding editor Michael Harloe. Many others joined the quest, including this author. This book is an attempt to remind more recent urban scholars of the wealth of what has gone before and is dedicated to one and all. Bliss was it in that dawn to be alive.

Praise for A Theory of Housing Provision under Capitalism

“The failure of capitalist societies to provide decent and affordable housing for a large proportion of their citizens is evident. It is equally true that most conventional analyses of housing provision fail woefully to explain why this should be so. In returning to and building creatively on a Marxist analysis of how housing is shaped by capitalism and is in turn at the heart of the capitalist social and economic order Mike Berry has made a welcome, pathbreaking and radical contribution to contemporary housing studies.” —Michael Harloe, London School of Economics, and founding editor of the International Journal of Urban and Regional Research. “Mike Berry’s book draws on many decades of research, analysis and deep thought to explain why achieving the social goal of decent, affordable housing for all is so elusive. The book shows the different ‘levels’ at which housing can be understood – as a commodity, as a land-use, as an element of social reproduction and as a product of public policies. Berry’s approach blends rigorous analysis with felicitous phrases to produce a book that is educational, thought-provoking and thoroughly engaging. The focus shifts between the social, economic and political factors to show how the ‘normal’ operations of capitalism are manifest in inequalities of wealth and power. It considers how these forces play out at different scales, from the home, to the city, the nation and the global xix

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PRAISE FOR A THEORY OF HOUSING PROVISION UNDER …

economy. More than any other book on housing, it shows how housing problems need to be understood in broader political economic context. It presents radical insights into why and how housing problems in counties like the USA, UK and Australia relate to the broader characteristics of capitalism as an economic system. Concurrently, it brings the analysis bang up-to-date, taking account of the Covid pandemic, war and climate change, all of which have significant implications for finding solutions to the housing question. This is a must-read book for anyone interesting in a developing a deep understanding of housing.” —Emeritus Professor Frank Stilwell, University of Sydney and author of Political Economy: The Contest of Economic Ideas, 3rd ed.

Contents

1

Introduction: Building from First Principles

1

Part I Housing as a Commodity 2

Housing as a Use Value

21

3

The Production of Housing

29

4

The Realisation of Housing

43

Part II Housing as a Land-use 5

The Territorial Imperative

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6

A Theory of Urban Land Rent

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7

Landed Property: An Historical Excursion

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Part III Housing and Social Reproduction 8

The Extended Reproduction of Labour Power

105

9

The Social Construction of the Home 1: Culture

115

10

The Social Construction of the Home 2: Gender and Age

125

Housing and Class in the Neoliberal Era

135

11

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CONTENTS

Part IV Housing and the State 12

Housing and the Myth of the ‘Free Market’

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13

Housing, Wealth and Power

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14

The Housing-Macro Nexus

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Part V Navigating the Future 15

The Project: Architect Not Bee

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16

Countering the Counter-Attack

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17

Concluding Comments—The Limits to Capital

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Index

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About the Author

Mike Berry is Emeritus Professor in the Centre for Urban Research at RMIT University, Melbourne, Australia. He was the foundation Executive Director of the Australian Housing and Urban Research Institute. Author of many technical research reports in the areas of housing and urban studies, he has also published widely in the fields of political economy and philosophy. His books include: The Affluent Society Revisited (Oxford University Press, 2013); Morality and Power: On Ethics, Economics and Public Policy (Edward Elgar Publishing, 2017); Justice and Democracy: A Progressive Agenda for the Twenty-first Century (Edward Elgar Publishing, 2017). He blogs at mikeberrywriting.com.

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List of Figures

Fig. 3.1 Fig. 4.1 Fig. 4.2

The production of housing Circulation of property capital Circulation of property and financial capital

35 45 55

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CHAPTER 1

Introduction: Building from First Principles

The more rapidly capital accumulates in an industrial or commercial town, the more rapidly flows the stream of exploitable human material, the more miserable are the impoverished dwellings of the workers. (Karl Marx, Capital, volume 1)

1.1

Preamble

This book is an attempt to offer a consistent and coherent Marxist theory of housing provision applicable to capitalist societies that developed in the West over the past two centuries. I do not claim to be offering a theory of housing in general, whatever that would be. It is a central premise of the book that housing meets high order human needs in any society and era of human existence as a social species, but that the ways in which this need is met in any real existing society will depend on the overall social dynamics in the concrete material and cultural conditions of the day. Western capitalism has been around for a fraction of the total time that people have sought some form of shelter in hostile environments. This means that there will be many ways of understanding the endless search for answers to the housing question, a title of one of Friedrich Engel’s lesser known works. The focus here, as for Engels, is the peculiarly unique way in which capitalism as an overall form of human existence has answered that question and the myriad ways in which housing failure has and continues to hamstring contemporary capitalism in its current global configuration. To look ahead in the analysis, think about how the © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_1

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‘financialisation’ of housing has come to drive unintended and undesirable consequences for social inequality and the macroeconomic health of nations. It is not too fanciful to suggest that the manifest failures of Western governments to tackle the housing question has raised the ‘spectre haunting Europe’ and well beyond. In what follows, I have stripped the analysis down to its essential structure, in line with the methodological approach sketched below. In progressively filling out that structure, and for illustrative purposes, I occasionally draw upon examples from a number of capitalist societies, notably Britain, the United States and Australia, mainly because these are the societies with which I am most familiar. I leave it to housing scholars in other jurisdictions to add to and subtract the approach offered here, as they see fit. I first began grappling with the challenge of understanding the complex nature of capitalist housing provision four decades ago. The 1970s and 1980s were years of intense debate over housing outcomes and policy. The post-war social settlement that raised housing to an important component of welfare capitalism, broke down and, especially in Britain and parts of Europe, came to be seen as the plaything of market forces. This had always been a prevalent tendency in the United States and as part of Australia’s ‘wage earners’ welfare state’ (Berry, 1988; Castles, 1985). But free market ideology, anchored in a commitment to boosting individual home ownership and encouraging the state to withdraw from direct provision, was supercharged by the rise of neoliberal governments throughout the West. Nowhere was this more evident, with massive consequences for housing provision, than in Thatcher’s Britain. Twelve years of Thatcherism led to the mass transfer of public housing to homeowners—directly by discounted sale to sitting council tenants and indirectly through progressive on sale to private buyers. Much of the remaining public stock was actually or effectively privatised via the state-fuelled growth of the non-profit social housing sector and for-profit developers of ‘affordable housing’. Then and now, I was dissatisfied with the prevailing approaches to understanding what was happening. I felt that Marxism offered a useful way of moving forward. My early attempts to do so (Berry, 1977, 1986, 1990) were intended as a beachhead from which to mount a full frontal attack. Alas, life intervened and it is only now in the autumn years that I am able to resume the battle. Although the years may have wearied me, I still feel the white heat of anger at the way the lives of large numbers of

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fellow citizens have had their lives stunted and worse by the failures of our societies to provide decent, affordable, secure and appropriate housing. The fact that the housing standards of a large majority of people living in the West has improved markedly during the capitalist era, by comparison to the lives of most in less developed societies and eras, only makes more disgraceful the failures that still persist. There is the capacity to decently house every person in societies like Australia. But that is not the way things currently work.

1.2

A Note on Method

The approach adopted here contrasts with conventional housing analysis steeped in orthodox economics and policy studies. The difference was starkly stated by Hollis and Nell (1975, p. 10): Neoclassical economists treat sound theory as the upshot of testing predictions with success. Classical and Marxist theorists insist that specifications and identifications be determined a priori by reflecting on what is essential to capitalist industrial institutions. This reflects a difference in epistemology.

For a coherent Marxist analysis of anything, explanation trumps prediction. To predict a series of future events without providing an understanding of why and how these events unwound is unsatisfactory on a number of grounds. First, even if a prediction turns out to true, it provides no basis for accepting that the theory generating it has adequately explained how that outcome emerged. It may have been a fluke; or some other theory may have also come up with the same result; or the theory may have grasped part only of what caused the outcome. This raises a second and more basic difficulty. There is no guarantee— rather the reverse—that the same theory will make successful predictions in the future. If people and governments rely simply on black-box past predictions to guide future policy and behaviour, they are likely to experience unexpected and unwanted outcomes. This epistemological difficulty follows from the nature of social ontology, the complexities of human societies in their concrete existential environments.1 1 See Skidelsky (2020) for a detailed discussion along similar lines to those presented here.

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Realist as opposed to positivist/empiricist approaches to explaining observed regularities in social life, are not satisfied with a ‘deductivenomological’ theory that deduces those regularities from general laws. Positivism is a ‘thin’ philosophy of scientific explanation that refuses to deal with unobservable entities (like utility and value) or treats them as useful fictions to aid prediction, whereas: (f)or the realist … theories are primarily seen as attempts to characterise the nature and mode of operation of such [unobservable theoretical] entities. The chief virtue of theoretical laws is not, as for the positivists, that lower-level laws can be derived from them – thereby achieving economy and rigour in a deductive system. Rather, it is that they describe the fundamental processes that actually sustain the observable regularities represented in those lower-level laws. Thus, for example, Marx’s account of modes of production, and Freud’s of the unconscious, might be treated in this sense, as theories by the realist. (Keat & Urry, 1975, p. 81)

Positivists, living in the shadow of David Hume, are most likely to invoke a ‘successionist’ notion of causality, whereby the causal significance of a theory resides in the observable sequential recurrence of observable events. Realists, on the other hand, are more likely to invoke a ‘generative’ theory of causality which holds that “…there is a real connection between causes and their effects, and that in many cases this can be identified with a causal mechanism which on being stimulated by the cause produces the effect (Harré, 1972, p. 91)”. For Bhaskar (1975), the realist’s aim is to discover ‘the causally effective underlying structure’ or mechanisms in the form of tendential laws. Central to the realist philosophy of science are the linked notions of ‘causal tendencies’ and ‘causal mechanisms’ (Reiss, 2013, Chapters 5 and 6). This recognises the slip ‘twixt the cup and the lip’. There may be a number of causal mechanisms generating observable outcomes. These may even be operating in opposite directions, making the observable events the net outcome. Thus, as Galileo (might have) demonstrated, a feather will fall more slowly from a tower than a cannon ball, even though both obey the law of gravity (and of air resistance). Reiss (2013) offers the example in economics of the quantity theory of money. David Hume, in the mid-eighteenth century, first described the correlation of the general level of prices (inflation) with the increase in the total supply of money in

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the economy. Hume also suggested, or was taken to imply, that the correlation was causally significant with the latter causing the former observable regularity or ‘constant conjunction’. In the centuries, since economists have vied to provide causal mechanisms by which the cause-effect transmission is instantiated.2 However, in any situation it may be that when the money supply increases, the general level of prices rises, falls or remains the same because the causal tendencies emanating from each channel are operating in different directions and over different timescales. But the situation is further complicated by the possible, intervention of exogenous factors. For example, in order to address or pre-empt possible inflationary outcomes, government may initiate counter-cyclical taxation or expenditure policies. It is unwise to attempt to explain the inflationary breakout in the Western economies during the 1970s without taking into account the particular and historically unique effects of US involvement in the Vietnam War and the oil price hikes early and late in the decade. This highlights another difficulty for the social as opposed to the natural scientist: the fact that the former does not have access to controlled experimental conditions. Natural experiments in disciplines like economics, sociology and politics are rare and rarely unproblematic. Hence, the social sciences must of necessity deal with ‘open systems’3 : The real methodological import of the absence of spontaneously occurring, and the impossibility of artificially creating, closed systems is strictly limited; it is that the social sciences are denied, in principle, decisive test situations for their theories. This means that the criteria for the rational confirmation of and rejection of theories in social science cannot be predictive and so must be exclusively explanatory. (Bhaskar, 1979, p. 128; emphasis in the original)

Outhwaite (1993, pp. 321–22; emphasis in original), building on Bhaskar’s arguments, argues: 2 Reiss (2013, p. 107) notes five such mechanisms: the Keynesian interest rate channel; the exchange rate channel in open economies; the asset price channel; the bank lending channel; and the balance sheet channel. 3 But the natural and life sciences also often deal with open systems; closing out crosscutting generative processes through controlled experimentation is not always possible. Thus, realists like Bhaskar deny a sharp methodological break between the social and natural sciences. See Outhwaite (1993, 1987, Chapter 3) for a discussion of this point. See also the previously noted work by Reiss (2013).

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The combined tendencies of these structures and mechanisms may generate events that in turn may be observed, but the events take place whether or not there is anyone around to observe them, and the tendencies of the underlying structures of reality remain the same even when they counteract each other in such a way as to produce no (directly or indirectly) observable change in reality.

Bhaskar identifies three domains of reality: the real, the actual and the empirical. Events in the empirical domain are or can be observed, either directly or indirectly by, for example, using calibrated instruments like microscopes and social surveys. This domain is separate, ontologically and epistemologically, from actual events that occur regardless of whether they are observed because they ‘…may just happen to be unobserved because there is no one around to observe them, or they may be too small/large/fast/slow to be perceived’ (Outhwaite, 1993, p. 322). Thus, the tree does fall in the forest. Finally, as noted, structural tendencies and causally generative mechanisms in the domain of the real exist regardless of whether the actual events they tend to cause occur or are observed, since these tendential processes may or may not cancel each other out. Even in the natural sciences, prediction turns out to be a tricky challenge. Natural scientists also often operate in the world of open systems (see fn. 3). Take the case of COVID-19. This was not unexpected. There are well-established models (explanations) of virus emergence, evolution and transmission. Life scientists and epidemiologists have been signalling the very high probability of something like COVID-19 occurring for many years. But their models and laboratory experiments were useless in predicting where and how and when such an event would actually occur, nor what the long-term effects will be. This follows from the undeniable reality that reality is constituted by the second law of thermodynamics and the one-way arrow of time. Over any short period, many interacting causal mechanisms are unleashing tendencies that together constitute our (changing) natural and human worlds. From the point of view of now, the past is history and the future open ended, the realm of ‘radical uncertainty’. “Radical uncertainty has many dimensions: obscurity; ignorance; vagueness; ambiguity; ill-defined problems; and a lack of information that in some cases but not all we might hope to rectify at a future date. These

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aspects of uncertainty are the stuff of everyday experience (Kay & King, 2020, p. 14)”.4 In the approach adopted in this book, I develop a realist reading of Marx’s analysis of capitalism as an historically specific form of social life that emerged in the West over the past several centuries.5 It is well known that Marx early on left the idealist metaphysics of Hegel behind in favour of a rigorously materialist approach that expressed a hierarchical attack on the subject. Much ink and angst has been expended in trying to explain what Marx’s ‘dialectical’ method was.6 I am going to dodge that mine field and adopt David Harvey’s strategy in Limits to Capital: “I begin, rather, with the simplest abstractions that Marx proposed and then seek to expand their meaning through consideration of them in different contexts. The view of the whole should evolve as more and more phenomena are integrated into the vast composite picture of what capitalism as a mode of production looks like (Harvey, 1982, p. xv)”. In doing so, I seek to grasp and communicate the nature of the generative processes driving outcomes in the provision of housing in countries like my own. This last point underscores my methodological strategy; that is, to present a coherent and consistent analysis of the housing question by avoiding mixing incommensurate theoretical frameworks.7 Thus, I do not attempt to review or critique a range of approaches or literatures in housing studies order to ‘integrate’ concepts that make sense only 4 Kay and King draw on the distinction between risk and uncertainty advanced during the inter-war years by both economists Frank Knight and John Maynard Keynes (see my discussion in Berry, 2021, pp. 20–24). 5 I do not propose to engage in the endless debates over the precise nature of emergence but concentrate effectively on developments in the Anglosphere over the past century or so, reserving some comments on the role of landed property over the longer stretch for Chapter 7. But see my comments on this matter, in the context of a consequentialist theory of social justice (Berry, 2021, Chapter 3). 6 For example, see the work of Bertell Ollman (1973, 2015) on the ‘philosophy of internal relations’ in Marx. 7 The treatment of ‘incommensurability’ in the philosophy of science is hotly contested. Personally, I find convincing the radical approach of Paul Feyerabend (1975, p. 30; italics in original) who argues in favour of a ‘pluralism’ of approaches as ‘…an ever increasing ocean of mutually incompatible (and perhaps even incommensurable) alternatives’. In other words, a range of non-Marxist approaches to housing studies are valid, as long as their conceptual framework is not eclectically mixed with other approaches, including the one offered here.

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within their particular theoretical universes. Theoretical (mindless) eclecticism is to be avoided; that way madness lies. This is not to deny the existence or usefulness of other theoretical and methodological positions, in understanding housing processes and outcomes; a plurality of approaches can raise new perspectives that require consistent treatment within a particular holistic frame. For example, the approach known as ‘urban managerialism’ focused on the role of urban gatekeepers from a broadly Weberian perspective. A Marxist reading takes the role and function of such ‘exchange professionals’ and situates them within the overall circulation of capital, as presented in Part I.8 I make no claim to be proposing a theoretically ‘sweet’ and complete Marxist analysis of housing. There are many unresolved theoretical questions that Marxism as a social scientific tradition presents us with. I have avoided as much as possible getting tied down in following the many twists and turns of differing interpretations of ‘what Marx really meant’. What you see is my interpretation, warts and all, applied to an important but much neglected problematic, the way we house ourselves as a social species. I would be grateful to see others add to and subtract from what I present. It is my hope to encourage housing scholars and policymakers to explicitly inject a social-theoretical cast into a field that has tended to focus on description rather than explanation. I would make a final point. I have tried to tell a complicated story in as simple a manner as the subject allows. I am aware that I may not have completely succeeded and that the reader may find parts of the narrative

8 For an example of other approaches to critical housing research, see the interchange debate in the journal Housing Theory and Society (Aalbers & Christophers, 2014). For alternative approaches, see also, Aalbers (2016), and Christophers (2020). These authors place housing at the centre of what is happening in the neoliberal era, but do not analyse the empirical developments around the increasingly dominant role of financial capital within a Marxist framework. Their method is empiricist and strongly focused on the United Kingdom. Munro (2022) offers a greater comparative perspective, but with little theoretical specification. They treat ‘rent’, as a phenomenal entity, closer to the Marshallian concept of ‘quasi-rent’, based on some institutionalised form of monopoly. Marx’s notion of ‘rent’ is presented (in Volume III of Capital) as an integral component of the routine flow of capital through agriculture and the built environment under conditions of capitalist competition. Monopoly rent plays a small role in his analysis. I will extend the concept of monopoly rent in the urban context but place it firmly within the foundational theory of capital circulation and accumulation. Munro (2022) does provide an historically informed study of Marx’s work on rent, but his focus does not extend to the broader significance of housing and land in contemporary capitalism.

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difficult to navigate. For this, I apologise. To keep the analysis flowing, I have resisted the temptation to address counter-arguments and add detail, leaving it to others to do so. The references cited and comments in footnotes are not exhaustive and should be read as indicative signposts.

1.3

Structure

The book is structured carefully with this limited aim in mind. Each part builds on the preceding analysis, refining and redefining the concepts and their interrelations, rendering the explanations closer and closer to grasping the complex social realities of our current existence.9 To understand housing in all its complicated and confounding forms, it is necessary to travel through multiple layers of the realm of the real. Thus, it is not until we reach and grasp the myriad forms of state intervention in housing (Part IV) that we gain an adequate understanding of the empirical and actual nature of housing provision under capitalism and grasp its failures and possibilities. This method is at odds with mechanistic approaches steeped in the politically imposed Stalinist reading of Marx’s ‘dialectical materialism’, for which Engels rather than Marx can be held partly responsible. To orient the reader, each part starts with a summary of the main lines of argument to be pursued in the chapters following. Part I begins, as does Marx in the first volume of Capital (the only volume published in his lifetime), with a consideration of the most basic structure in capitalism, the commodity form.10 Housing is primarily (but not exclusively) produced, exchanged and consumed as a commodity in mature capitalist societies. Social wealth in the form of human and nonhuman means of production are mobilised under specific institutionalised conditions to provide housing in its myriad configurations to meet the various needs and desires of people. The latter stand in pre-determined relations with each other and with the acts of producing and consuming the material ‘product’. That is, at base, housing has, like all commodities,

9 This progressive approach to an ever-greater grasp of complex reality occurs by systematically developing the analysis from within a single coherent theoretical approach, not from some continuous slide between approaches. ‘Knowledge so conceived is not a series of self-consistent theories [note plural] that converges towards an ideal view; it is not a gradual approach to the truth (Feyerabend, 1975, p. 30; italics added)’. 10 For one attempt to explicate Marx’s particular mode of theory construction, see David Harvey’s (2010) Introduction in his Companion to Marx’s Capital.

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a dual form, both material and social, carrying or expressing both ‘use value’ and ‘exchange value’. Chapters 2 and 3 explore this dual nature and its implications for the production of housing. Chapter 4 moves the focus to the realisation of housing, the intervention of commercial and financial capital, expressing the ‘functional’ or social division of capital in mature capitalist societies by which what is produced is delivered to the point of consumption, a radically uncertain process that carries the seeds of economic and social crisis, as the global financial crash of 2008 and its aftermath vividly demonstrated. The argument in Part I explicitly recognises that the production and consumption of housing takes place in real time. Housing in even its most rudimentary forms does not emerge spontaneously or instantaneously to meet human needs. The process of producing and delivering housing to the point of consumption is a lengthy and often trouble-prone process during which delays and mistakes intervene to create unexpected outcomes, both at the micro and macro levels. This consequence of the second law of thermodynamics has serious implications for the ‘functional fit’ of housing in reproducing and securing social life. It can be persuasively claimed that the regular failures in housing provision, as in food and water supply, account for many of the social and political crises dotted throughout history. This unfortunate complication, and the need for peoples and their governments to collectively confront it, is ignored by analytical approaches that assume away the temporal dimension.11 Part II follows on in like fashion by identifying the other basic ontological feature of the housing question—namely the reality that housing is produced and consumed in Euclidean space. Even the humblest abode occupies a unique place in three dimensions, involving a ‘footprint’ on ‘planet Earth’. This footprint can, as in high-rise configurations, be hauled into the sky. Neither the production nor consumption of housing takes place ‘on the head of a pin’.12 The key causal mechanisms and tendencies are intimately tied up with the concept of ‘land rent’, a subject that both

11 This weakness characterises many orthodox analyses in housing economics and policy studies. 12 Again, orthodox approaches tend to ignore or downplay the centrality of land as a factor; see Ryan-Collins et al. (2017) for a discussion of the importance of land in understanding housing outcomes, and its absence in conventional analyses. However, these authors treat land as a ‘factor of production’ rather than a ‘condition of production’, implicitly placing their analysis within a neoclassical economic approach.

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classical economists and Marx spent much effort elaborating. However, it is only Marx’s analysis that allows us to penetrate the complications of urban land rent, to unravel the links between housing and the growth of industrial capitalist societies in large urban regions. In short, space and time are critical dimensions of the housing question. Chapter 5 elucidates the ontological tie of housing to the earth through a century or more of technological innovation, marked by the successive discoveries of building styles, techniques, logistics and materials. Developments internal to the build, like elevators (lifts) as well as external factors like network connections to utilities (water, sewerage, electricity, telephone and internet) are relevant and have important implications later in the book for the analysis of social reproduction and state intervention. Chapter 6 focuses on urban land rent, starting with the application of the concept of differential rent in agriculture, introduced almost simultaneously by Ricardo, Malthus, West and Torrens early in the nineteenth century.13 Application to the urban context involves stretching its reach to encompass access and locational advantage, to notions of ‘external economies and diseconomies’ of agglomeration. It also leads to a consideration of Marx’s categories of absolute and monopoly rent. City regions provide ample opportunity for the extraction of both forms, though the true impact of absolute rent cannot be understood until the role of state intervention is considered in Part IV. Chapter 7 provides a brief historical narrative of the social and economic role of landownership in the emergence of modern urbanindustrial landscapes. The appearance of new forms of property rights in urban land saw the rise of new land tenures in the city, and the partly congruent and partly offsetting interests of landlord-investors, property developers, speculators and owner occupiers. These tenure arrangements had implications back on the processes of producing and consuming housing (Part I), and forward to the uses to which land is put (Part II), the social reproduction of capitalist relations (Part III) and the role and impact of the state (Part IV). Part III deals with housing as a central moment in the extended reproduction of capitalism as a social system or formation. For modern capitalism to function, adequate numbers of variously skilled workers 13 Earlier contributors to rent theory can be traced back at least to Adam Smith and William Petty and forward to Von Thûnen, John Stuart Mill and Henry George.

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need to be routinely delivered to the site of production. As a bare minimum, workers need to physically survive long enough to contribute their labour power to collectively transforming raw materials and intermediate commodities into finished products. Physical survival in most environments requires some form of shelter, especially as a basis for raising the next generation of workers.14 The more developed the society, the more complex is the functional requirement of delivering up adequately trained and housed workers to the point of production, a factor that, of course, forced the state to intervene from the latter half of the nineteenth century in societies like Britain. Chapter 8 develops this insight, identifying the contradictory and conflict-ridden processes by which housing opportunities are differentially delivered across the population and the basis laid for the outbreak of social and economic crises. Chapter 9 takes up the cultural dimension and character of housing under capitalism. The house figures as the cultural container of intimate family and community life, including in developed capitalist societies. It is the site of primary socialisation, the place where the new generations acquire much of their individual personhood, their values or moral compass, if you will, along with their taken for granted understandings of themselves, their fellows and the broader world. The house as home also provides the base from which household members access the advantages and suffer the disadvantages of access to the utilities and disutilities of urban life. Chapter10 focuses on the roles of gender and age in overdetermining the sphere of domesticity in the home. The multiple roles of women in domestic labour define particular life-trajectories that differ significantly from other genders. Likewise, age, the young and the old, makes a difference in how home is experienced and how the house is implicated in the changing life experiences of people in complex capitalist societies like my own. To anticipate a point developed at length later, the increasing participation of women in the paid labour force over past decades has changed significantly the ways in which domestic life within the home has been reconfigured, with implications for the growth in low paid and precarious occupations, like child and age care. 14 Even in slave-owning societies, the slave owners have an interest in keeping their slaves alive long enough to extract maximum labour. Only, when there is an endless supply of new slaves by war or capture do the owners allow their existing stock of ‘human capital’ to work and die quickly, as in the salt and silver mines of ancient Rome.

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This leads in Chapter 11 to a fuller consideration of how housing provision is changing the class structure of developed capitalist societies. Differential access to housing across the population and generations is both reflecting and reinforcing/modifying the generative processes of class formation inscribed in the capitalist mode of production. Housing situation is coming to play an increasingly important role in processes of both class entrenchment and fragmentation that historically have been driven by technological, skill and spatial differentiations. Not the least of these developments sees the wealth of parents supporting their children becoming first homeowners, while other young people are consigned to rent or homelessness (see Chapter 13). Part IV finally ‘brings the state back in’. Chapter 12 debunks the suggestion that housing is somehow the resulting outcome of the unfettered operation of free markets. This has never been the case and never will be, even in supposedly free market economies like the United States. The chapter surveys the forms that state intervention assumes in constituting, supplementing and, at times, replacing the market in housing provision. Chapter 13 tracks the intimate connections between housing, wealth and political power. Ownership of land and housing, real estate, comprises around half of the wealth of people in developed capitalist societies. It also provides a potent political base from which to influence government policies and their absence. Existing patterns of class inequality are being actively reinforced by the influence of components of ‘the rent-seeking property lobby’, especially with respect to the taxation and infrastructure policies of governments. This impacts most severely on the dispossessed, the people who miss out on securing decent housing and, thus, on the life chances that come with having a secure home base from which to operate. Bad housing leads to bad lives, especially for children raised in conditions that are likely to be marred by material want and domestic violence. But those at the other end of life, the frail aged, also suffer from effective dispossession, as conventional patterns of home care previously delivered by younger women who now work in the paid workforce, are outsourced to charitable and for-profit providers. As I argue, attempts by governments in countries like Australia to regulate the situation have been minimal to woeful in their impact on real lives. This has been especially highlighted during the COVID-19 epidemic. Chapter 14 highlights the (dys)functional interrelations between housing provision in advanced capitalism and the macro performance of

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the economy. The last forty years has seen housing throw off its guise as the sleepy corner of finance to assume central stage in how instability at the national and global levels manifests in ever-threatening economic and social crises, with implications for how and why the state intervenes through institutions like the central banks of the major economies. In 2021, China’s second largest property developer, Evergrande, teetered on the edge of bankruptcy, threatening seismic shocks throughout the Chinese, and therefore global economies. This danger persists. Finally, Part V attempts to sketch out a progressive political project aimed at countering some of the barriers to providing appropriate and affordable housing in developed capitalist societies. This involves considering policies, of government and community organisations, that challenge the prevailing logic of how housing is delivered and consumed (Chapter 15 and how to offset or defuse the inevitable counter-blast by vested interests in things remaining the same (Chapter 16). The book finishes in Chapter 17 with final reflections on the significance of the housing question for the citizens of twenty-first-century capitalist democracies, noting the very real limits to capitalism.

References Aalbers, M. (2016). The financialization of housing: A political economy approach. Routledge. Aalbers, M., & Christophers, B. (2014). Centring housing in political economy. Housing Theory and Society, 31(4), 373–394. Berry, M. (1977). Marxist approaches to the housing question, Research memo 69. Centre for Urban and Regional Studies, University of Birmingham. Berry, M. (1986). Housing provision and class relations under capitalism: Some implications of recent Marxist class analysis. Housing Studies, 1(2), 109–121. Berry, M. (1988). To buy or rent? The demise of a dual-tenure policy in Australia, 1945–60. In R. Howe (Ed.), New homes for old: Fifty years of public housing in Victoria: 1938–1988. Melbourne: Ministry of Housing and Construction. Berry, M. (1990, July). Economic restructuring and the transformation of urban space: The view from Australia. In 12th World Congress of the International Sociological Association. Madrid, Spain. Berry, M. (2021). Justice and democracy: A progressive agenda for the twenty-first century. Edward Elgar Publishing. Bhaskar, R. (1975). A realist theory of science. Leeds Books.

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Bhaskar, R. (1979). On the possibility of social scientific knowledge. In J. Mepham & D.-H. Ruben (Eds.), Issues in Marxist philosophy (Vol. 3). Humanities Press. Castles, F. (1985). The working class and welfare. Allen and Unwin Australia. Chistophers, B. (2020). Rentier capitalism: Who owns the economy, and who pays for it? Verso Books. Feyerabend, P. (1975). Against method. Verso Books. Harré, R. (1972). The philosophies of science: An introductory survey. Oxford University Press. Harvey, D. (1982). The limits to capital. Basil Blackwell. Harvey, D. (2010). A companion to Marx’s capital. Verso. Hollis, M., & Nell, E. (1975). Rational economic man. Cambridge University Press. Kay, J., & King, M. (2020). Radical uncertainty: Decision-making for an unknowable future. The Bridge Street Press. Keat, R., & Urry, J. (1975). Social theory as science. Routledge and Kegan Paul. Munro, D. (2022). Marx’s theory of land, rent and cities. Edinburgh University Press. Ollman, B. (1973). Marxism and political science: A prolegomenon to a debate on Marx’s method. Politics and Society, 3, 491–510. Ollman, B. (2015). Marxism and the philosophy of internal relations; or, how to replace the mysterious ‘paradox’ with ‘contradictions’ that can be studied and resolved. Capital and Class, 39(1), 3–5. https://doi.org/10.1177/030 9816814564128 Outhwaite, W. (1987). New philosophies of social science: Realism, hermeneutics and critical theory. MacMillan. Outhwaite, W. (1993). Towards a realist perspective. In G. Morgan (Ed.), Beyond method: Strategies for social research. Sage. Reiss, J. (2013). Philosophy of economics: A contemporary introduction. Routledge. Ryan-Collins, J., Macfarlane, L., & Lloyd, T. (2017). Rethinking the economics of land and housing. Zed Books. Skidelsky, R. (2020). What’s wrong with economics? Yale University Press.

PART I

Housing as a Commodity

The aim of this section of the book is to describe the way that capital circulates through the economy, attracting different fractions to interact in order to produce and distribute the basic (high order) commodity, shelter. The continuous process of production, exchange and consumption of housing in its mature commodity form is driven by the endless competitive search for profit on an ever-expanding scale. Marx’s analysis of the extraction of surplus value during the construction process is presented as the source of the profit distributed among the capital agents ranged across the construction, property and financial functions, conditioned by the economy-wide operation of the law of competition and the impact of the expressions of monopoly power. The prerequisites for the capitalist production of housing, rather than housebuilding by individuals and local communities, are the generalisation of capitalist relations of production society wide. This is an historical project during which a wealthy class comes to control the means of production and confront a class of ‘free’ workers who must sell their labour power in return for life itself. At base, then the price of production of a house is set by the overall circulation of capitals driven by the laws of value and competition, reflecting the total quantity of socially necessary labour power embedded in its construction, conditioned by the economy-wide competitive process towards the determination of an average rate of profit. The observed market price of a house varies around this ‘equilibrium’ level, buffeted by counter tendencies and contingencies, like the effects of individual firm

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failure, the advent of monopoly and monopsony power, labour strikes, supply chain delays and the weather. The long construction and realisation periods entailed in actually getting the house from a vacant lot into the possession of a buyer massively increases the scope for these intervening factors to disrupt the smooth circulation of the capital fractions through the sector. The result at the sector level is a continuous but irregular oscillation of housing gluts and shortages, feeding into and off the macro business cycle. As the general level of productivity has increased under capitalism, the bundle of use values delivered by the house has blossomed. Domestic fixtures and fittings and consumer durables supplied by the giant big box retailers have not only revolutionised domestic living, they have radically changed the social dynamics of the household and, among other things, the roles of women. Also transformed through the information and technology revolution has been the nature of working relations, creating a new class of ‘electronic serfs’ or outworkers, and changed also the nature of mass entertainment. But—ominously—these material and social developments have also driven ever-increasing market prices for housing. House price inflation is a permanent and strengthening trend in all advanced capitalist societies. In addition to the overdetermining factors addressed in later chapters, the analysis of Part I directs our attention to the deep structural cause of house price inflation and the ‘crisis of housing affordability’—namely the progressive increase in the total quantity of socially necessary labour power required to produce the range of houses added to the consumption fund. It is in this sense that Marx defined ‘socially necessary’ as ‘…the labour required to produce an article under the normal conditions of production and with the average amount of skill and intensity prevalent at the time (quoted in Harvey, 1982, p. 15)’. The quality of housing—that is, the standard of use value consumption by the resident—rises and falls, along with its price of production, in line with the interplay between those technological improvements that raise labour productivity of wage goods, including housing (and lower the quantity of socially necessary labour power in construction) and those socially driven incentives to increase the input of labour power in order to produce a greater bundle of residential use values or ‘luxuries’. Technological improvements cover the Schumpeterian categories of new materials, new production methods and new forms of organising the production and logistics involved. Similarly, technological improvements in marketing and financial engineering indirectly

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boost total profits by speeding up the circulation of productive capital in construction. Over time, developments in the productivity and profitability can, given particular ‘historical and moral’ circumstances, result in rising housing standards for some workers. However, experience in real existing capitalist societies suggests that the upward trend in housing prices leave large sections of the population behind, creating ‘a reserve army of the homeless’. The wage cost to the builder will depend on the socially necessary labour power required to reproduce the worker, which Marx argued will change with social circumstances depending on the current level of existence (not bare subsistence) of the working class: [the worker’s] natural needs, such as food, clothing, fuel and housing vary according to the climatic and other physical peculiarities of his country. On the other hand, the number and extent of his so-called necessary requirements, as also the manner in which they are satisfied, are themselves products of history, and depend therefore to a great extent on the level of civilisation attained by a country; in particular they depend on the conditions in which the class of free workers has been formed. In contrast, therefore, with the case of other commodities, the determination of the value of labour power contains a historical and moral element. Nevertheless, in a given country at a given period, the average amount of the means of subsistence necessary for the worker is a known datum. (Marx, 1976, p. 275)

The ‘average amount of the means of subsistence necessary for the worker’, including the building worker, has historical risen in western societies driven by both major technological advances that made the conveniences of life expand popular horizons and the social and moral factors that underpinned popular conceptions of what an acceptable life entailed. Foremost among, the former factors were the rise of mass production and among the latter, the rise of the labour movement and the means of mass consumption. Better housing for workers became a measure of social advance as social reformers sough to clear away the remnant ‘slums’ of early industrial capitalism and two world wars. But over the past fifty years, opposing forces have regrouped and push back the broad social gains of welfare capitalism. Technological advances have incessantly increased the class power of capital to impose new, meaner conceptions of what are acceptable living standards for a rising minority

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of the population; social inequality has hardened and is impacting on who is housed and how well, and who misses out. The potential for societies with the most advanced technological capacity, like the United States and my own, to decently house everyone, has atrophied thanks to the new patterns of class cleavage emerging. To understand how and why this is happening requires us to leave off basic value analysis and venture further afield, initially to consider the complex nature of the land question under capitalism. This will be the focus of Part II.

CHAPTER 2

Housing as a Use Value

The material side of commodities is captured in its relation to human wants and needs by the concept of its use value. (David Harvey, The Limits to Capital )

This chapter is intended as a brief scene setting for the later chapters in this section. The argument is necessarily spare, focusing on a number of basic ideas that are drawn out in more detail in what follows.

2.1

What Is Housing?

In its most basic sense, housing involves materially transforming raw materials and intermediate products—timber, clay, rocks, bark, bricks, glass, steel, etc.—into artificial structures that provide people with shelter. That is, a house, in whatever material form, produces useful effects for humans. It has what classical economists called ‘use value’. This is so regardless of the institutionalised means by which the house is produced. Societies have found many different ways of providing shelter over the millennia. The one constant feature is the role of human labour in this endeavour vital for survival. Labour, normally organised collectively, is a necessary but not sufficient force to generate housing. This is so even in the case of the earliest cave dwellers who had to find, make accessible and internally configure the geologically given spaces discovered. It also characterises the use of animal skins and the bark of trees by mobile hunter-gather bands © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_2

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prior to the emergence some ten thousand years ago of sedentary villages based on agricultural subsistence. Throughout pre and recorded history, the lives of peoples have been eloquently told through the ingenious ways that they housed themselves. In many cases, especially with respect to the earliest examples of village life, the physical remains of their houses and domestic utensils are all that signals their one-time existence. Thus, the two basic features of the house stand out through all historic periods—namely the useful effects in supporting human and social life, and the centrality of human labour in bringing those effects to the table, so to speak. The social organisation of labour necessary to produce housing suitable to human survival has taken many forms through the millennia. Even today, we can see many if not most of the ways that this has been achieved extant somewhere in the world. But starting about three hundred years ago in parts of Europe, a particular way of organising housing provision and use has come to the fore. That is, of course, the production, exchange and consumption of housing through the circulation of capital. This is not the sole way that we house ourselves in modern capitalist societies. A range of earlier modes of provision survive and operate alongside, as in the case, of self-building at small scale. However, it is clear that in societies like the United States, Britain and Australia, most new housing (and resale of existing housing) arises from the circulation of capital in its various fractions, through the built environment. In other words, housing has increasingly assumed the form of a ‘commodity’, something that is routinely bought and sold in property markets. Even when houses are not originally produced by capitalists employing wage labour and ‘petty bourgeoise’ self-employed trades persons, it eventually ends up being thrown back into circulation as a ‘second hand’ commodity, with major implications for how housing affects social life. But let us stay with housing as a bundle of useful effects for the households that dwell within. A house offers shelter at levels of amenity dependent on the general stage or material development of a society. Thus, the quality of biological and cultural benefits enjoyed by a household living in prehistoric Britain differs markedly by that enjoyed by penthouse dwellers in today’s world cities. Note the emphasis on ‘the household’. One of the great cultural effects of having a permanent fixed abode was to provide greater security for the raising of children. Different societies developed different ways of doing this; the nuclear family is a recent structure distributed unevenly across the globe. The second great impact was to open up opportunities for routine social interaction with

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neighbours as small villages emerged and sparked the beginnings of a social division of labour. Likewise, modern New York high-rise dwellers can take advantage of the full range of cultural events and opportunities for social interaction offered in the big apple. Indeed, the appearance five and a half thousand years ago and rapid growth of the first cities in Mesopotamia and Egypt, and later in the Indus Valley and the Americas, signalled a sharp break, ushering in a sophisticated and differentiated pattern of settlement reflected in the range and quality of the structures housing their growing populations. This break was sharp enough for the Australian prehistorian Vere Gordon Childe (1942) to coin the phrase, ‘the urban revolution’. The large and densely populated new cities were supported by and drove technological developments in agriculture that underpinned the selfpropelling urban dynamic. Writing, art, religion, long-distance trade, government, warfare, imperial reach and class divisions characterised the new human settlements that made over the near, middle and Far East, while Western Europe slept. Position in the social structure of urban life was reflected in the type, allocation and quality of housing enjoyed. The juxtaposition of palace and hovel is still a dominant feature of all cities today. Social inequality is, literally, embedded in our cities, and has been in its specific ways, since the Neolithic was overtaken by the urban revolution. And the house, be it ever so humble, is the epicentre of that fact. But it is not only patterned social interactions between people in the broad sense that has a firm domestic base; interactions within households, that is between members of the household living in intimate proximity, are critically influenced by the nature, quality and location of their houses. Rapid urban-industrial growth in the nineteenth century created increasingly dysfunctional environments for family living. Engels (1909/1845) described the appalling overcrowding and disease-ridden nature of the houses workers were forced to live in in the early industrial cities of Britain, contrasted to the mansions of the factory owners living nearby in the same cities. Housing situation, as much as language, dress and manners, came to denote one’s position in the social hierarchy of life and death. It was only when the degree of urban concentration and the social intercourse of people of different classes in everyday commercial life had reached a certain level, that the dominant classes, prodded by the interventions of middle class church and medical experts, began to consider the housing question. The unwelcome advent of communicable diseases,

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cholera and typhoid, that flourished in densely packed urban environments and made no distinction between master and servant, then as now, concentrated minds wonderfully. This brief summary of the social significance of housing allows us to identify and underscore a number of key points. First, housing is more than a roof over one’s head, though this is important for most people in most environments. A dwelling facilitates or not access to a range of desired life experiences, including a sense of what has been called ‘ontological security’ (Giddens, 1991), which has been described as having a sense of order and continuity in regard to an individual’s life experiences. The individual and social psychological factors that create an enduring sense of ‘home’ are discussed in more detail in Part III. Second, by contrast, poor housing conditions are central factors in limiting or blighting the life chances of one or more members of a household. The intimate impacts of housing situation on the health of residents, the range of activities they can undertake and their general enjoyment of and contribution to life in their communities are manifold. Today’s COVID-19 pandemic has brought home with a thud, the force of the links between house and health. Third, the house is a durable, long lasting asset that provides its useful effects to residents over the long period. As a fixed structure, a component of what Harvey (1982) calls, ‘the consumption fund’, a house like a machine in a factory gives off its services thought time. And as ‘a machine for living’, the entropy law works its remorseless logic, depreciating the asset year on year. Hence, from time to time, repair and replacement activities must be brought to bear. Since, houses can last longer than the people who inhabit them, change of occupation sees different households cycle through. One house in its time sees many residents. In the extreme, an individual dwelling may reach its use-by date long before entropy completes its task; demolition and replacement on the site anticipates the end game. This has much to do with the economic and social forces (and political regulations) that drive land use, as I discuss in Parts II and IV. Fourth, the basic structure of a house, including its culturally specific fixtures, serves as a container for the employment of complementary devices that contribute to the living experiences, the use values enjoyed by its residents. I refer here to ‘the fittings’ and domestic appliances that have revolutionised the lived experiences of people, especially over the

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past century and a bit since the innovation of electricity, refrigeration, the telephone, the washing machine, television and, most recently, the internet. This raises and emphasises a crucial fifth point—namely the gender division of labour in the home, and the dominant role of women in providing unpaid domestic labour; cooking, cleaning, child and aged care. Increasingly, the house as home has come to impose a dual role on women, adding work in the paid workforce to unpaid domestic labour (However, I will qualify this later in the book, by noting the complex domestic and class arrangements that relieve some women of some of the burdens of domestic work.) The gendered nature of housing provision has been much neglected in housing studies until relatively recently. Sixth, as a long-lived asset, housing has always functioned as a store of wealth. House owners have always enjoyed the benefits of secure tenure and the choice to consume the income derived, either by rent charged to tenants or in-kind (the roof over one’s head). The payment by the tenant has assumed many forms in different societies—grain, cows, shells—in short, money in all its forms. In stable societies with enforceable property rights, including rules with respect to inheritance, housing will assume a significant proportion of that society’s total stock of wealth. Today, the total global market value of housing roughly equals the total value of equities on stock exchanges; the share of housing (including land) in household wealth ranged from 63% in Italy to 25% in the United States (Organisation for Economic Cooperation & Development, 2021). Housing has become ‘fungible’, the basis for switching asset forms and functions, and for accumulating further wealth. Its ‘lumpy’ nature had hitherto prevented use as one of the classic functions of money—namely as a medium of exchange. However, modern finance in advanced capitalism has ‘solved’ this constraint through financial engineering and the rise of securitisation. Ownership of individual houses located across widely divergent landscapes can be ‘bundled’ together and transmogrified into pieces of paper, actually digits on screens, to be traded internationally. So can the debt instruments created to facilitate primary securitisation. The consequences for life under capitalism can be complex and often dire, as Chapter 14 will show—and the reader’s memory will attest.

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2.2

Housing as Exchange Value

Once, housing has been drawn into the web of market exchange— a process that took many centuries in different parts of the world—it becomes a commodity, a bundle of potential use values to be exchanged at an agreed price between strangers. The house takes on a dual character, as quality and quantity. “In relation to exchange value, which is seen primarily as a quantitative relation Marx stresses the qualitative aspects of use values. But in a sophisticated and complex system of commodity production, the quantitative aspects of use values become of greater importance” (Harvey, 1982, p. 5). Once housing is produced, not for the immediate end use of the producer but for the purposes of sale to another, the question is immediately posed—at what rate or price will the exchange be made? The qualitative use value of the house for the buyer is necessarily higher than for the seller but this is not sufficient to determine its rate of exchange. A further implication of the long half-life of a particular house is that it eventually moves into the second-hand market, with complex impacts back on new construction. Unless otherwise stated, I am referring in what follows to newly constructed housing. The wider implications raised by the co-existence of new and existing house markets are held over for later treatment. In early commercial societies characterised by ‘simple commodity production’, direct producers trade their products, with or without the use of money as a medium of exchange. Prices here are likely to fluctuate according to local conditions of excesses and shortages. Adam Smith’s attempt to tie market exchange to a simple comparison of relative ‘labour embodied’ is unconvincing and historically wrong, as is his famous hunting and fishing parable based on an assumed human ‘propensity to truck and barter’. Local customs and unequal relations of power and status also intervene. According to Marx, it is only when capitalist relations of production emerge to overwhelm simple commodity production that the production and exchange of housing is mediated through the ubiquitous presence of impersonal markets, and the internal contradiction between use value and exchange value is resolved in the form of the commodity’s ‘value’.1 1 For an interpretation of Marx’s discussion of use value, exchange value and value, see Harvey (1982, pp. 5–24).

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Once capitalist relations of production of commodities like housing are established, production and exchange (price) come to be regulated by the relation in which capitalists stand to workers, that is, the processes by which propertyless wage labour is employed by employers advancing capital in the expectation of appropriating a profit on final sale.2 The social division of labour must have developed to the point where an accumulation of wealth at one pole of society confronts a mass of workers divorced from the means of production and reliant on selling their commodity— the power to create profit for capitalists—in order to exchange their wages for use values vital to their survival. In the dance of life, capital leads and workers follow. As capitalists as a class tighten their grip on the production of commodities, by accumulating and reinvesting profits, other forms of use value production recede in importance, strengthening the patterns of class polarisation and the ever-growing dependence of workers on their ability to sell their labour power. In this emerging matrix of co-dependence, a degree of stability solidifies. Labour, commodity and financial markets assume forms that persist. Prices apparently emerge and change according to the movements in demand and supply. However, as even a superficial reading of Marx discloses, this pattern of surface stability is, at base, illusory. Deep currents of contradiction regularly disrupt the routine operation of markets, including for housing. Booms and busts regularly visit the housing system and indeed can reinforce instability in the capitalist economy as a whole. Moreover, the interplay of demand and supply although resulting in observable price outcomes, does not, in Marx’s scheme, explain what the equilibrium tendency around which these forces oscillate is. That is, the value of housing is (over)determined by factors specific to capitalism that underlie the surface level interplay of supply and demand. Price itself comes to assume the form of ‘the universal equivalent’, money. “Money is thrown into circulation to make more money – a profit. And money that circulates in this way is called capital” (Harvey, 1982, p. 13). Various fractions of capital are thrown (by developers, 2 The key term is ‘regulation’ not ‘determination’, in the realist sense discussed above in the Introduction. The value of housing manifests in the realm of the real, as a structural mechanism unleashing causal tendencies that may or may not be reinforced or offset by other tendencies, which together are expressed in the realm of the actual. Finally, the market price of housing is observed or not in the realm of the empirical. Sorting out the interplay of structural tendencies and counter-tendencies, and their consequences, in concrete situations forms the core aim of the remainder of this book.

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builders, tradespeople, real estate agents, mortgage lenders) into circulation in this way in search of a share of profit. But where does the profit that they carve up between them come from? How does it manifest? What are the deep structural mechanisms at play? Answering these questions takes us to the way housing is produced and realised under capitalism.

References Childe, V. G. (1936). Man makes himself . Watts. Childe, V. G. (1942). What happened in history. Penguin Books. Engels, F. (1909/1845). The origin of the family, private property and the state. Charles H. Kent & Co. Giddens, A. (1991). Modernity and self-identity: Self and society in the late modern age. Polity. Harvey, D. (1982). The limits to capital. Basil Blackwell. Organisation for Economic Cooperation and Development. (2021). The value of land and its contribution to wealth. OECD. https://www.oecd-ilibrary. org/docserver/9789264235175-10-en.pdf?expires=1629338908&id=id& accname=guest&checksum=81D13D6B5A9558F5D7A32BFBB28C65AF. Accessed on 19 August 2021.

CHAPTER 3

The Production of Housing

Failure is all around us. Failure is pervasive. Failure is everywhere, across time, across place and across all aspects of life… more than 10 per cent of all companies in America disappear each year. Large and small, from corporate giants to the tiniest one-person business, they fail. (Paul Omerod, Why Most Things Fail)

There are many elements and processes and materials that go to produce a complex human artefact like a house. People at different times, climes and places have created a variety of ways of meeting their shelter needs. But, as argued earlier, all have involved the active agent of intentionally directed labour. For as Marx famously commented to the effect both architects and bees build houses but only the former do so to a pre-arranged plan, rather than driven by instinct. Economists have traditionally bracketed labour with other ‘factors of production’, notably land and capital, to describe the process of construction. But a moment’s thought will tell us that simply throwing a heap of materials and tools onto a vacant site produces nothing but rust and weeds. At each stage along the way—levelling the site, felling and transporting the timber, forging the tools and wielding them to fashion functionally appropriate forms—human labour is necessary. Even in the most developed economy, drawing on the accumulated skills and innovations of ‘manufactured housing’, other forms of labour survive and thrive. The small trades person, self-employed or employing a few day labourers or subcontractors also exist on building sites. However, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_3

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they are generally under the managerial control, of the capitalist builder, many of whom employ large numbers of such functionaries along with employees on wages. It is those large builders, ranging from giant construction companies to large private businesses that come to dominate construction in both the residential and non-residential sectors. Similarly, large capitalist concerns dominate along the supply chain back to firms producing the steel, timber, plastics, pipes, fabrics and the like, that comprise the modern house’s fixtures and fittings in countries like Britain and the United States. The price of housing is fundamentally affected by how these capital fractions play out in real time and space; note that in this chapter (and the following) I abstract from the role and specific determinations of land. Using Marx’s notation, we can depict the process of throwing capital into the production of a house as follows. This, Marx terms the industrial circuit of capital; money M is thrown into circulation to realise more money M1 , in order to appropriate a profit of m. But before this happy event occurs, the capitalist builder must exchange his (note the historically accurate pronoun in the traditionally masculine world of construction) initial money capital into commodity capital C, in the form of the means of production MP and labour power of construction workers LP. The means of production include steel, timber, nails, bathroom fittings, etc., and the tools and machines with which to work them that have previously been produced by other capitalists throwing their money into circulation in search of profit. Workers sell their labour power to the builder in return for wages that are then spent buying commodities like housing and food in order to reproduce themselves in a form fit to turn up again and again at the point of production. The building industry capitalist must achieve one other task. Having successfully navigated the M—C track, bringing labour power and means of production together and managing the labour process P by which construction occurs, he must now realise the enhanced value in the resulting product, the house C1 at a price M1 by selling it to someone who both wants it and has the money resources to buy it. But how does m arise in order to be realised and appropriated as money profit? If all commodities, including labour power exchange at their full values, as determined by the socially necessary labour power in production—as

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Marx assumes at this stage in the analysis—where does the surplus m come from?1 It is here that Marx’s specific theory of value asserts itself. He argues that the labour process in capitalist societies is specific to that society, not merely at a technical level—though given the technological dynamism of capitalism, that is true too—but also due to the effects of the social division of labour expressed in the defining class division between the wealthy and the propertyless, between capitalist and worker. From the perspective of capitalists, workers are the sellers of labour power, their only resource. The capitalist hires the worker for a period of time, say twelve hours a day, six days a week. All that is produced collectively by workers during the day belongs to the capitalist. That total product embodies the total labour power expended during the day and realises its money equivalent when sold. But the wages paid to workers will be less than that since they are determined by (reflect) the labour power expended in producing the average basket of wage goods sufficient to meet the socially acceptable level of existence, totalling, say, six hours of labour time per day per worker. Part of the remaining six hours is expended on means of production used up by workers, leaving a ‘surplus value’ of, say, four hours per day to be realised on sale as the capitalist’s profit (m). The surplus value created during the productive labour process is realised as money profit on sale to the consumer. In other words, on sale, the builder receives his initial money capital advanced (M) plus a money profit (m). The greater the surplus values extracted in production, the greater the profit appropriated on sale, assuming that a final sale is consummated.2 Of course, the production of even a simple house takes place over many days, weeks and months. But the basic logic remains.3 Thus, when the process of the circulation of capital is viewed at this high (deep) level of 1 ‘Socially necessary labour power’ refers to the average amount of labour time of the relevant skills that collectively produce the house, given current technologies and work practices. In the case of workers, the wage price reflects the amount of socially necessary labour time required to produce the ‘basket’ of goods that meets the culturally acceptable level of subsistence for workers, in the circumstances of the day. 2 Total profit gained will depend on the mass of surplus value extracted, that is on the surplus value per worker per day multiplied by the number of workers employed and the number of days in producing the house. 3 However, the lengthy period of construction and uncertain period before sale can result in the actual price realised falling below the value of the house, reducing actual builder profits; serious disruptions to completion of the circulation of capital wipes out

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abstraction, the peculiar value creating power of labour in the process of producing the commodity (house) for less than the input of labour power necessary to reproduce the workers, marks labour power as the sole case of a commodity that exchanges for less value than it creates in the market (ignoring at this point the impacts of monopoly). It is in this sense that Marx talks about the exploitation of labour by capital, of flesh and blood workers by blood-sucking capitalists. At this high level of abstraction, the price or exchange value of housing reflects its value, the total quantity of socially necessary labour power ‘used up’ to produce it. This is ‘the direct price’ of the commodity. It is similar to the classical economist’s ‘equilibrium price’ around which the actual observed price tends to oscillate, with the exception that for Marx demand and supply forces have no role in establishing, rather than converging on the equilibrium. Other tendencies also influence this dual process of price establishment and convergence. For example, in volume 3 of Capital, published posthumously by Engels from notes Marx left, the law of competition drives capital mobility across industries in search of greatest profits, with the resulting tendency to equalise rates of profit across the economy—another deep causal tendency in the capitalist mode of production—thereby modifying the equilibrium generated by socially necessary embodied labour power and resulting in what Marx termed the commodity’s ‘price of production’,4 expressed in the universal equivalent, money. Hence, to summarise, the prices of production of new housing ranging across the full spectrum from hovel to mansion, is determined, in the first instance, by the relative total quantities of socially necessary labour power embodied in production of the ‘package’ (structure, fixtures and potential profits completely and threatens the builder’s recoupment of his initial investment. Such an outcome may result from unhappy timing of the sale during an economic recession or an urgent need to realise cash to meet liabilities due, which if not met, result in the bankruptcy of the builder and possibly suppliers. Business failure, as the chapter headline quote states, is everywhere but particularly prevalent in the construction Industry. 4 This raises the question of the controversial debates over what came to be called ‘the transformation problem’. I don’t propose to add to or attempt to resolve the alternative interpretations offered over the past century or so, simply to note that Marx left in his manuscript notes that became volume 3 a proposed method of moving from direct value determined prices to prices of production that was taken up and completed by Anwar Shaikh (1977, 1984). For his most detailed and recent discussion, see Shaikh (2016, Chapter 6). In this book, the ‘housing price’ of new stock is to be interpreted within this context.

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fittings). Intense competition between capitalists, within and between industry sectors, drives individual (realised) profits towards an average level across the economy. In industries where, using given technologies, individual realised profits fall below the economy-wide level, capitalists will vote with their feet and reinvest elsewhere; competition sets prices that drive profit rates within each sector and across industries towards the economy-wide average, effectively redistributing total surplus value extracted from low-efficient to high-efficient capitalists. Prices of production thus diverge systematically from direct prices determined by values in line with this competitive process. The ceaseless flow of money capital across the economy forms a rationale for the existence and intervention of capital markets, as we will see. The operation of the law of competition is partly offset by the uneven growth of market power between and within industries focused on housing construction and realisation. Where some capitalists exert market power over say supplies of particular building materials, they can extract higher prices from builders, inflating their profits of the former and deflating that of the latter, at least for a time. In other words, the tendency to equal profit rates within construction and across the whole economy expressed through the formation of prices of production is undermined (overdetermined) by the uneven development of monopoly and oligopoly power. This factor becomes even more salient when the issue of land development for housing is considered; land banking and staged release can materially affect the end price of new houses and the final division of total profits to different agents in the development and construction sectors Housing profits, once appropriated, can then be reinvested along with the builder’s original capital in further construction and sale, thereby adding to the general process of capital accumulation that drives individual capitalists in the ceaseless race to accumulate or perish. For Marx, as for Schumpeter, innovation was a defining characteristic of capitalism as a system of social reproduction. With every innovation—of technology, education, organisation and materials—the socially necessary labour time in production declines, reducing prices and threatening the capitalists’ profit margin—unless they can surf the innovation wave first. Since price is, at base, determined by the average quantity of labour time required for production, the capitalist who can produce for less than that will earn a higher money profit on sale (m + n). This presents the capitalist with a double incentive to realise improvements in the efficiency of production:

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first, by squeezing more surplus value out of his workers, more profit is appropriated on sale of the final product; second, and at the same time, he forestalls the likelihood of being undercut and driven out of business by rivals. The double advantage is cumulative; greater profit builds greater financial reserves (to survive trade slumps and outbid rivals) and supports continued growth in the scale of operations. One important caveat should be added here. The builder like all capitalists is ‘encouraged’ by the remorseless law of competition and the ubiquity of innovative disruption to reinvest profits in order to survive. But incentives are not absolute directives. Capitalists are human beings; they have human needs, commitments and ambitions. They have families. They have desires that depend on accumulating and preserving wealth but that also require consuming part of their wealth to satisfy those desires. In short, successful capitalists who accumulate wealth always have the choice to withdraw part of their resources from the capital sphere of circulation, to throw it into the circulation of revenues chasing consumption of commodities produced by other capitalists, like luxury houses, private jets, expensive education for their children, etc. This lies at the basis of the major class division in capitalism. Workers do not have this choice. Lacking a significant stock of accumulated wealth, they must sell their current power to create value for capitalist employers on a regular basis. TINA; there is no alternative. Workers and their dependents have a choice only in a sense that they are ‘free to starve’. Simply laying out the logic of Marx’s industrial circuit of capital is only the starting point to understanding the way in which housing is produced, exchanged and consumed in the realm of the empirical that is before our eyes. A key factor here is the one way flow of time denoted in Fig. 3.1. Housing, as stressed, is an expensive commodity that takes a long time to drive to market. Many unexpected events can intervene between the glint in an architect or builder’s eye and the arrival of the moving vans of the houses’ first occupants. The capitalist builder must be able to manage and coordinate an array of trades5 and supply sources, finance (from 5 Not all labour power in house building is homogenous. Labour involving different specialist skills ‘costs’ more to bring to the point of production through specialised and lengthy training. The cost of this training must be included in conceptualising the average quantity of labour time necessary to reproduce workers with the relevant skills. There is a large literature on how to interpret Marx’s distinction between abstract and concrete labour and the ‘reduction’ of ‘complex’ to ‘simple’ labour. I also propose to ignore this literature and point the interested reader at, for example, Tortajada (1977) and

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TIME

Fig. 3.1 The production of housing

MP M C … P …C1

M1.

where M1 = M + m

LP

existing or external sources) the production and marketing processes, and market the finished house to the buyer. The latter may be an investor or owner occupier, who must also finance their purchases. There are so many things that can go wrong at various points in the time flow of capital and revenues (incomes and released wealth). Time, as Joan Robinson (1978) argued, is irreversible, a one-way ticket to an open future, making the notion of a static equilibrium state irrelevant to understanding what is happening in real time and space. Managing multifarious risks and ever aware of the contingencies of radical uncertainty (Kay & King, 2020), our builder lives in a perpetual state of unease. He (again he) feels that he has earned his whack, that profit is a just and appropriate reward for bearing the psychological and financial burdens of command. In this conceit, he is buoyed by the tradition of philosophical liberalism deriving from John Locke’s defence of private property as a ‘natural right’. For Marx, private property is an historically constructed institutional underpinning of the class power of capital over workers. The latter don’t have the luxury of bearing the ‘burdens’ of control (and reaping the rewards of doing so). The polarisation of wealth that supports and is accelerated by the circulation of capital recreates anew the conditions of its perpetuation, the rule of private property and the structures of ideology and power that defend said rule. What are the possible exigencies and contingencies that can block or blindside our capitalist builder6 ? Consider the time-patterned process involved. The builder must first gain access to sufficient resources to finance the build, for it is a consequence of the arrow of time that money Itoh (1988). The systematic differentiation of wages has important social and political implications for class fragmentation in advanced capitalist societies, as we will see in later chapters. 6 ‘The future is of course forbidden fruit, a tenebrous figure, a fickle guardian of secrets small and large. It forgives us knowledge of the months, years and decades to come (Keane, 2020, p. 234)’.

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must be laid out in advance to buy or contract the means of production and labour power. Construction must then take place at a point in space in real time. The stages of construction must be managed on a critical path. Some skills and processes can be brought on site contemporaneously. Other must be carefully staged to avoid costly remediation. Even then, careless mistakes on site or unexpected delays in delivery can upset the best laid plan. Of particular concern (to the builder) are disruptions due to weather, bureaucratic delays, industrial accidents, strikes, on site and in the supply chain and the general state of the economy. Unlucky timing can see the finished houses come onto the market just when mortgage interest rates and/or unemployment rise, or other builders decide to put their finished properties on the market. These are examples of the sorts of countervailing tendencies and exogenous ‘shocks’ noted in the preceding chapter that impact on observable housing prices. The delays and cost over-runs are legion, as many a buyer of high-rise apartments ‘off the plan’ in Melbourne and Sydney over the past decade knows only too well. The lengthy construction and sale period, beset by delays and unexpected shocks, sees observed prices gyrate wildly around direct prices determined in the sphere of production, modified by the law of competition and impacts of monopoly power. At the level of housing as a commodity, the full extent and consequences of these movements in time cannot be gleaned until we get to an understanding of the ways commercial and financial capital intervene in the overall circulation of capital through the housing system (Part I), the role of land and landowners (Part II) and the ubiquitous intervention of the state (Part IV). But to return to the production of housing. One feature of housing systems observable in many capitalist economies is the uneven size distribution of building firms. I have already noted the plethora of small businesses engaged in aspects of the sector, particularly in relation to what in Australia are referred to as ‘ute-driving tradies’. But it is also the case that, at the other end of the scale, giant companies engaged in construction, supplies and logistics dominate the field. This is natural in capitalism, the outcome of the crisis-driven competitive battle to accumulate or perish, termed by Marx, ‘the centralisation of capital’. By displaying this pattern and trajectory, residential construction shows itself to have been fully integrated into the capitalist world. It is useful here to consider just how characteristic is the persistent uneven size distribution of capitalist concerns, as a permanent feature,

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while the fate of individual capitalists is far from permanent. Commercial failure, as the quote at the chapter heading suggests, is the common fate of the individual firm. Builders, large and small, are no exception. We do know that the average lifespan of small firms is shorter than very large ones, but this is accounted for almost entirely by relatively high death rates in the very early years of existence. The offer, launched with such excitement and anticipation, turns out to be not quite right for the intended market. The failure of its main product means the end of the firm itself. At a more elementary level, the owners of the firm may get their cash flow wrong and not be able to meet in time the demands of ruthless predators such as the tax authorities. But after the first few years of existence, the difference between large and small firms’ survival potential narrows dramatically. Their prospects of surviving the next year become more or less the same. And, eventually, age claims them. Most firms fail. (Omerod, 2005, p. 15)

Omerod notes that Alfred Marshall in his original 1890 edition of Principles of Economics, offered the metaphor of the forest; the economy at any time had large and small firms (‘trees’), growing at different rates. However, eventually all would succumb to the competitive rigours of innovation by rivals, as the forest (economy) itself prospered and survived. Omerod presents data from a twentieth-century study (Hannah, 1999) that compared the survival of the largest one hundred US companies from 1912 to 1979. Of the top hundred in 1912, 48 had disappeared by 1979 and 29 had gone bankrupt. Fifty-two had survived but only 19 were still in the top one hundred. Creative destruction fells the titans as well as the dwarfs. Omerod and Cook (2003) provide evidence that the frequency of failure of US firms can be described by a ‘power law’, a mathematical relationship found in many areas of science and society.7 The forest metaphor nicely describes the heterogeneous nature of the industries that make up the housing production sector. The ecology of production draws large construction companies, both private and incorporated, into an often contentious relationship to each other and the penumbra of smaller firms and trades. Managing the complexities and 7 A power law is a log-linear relationship between two variables, in this case the size and failure of firms. Power laws have been found to characterise the extinction rates of many biological species, the frequency of earthquakes, and stock market fluctuations. See Omerod (2005, pp. 169–188) and Mandlebrot and Hudson (2006).

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contingencies of the drawn-out construction process and managing cash flow in a sector in which time is not one’s friend, raises the likelihood of individual failure. Functionally, the problem of the weakest link makes its presence felt. A breakdown in part of the chain of inputs, say as a result of delays in transporting window glass or tap fittings, can cause delays that ramify through to late receipt of revenues along the entire chain. The high dependence on many firms in the chain on various forms of credit intensifies the pressures and raises the prospect of failure. And as the quote above notes, one important source of threat comes from the government tax collector who always demands to stand at the head of the queue during the bankruptcy process. It is also important to note the differentiated industry structure of the construction sector. Relatively low barriers to entry and exit flourish, provide sector-wide flexibility on the supply side of new residential construction. Such businesses tend to move into and out of operation in line with the typical cyclical pattern of new house demand. Small speculative builders also fit that pattern. Lags in such responses can cause short term perturbations in new house prices, an example of where actual observed prices oscillate unpredictably around underlying trends. Price volatility tends to be less prevalent, or at least less visible in those parts of the sector dominated by large established companies. These companies benefit from a range of competitive advantages: economies of scale and scope; managerial expertise; significant internal reserves; connections of influence mediated through industry associations and political contacts and donations; access to capital markets; and an ability to plan and stage release of product. Nevertheless, the culling effect of time and the predatory environment can catch up with even the most established operators. Large scale operations carry large scale downside, as well as upside, risks. A general economic recession can devastate the ecology of construction much like a wildfire can incinerate a forest. The impacts of COVID-19 are, as I write, bringing construction and much else to a standstill in economies throughout the world. It is unclear which businesses will survive the fallout. There is another consequence that flows from the uneven size distribution of firms in the residential construction sector. Smaller operators are poorly placed to innovate. Many will produce at less than average productivity in the economy, resulting in a redistribution of surplus value towards the larger and more efficient industries in the whole sector and

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broader economy. Lower realised money profits make the life of less efficient firms even more precarious, supercharging their movement in and out at the industry fringe. At the macroeconomic level, new construction is a lead indicator of general performance. It typically also employs a significant proportion of the total workforce, meaning that elected governments are ever-alive to the level of construction activity, their attention further sharpened by the existence of a well-organised and resourced property lobby. Thus, any analysis of housing must be able to place this sector within a broad political economy of capitalism as an historically unique social formation. The production of housing within this context is but a starting point. The rest of this part of the book fills out the commodified nature of the subject before moving onto more developed understandings of how housing ‘fits’ the whole. The most immediate barriers to a smooth appropriation of profit by our capitalist builder are thrown up by the challenge of selling the finished product and financing their operations. The next chapter focuses on this dual challenge, in that order. But before we go there, we must, finally, recognise and explain the significance of the fact that housing as a prominent component of the consumption fund gives off its use value over a very long period. New housing appears freshly minted into a maelstrom of selling activity in a housing market differentiated or segmented by stock quality, age and location. New houses ‘compete’ against older, partly used stock in varying stages of physical decay and functional obsolescence. Leaving aside location until a later chapter, the new house will often have a competitive edge in the eyes of potential buyers. It will not have started its remorseless physical decline. It will likely include the latest fixtures and design features; that is, older houses suffer obsolescence as well as physical depreciation. These advantages suggest that the new house may fetch a higher sales price than ‘similar’ existing houses. This is, after all, a well-established pattern in other durable components of the consumption fund, like the motor car industry. More formally, the process of producing housing under capitalist relations ‘valorises’ capital in the form of a commodity. Consuming commodities obliterates their value. The end of the line for all commodities is devalorisation (devaluation). However, even without considering the tendential causal effects of location, housing does not necessarily go quietly. Existing houses can be reborn through renovation, minor and major. They can undergo a process of re-valuation (revalorisation) by the

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capitalist builder’s commitment of labour power and means of production anew to renovating/extending the existing house. The home renovation business has become a major component of the broader residential construction sector in countries like Britain and Australia. So too, it must be added, has ‘do-it-yourself’, the application of human labour (‘sweat equity) by the existing house owner. Renovation has expanded considerably the scope of housing construction as a major component of the economy and employer of workers, in industries that include not just construction but also the fixtures, fittings, materials and design services that equip the capitalist builder as well as the DIY enthusiast.8 This means that, as substitutes of varying degrees of closeness, the prices of new and existing houses exert a mutually restrictive effect on each other. This imposes a further degree of uncertainty into the builders’ calculations. Uncertainty is heightened by the ‘option value’ of existing houses, whose price in the market can reflect not only the current level of recent renovations/upgrading but also the potential for future revaluation/upgrading. I did say that housing is a complex matter.9

References Hannah, L. (1999). Marshall’s “trees” and the global forest: Were giant redwoods different? In N. Lamoreaux, D. Raff, & P. Temin (Eds.), Learning by doing in markets, firms and countries. National Bureau of Economic Research. Itoh, M. (1988). Skilled labour in value theory. Capital & Class, 11 (1) 39–58. Kay, J., & King, M. (2020). Radical uncertainty: Decision-making for an unknowable future. The Bridge Street Press. Keane, J. (2020). The new despotism. Harvard University Press. Mandlebrot, B., & Hudson, R. (2006). The (mis)behaviour of markets: A fractal view of financial turbulence. Basic Books. Omerod, P. (2005). Why most things fail: Evolution, extinction and economics. Faber and Faber. Omerod, P., & Cook, W. (2003). Power law distribution of the frequency and demise of US firms. Physica A, 324, 207–212. Robinson, J. (1978). Contributions to modern economics. Basil Blackwell. 8 DIY production occurs outside the valorisation of capital, beyond the circulation of profit-seeking capital. DIY producers are price takers not makers. 9 A well-worn sales pitch describes existing houses in poor condition as ‘renovators’ opportunities’.

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Shaikh, A. (1977). Marx’s theory of value and the transformation problem. In J. Schwartz (Ed.), The subtle anatomy of capitalism. Goodyear Publishing. Shaikh, A. (1984). The transformation from Marx to Straffa: Prelude to a critique of the neo-Ricardians. In E. Mandel (Ed.) Marx, Ricardo, Straffa. Verso Books. Shaikh, A. (2016). Capitalism: Competition, conflict, cries. Oxford University Press. Tortajada, R. (1977). A note on the reduction of complex labour to simple labour. Capital and Class, 1(1), 106–116.

CHAPTER 4

The Realisation of Housing

He [Marx] simply asserts that value has to be created in production and realized through exchange and consumption if it is to remain value. (David Harvey, Limits to Capital ) The financing needs of capitalist production induce financial innovations (interest-bearing capital) which comes to have a dominant, rather than a subordinate, role in relation to production. (Toporowski, Credit and Crisis from Marx to Minsky)

4.1

Exchange

To restate the key conclusion of the last chapter, building capitalists must find a way of selling the finished house to someone, willing and able to pay a price that returns an average rate of profit, given profits received in line with other industries at the time. To fall short of this aim—either by failing to find a buyer or only doing so by discounting the sale price— risks bankruptcy. To minimise these risks, particular institutional forms have evolved, notably capitalists specialising in the marketing and sales functions. Other capitalist enterprises, banks and non-bank lenders and insurance brokers, have also been drafted into harness to finance the overall circulation of capital through the housing system and manage risk. In other words, the particular social form under which housing is created and produces its useful effects in developed capitalist societies creates a developed functional or social division of capital. This chapter first deals © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_4

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with the processes of intervention by the firms that manage the C1 - M1 phase in return for a share in realised profit m. We can usefully designate commercial capital put to use in selling housing as ‘property capital’. The following section then traces the intervention of ‘financial capital’ that concentrates and directs the flows of money capital through the processes of housing production and exchange. The intervention of property capital, comprising, real estate, marketing, media and professional inputs by valuers, surveyors, solicitors, real estate agents, marketing specialists and the like, oils the wheels of commerce. I leave out land developers until Part II, though, of course, the functions of developing land and building on it are often integrated within the same organisation; nevertheless, the functions are specific and analytically separable. The sales functions can be internalised in large construction companies, but parts at least will tend to be outsourced to specialists. Enterprises throw their capital into the fray in search of profit. The process in simplified form is represented in Fig. 4.1. Note that the intervention of property capital complicates significantly the picture presented at the beginning of Chapter 3. The house is produced by our builder, value added in production and sold as before. But now property capital intervenes. The builder receives Mb 11 < Mp 1 (equals M1 in Fig. 3.1), the final price paid by the consumerresident or landlord that reflects the full value of the house. (The landlord is not, in this context part of the property capital fraction; more about this point later.) The property capitalists collectively act as if they take the house off the builder’s hands at a price that will, when on-sold to the final owner, (tend to) return an average profit to the property capitalist. This analytically inferred inter-capitalist transaction is represented by the exchange cross in Fig. 4.1. The property capitalists pay the builder Mp (= Mb 11 ) to buy the house and sell for the full price, represented as Mp 1 (equal to the original M1 ). The difference between Mp 1 and Mp (= Mb 11 ) is the property capitalist’s profit, which is divided between savings (Mp s ), consumption (Cp ) and accumulation (mp ) committed to the next round of activity (Mp + mp ) for housing exchange. B represents the recommitment of the larger ‘lump’ of capital (Mp + mp ) to the exchange activities of the property capitalist. The larger are the ‘leakages’ of capitalist consumption (Cp ) and/or savings (Mp s ), the smaller the recommitment of the property capitalist’s reinvestment (B) in future construction-related activities; mp can

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MP Mb

C …….P…….C

1

Mb

Mb s

11

LP Mp

Mp 1

Mb + m b

M ps Mp + m p

Cp

W

A

B

Cb

Consumption Cw

Ws

Fig. 4.1 Circulation of property capital

be negative, reflecting a downsizing caused by either strategic decision or forced by cash flow problems. Likewise, the profit of the builder-capitalist is (Mb 11 − Mb ) and is split between savings (Mb s ), the builder’s consumption (Cb ) and accumulation (mb ) committed to the next round of activity (Mb + mb ), which is represented by the time-flow A in Fig. 4.1. Total profits (Pt ) on production of the house (by the builder) and sale (by the property capitalist) of the house flow to the building and property capitalists thus: ] [ ] [ Pt = Mb 11 −Mb + Mp 1 −Mp

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More generally total profit can be written as: ] [ ] ( [ ) Mp 1 −Mb = Mb 11 −Mb + Mp 1 −Mp = Mb s +mb + Cb ( ) + Mb s +mp + Cp All this assumes that the sale of the house organised by property capital proceeds smoothly and quickly, so that the building capitalist receives his capital advanced and profit. But time and possible delays intervene between completed production and completed sale. During that time potential value passes beyond the circulation of capital—is ‘frozen’— and depends on the circulation of revenues from current incomes and dis-savings of past incomes. Wages received must be spent or saved. Wages saved represents a leakage and may only flow back into purchasing commodities at some future time. Likewise, as noted above, the shares of the capitalists’ profit once realised can be split between adding to the money capital recouped to expand the scale of future operations (that is to accumulate), or leak into a form of ‘dormant’ wealth, like financial securities, gold, rare coins and paintings, bitcoins, etc. Existing housing and other forms of real estate are also convenient places to ‘park’ savings withdrawn from prospective capital circulation. Wealth is dormant in the sense that it is held outside the circulation of capital, beyond the realm of the self-expansion of capital. The same is true of the leakage of profits in capitalists’ consumption. In a fiercely, competitive wolf-eat-wolf world, such leakages threaten the tree in the forest, the complacent, sybaritic builder resting on his backside. The same choices and logic apply to the property capitalist.1 Wealth is capital only to the extent that it circulates in search of self-augmentation; capital is wealth in motion.2 But things are fluid. Current wealth exists as 1 Marx referred to the case where all profits leaked as ‘simple reproduction’, in which only the recouped initial capital advanced is thrown back into a new round of production. Where leakage is less than complete, capital is expanded to increase the scale of the value creating process. In some circumstances m is negative, as capitalists spooked by the gathering clouds of commercial crisis scale down their operations and build up their reserves. 2 In Fig. 4.1, W , and Ms leak while m ‘rests’, waiting to be reinvested along with s b the original Mb in a new house-building project. The length of waiting time will depend on the expectations of individual capitalists as to when circumstances are propitious and opportunities extant to recommence building. These tactical decisions will impact the level and timing of the recommitment of property capitalists. In some circumstances of

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a fungible source of potential capital to support/expand future production and exchange activities. Paintings and vintage cars can be sold, and the proceeds turned to new capitalist pursuits, both in the upswing of an economic cycle and when the winds blow cold, business failure looms and capitalists hasten to keep the wolves at bay. Individual capitalists subject to the uncertainties of the future and predation of rivals—trees at risk—are under constant pressure to draw on their accumulated wealth less they fail, and their wealth is seized by suppliers, creditors and the government.3 Capitalists have become adept at limiting the potentially disastrous impacts of failure by the invention of the limited liability or joint stock company, unloading the costs of failure on shareholders and laws regulating personal and corporate bankruptcy, unloading the costs of failure onto creditors. The time-patterned nature of capitalist production and realisation, involving the discontinuous circulation of capitals and revenues carries with it an ever-present possibility of disruption or crises resulting in the thinning of the forest, the failure of individual capitalists. Housing as a ‘lumpy’ commodity with a long gestation is particularly well suited to sparking what Marx in Capital, Volume 2, termed ‘disproportionality crises’. Once, the intervention of financial capital occurs (see below), the likelihood of disruption multiplies. What this presentation makes clear is that profit is extracted as surplus value in construction, realised as money profit on sale and split between the primary and ancillary fractions of capital drawn into the construction sector.4 The two capital fractions advance capital in expectation of profit, described by the transformation M — C — M, as opposed to the heightened expectations, property capitalists will take a more active role in encouraging builders to boost construction. “The modern capitalist economy must continually increase production if it is to survive, like a shark that must swim or suffocate” (Harari, 2011, p. 388). 3 Of course, capitalists and other wealth holders will go to great lengths to protect their wealth from the clutches of creditors and governments by utilising various legal and other means: trusts, corporate arrangements, offshoring, political lobbying, corruption and so on. The means are endless. 4 This turns on Marx’s distinction between productive and unproductive labour. The former is applied only in the sphere of production, the latter, including all the highly paid exchange professionals are classed as ‘unproductive’—of value. This does not mean that workers and managers in the property industries are useless or ‘non-productive’, only that their impact is indirect (see below). There is, of course, a lively debate on this distinction, denied in orthodox economics. Again, I invite the interested reader to follow up the relevant literature. But note the simple fact that there is no prospect for property

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process dominant in historically earlier commercial societies characterised by simple commodity production C — M — C. In the latter, money functions simply as a means of exchange, based on conventions of trust and mutual obligation. Under capitalism, money as the ‘universal equivalent’ is the beginning and end of the anonymous process, the reason for living, the gateway to accumulating wealth in fully fungible form, under the whip and spur of competition. Competitive pressures and capital mobility tend to equalise the rates of profit between the construction and property sectors and throughout the economy.5 The proceeds of the sale of the house to the buyer must (tend to) return the quantity of capital advanced by the building and property capitalists and an average rate of profit on the advances of each, such that: ( ) ) ( Mb 11 −Mb /Mb = Mp 1 −Mp /Mp = average rate of profit in the economy That is, Mb 11 (tends to) adjusts to bring about this result.6 There are a number of qualifications necessary even to this simple schematic presentation, before we further complicate the picture by bringing in another fraction, financial or in Marx’s term, ‘interest-bearing’ capital. Consider the following. First, most of the building capitalist’s means of production will be purchased from other capitalists supplying building materials, tools, machines and fixtures. Thus, a more complete map would add a series of links with MP in the top left of Fig. 4.1. This can be described by the use of the economists’ input–output matrix. I say described because such analyses depict the inter-industry flows of ‘value’ measured in physical quantities and actual prices, oblivious to the deeper process of value as capital-in-motion. Second, the house buyer can be either an owner occupier or a landlordinvestor. Both must, in this model, that is before a consideration of

capitalists to reap profits—no reason for their existence—unless and until there are or will be houses produced to sell. 5 Remembering that tendency here refers to the causal mechanisms at the level of the real operating on the actual. In the observable chaos of life, prices and profits will fluctuate around the moving ‘equilibrium levels’. 6 Remembering that M 11 is the price received by the builder of the new dwelling. b

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loan finance and state intervention, draw on their savings or accumulated wealth (boosted by current Ws , Wb and Wp ) in order to acquire ownership of a house. A capitalist landlord must participate in the general scramble for profits with other capitalists and partake of the surplus value carve up accordingly. Small ‘petty bourgeoise’ landlords like simple commodity producers are not driven by the laws of value and competition, as described above, but operate around the fringes, ‘price takers’ in a sense. Different societies at different times developed particular rental sectors with specific characteristics. Thus, in Australia small investors owning one or a few dwellings have always been the predominant rental providers for reasons peculiar to the overall structure of the housing sector, the confined investment outlets for personal savings, the cultural attachment of Australians to ‘bricks and mortar’ and the favourable taxation treatment of capital gains and interest payments.7 The capitalist landlord-investor, however, advances capital in order to achieve profit by extracting surplus value from its employees, in competition with other capitalists. The commodity they produce is ‘usable space’ for domestic consumption. This represents a continuing money-relation with tenants, based on the regular rental payment. Unlike the case for some but not all petty-landlords, this is a purely monetary relationship, often mediated by the intervention of property capitalists, notably real estate agents. The capitalist landlord employs productive labour, from which surplus value is extracted that swells the total mass of surplus value in the economy that is divided across the capitalist class by the general processes of competition noted above. Conceptually speaking, capitalist landlords are members of the circuit of productive (industrial) capital, not of property capital. This raises a thorny issue in Marxist political economy. In Capital, Marx was clearly focused on the production, exchange and consumption of material commodities like food, buildings and clothing, in his period representing the overwhelming composition of commodities in circulation. Services were few and mainly devoted to flattering the egos and easing the daily grind of the wealthy. Marx noted the role of domestic servants, by far the largest group of service providers at the time,

7 This distinction could be incorporated in Fig. 4.1, but the visual complication is not worth it. This is particularly so when we recognise that the current tenure of a house can change through time. The house buyer purchases an implicit option along with the material artefact: namely a landlord can choose to live in the dwelling and an owner occupier can choose to move out and rent to a tenant.

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as the consumption (often conspicuous) expenditure by the rich, rather than an advance of their wealth in search of profit. Hence, the rich was consuming their wealth, not accumulating more. In Marx’s time, the vast bulk of services were not aimed at the consumption of the broad working and lower classes and were not provided by capitalists. However, today, services represent a predominant mix in the total annual production of the capitalist economy. The key distinction now is between productive and non-productive services, that is, between those services that directly add to the total mass of surplus value and those, on the one hand, that indirectly do so by speeding up the turnover time of productive capital (like the elements of property capital noted above) and those, on the other hand, provided by petty-commodity producers, like self-employed plumbers, house cleaners and child nannies.8 Third, the share of building and property capitals’ housing consumption is properly represented as being committed to drawing on an enhanced consumption fund. That is, current housing production adds to the existing stock of long-lived houses, from which residential consumption (of workers, capitalists and the workless) occurs. Since new houses generally represent a minority of house sales in a period, much of the flow of revenues, current and past savings, will circulate ownership and 8 The importance of the role of the mass of surplus value in Marx’s schema is argued by Harvey (2021a); see also the resulting debate in the New Left Review by Riley (2021) and Harvey (2021a, 2021b). The debates over productive and non-productive labour, and the significance for the analysis of issues like the falling rate of profit and economic crises continue. I leave it to the interested reader to pursue. (Incidentally, Ernst Mandel, in his introduction to the Penguin edition of Capital, volume 2 argues against the view I put here, claiming that industrial or ‘productive’ capital should exclude services and apply only to the production of material goods, that is to labour processes that transform material nature. I think he’s wrong. Again, I leave it to the reader to make up her own mind.) More generally, recent social theory has come to distinguish between productive resource usage that enhances welfare and so-called ‘defensive expenditures’ and ‘guard labour’ that are needed to control or mitigate the accompanying ‘illfare’ (pollution, climate change, crime) and control potential popular opposition to rising inequality: “… states in highly unequal societies are often obliged to commit a large fraction of the economy’s productive potential simply to enforcing the rules of the game from which inequalities flow: soldiers, police officers, prison warders, and others in the ranks of what Arjun Jayadev and I call guard labour constituting large fractions of the labour force (Bowles, 2012, p. 9).” But note, these areas of the economy became profitable fields of exploitation by capital feeding off government defence contracts, the ‘war on drugs’ and the process of privatisation during the era of neoliberalism. Capital exploitation sits easily with socially wasteful and dangerous uses of society’s resources, as John Kenneth Galbraith noted in his famous 1957 book, The Affluent Society.

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consumption of existing houses. The significance of this point will be clearer once we analyse the role of urban land rent. Fourth, the introduction of a basic distinction between owner occupier and landlord investor necessarily focuses attention on the role of housing in both reflecting and reinforcing inequalities in wealth as a key feature of capitalist development. Unless they ‘choose’ to live under a bridge, an investor’s house will be their second or third (or more) houses. In growing their property portfolios, investors are often in a position to either outbid or settle the sale sooner than owner occupiers, thereby accumulating wealth at a faster rate, and pushing owner occupiers out of the way. The boom in house prices in Australia in the period 2018–2021 was sparked by property investors, domestic and foreign, displacing younger first-time owner occupiers, sparking complex movements in housing chains and ‘filtering’. Australian government regulators responded by tightening regulations on bank mortgage lending and foreign investment, ushering in a battle to buy among owner occupiers, a battle in which many first-time buyers lost out. Current wealth standing will reflect prior economic activities and patterns of inheritance. There will be significant differences in the market position of both investors and owner occupiers. Intra-family transfers of wealth also play out in housing markets. This, note, is before the advantage of wealthy buyers’ balance sheets gains them privileged access to loan finance. I return to the implications of these considerations in Chapter 11. Fifth, the size differentiation of capitalists involved in the production and sale of housing raises a further complication to the preceding picture. Those firms exerting a degree of monopoly or monopsony or oligopoly power in the broad building sector can effectively appropriate part of the surplus value that would (under normal competitive conditions) be appropriated by smaller capitalists. We see this process of price differentiation or gouging in numerous industries like supermarkets in the retail sector. The appearance of huge hardware store franchises is a case in point in the building industry. This is another factor or higher level contingency that overdetermine the prices we observe in the world. Such seeming anomalies do not invalidate the real causal tendencies actually expressed, driven by the law of value; they simply form part of the full explanation of what is driving the overall actual outcome. They do, of course, also have implications for public policies that we might wish to embrace (see Chapters 15 and 16).

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Finally, to stress a point made above, the leakage of savings (Ws , Mb s and Mp s ) from the housing sector by both capitalists and workers can flow into a range of asset classes like existing houses, equities and other financial assets. Historically, house prices and equities tended to show a negative co-variance; that is, their prices varied inversely over the business cycle, a useful hedge for investors wishing to diversify their investment portfolios. Recently, however, since the global financial crisis negative has turned to positive co-variance. Both asset classes have risen together, particularly in the era of easy money and historically low interest rates. We take up the intervention of housing finance, initially in the next section, then in detail in Chapter 14. The number and functions of property capital are legion. Well before the first sod is turned the builder must have an eye to how and how quickly the eventual finished product can be disposed of. A completed vacant house is capital (value-in-motion) stalled; profit can’t be appropriated and capital advanced recouped until the all-important final sale is consummated, preferably well before completion and sign off. In large multiunit projects, builders will seek to attract pre-sales, termed in Australia, ‘off the plan’ purchases, involving buyers committing to purchase prior to the start of construction. Perhaps, the first property buy-in will appear wearing an architect’s hat. The all-important house design will establish the project’s parameters, the framework within which the build will be conducted, and the range of buyers targeted. The larger the project, the more crucial this initial design-and-plan stage becomes. Mistakes here can seldom be rectified without subsequent losses, that can consume the original capital advanced in addition to profit foregone. For smaller projects, existing off-the-shelf options can be drawn upon. A large building company can offer prospective buyers a range of houses with a menu of tweaks around fixtures, fittings and finishes. Marketing experts will be consulted to draft a sales plan; display houses will be conjured up; pre-publicity in the form of large billboards and media releases will follow; local celebrities will endorse the imaginatively conveyed ‘artists’ impressions’ of the promised desirable lifestyle. Estate agents will be appointed to handle sales enquiries through to sale. Lawyers will draft sales contracts. Again, well before construction starts, surveyors and lawyers will have helped the land developer carve up the estate in site packages ripe for sale to builders, small, large and self. The process of residential subdivision

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is a lengthy and complex journey through raw land acquisition, regulatory hurdles and potential community opposition. More on this in later chapters. That still leaves us with the following question. Why, if value and surplus value is produced through construction, would a builder effectively and willingly share the profit with an agent or other property capitalist? The previous discussion suggests why. The answer turns on Marx’s notion of the ‘turnover time of capital’. The builder as we have seen only realises a profit on sale. Until then he cannot recoup his initial capital laid out on means of production and wages, still less reap a profit. By ‘selling’ to someone else using the services of property capitalists, he can benefit from economies of scale and the benefits of the detailed division of labour identified by Adam Smith. More importantly, by reducing the time taken to find a buyer, and the attendant risks, the builder can get his hands on his money sooner. That money can then be thrown again into a new cycle of construction sooner. Instead of remaining locked within the commodity form until finally sold directly to consumers, capital is immediately freed to commence a new cycle of production. If instead of taking a year to build and sell a house himself, the builder can sell it (say) on completion in the middle of the year, start and finish a second house and throw that into the market by the end of the year. Although the profit margin on each house is lower, the total profit per year is higher in the second instance. That is, the primary use value of property capital services sold to builders is to reduce the time his capital stays locked in the house and incapable of realization and self-expansion.9 From the builder’s point of view, the extraction of potential profit by the property capitalist is an impost, a cost of doing business. But the arrangement suits him because it facilitates his driving aim, to accumulate capital as quickly as possible in an uncertain and hostile world.10

9 Figure 4.1 does not indicate the need for an actual sale by the builder to the property capitalist but represents the outcome (reduced turnover time of builder’s capital) as if an actual sale had occurred. 10 It should be noted that at this level of abstraction, it matters nought whether the property realisation functions are located inside or outside the capitalist building firm. In the former sense, it is still the case that value is created only during the construction phase, and that the firm’s total profit can still analytically be divided into the two components flowing to the building and exchange functions.

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4.2

Financing

To date, we have ignored the most pervasive feature of advanced capitalism, namely the role of financial capital. Capitalist institutions—banks, investment banks, shadow banks, brokers, advisers, stock exchanges, peer to peer lending, bitcoin, etc.—have emerged over the centuries to coordinate the vast flows of wealth accumulated and coursing at ever-enhanced levels through the economy. The phenomenon of credit is as old as urban civilisation; hence the title of a book by Grabler (2014)—Credit: A 5000 Year History. But the advent of industrial capitalism gave the function of credit a bold new livery and an increasingly central role in how modern capitalism works and doesn’t. Credit interposes itself at each stage of the circulation process. Money advances are made to the builder. Trade credit is supplied along with inputs by suppliers. Similarly, advances are made to facilitate the operations of property capitalists. What the appearance on the scene of ‘Mr. Money Lender’ does is to raise the stakes. Capital can flow through the economy at a much larger scale and intensified rate, increasing the total mass of surplus value extracted and realised as profits of enterprise and exchange in any given period. No longer must the builder and property firm wait until they have accumulated a profit to start or expand a new round of production; they can anticipate this happy state of affairs by leveraging their initial capital by borrowing someone else’s wealth. This has two main benefits. First, it increases the scale and pace of operations, boosting total profits per period. Second, it offloads some of the risk and uncertainty onto someone else. This, of course, comes at a cost to the builder and realisation facilitators in the property sector, a cost in the form of interest paid. It is easy to see interest as a deduction from profit, an impost levied on the capitalist sector as a whole. Such an impost is explicitly expensed in the financial reports of firms. The financial capitalist is, at base, another kind of facilitator that expands the scale and reduces the turnover time of capital, the active cause that speeds up the rate of capital circulation and accumulation in the economy. Housing, as noted, has become a primary target for the intervention of financial capital. This can be represented schematically in Fig. 4.2, which adds to the flows of capital depicted in Fig. 4.1. For simplicity of exposition, I have assumed that a bank lends to the builder and property capitalist short term on an interest-only basis,

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Mfs (Mfb + mf)

(Mfb + i. Mfb)

55

Cbf

Mfb1

Mfb

MP Mb s

Mb11

C ……. P…..C1

Mb

LP Mbe

Mp1

Mp

(Mb + mb)

M ps (Mp + mp)

B

Mfp1

Mfp

Mpe

A

M fs (Mfp +i.Mfp) (Mfp + mf) Cf

Cp

W

Cb

Consumption Cw

Ws Cf Mfh

(Mfh + i.Mfh )

Mf s

(Mfh+ mf)

Fig. 4.2 Circulation of property and financial capital

Cfh

Cpf

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repayable at the end of each sale, and lends also to the buyer on a long term credit foncier mortgage involving both the regular payment (r) of interest and repayment of principal over the term of the loan, typically twenty to thirty years. There are, of course, many more complex financial products available to capitalists in particular. The implications of this fact will be addressed in later chapters. Taking the construction phase first, the bank lends to the builder, Mfb , at an interest rate, i: this leverages the builder’s capital advanced or equity staked, Mbe . In Fig. 4.2, Mbe < Mb , the total advance for construction, due to financial leverage. At the end of the round of production, the builder repays the principal, along with the interest component: (Mfb + i.Mfb ). Similarly, the property capitalist borrows Mfp and repays the bank: (Mfp + i.Mfp ). ( ) The builders profit is Mb 11 −[Mbe + (Mfb + i.Mfb )] . builder’s rate of ) profit on equity committed is: ( The Mb 11 −[Mbe + (Mfb + i.Mfb )] /Mbe . Similarly, ( 1 [ for the( property capital )]) the profit appropriated is: Mp − Mpe + Mfp + i. Mfp and the rate of profit is ( 1 [ )]) ( Mp − Mpe + Mfp + i.Mfp /Mpe . The bank’s profit is: (i.Mfb + Mfp ). The bank’s rate of profit will depend on its leverage, the degree to which depositors’ savings fund the loan as opposed to the bank’s equity. Profits appropriated by each party to the transaction will collectively exhaust the total profit, Mp 1 − [(Mbe + Mfb )].11 That is, total profit is the final sales price to the buyer minus capital advanced in construction, Mb , contributed by the builder, Mbe and the bank, Mfb . The total profit is divided as detailed above. The fluid mobility of capital, driven by competition, between and within the industrial and financial sectors will tend towards equality of profit rates thought the transformation of direct prices into prices of production: ( ( ) )]) [ ( Mb 11 −[Mbe + (Mfb + i.Mfb )] /Mbe = Mp 1 − Mpe + Mfp + i. Mfp /Mpe ) ) ( ( = i.Mfb + i. Mfp / Mfe b + Mfe p ,

11 The algebra is straightforward, remembering that M 11 = M = (M p pe + Mfp ). b

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where Mfe b is the bank equity behind the loan to the builder and Mfe p is the bank equity behind the loan to the property capitalist. From the viewpoint of the overall capital circulation, industrial, financial and commercial capital instantiate a social division of capital , with each fraction sharing in the production of surplus value extracted in production, once it is realised by final sales. The development of credit to support industrial capitalism, and the emergence of interest-bearing capital, would [in Marx’s eyes] give rise to a division among capitalists between ‘money capitalists’ who lived from interest and ‘functional capitalists’ who did the actual organisation of industrial production. (Toporowski, 2020, p. 11)

Workers also borrow to rent or buy housing. Owner occupiers make regular mortgage repayments accordingly. This is represented in Fig. 4.2 by the division of wages into workers’ savings (Ws ) and consumption, Cw including of housing. Regular (re)payment is made to either the capitalist landlord, petty landlord or mortgage lender. The repayment to mortgage lenders is (r.Mfh + i.Mfh ) which includes interest plus a proportion r of principal (r.Mfh ). The sum of leakages from the circulation of capital is: Mb s + Mp s + Mf s (from each capital circuit) plus total current consumption. Total expansion of capital to the housing sector is: (mb + mp + mf ). The total recommitment to house building is: A + B + (Cbf + Cpf + Cfh ). The net effect on capital circulation in the housing sector will depend on the changing relative magnitudes of these leakages and injections over time, influenced by the myriad of forces acting on individual capitalists, firms and households. Put another way, the realised values, the As, Bs and Cs in Fig. 4.2, are split between recommitment to a new round of construction, exchange and realisation, on the one hand, and the leakage into all manner of speculation in financial securities, real estate, fine art, vintage wines, cars and seventeenth-century French clocks (the list is endless), on the other hand. This dynamic contributes to the actual progress of capital accumulation and crises through real time. The reverse flow (not included in the diagram), from past leakages, would represent wealth moving back into the circulation of capital. In other words, prices of production across the economy, including within the development-construction sector, will tend to gravitate to relative levels that equalises profit rates across the economy. But as noted

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in Chapter 3, the advent of monopoly or oligopoly in various industries will systematically bias observable market prices in favour of capitalists wielding monopoly power. Thus, for example, large oligopolistic builders, developers and building supply firms will earn higher, and smaller ‘pricetaking’ firms lower, profits than would result in a situation of universal ‘pure’ competition. Large commercial and financial firms can also extract monopoly profits at the expense of smaller competitors. Large lenders to house buyers and builders are in a particularly strategic location in the development and construction chain to extract excess profits. But as also noted earlier, nothing is guaranteed under the crisis-prone condition of capitalism. Oligopoly power can be eaten away over time as innovation-driven accumulation continually threatens the competitive position of individual capitalists. External shocks posed by pandemics, war and natural disaster can also recast the landscape of production, exchange and consumption, especially in housing provision, a field where bankruptcy and loan defaults are rife. Time is not a friend of the builder and developer. Too much can go wrong between conception and birth. One thing is clear from Fig. 4.2; financial capital intervenes everywhere in the chain from production to realisation to consumption of housing. So much can and does go wrong. Is it any wonder that housing has been implicated in social and financial crises over the past few decades? It is noteworthy that the potential for reinvestment/disinvestment by financial capital (the three Cs in Fig. 4.2) is ubiquitous across the housing sector and highly sensitive to movements in the macroeconomy (see comments in Chapter 14). The historical emergence of interest-bearing capital from the earlier forms of credit (usury) was the first great case of financial innovation wrought by the rise of capitalism’. It was only the first step on the way to the ‘financialisation’ of capitalism that was to have massive implications for the processes of housing provision in modern times. As the banking and financial system developed from the late nineteenth century on, new financial instruments were created to meet the long term financing requirements of capitalists; ways of financing the purchase of fixed capital were necessary to allow productive (‘functioning’) capitalists to match their financial liabilities to their uncertain cash flows. “Here, share capital [equity securities], which does not have to be repaid and on which dividend payments are, in theory at least, discretionary, plays a key role in stabilizing the finances of capitalist business” (Toporowski, 2020, p. 13). Further innovations saw the markets for long term corporate bonds

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and a host of other securities emerge to ‘solve’ the problem for capitalists in committing capital ahead of its realisation in the sale of the commodities produced and exchanged. The cost to capital in general was greater instability generated from within the financial system itself (see Chapter 14). Given the very high leverage of banks, they are in a strong position to reap large returns on their equity capital. Common observation suggests that is the case. The large commercial and investment banks are highly profitable in today’s global capitalist world. The law of competition works weakly to regulate the extent to which financial institutions can extract surplus value from the productive sector of the economy. Financial capital also extracts profits from the circulation of revenues, that is from the sphere of consumption, notably through the advance of mortgage and personal loans and though credit cards which levy not only high interest rates but also charges that supplement a range of innovative ways that have been introduced to boost the banks’ revenues. Thus, the schematic representation in Fig. 4.2 does not account for many of the ways in which financial capital intervenes in the housing system and elsewhere. There are numerous innovative financial products that have been developed, especially this century based on the production and sale of houses, not all of which have had benevolent outcomes. Commercial banks are but one corner of the modern financial sector. A cavalcade of institutions vies to ‘clip’ the flow of surplus value conjured in the sphere of production. Investment banks, insurance and superannuation funds, brokers and stock jobbers jostle to hoover up dormant wealth lying in vaults, art collections, gold bullion and property. But in each case, the key point is that finance is derivative and facilitative. Its intervention oils the wheels of commerce, intensifies the process of capital accumulation. It does not create value but facilitates value creation. Finance is not, as is often said, parasitical on productive capital. Indeed, it is impossible to imagine the growth of capitalism over the past two centuries without the maturing of an integrated financial system, including the central role of insurance companies in risk sharing among capitalists. In consolidating the savings of many for the purpose of lending to capitalists and consumers, financial institutions like banks and insurance companies raise the limits placed on capital accumulation by the conditions that underlie and limit the average rate of profit, namely low and slowly growing labour productivity, but not without contradictory and problematic consequences. Instability and crises, as Marx was one of the first to notice, are endemic to capitalism.

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Finance offers innovative ways for capital to leak from productive circulation into self-reinforcing speculative loops in the macro economy, as heterodox economists have long stressed.12 Some of these services facilitate the faster circulation of industrial capital in production, and ‘pay for themselves’ through enhance extraction of surplus value, some do not but lie like a concrete blanket on the circulation of capital. The tendency to super profits in finance is due to a number of historically specific factors in the recent political economy of capitalism. The strategic positioning of finance in advanced capitalism has created a ‘too big to fail’ conundrum for both for capitalism as a system and governments attempting to regulate its excesses. This raises large issues that go beyond the scope of this book; however, I do return to this crucial subject in relation to the macro-housing nexus in Chapter 14.13 To return to the restricted view of the housing system, the weight of profit equalisation falls on the effective price received by the builder from the property capitalist, Mb 11 , which will tend to vary until the profit rates converge across the productive, commercial and financial sectors. This is, to repeat, a tendency, ceteris paribus, as economists are wont to say. It assumes repeated cycles of production at the same scale, under unchanging conditions. Given the long process of house production, the impacts of oligopoly power and the dynamic and uneven process of capital accumulation, this tendency exists at the highest level of abstraction. The tendency will be, as noted, forever buffeted and offset by the actual process of capital reproduction and accumulation, in the housing sector and more broadly. Total profit in an economy in a given period is limited by the total quanta of surplus value extracted during that period; its distribution among individual capitalists is determined by the process of formation of prices of production, tempered by the impacts of monopoly power, external shocks and unexpected contingencies. It is the open nature of these processes that makes prediction (of future house prices, for example) epistemologically impossible.

12 The post-Keynesian Hyman Minsky (1986), for example, presented his instability thesis long before the global financial crisis gave it prominence. We return to this issue in Chapter 14. 13 Monopoly profits are also extracted by large financial institutions through the criminal exercise of strategic market power, as when six global banks, including Barclays, UBS, HSBC and Credit Suisse were fined hundreds of million pounds for fixing foreign exchange markets and swap rates over many years, starting in 2012.

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Finance, notably investment banks, also plays an important role in facilitating the concentration and centralisation of capital through the management of mergers and acquisitions. However, this process can cut both ways. Increasing size and scope can raise productivity and profits, weeding out the wilting tress. But M&A activities can also assume a rent-seeking form, resulting in unproductive asset-stripping and ‘coupon clipping’. The rise of corporate raiders and leveraged buyout activity in the 1980s in sectors like retailing, food and the media arguably did little for productivity and stability in the economies of the West rather the reverse. Housing, by and large, did not attract a lot of M&A in the construction and exchange sectors, although in the United States during the 1980s and 1990s, there was a significant move towards financial concentration as smaller savings and loans institutions and banks were snapped up by larger institutions, resulting in an eventual crash-and-burn in the sector. Dysfunctionality was especially concentrated in the field of mortgage finance, as Chapter 14 will highlight. To conclude, financial capital has come to assume a central role in coordinating and directing the accumulating circulation of capital throughout the economy, including the housing system. Initially forming a minor and facilitative part of the functional division of capital, subservient to the industrial and commercial capitalist, financiers now occupy the commanding heights of the capitalist economy on a global scale. There are few parts of the economy, few stages in production, distribution and sale where their reach is not apparent and influential. As capitalists who trade in money, they are the purveyors of ‘fictitious capital’—‘… money that is thrown into circulation as capital without any material basis in commodities or productive activity’ (Harvey, 1982, p. 95). Real capital is the stock of plant, equipment and materials [and labour power!] out of which goods [commodities] will be produced. Fictitious capital is the structure of financial claims on that capital. This is crucial for the process of equalising the rate of profit across industries. It is through the market for fictitious capital that money capital may be advanced to particular industries, and through that market, money may be taken out of particular industries and firms and transferred to others. (Toporowski, 2020, p. 22)

In short, the generalised intervention of finance increases the scale of capitalist operations but also the volatility and instability of housing

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system and the economy as a whole, partially emanating from and reacting back on the housing sector. Nothing more of use can be said here until the issues discussed in Parts II–IV have been properly canvassed.

References Bowles, S. (2012). The new economics of inequality and redistribution. Cambridge University Press. Grabler, D. (2014). Debt: The first 5000 years. Melville Press. Harari, Y. (2011). Sapiens: A brief history of mankind. Vintage. Harvey, D. (1982). The limits to capital. Basil Blackwell. Harvey, D. (2021a, July/August). Rate and mass: Perspectives from the Grundrisse. New Left Review, 130, 73–98. Harvey, D. (2021b, November/December). Reply to Riley. New Left Review, 132, 99–106. Minsky, H. (1986). Stabilizing an unstable economy. McGraw-Hill Professional. Riley, D. (2021, November/December). Capitalist functionalism: A reply to Harvey’s rate and mass. New Left Review, 132, 89–97. Toporowski, J. (2020). Credit and crisis from Marx to Minsky. Edward Elgar.

PART II

Housing as a Land-use

In Part II, I focus attention on the complex role and impacts of urban land in affecting the provision of housing under capitalist social relations of production, exchange and consumption. In the first place, I argue that land in the city becomes another commodity, developed for urban uses to return a profit for the productive, commercial and financial investors engaged in its development. At this level, land dances to the same tune as house construction. But, simultaneously, the dance is a tango; house and land go together like a horse and carriage, or, if you prefer, marriage. Land leads in the sense that it is possible to have land lying idle without a house or other use, but a house always requires a site, a place in threedimensional space.1 Idle sites may command a current option price based on the possible future uses to which it can be put. Since the future is chronically uncertain, this price can change (up or down) gradually along with changing urban population size or rapidly as when new urban infrastructural projects are consummated or mooted. More importantly for the evolution of the city, land and any particular use like housing can turn into a solo performance or divorce as the potential arises for greater returns to the landowner in alternative uses. To understand this, we need a robust theory of urban land rent (Chapter 6). The rhythm and pattern of urban land use emerges through the extraction by landowners of differential and monopoly rents based on 1 ‘Land’ here also includes ‘water’ to the extent that housing is anchored to the sea bed.

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locational advantage and monopoly power of those capitals that own and develop sites. Urban land has to be considered as delivering bundles of ‘useable space’ to capitalists and consumers. It is floor space put to the most profitable use that drives what is produced, where and for whose benefit. The long production period of the land-house package, its potential separability and the scope for the creation of positive externalities, together with pervasive urban population growth, come together to generate conditions for rising rent extraction reinforcing the built-in tendency to house price inflation and ‘all manner of insane speculative and monopolistic practices’. It is important to grasp, analytically, that the higher land rent reflected in rising land prices represents an enhanced deduction from the greater pool of value produced by the matrix of land uses supported, while it appears that rising prices are driven by rising land values; commodity prices and incomes received, including rent, depend at base (that is, over the long term) on the total mass of surplus value extracted in production throughout the economy. Metaphorically speaking, land really dances backwards, even though the landowner may be the active agent in selecting the music. Urban landowners can be active agents in creating conditions that allow them to appropriate enhanced land rent by enhancing the prospect of boosting future surplus value extraction. In the short term, speculative exuberance can create fictitious land values that anticipate future value creation. But where the prospects fail to materialise, fictitious values collapse and the capital advanced is devalued, often precipitating an economic crisis. This point becomes important when we turn (in Part IV) to the role of politics and government policy influencing urban land use and the enhanced returns generated. The other key implication of the separability of housing from its site is that while the use value of the house will inevitably decline (devalue) over time due to depreciation and obsolescence, the price of the land on which it sits will fluctuate according to the current and future expected rental streams it produces. As the expected future rent rises, eventually the devalorised2 house on it will assume a negative implicit price, becoming 2 The concept of ‘devalorisation’ is tied to the notion that the labour power initially socially necessary in producing a commodity has fallen over time (due to technological innovation and the social determination of subsistence) rendering the current commodity literally less valuable, since theoretically it could be replaced at a lower price. In reality,

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a positive and costly hindrance to the most profitable use of the land in question. Chapter 5 makes the point that land has always been at the centre of the human story. The ways land has been used since the agricultural and urban revolutions of the tenth and fourth centuries BCE, respectively, have defined the spatial framework of life on Earth. The social structures and routines of life have developed, often in unexpected, even revolutionary ways, as new patterns of land tenure and use evolved. Different social formations will entail different patterns and drivers of land use and require bespoke analytical understandings. Explaining the way land use and the built environment emerged as it did in third century BCE Byzantium, for example will be a very different exercise to grasping the nature of life in contemporary cities like London; even though at a general functional level there are similarities, like buildings devoted to government administration and religious observance Only over the past few centuries in some countries have the historical and social conditions required the sort of analysis pioneered by Karl Marx and applied in this book to the contemporary housing question in societies like my own. Chapter 7 steps back and sketches aspects of the way that land figured in the emergence of capitalism in Western Europe and its colonial reach. By the middle of the nineteenth century, urban land had been fully integrated into the circulation of capital and revenues in the former economies. The extraction of urban land rent began to overtake the traditional survivals of pre-capitalist landownership, especially in and around the major industrial cities of Europe and the new colonies like Australasia. In the latter cases, the traditional patterns of land tenure and use of Indigenous peoples, along with the role of land in their spiritual life, was largely obliterated, though not without partially successful resistance, especially in New Zealand3 . The consequences of the global expansion of replacement will not necessarily take place since, from the consumer’s viewpoint, the price paid is a fixed cost, water under the bridge. All the consumer is interested in, having once purchased the commodity is its remaining use value relative to how much more use can be sourced through replacement by a new substitute. Capitalists are well aware of the threat that consumer inertia possess; hence, the design and sales efforts devoted to built-in obsolescence and buyer churn. Think of the progressive product cycle of Apple mobile phones. Remember also the hectic efforts of banks to shovel loans out the door during house price booms. 3 New Zealand’s colonising experience is different in this respect from that across ‘the ditch’ in Australia. The native Maori tribes were organised in larger concentrations and

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capitalism for Indigenous peoples has almost everywhere been disastrous in cultural and economic terms. This has been particularly the case in Australia with respect to housing, health, education and criminal justice, where generations of government policies designed to ‘close the gap’ with the non-Indigenous majority have had meagre returns, to put the best gloss on it. Housing delivered on a European model has simply failed to accommodate the cultural traditions of Aboriginal and Torres strait Islanders. Their continuing plight is eloquent testimony to the realities of primitive accumulation and the problematic transplanting of the capitalist mode of production in places like the Antipodes.

their terrain was conducive to guerrilla warfare. The chiefs on the North Island were able to force the British government to negotiate the Treaty of Waitangi in 1840, creating an uneasy but lasting basis of co-existence, that has persisted to the current day when some thirty per cent of the total population identify as Maori. Australian Indigenous representatives are still agitating for a treaty and recognition in the Australian Constitution for an independent ‘voice to Parliament’.

CHAPTER 5

The Territorial Imperative

What greater grief than the loss of one’s native land. (Euripides) Our land is more valuable than your money. It will last forever. It will not even perish by the flames of fire. As long as the sun shines and the waters flow, this land will be here to give life to men and animals. (Chief of the Blackfeet, First Nations American tribe)

The land has always provided the context within which peoples sought to house themselves through the ages. Even nomadic tribes that carried their shelters with them in recurrent migrations in pursuit of food needed to secure rights of access to the rooted places where the house, however humble, could be temporarily located. The history of humanity could be written as a compendium of the numerous ways in which the access to and utilisation of land has been secured. Land was the original form and source of wealth in human society. Other forms of wealth—livestock, grain and minerals—required the prior and continuing control of land or territory. Once, human life settled into the agrarian and eventually urban moulds, the land question had become embedded in cultural traditions and authoritatively enforced laws that regulated access to, use of and the transfer of the rights to access and use. For coastal and river communities, these rules or ‘rights’ extended to the produce of the seas. Although the particular forms of traditional and politically constructed land rights varied enormously over time and space, the land question has never ceased © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_5

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to be central to the human story. Communities were organised to defend their land rights in a life and death struggle between current possessors and would-be attackers. The way that people organised space, behind ramparts and in naturally defended places, told later generations of the desperation with which people sought to secure their rights to the land and of the continual pattern of replacement and displacement that marked the historical geography of the earth. Much of this story has been told in terms of the rise and fall of empires, of the Akkadian Empire, ancient Greece, Alexander the Great, Persia, Rome, the barbarian hordes, the Norsemen, the rise of Islam and Christianity. But, beneath the surface of war and trade, most history took place quietly and at a slow pace, as generation after generation cultivated and tended the land they were bequeathed. Control over land was in most places and times massively unevenly concentrated. In feudal Europe, the ruling caste measured their social standing and political power by the vastness of the lands they held and the human souls who owed fealty to them in return for their traditional rights of land access and use. But it was and is also the case that patterned access to and use of land regulated the lives of nomadic peoples. Traditions of interaction, including warfare, impacted on how the native peoples of North America survived and, until the coming of Europeans, thrived. In Australia, Aboriginal and Torres Strait Island peoples can trace their continuous connection with ‘country’ back more than fifty thousand years. Prior to British colonisation in the Eighteenth century, some seven hundred language groups had resolved a complicated mosaic of the continent that involved stories of creation that regulated their interaction with the land and with each other and the other species around them. Capitalism didn’t invent the land nor its importance. But it did result in huge changes in the form and function that land or control of territory came to play. The ability of commercial or merchant capital to ‘buy cheap and sell dear’, to arbitrage across space, required secure access to trade routes, land and sea, along or over which the produce of human labour could move. In this era, long-distance trade and the requirements of traders and those who financed them became paramount in the trading cities of the Mediterranean and North-Western Europe. The newly emerging hierarchy of towns and nation states came to depend on the taxes, and other imposts that the control of the land and ports ensured. This uncertain interplay between traders, financiers and rulers was not the capitalism that we in the West came to know and live several

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centuries later. The productive application of human labour was not governed by the capital-labour relation, expressed in the wage bargain, but by the disparate and chaotic blend of modes of production co-existing across the globe. Nevertheless, the rise of a subservient merchant class and the invention of new transport technologies, financial instruments and double-entry bookkeeping laid the groundwork for what came later. I will have more to say about this in Chapter 7. But it is worth saying here that the increasing flows of capital through land and the built environment under the logic of industrial capital is and was not the only story of land over the past two centuries. In particular, there were other paths trodden up to and including the present day. Noting some of these paths provides a basis from which to fully appreciate how revolutionary the capitalist answer to the land question is. In the early nineteenth century, as the bones of industrial capitalism were slowly and unevenly emerging from the under the heel of feudal and mercantile society, a number of ideas that came to be called ‘utopian socialism’ sparked an interest in the creation of communities based on cooperation rather than competition. Actual experimental communities were established, often by religiously motivated wealthy entrepreneurs like Robert Owen (New Lanark) and George Cadbury (Bourneville, Birmingham), designed to demonstrate the positive and humane face of commercial society. These were privately owned estates which provided employees with housing, education, health and recreational facilities, within a set of patriarchal rules and norms that complemented rather than replaced the coercive force of the wage bargain. Disobeying the many controls over personal behaviour risked not just losing one’s job but the loss also of house and land and the activities reliant on access. The realities of the need to compete in a rapidly commercialising world sounded the death knell for most of these experiments. Bourneville village was an exception and continued to prosper well into the twentieth century, although much of the early ethos and patterns of social control were diluted as generations moved through the houses and as builders and the local council moved into the area and developed the land around. In France, the writings of Saint-Simon, Proudhon and Fourier stimulated efforts there and elsewhere to ‘humanise’ the chaos and disharmony of commercial and industrialising society. Charles Fourier’s work, in

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particular, was taken up by groups in the newly united United States.1 Utopia Ohio was established in 1844 and struggled through a succession of failures and revivals. Fourier’s communities were called ‘Phalanxes’, communities of around 500–2000 people who lived in special ‘phalansteries’ or grand hotels that combined communal activities like libraries, carpentry, child minding, meeting rooms, a ballroom and much else. Work was the common glue. Everyone contributed their labour, but individual income was related to need and the importance of necessary tasks. Thus, higher incomes might be paid to people doing disagreeable jobs. Human labour was seen as the essence of being human not the means to survival. Fourier favoured high minimum incomes. Poverty not inequality was the great social evil of the societies of his time. Wealth could and would be unevenly distributed but not to the extent of impoverishing anyone. Harmony could only reign when want was banished. Unequal status was to be built into the landscape, including by way of multi-storey housing. The rich would dwell on the top floor, the least wealthy on the ground floor, with those of middling wealth in between. But at least lives were not to be consigned to over-crowded basements. Fourier, among a sea of fantasies, held non-traditional views on issues like the rights and roles of women, even to the extent of suggesting the possibility of polyandry. Utopian movements and communities also sprang up elsewhere in the world. For example, in 1892, British born socialist William Lane and Australian poet Mary Gilmore arrived in Paraguay with a group of followers to found New Australia. This community was intended to be a ‘brotherhood’ of English-speaking white people, teetotal and subscribing to a ‘communist’ ethic of common ownership. Lane soon fell out with others and left the community, which staggered on for a few more years before collapsing completely. Some founded communities elsewhere in the country and there are several thousand descendants still living in Paraguay. Disintegration from within has been the common fate of such communities. Small scale, under-provisioned and under-governed, they quickly fell prey to the petty feuds and ideological disagreements of prominent

1 Other utopian efforts were tried in early nineteenth-century America. For example, housing reform movements based on Robert Owen’s commutarian philosophy appeared in New York and elsewhere (see Dawkins, 2021, chapter 2).

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community members. They often also suffered from the hostile reception of the surrounding societies into which they had been parachuted. This pattern has been repeated many times during the past century in the communes and communities that have sought to cut themselves off from mainstream life. Not all have ended so tragically as Jonestown and Waco. Successful and long lasting cases like the Amish in Pennsylvania, Mormons in Utah and Mennonites in Ohio thrive and have a presence in many other countries. But for most, the internal and external threats overcame the bright promise of a new life of Epicurean harmony. Neither the ideas of nineteenth-century social philosophers nor the fictional accounts of utopias by authors like Edward Bellamy (in Looking Backward) sufficed as capitalism spread its grip wider and wider. A mid-twentieth-century fictional account of a harmonious self-governed community was offered by the behaviourist psychologist B. F. Skinner in his novel Walden Two, a reference back to Henry Thoreau’s mid-nineteenth-century arcadian reflections of a simple life in his book Walden: Or Life in the Woods. Written before the advent of modern neuroscience Skinner tells the tale of a society where people are manipulated through applied behavioural methods, what we might now call ‘nudges’ to create an experimentally tweaked socio-cultural system of utopian intent. What is left unclear is the nature of the authority structure: who nudges the nudgers, how are the nudgers chosen and to whom are they held responsible. It seems implicit that Walden Two is to be a form of epistocracy, rule by the knowledgeable, that is people like Skinner, expert in behaviouralist techniques.2 In all cases, long-lasting and temporary, such communities have been tied to the land they claimed as their communal home. Control of territory, either virgin, ceded by governments or seized from current occupiers was and is a sine quo non for their existence. But control of territory, particularly when contested by others is a project in progress. Security of tenure of the land must be protected through laws relating to property rights and cultural traditions and norms perpetuated within the communities. All the while that experimental exclusivist communities were seeking to create utopia, the remorseless logic of capitalism unwound in Western 2 The economist Paul Samuelson also commented in and off-handed swipe, that such a community would only last up until the monthly cheques from parents ceased to arrive.

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nation states. As the last vestiges of feudal land controls atrophied, land itself became commodified. Against the rear-guard efforts of conservative landed interests in old Europe, the free exchange of land, especially in the new industrial towns and ports, became ubiquitous. Land’s use values of access and rootedness underlay its exchange value, as for other commodities in the capitalist firmament. As such, the law of value regulated its price.3 At this first cut, the price of land reflected the quantity of socially necessary labour required to bring it to a state of readiness for the multiple uses to which it can be directed. Thus, land acquired to build docking facilities for ships requires a different quanta than land developed for housing nearby and the sowing of crops elsewhere. Land developers emerged to manage the conversion of land in its various current states. Increasingly, capital penetrates this field of commodity production, displacing simple commodity producers like individual farmers converting their land from traditional uses. Large developers able to mobilise large capital advances to outcompete smaller operators can benefit from economies of scale in development as well as afford to build up land banks from which to stage the release of developed lots to builders. A degree of concentration and centralisation of capital occurs as larger developers ‘eat’ smaller fry and vertical integration from the stage of raw land acquisition to finished houses comes to characterise the sector. The productive, commercial and financial capital fractions interact in ways described in the previous chapter to deliver a composite commodity—the land-house package—to the resident. It is important to note that I am here referring to the new land-house package. The price of existing (second hand) packages will differ according to the processes of depreciation, obsolescence and revaluation noted earlier, and to factors related specifically to the pricing of the land component itself. We turn to this crucial latter point in the next chapter.

Reference Dawkins, C. (2021). Just housing: The moral foundations of American housing policy. MIT Press.

3 Note that I again use the term ‘regulate’ or ‘determination in the first instance’.

CHAPTER 6

A Theory of Urban Land Rent

We desperately need a “scientific analysis of ground rent”. (David Harvey, The Urban Experience)

I argued in the previous chapter that land prices under capitalism were in the first instance determined like all commodities by their value. However, even the most casual observation in cities like London and Sydney notices land prices varying widely, over both time and space. This includes the case of both undeveloped and newly developed land. A vacant site located next to facilities like shops, a railway station, employment centre, a hospital, and so on, will sell for a much higher price to the developer-house builder than an otherwise identical plot in areas far removed from such facilities. This differential advantage will likely grow over time as complementary land uses cluster in established patterns, especially around major transport routes. Land price differentials will be ‘passed on’ in the prices of the respective land-house packages. However, the social process by which the land price influences the price or ‘rent’ that the resident pays in the final land-house package is quite separate from the value creating process in producing the package. The process, in fact, forms yet another moment in the overall circulation of capital and revenues (wealth). This dynamic is to be found in Marx’s theory of ground rent, when applied to the urban context. Marx did not get to his rent theory until what became the posthumous third volume of Capital, put together by Engels from Marx’s notes originally written in the early 1860s, that is before the first volume © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_6

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was published. Marx, like his classical predecessors, discussed rent in the context of agricultural land. He took over and further developed the theory of ‘differential rent’ from David Ricardo and Thomas Malthus. But he then added two other categories, ‘monopoly rent’ and ‘absolute rent’. Together, these categories provided the means by which part of the surplus value extracted by the capitalist farmer is appropriated by the landowner. This income flow provides the social basis for the class of landowners who along with industrial, commercial and financial capitalists grow rich on the backs of productive workers. There is a difference, however. Whereas the banker and merchant in some sense ‘earnt their whack’ by speeding up the turnover time of productive capital, landowners were wholly parasitical, a class of idlers sitting back and ‘clipping the coupon’ as capital circulated past their reclining lounge chairs. Marx saw the landowning class that still dominated the politics of his day as holding the feudal vestiges of monopoly power. This ushered in yet another social class distinction under capitalism, that between rentier and entrepreneurial capitalists, between the latter who received income from profit of enterprise and the former who lived on the rent of land. Today, a new fraction draws income from passive ownership of company shares and other securities (as well as real estate) that make up the wealth of the top one per cent and a declining and minor component of the wealth of most of the remaining ninety-nine per cent.1 Before discussing how Marx’s rent theory can be developed in an urban context, where important use value considerations require addressing, I will briefly describe his underlying theory of agricultural rent.2 In an agricultural sector marked by capitalist farmers employing farm hands to produce the annual produce, part of the profit realised on sale of the crop will be paid as rent to the landowner. Where the farmer owns the land, that appropriation is ‘internalised’; that is, the farmer’s income

1 Pension and mutual funds have also proliferated to hoover up the savings of middle income earners, though for most people their primary income depends on the continuing sale of their labour power. 2 There was an extensive debate on rent theory in the 1970s and 1980s. See for example, Ball (1977, 1985), Fine (1979, 1986), Haila (1988, 1989), Harvey (1982, 1989), and Evans (1992). My initial contributions, focused on housing, were Berry (1977, 1990). For a recent contribution see, Munro (2022).

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is composed of both profit and rent.3 According to Marx, following Ricardo, the rental payment comes in two forms: differential rent I and differential rent II. Since the price of ‘corn’ must return an average profit to capital advanced on the most marginally fertile soil, production focused on intramarginal fertile land will return a greater than average profit to the farmer; that is, price will be stablished by productivity at the margin, not by the average quantum This assumes that the most fertile land will be taken into cultivation first and then extended progressively to land of ever-declining fertility ending when all land capable of producing at all has been cultivated. At this ‘extensive margin’, rent is zero. This remorseless decline can partly be offset by the farmer applying more capital by use of fertilisers, scientific framing methods, machinery, etc., but here too, diminishing marginal returns (a general assumption held by economists to this day) eventually exhaust outputs reaching a zero ‘intensive margin’. The intramarginal returns to the landowner from differential rent I (DRI) in relation to the extensive margin and differential rent II (DRII) in relation to the intensive margin are both appropriated by the landowner, leaving the capitalist farmer with average profit on his or her capital advanced. The current price of agricultural land thus comes to reflect the capitalisation of the future expected streams of DRI and DRII. Marx, by and large, accepted this Ricardian model but developed it and added further refinements. DRI and DRII stem from naturally given and socially created variations in productivity due to differences in fertility and location. Marx recognised the importance of locational advantage, even in farming, as when a farm is located on the banks of a navigable river or canal. DRI and DRII, due to extensive and intensive accumulation, are mutually interrelated and limiting (Fine, 1979; Harvey, 1982). The social fact that landed property intercepts surplus profits as a condition for productive capital’s access to land, poses as a class barrier to the accumulation of capital in agriculture. The barrier is partial not permanent or complete. “Landed property has the effect of appropriating surplus profits in the form of DRII, holding down the increase in in the size of normal capital, but increasing rents are themselves subject to erosion by the increasing size of normal capital” (Fine, 1982, p. 71). As potential 3 Think of it this way. If the farmer in this situation lets the land to another farmer, he or she would forego the profit component but still reap the rental exaction, rather like the owner occupier who lives under a bridge and lets the house to a tenant.

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profits from increasing the normal size of investment grew, the average size of the farm increased, and the purchase of land by large farmers intensified. The barrier to intensive investment thus declined; the landowning farming company didn’t care where its financial return came from, rent or profit, it’s all as one to them. However, with the survival of a penumbra of relatively small unproductive farms, added to declining marginal productivity on large farms, the average level of productivity tends, according to Marx, to lag behind the dynamic productivity increase in other industrial sectors. This tends to result in the redistribution of surplus value from the industrial to the agricultural sectors, through the formation of prices of production noted in Chapter 3, creating a brake on the general accumulation process. Moreover, the combination of land ownership with farming increases the pressure on the productivity brake by providing owners of lands of superior fertility and location with a buffer of surplus profits that takes away, in part, the ruthless competitive force of the need to accumulate or perish (Murray, 1978). Marx draws from these considerations his category of Absolute Rent , AR. AR arises, he argued, because lower productivity (a lower than average ‘organic composition of capital’) in agriculture requires capital to flow from more profitable industries into farming in order to equalise the general profit rate across the economy: but because landowners, happily already earning surplus returns, can block the inflow, they will require a rental payment, a toll or sweetener if you will, to oblige, even on the most marginal of lands.4 Marx’s analysis of AR has proved the most contentious part of his rent theory and is generally dismissed as misplaced (but see Fine, 1979). I tend to agree, in the case of agriculture. But I will later argue (in Chapter 13) that the idea of a politically created barrier to intensive land investment makes more sense in urban contexts, though there the social process of rental appropriation is better grasped by applying a variant of Marx’s category of ‘monopoly rent’. 4 AR stems from a disruption to the process of transforming direct (value) prices into prices of production, associated with differences in the ‘organic composition of capital in each. “In this sense, AR departs from DR. Both forms of rent concern the obstacle to capital investment posed by landed property in the form of the appropriation of rent. However, DR and AR are located at different levels of analysis, and therefore, their source is correspondingly different. DR derives from productivity differences within agriculture, while AR derives from the productivity differences between agriculture and other sectors of the economy” (Fine & Saad-Fihlo, 2004, p. 161).

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Monopoly rent was introduced in Capital and Theories of Surplus Value, without much elaboration. The first and basic form related to what Marx saw as a relatively minor situation in agriculture, where a particular commodity was in chronic excess demand due to the limited supply of land suitable for its cultivation. The example he used was wine of a particular quality and regard. The price premium of the wine is reflected back in the price of the land on which it grew and matured. Further price variation of both the wine and the land arose from the impact of natural climatic variation and the quality of the labour power committed to the harvesting manufacturing and storage functions. But the main conclusion was that what we can call monopoly rent one (MRI) has a relatively marginal impact, falling mainly on the capitalist wine industry. However, Harvey (1982) suggests that, a second form of monopoly rent can be gleaned from Marx’s fragmentary comments. Monopoly rent two (MRII), in this reading, arises from the capacity of landowners as a group to control the use of land for particular purposes. “In this instance, which depends on the scarcity of land and upon the collective class power and position of the landed interest, the rent charge creates the monopoly price. This form of monopoly rent can be important in all sectors and [for example] affect the cost of food grains and as well as the cost [price] of working-class housing” (Harvey, 1982, p. 350). Harvey’s last sentence implies that rent theory can be applied to urban as well as agricultural contexts, since housing for the working class obviously extends across capitalist societies. The remainder of this chapter teases out this thought in some detail. It will be shown that urban rent theory is a powerful analytical tool for understanding (explaining) many of the key features of housing provision under modern urbanised capitalism. It is first necessary to clear away some misunderstanding. Ball (1985) has argued that Marx’s rent theory is inapplicable to the urban for two reasons. First, he asserts that rent only exists as an actual payment between parties, landlord-owner and tenant-user, denying by assertion, the analytical status of the concept. “Where no such payment takes place, rent does not exist ” (Ball, 1985, p. 512; emphasis in original). In terms of the method used in this book, as described in the Introduction, Ball conflates, indeed denies the epistemological significance of the different levels of the real, the actual and the empirical. Concentrating his view on the observance of an overt monetary transaction, he opts for an empiricist

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over a causal analysis. As Haila (1989) comments, Ball adopts an ideographic over a nomothetic approach. I would go further and argue that he ignores the casual mechanisms that generate causal tendencies that can be captured in general law-like generalisations. Ball’s second argument against urban rent theory carries more substance and opens up fruitful avenues of analysis. He directs attention to what following Harvey we can call the particular use value characteristics of the commodities in each sector; “(p)erhaps the most important distinction between the urban and agricultural contexts is the relationship of the individual plot to the social determination of prices and rent” (Ball, 1985, p. 514). Agricultural production, he maintains, produces a homogenous product, for example, a number of bushels of wheat. Individual plots of land can thus be conceived as independent points of production. Differential agricultural rent then arises through the determination of a common market value from a situation characterised by different costs and prices of production on the individual land plots. The usefulness of urban land, on the other hand, depends on the web of evolving overlapping ‘externality fields’ across the city (Harvey, 1972). “Each urban site, in other words, cannot be treated as an independent point of production (or use value) as in the agricultural case because its usefulness is determined by its linkages to other urban uses, the extent of infrastructural provision, environmental quality, etc.” (Ball, 1985, pp. 514–515). Consequently, Ball’s asserts, the output of urban land use—buildings, including houses—is priced differentially at different locations independently of the costs of building at those locations. Whereas an agricultural product has different costs and a uniform price across locations, urban products (buildings) have uniform costs and different prices across the city. “Thus, the relationship between rent and market price cannot be assumed to be the same in the urban and agricultural contexts” (Ball, 1985, p. 514). Ball’s analysis of the urban–rural divide can be criticised on two grounds: first, it fails to establish the non-applicability of agricultural to urban rent analysis; second, it does not succeed in establishing the qualitative differences between these two sectors, when capitalist relations of production predominate in both. Having established, to his satisfaction, the differences between agricultural and urban production, Ball nowhere explains why these supposed differences invalidate the transposition of

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agricultural rent categories to the urban context. Simply pointing out the differences does not, by itself, negate the applicability of rent theory.5 It is, however, Ball’s second criticism that is of more interest. Although Ball’s claimed differences turns out to be unimportant or simply wrong, a closer consideration of the urban specificity allows us to develop the land rent concept in ways that better capture the urban context. The idea that agricultural products on specific lands are homogenous is, strictly speaking, untrue. Many different types of food and fibre can be produced, some like wool and mutton, jointly. Land grazed by sheep can, with adequate investments in irrigation, be turned to growing grain, cotton or even rice. More significantly, as already noted, Marx was clear that the location of agricultural land played a role in rental formation. Even more to the point, the assertion that agricultural as opposed to urban production is characterised by spatial independence is surely far-fetched. Externalities (positive and negative) abound in the agricultural sector. Farming costs will be influenced by the prevailing patterns of infrastructural investment and the collective effects of land use in the immediate region and, when it comes to transport, well beyond. Think of the deleterious effects on the production of GMO-free crops by contiguous farms applying pesticides. The economist who first popularised the notion of external effects, Arthur Pigou, noted the positive benefits conferred on orchardists located next door to bee-keeping farms. In Australia, dryland salination has assumed crisis proportions in some highly fertile regions caused by deforestation hundreds of miles away, as well as poor irrigation practices, nearby and region-wide. The patterns of spatial externality overlap and are more complex in cities but the contrast with rural agricultural regions is a matter of degree not kind. Finally, Ball mis-specifies the product or use value unit of urban land as the building—i.e., office, factory or house—by comparison to the homogenous agricultural product, ‘corn’. In fact, I would argue, that the correct output product of all developed land, agricultural and urban, is ‘usable space’, customarily measured by site and floor area. Urban buildings can be designed and constructed to support many uses in production,

5 “What is needed for the non-applicability argument to be valid is to show how the urban context distorts the essence of agricultural rent theory, or in what way agricultural rent theory is dependent on its specific context. Ball does not, however, give any arguments to his effect. He stops prematurely at this point, where he has shown the differences of context” (Haila, 1988, p. 1527).

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exchange and consumption, driven by the flow of capitals through the built environment. Moreover, usable space in built form can be adapted, converted and redeveloped through time. The use value of buildings can be transformed through the ‘revalorisation’ process unleashed by new capital flows.6 Land functions as a condition of production of usable space. The prospects for and likelihood of revalorisation in any instance will turn largely on the potential for capturing future rent created by positive externalities. Let us take the case of an urban district that had long experienced decline and dereliction. Suppose a large company progressively acquires several streets of dilapidated houses and the land they sit on at low current prices. The prospect of new jobs in the area can act as a stimulus to attract higher income households into the area, buying up and renovating the existing stock. Developers and builders will also arrive to amalgamate sites and build new houses. Eventually, these external effects will lead to other contiguous areas, as other large employers move in to gain access to the pool of labour power of an increasing and higher skilled residential population. This rolling, self-reinforcing loop will be facilitated by lending institutions that might previously have ‘red-lined’ the original area. ‘Gentrification’ is a widespread process recognisable in many cities over the past few decades (Think of this process crossing the bridge from Manhattan and moving through Brooklyn and Queens over recent decades or the transformation of London’s East End). So too will progressive neighbourhood decline occur as negative externalities concentrate and confine disadvantaged and marginalised urban populations. In these latter situations, race and ethnicity join social class differences in determining urban outcomes. The changing patterns of market prices of the land-house packages providing usable space in the city, over time and across space, can be grasped as the narrative of the creation and appropriation of differential rent, DRI in this case, capitalised into prices of the land-house packages. But the complex nature of the land-house package in the city means that there also exist multiple opportunities for developers to ‘uncouple’ land from its current built form.

6 And, as noted in earlier chapters, by DIY enthusiasm.

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Because in London, a building best hurried past is a building without a reason to be, and such a building might find its days numbered; might find itself viewed not as bricks and mortar but as an opportunity; as an empty pillar of air, waiting for steel and glass to give it shape. The history embedded in its bones counts for nothing. To those who buy and sell and own and build, the past is simply a shortcut to what’s yet to come, and what’s yet to come offers magpie riches to those prepared to embrace the changes demanded. Or so the promises run. (Herron, 2021, pp. 33–34)

The current or prospective house becomes a barrier to the higher extraction of DRI. In extreme speculative property booms, the prospects of rental capture can actually result in the price of vacant land exceeding the price of nearby land with existing buildings, to the extent of the cost of demolishing the latter. For developer capital tirelessly on the search for self-expansion, the prospect of buying a site and demolishing the house to put a shopping centre or factory or luxury condos on it will be irresistible if the price they can sell the end product for more than returns the costs of doing so and (at least) the average profit reaped. Whether or not this happy state of affairs beckons will depend (assuming for the moment, no regulatory or other state interventions) on judgments of future rent returns. Residential gentrification occurs, in part, because of the increased accessibility of current houses and vacant sites to the range of facilities nearby7 (The other main cause of gentrification will be discussed below). Industrial redevelopment, once it reaches a certain scale, in an area tends to limit or reverse residential gentrification due to the net negative externalities—noise, trucks and air pollution—caused. I am arguing that the deliberate transformation of urban land uses by capitalist developers and builders can be powerfully understood by applying the analytical concept of DRI. End users of the spaces created compete with each other to buy and reconfigure the built form in order to consume the locationally specific use values provided. The mosaic of land or site prices emerging and evolving reflects both the processes of valorisation (of new sites) and revalorisation (of existing sites) and the differential rental flows created. DRII can also be appropriated intensively through the process of redevelopment and densification. This derives from the

7 Neil Smith (1979) with his concept of ‘the rent gap’ was the first to the point to potential differences in rent as a force leading to gentrification and neighbourhood transformation.

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point made in Chapter 2. Housing can be supplied in three-dimensions. This multiplies output by increasing the total residential floor area of usable space per individual site, akin to applying more and more fertilisers to the one plot of agricultural land. A particular site, newly developed or under current use, can be (re)developed as multi-storey flats or apartments. Clever design can internally configure a range of saleable products, differentiated by floor area, number of bedrooms and bathrooms, quality of fittings, view and access to onsite car parking. DRII can also drive land-built form prices in the city, through the process of ‘internalising externalities’ on site. DRII comes from including within the apartment building or residential enclave a range of complementary land uses, like gymnasiums, swimming pools, meeting rooms, professional offices and so on. Another example of DRII extraction comes in the form of ‘the gated community’, an integrated ‘lifestyle’ development of high-end, low density land-house packages that bundle a mix of use values for their affluent residents. The focus, emphasised in the considerable sales promotion campaign, is on promising qualities of life like security, status, exclusivity, environment and recreational facilities. Private golf courses figure prominently. Most of these qualities are difficult to quantify, and so easy to exaggerate. To borrow from an iconic Australian film, The Castle—it is the vibe. The idea of gates and high walls guarded by security devices, human and non-human, conjures up the walls of medieval cities. To some extent cities grew to prominence precisely as a means of collective security. On that score, the gated community, located in affluent suburbs or attractive natural environments, is a low density version of the inner city high rise tower, equally well guarded by similar human and electronic security devices. Both Manhattan towers and gated communities also share the benefits for their residents of social exclusivity, the reassuring thought that they will never have to meet members of the lower orders within their protected domestic cocoon. I am reminded of one of Australia’s earliest gated communities on South East Queensland’s Gold Cast, Sanctuary Cove. One of its early advertising roadside hoardings unashamedly proclaimed: “Most of the world is full of cockroaches, some of them human”. The retirement village is another variant that caters to a broader (less exclusive) market; whole suburbs can become targets for developers looking to ride the demographic wave. Parts of Florida in the United States provides a clear example.

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The obverse or mirror image of the gated community is the slum or ghetto. Here socioeconomic forces quarantine low income and low status residents tightly in particular parts of the city that have evolved as dumping grounds for the marginalised and newly arrived urban immigrants. The land-house packages there are consequently priced expressing minimal rental value in current and prospective land usage. But processes of renewal and renovation can, as we have seen, change matters radically over time, even in previously shunned areas. From one point of view, it appears that rental appropriation is driving market prices, rather than the deep creation of values by productive capitalists. But this is illusory. Certainly, the possibility or hope for enhanced rents galvanises developer-builder loins. But whether or not the rental flows materialise will depend, in the end and over time on whether sufficient profit has been generated economy-wide through surplus value production. Short-term property cycles of boom and bust limit the enthusiasms of capitalists and consumers alike. Eventually! However, as Keynes famously remarked, ‘in the long run we are all dead’. Life happens in the here and now. The potential for land price inflation can unlock existing stores of wealth, unevenly distributed across society. Wealth held in liquid financial securities, equities, bonds, bank deposits, can be readily turned into purchasing power in the property market, further destabilising housing prices upwards.8 FOMO (fear of missing out) is a potent source of house price inflation during the heady times. Likewise, falling property prices can spark a self-fuelling spiral down as house owners rush to sell and move their wealth to other havens. These cyclical movements have much to do with what is happening at the macro and international levels (Chapter 14), as well as the mass psychology of capitalists and residents—‘animal spirits’, in Keynes’ words. Empirically, observable land-housing price volatility thus reflects both the value created in construction (and redevelopment) and the speculative or ‘fictional’ values emerging from the complex temporal and spatial patterns of capital and revenues circulating through the urban economy. Much of the gyration in urban land prices can be explained in terms of DRI and DRII. But there is still a role for monopoly rent, where the underlying conditions permit. In parallel to its expression in rural life, MRI occurs in the city when excess demand exists semi-permanently for

8 Non-liquid wealth can also collateralise loans to underpin property speculation.

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housing (or other urban land uses) with particular use value characteristics. For example, a site with a stunning view of nature or access to a limited (‘nongeneralizable’) resource like water or exclusive schools can command a market premium, just as in Marx’s wine example.9 During the latter decades of the twentieth century, whole areas of inner Sydney and Melbourne, for more than a century dismissed by the affluent, as ‘slums’, became desirable residential addresses. In part, this had to do with realising DRI as renovation upgraded the houses and attracted the buzz of diverse commercial life. But in part, it also had to do with the remnant nature of the nineteenth-century housing stock. The Victorian terrace, suitably renovated and extended, made a comeback, outcompeting the attractions of post-World War II flats, that had progressively replaced many, especially in Sydney. MRII, it will be remembered arises where landowners individually or collectively manage to control the supply of sites for production. Developers who build up a land bank, say on the suburban fringe, can stage the development and release of new sites for housing to builders, creating an artificial shortage that raises new land-house package prices. A study by found the prevalence of supply-constrained land banking on masterplanned estates on the fringes of Australis’ major cities. Over 2011–2019 period large developers released for sale only twenty-five per cent of rural land rezoned for residential use by the state government, resulting in a pronounced negative correlation between the number of sales and average land prices. Newly developed land prices increased in real terms at twice the rate of real wages over the period, negating the state governments’ intention of making housing more affordable in outer suburban areas of the metropolitan regions. The report concludes: If supply can be curtailed in this way, we suggest it shows that property markets are inherently monopolistic, rather than competitive, and unlike markets for goods and services. Property is an asset: land banks are patiently managed and development projects are timed to maximise overall returns.

But MRII is inherently more tenuous than MRI, since the basis of the monopoly in the first case depends either on collusive behaviour of most 9 A similar phenomenon was analysed by Hirsch (1976) using the concept of ‘positional goods’.

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developers or very deep pockets of large individual developers, willing to pay the holding costs, explicit and implied, of keeping land dormant or in current low value usage. The longer land is held back, the more scope for competing landowners to capture the market by developing their sites. Would-be developers face a form of ‘the prisoners’ dilemma’ confronting all cartel members: It is better for all to maintain the barrier to supply, but it benefits the cheat, if all others stay their hands; the problem is that they all have the same individual incentive to be the first to break ranks, and they all know that. This is the volatile dynamic driving oil prices. The pressures for the collective attempt at monopoly control (of land in this case) to break down are immense in large urban centres.10 It is also the case, as in agriculture, that differential and monopoly rent tend to limit each other. Perhaps only MRI, based in the irreversible cradle of history, is impervious to the march of new construction and redevelopment. And even here, capitalist builders and spruikers will make strenuous efforts to provide saleable imitations of the genuine thing; for example, ‘modern’ Victorian terraces built on reclaimed inner city sites. As Harvey has argued, monopoly rent exists in the city but plays a relatively minor role by comparison to the force of differential rent. The latter category is vital to understand the spatial structure of cities, both with respect to the creation of residential submarkets and the hierarchy of land uses. When, for example, rental extraction can be increased by changing from residential to commercial uses, housing and its exiting residents will tend to be displaced. The lower the current price of land, the more cheaply and expeditiously the process of displacement occurs; this is one of the ways that socioeconomic inequality is inscribed in the urban built form. What this discussion makes clear is that urban landowners have a strong incentive to seek to create conditions most conducive to extracting maximum urban land rents.

10 But let’s imagine a situation in which all forms of urban rent are extracted: a penthouse in a luxury skyscraper in the CBD of a major city like Sydney with 180 degree views of Sydney Harbour and Opera House, which also has on many floors below served by different lifts, a casino, cinema complex, gymnasium, swimming pool, high-end offices and top quality private medical facilities, linked to similar buildings on a peninsula with limited access to the public and an efficient security team to keep things that way. To complete the picture, the developer has a one hundred year peppercorn lease on all sites within five hundred metres. Viewers of the property porn television show, Million-dollar Listing New York, can conjure their own images. Enough said.

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This chapter has attempted to introduce and integrate the role of land in understanding how cities evolve as socio-spatial structures under capitalism. Although the patterns sometimes build on and are similar to the form of cities in earlier pre-capitalist eras, the political economic forces now at work differ and must be grasped in a systematic and coherent way. The theory of land rent applied to the urban context is vital to this project. It is applied at a lower level of analysis (closer to the realm of the empirical) to modify the earlier, foundational analysis of land and built structures as commodities through which capital, productive and non-productive, circulates. Dealing with the land question is thus vital, an imperative generally ignored by most orthodox economic approaches which treat land as simply another independent commodity like pins and widgets. In many cases, land doesn’t even figure at all, as analysis focuses on the twin factors of production, labour and capital.11 Before leaving this subject, it is worth underscoring that I regard the categories of urban land rent laid out above as pertaining to the circulation of both capital and revenues (current income and released wealth).12 David Harvey disagrees. His rationale seems to be that the circulation of income and wealth into the urban housing market opens that market to “…all manner of insane speculative and monopolistic practices within the field of rental appropriation or the transmission of speculative impulses from within the credit system (Harvey 1989, p. 101).” Exactly! And precisely the reason that urban rent theory offers such a powerful way into understanding the dynamic, uncertain, dysfunctional and, to a degree, deeply chaotic development of the capitalist city. The ability to explain house price inflation in ‘world cities’ like London, New York and Sydney absolutely requires an inclusive conceptualisation and application of rent theory. House and land prices in those cities are driven by capital and wealth released and flung into the built environment on a global scale; they are not called global cities purely for their control and command functions. Urban land rent is subtracted from the entire pool of surplus value extracted in the urban economy from land directed to existing uses and from the speculative activities of landowners focused on possible 11 See Ryan-Collins et al. (2017) for a detailed critique of this blind spot. 12 Consult Fig. 4.2 again and note the leakages of revenues into consumption and

savings (wealth). Dissaving (drawing down wealth) can throw revenue back into circulating as both new consumption and new capital investment and for the purchase of existing land and housing.

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future uses. Speculation about an uncertain future lies at the heart of how cities are structured and redeveloped over time.13 By integrating the circulation of revenues (income flows and wealth changes), the explanation is certainly made more difficult—yet that merely reflects or captures the complex social reality in which as Harvey himself notes the circulation of revenues “is…always related back to the circulation of capital that necessarily lies at its basis” (Harvey, 1989, pp. 102–103). I noted in my Introduction Harvey’s (1982) methodological Marxist approach, which I proposed to follow, in which concepts are progressively developed, rather than assuming a fixed meaning, but developed, refined and reoriented as more and more layers of reality are overlaid. The challenge is to do so in a systematic, coherent manner. The theory of rent is an important key to understanding the importance of the land question. But it does not exhaust the significance of the subject for a deep understanding of how we got to where we are. The next chapter outlines (only) aspects of the historic role and trajectory of land in the development of the capitalism we know today. Since I stray beyond issues strictly specific to housing, this acts as a brief buffer before refocusing on the place of the house in the social structure of cities (Part III). It also hints at the importance of the state (Part IV). The full significance of the role of urban land rent cannot be grasped until the state is brought back in.

References Ball, M. (1977). Differential rent and the role of landed property. International Journal of Urban and Regional Research, 1(1–3), 380–403. Ball, M. (1985). The urban rent question. Environment and Planning A, 17 , 503–525. Berry, M. (1977). Marxist approaches to the housing question (Research memo 69). Centre for Urban and Regional studies, University of Birmingham. Berry, M. (1990, July). Economic restructuring and the transformation of urban space: The view from Australia. 12th World Congress of the International Sociological Association, Madrid, Spain.

13 As Harvey’s quote suggests, the intervention of financial capital opens up manifold opportunities for ‘all manner of insane speculative and monopolistic practices’ in urban land markets. (See my comments in Chapter 14). The point is also made in the title of one of Harvey’s (2018) books: Marx’s Capital and the madness of Economic reasoning.

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Evans, A. (1992). On differential rent and landed property. International Journal of Urban and Regional Research, 6(1), 81–96. Fine, B. (1979). On Marx’s theory of agricultural rent. Economy and Society, 8, 241–278. Fine, B. (1982). Theories of the capitalist economy. Edward Arnold. Fine, B. (1986). On Marx’s theory of agricultural rent. In B. Fine (Ed.), The value dimension: Marx versus Ricardo and Straffa. Routledge. Fine, B., & Saad-Fihlo, A. (2004). Marx’s capital. Pluto Press. Fitzgerald, K. (2022). Staged releases: Peering behind the land supply curtain. Prosper Australia. https://www.prosper.org.au/wp-content/uploads/2022/ 07/Staged-Releases-Prosper-Australia-web22.pdf. Accessed 26 July 2022. Haila, A. (1988). Land as a financial asset: The theory of urban rent as a mirror of economic transformation. Antipode, 20(2), 79–100. Haila, A. (1989). Misguided rhetoric on rent: A comment on Ball and Clark. Environment and Planning A, 21, 1525–1532. Harvey, D. (1972). Social processes, spatial form and the redistribution of real income in the urban system. In M. Stewart (Ed.), The city: Problems of planning. Harmondsworth, Middlesex: Penguin Books. Harvey, D. (1982). The limits to capital. Basil Blackwell. Harvey, D. (1989). The urban experience. Basil Blackwell. Herron, M. (2021). Slough house. London: John Murray (Publishers). Hirsch, F. (1976). The social limits to growth. Harvard University Press. Munro, D. (2022). Marx’s theory of land, rent and cities. Edinburgh University Press. Murray, R. (1978). Value and theory of rent: Part two. Capital and Class, 2(1), 11–33. Ryan-Collins, J., Macfarlane, L., & Lloyd, T. (2017). Rethinking the economics of land and housing. Zed Books. Smith, N. (1979). Gentrification and the rent gap. Annals of the Association of American Geographers, 77 (3), 472–565.

CHAPTER 7

Landed Property: An Historical Excursion

The whole movement, therefore, seems to turn in a vicious circle, out of which we can only get by supposing a primitive accumulation (previous accumulation of Adam Smith) preceding capitalistic accumulation; an accumulation not the result of the capitalistic mode of production, but its starting point. (Karl Marx, Capital )

The preceding chapter made the argument that the land question must be centrally addressed in order to understand how capital flows through and moulds the built environment of our cities today. But land has always and everywhere been critical to the human story. Land under capitalism is but one chapter. For centuries before nascent capitalism took root in Western Europe, pre-existing relations between people and the land that sustained them threw up barriers to capital accumulation; the social and political soil was infertile to this revolutionary mode of production. It took a long period of transformation of property relations, often involving violent means, for these barriers to fall. Although land reform was just one of a number of social preconditions for capitalist accumulation to gain a foothold, it was central to the process. Where the land remained locked in traditional channels, pre- and non-capitalist modes of production survived, and in some places on earth still cling on. Marx addressed this historical trajectory in Europe in the last section of Capital, Volume I on ‘primitive accumulation’. He argues that the defining condition for real-existing capitalism was the creation of a large class of free labourers. “Free labourers, in the double sense that neither © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_7

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they themselves form part and parcel of the means of production, as in the case of slaves, bondsmen, &c., nor do the means of production belong to them, as in the case of peasant-proprietors; they are, therefore, free from, unencumbered by, any means of production of their own. With this polarization of the market for commodities, the fundamental conditions of capitalist production are given” (Marx, 1976,1 p. 874). From this, Marx deduces that the social processes that broke down the barriers were those that set the worker ‘free’ in that double sense. Consequently: “(t)he economic structure of capitalist society has grown out of the economic structure of feudal society. The dissolution of the latter set free the elements of the former” (Marx, 1976, p. 874). The ‘unencumbered’ worker swapped one form of servitude for another, one master for another. The actual process was lengthy, messy and varied according to local conditions and contingencies. But once begun, the logic proved remorseless. Eventually, political structures and behavioural or cultural institutions came into line. But not without pronounced and often tenacious resistance by both master and worker. “And the history of this, their expropriation, is written in the annals of mankind in letters of blood and fire” (Marx, 1976, p. 875). In the history of primitive accumulation, all revolutions are epoch-making that act as levers for the capital class in course of formation; but, above all, those moments when great masses of men are suddenly and forcibly torn from their means of subsistence and hurled as free and “unattached” proletarians on the labour-market. The expropriation of the agricultural producer, of the peasant, from the soil, is the basis of the whole process. The history of this expropriation, in different countries, assumes different aspects, and runs through its various phases in different orders of succession, and at different periods. In England alone, which we take as our example, has it the classic form. (Marx, 1976, p. 876)

Marx’s case study, England, provides a master-class in how both a class of capitalists came to displace a class of feudal landowners—how ‘the knights of industry’ supplanted ‘the knights of the sword’—and the class of serfs were flung onto the market for their labour power.2 Wood (2017) 1 All quotes from Capital are from the Penguin Classics edition. 2 For an alternative historical account of the emergence of capitalism that focuses on

the role of merchant capital and the role of long-distance trade and imperial conquest, see Kocka (2016).

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focuses post ‘the Glorious Revolution’ of the late seventeenth century on the role of rural squires and large aristocratic landholders who used their local social status and economic power, along with domination of the Parliament in Westminster to progressively remove the feudal remnants of tenant farmer rights to lease land and work common land. Whereas the clearances in Scotland were often accomplished by violent means, displacement in England tended to be managed in a more ‘civilised’ fashion. Enclosing the commons by Parliamentary statute and legally voiding implicit leases, were complemented by more muscular methods, like demolishing the tenant farmers’ hovels in which they lived. Wood argued that these moves were driven by the efforts of the landowning ruling class to augment their incomes and wealth in support of the status and power of its members. Marx had, in his analysis of primitive accumulation, pointed to the role of the dissolution of the monasteries in the sixteenth century in concentrating wealth and power in the rising Protestant establishment, solidified by the outcome of the English civil war a century or so later. Marx also noted as a facilitative factor, the rise of independent towns and cities and the declining control over production of the medieval guilds. The increasingly mercenary culture of gain though commerce encouraged rural landowners to invest their wealth in acquiring more land and investing in its intensive cultivation for the national and global market. New mines were dug. Canals and turnpikes were carved into the rural landscape from which a rich stream of tolls and imposts was harvested. Nascent manufacturing grew up through the ‘putting out system’, as the cottages of freemen and women were turned into the specialised production of textiles and other commodities, bound for wider markets. By late in the eighteenth-century technological improvements in steam power allowed large concentrations of capital in the new industrial towns, with labour power corralled into factories, creating new land uses with massive possibilities for extracting both surplus value and rental returns to urban landowners. The prospect of employment in the new factory towns pulled displaced rural workers into these rapidly growing urban centres, creating scope for turning land, especially close to the factory gate, to the production and letting of houses. Thus, began the modern urban experiment of an emerging ecology of urban land uses, as sites were progressively developed and redeveloped to extract and distribute surplus value as wages, profit and rent. The capitalist city, cited on navigable rivers (Manchester, Liverpool, Bristol and Glasgow) and served by a web of inland waterways

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(Birmingham, London) had emerged by early in the nineteenth century as the socio-spatial containers of capitalist growth, with economic shadows that were cast worldwide and political and naval power that painted those shadows red. Factory production overtook putting out as ‘machineofacture’ displaced traditional methods of manufacture. Factory-organised production, it turned out, offered huge efficiencies in worker control, that is, in control of the direct labour process in production. Workers could be readily organised into specialised tasks and the time between stages of production shrunk (Adam Smith’s pin factory writ large) with maximum potential for extracting what Marx called ‘absolute surplus value’, or value produced collectively by maximising the normal hours per day workers were employed. The factory was also a site uniquely fitted for the introduction of machinery to which the rhythms of daily work were handcuffed, providing scope for extracting ‘relative surplus value’.3 In other words, the factory offered capitalist bosses the ability to closely supervise workers. The introduction of machines in factories further allowed them to intensify the labour process; workers came to be human appendages of the machines that controlled the pace and nature of the work tasks. And all this development created opportunities for landowners to convert or redevelop their land as sites for the new factories and their workforces.4 Some of Marx’s most excoriating prose figures in the chapters of Capital that describe the working conditions in England’s ‘dark satanic mills’.5 In this, he drew copiously on the official research of government inspectors and the private enquiries of the pioneer social researchers, mining resources held in the British Library. He was also aware, of course, of Engels (1845) first-hand study of industrial Manchester carried out in 1844. By then urban land in the main industrial centres had become fully commodified, freed of all feudal and guild fetters. Capital had been liberated to flow virtually unimpeded through the urban built environment of ‘Coketown’ in the ways described in the last chapter. However, as we will see later (in Part IV), this nirvana of freedom for the urban landowner

3 Extracted as wages fell in line with falls in the price of wages goods including (theoretically) housing. 4 Cockshott (2019) in Chapter 5 of his sweeping history of work offers interesting insights into the role of the machine in capitalist societies. 5 The phrase was William Blake’s not Marx’s.

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has subsequently been whittled down somewhat in capitalist societies like Britain. As an earlier quote makes clear, Marx was fully aware that the role of landed property in England did not provide an iron template for the emergence of capitalism elsewhere in the world, though I would argue that it did pre-figure how the logic of capital circulation through the urban built environment would unfold once capitalist relations had matured in those societies. Marx himself, in his journalistic contributions on the American civil war to a liberal Vienna newspaper, unpicked a very different dynamic of land development in the increasingly disunited United States.6 He argued that the key to the American civil war was the battle between two modes of production and the landowning relations supporting the institution of slavery. Slave labour was the primary economic driver in the eleven Southern states that seceded from the Union in 1861. Their main agricultural products depended on the repeated application of cheap unskilled labour to flat land of at least minimal fertility. But as Marx stressed, this age-old method of tilling the soil quickly exhausted it and slave owners required access to more and more previously untilled fertile land to shift their slaves to, while replacing their old dying slaves with younger ones. A division of labour between Virginia and South Carolina, on the one hand, saw those states raising and selling slaves to states further south like Missouri and Georgia and further West like Louisiana and Texas that employed the purchased slaves to produce staples like cotton. The Southern slave owning class pushed politically for the border states Delaware, and new territories to the West, New Mexico and Nebraska to mandate slavery regardless of the wishes of their current white settlers. The key focus of this conflict was Kansas, out of which the Republican Party arose to challenge the alliance between northern Democrats and southern slave owners. The northern Democrats were not against slavery as such, just against its mandated legalisation in all states of the Union, established and embryonic. They wanted the populations in each state and territory to decide for themselves if slavery was to be allowed in their jurisdictions. Marx argued that this would have killed off the southern slave-owning oligarchy as those jurisdictions would be dominated by the 6 In all, Marx wrote thirty seven articles on the conflict, some ghosted by Engels; some are included in the second volume of his political writings from exile (Marx, 1973, pp. 334–356).

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majority of small farmer settlers and business interests. Once, it became clear that they couldn’t win the battle politically, the slave states rolled the dice and in April 1861opened fire on Union troops at Fort Sumter, South Carolina. The stakes were indeed high: As a result of economic laws, then, to confine slavery to the limits of its old terrain would have led to its gradual extinction; politically it would have destroyed the hegemony exercised by the slave states by way of the senate; and finally, it would have exposed the slave owning-holding oligarchy to ominous dangers within their own states from the ‘poor whites’. (Marx, 1976, p. 342)

This always-tense alliance between northern Democrats and southern slave owners over slavery split their new party and allowed the Republican’s candidate from Illinois, Abraham Lincoln, to slip through the gap and win the 1860 Presidential election. Thereafter, the War dragged on and was finally and bloodily resolved, emancipating slaves throughout the nation and establishing the right of small landowners and enterprises to employ free labour. It also established the property relations conducive to the growth of capitalism in its fullest sense, a project completed over the following century as millions of immigrants arrived from the Old World eager to secure access to the lands out West. In reality, most of these arrivals found themselves trapped in the maw of the urban capitalist growth machine in the great cities and smaller towns that spread east to West across the continent.7 The dangers to the triumphant capitalist class posed by ‘running out’ of labour power, as its supplier (the migrants and locally born) looked Westward, was calmed by the seemingly endless tide of humanity washing ashore from the over-populated and, in some case, starving countries of Europe and, to a lesser extent, the Orient. Ironically, the aim of individual immigrants to acquire their own land to support themselves and their families was undercut by their collective over-supply, unwittingly creating the pools of free labour necessary to establish the capitalism as the dominant mode of production in the New World.

7 After Reconstruction, the South and its northern mid-West neighbours came to dominate national politics under the flag of the openly racist Democratic Party, up until the Reagan presidency. A case of losing the war and winning the peace. It is ironic that after Reagan, Bush senior and junior and Trump the Republican Party now flies the flag of disunion and keeps ‘the poor whites’ under control.

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The triumph of American capitalism was certainly told ‘in the annals of mankind in letters of blood and fire’; 600,000 Americans died during the four-year struggle that the President himself barely survived, becoming the first in his office to fall to the assassin’s bullet. The Civil War was the greatest concentrated loss of life in America until the great flu epidemic of 1918–1919 and COVID-19 in the following centuries. Many more deaths were to follow as white settlement pushed further and further into the interior destroying the centuries’ old communities of the country’s first peoples. What Marx and many later historians of the Republic stress is that in the nineteenth century the land question in its specific historical context lay at the centre of what was happening. After the last of the great westward land rushes, landowners split into two classes, small holders on owner-occupied farms and large ranchers, both increasingly dependent on the flow of commodities produced in the growing towns and cities. The embedded frontier myth galvanised local values and political structures and outcomes, imparting a particular flavour to American capitalism and democracy that has persisted to the time of Donald Trump. The United States experience is unique but there are echoes in the histories of some other white settler societies, including the British crown colonies of Australia, which has its own version of the frontier myth.8 In Chapter 33 of Capital, ‘The Modern Theory of Colonisation’, Marx analysed the problems posed for capitalist expansion in non-Western societies in which traditional patterns of small scale production predominated. This move, he saw as a natural expansion of capitalism from the centre to periphery as Europe completed its process of primitive accumulation and firmly established capital relations of production in the main sectors of their national economies. Unlike later Marxists (e.g., Rosa Luxembourg), Marx did not see the rush to colonise as being driven by the problems of realisation in the centre but as the result of the ceaseless competitive urge to accumulate on an ever expanding scale. The major developments in long distance sea transport during the century he lived in facilitated the growth of a world market for commodities produced under the control of capital. However, in many places, like India and the Indies, colonised local conditions were not immediately conducive to integration within the global system.

8 The iconic telling is in Ward (1958), The Australian Legend.

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There the capitalist regime constantly comes up against the obstacle presented by the producer who, as owners of his own conditions of labour, employs that labour to enrich himself instead of the capitalist. The contradiction between these two diametrically opposed economic systems has its practical manifestation here in the struggle between them. Where the capitalist has behind him the power of the mother country, he tries force to clear out of the way modes of production and appropriation which rest on the personal labour of the independent producer. (Marx, 1976, p. 310)

The methods employed were often brutal, as in the displacement of local producers from land and housing, by force or ruinous taxation. In the longer term, the handicraft producers of textiles (‘calicos’) in India, say, were driven out by the killing competition of cheaply produced and exported commodities from the Manchester and district factories. The worst examples of making colonies ripe as subsidiary cogs in globally expanding capitalism came in the slave economies of the American south, South America and the West Indies. Indigenous populations suffered too. “The treatment of the indigenous population was, of course, at its most frightful in plantation-economies set up exclusively for the export trade, such as the West Indies, and in rich and well-populated countries, such as Mexico and India, that were given over to plunder” (Marx, 1976, p. 917). One could say much the same about the Dutch and Portuguese in Southeast Asia. The British colonisation of Australia and New Zealand followed a different trajectory. In part, this followed from their distance from the mother country, in part from the nature of the Indigenous inhabitants of the ‘virgin’ lands. The arrival of a bunch of British convicts in Sydney Cove in 1788 was hardly a clarion call for the triumph of capitalism in the southern Hemisphere. The fledgling colony established in the spectacularly misnamed ‘New South Wales’ was at best seen by members of Britain’s ruling class as a necessary evil and a break-even proposition.9 Denied by rebellious white settlers the American continent as a more convenient dumping ground for their criminal underclass, Sydney seemed suitably remote to step up as a worthwhile replacement, a prison surrounded by the world’s largest moat. 9 The name conjured up an image of a place just around the corner from the real Wales. This may have fooled many of the forced passengers who embarked for the new land on a dangerous sea voyage of nine months. Many of the prisoners, their guards and crew never made it, their bodies consigned to the depths en route.

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However, within a few years of arrival, smaller settlements began to spring up along the eastern seaboard and across Bass Strait in Van Diemens Land (Tasmania). Timber for local construction and the supply of tall masts for the Royal Navy was harvested and worked by convict labour. Convicts also quarried stone and built roads, bridges and their own prison barracks. Food was of necessity home grown. Initially, relations with the local Aboriginal peoples were, if not exactly cordial, at least for the main part, peaceful. This held only as long as the settlers remained hemmed in by the Great Dividing Range, a string of mountains running north to south about twenty miles West of the Sydney settlement. However, once the Blue Mountains were successfully crossed in 1818, the fertile lands of the interior lay beckoning to emancipated convicts, retired army officers and the trickle of free settlers that would soon become a torrent. Land hunger focused on the lucrative new product, wool, Australia’s cotton, the quality of which sparked an insatiable demand in the woollen mills of the north of England. Australian Merino wool became the colony’s golden fleece. Urban land in Sydney had become effectively commodified by early in the nineteenth century. An active land market saw a degree of concentration as successful merchants bought up the land grants of their failed competitors and emancipated convicts. Land grants beyond the town were also worked by ex-convicts and white settlers, helped by convict labour also bestowed by the local Crown authority. By 1820, the colony had burst well beyond its jumping off spot on Sydney Harbour. Its survival still depended on the tenuous link with the mother country that brought in fresh forced labour, free settlers and necessary goods, while taking back wool and other primary products. The prospects of wealth from wool placed a premium on gaining access to agricultural land that ran ahead of government attempts to control the process. A land scramble resulted in the practice of ‘squatting’, seizing land and staking a claim by way of possession. Given the extensive nature of sheep grazing, the scale of seizure inevitably came up against the prior tenure of the Indigenous inhabitants. Conveniently, for the land-grabbers, British law cast the latter as non-existent; a spurious quasi-legal fiction designated NSW (and later by extension to the other Australian colonies) as Terra Nullius—‘land belonging to no one’.10 10 This mistake apparently stemmed from the earlier deduction of James Cook and Joseph Banks that the limited numbers of coastal Aborigines they observed presaged their

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This process of land seizure and Aboriginal displacement continued inland and up and down the coast to what would become the separate colonies of Queensland and Victoria and often assumed murderous form. An official policy of genocide was unleashed in Tasmania and operated more as a private enterprise elsewhere as the squatters small and large, sought to protect and extend their operations. In many places, the Indigenous peoples resisted and pushed back the tide of invasion on the lands their ancestors had occupied for millennia.11 By the late 1840s, even before the great gold discoveries in Victoria rewrote the Australian story, the social conditions for colonial capitalism had become embedded in the landscape. A sufficient, expanding pool of free labour had grown up in the colonies, fed by increasing immigration and local births, concentrated in the port cities through which wool and other primary exports traversed to the other side of the world. Convicts were no longer required to do the heavy lifting. Limits on access to unused land and the capital to acquire and work it were confining an increasing proportion of the colonial population to reliance on the sale of their labour power for a wage to live on. Their housing situation, like all the prerequisites of survival, depended on consummating that bargain. The founding of the colony of South Australia in 1834–1842 offered an alternative path to the same destination, only more expeditiously. In 1834, the British Parliament passed the South Australia Act establishing The South Australia Association as a private corporate owner of what later became a Crown Colony and eventually a state of the Australian Commonwealth. The founders included Edward Gibbon Wakefield, whose theory of ‘systematic colonisation’ proposed to establish at a single blow a full-blown settler capitalism on land previously occupied by Aboriginal peoples. His basic premise was that the new settlers should arrive already class sifted into capitalists, artisans and workers. Instead of offering free land grants to all, the wealthy immigrants would turn their wealth to purchasing land from the company at a price high enough to

absence in the great unexplored interior. This level of ignorance of the South by the North was repeated many times in Australia, as when British public and rulers, were, on the exploration around what would become Perth in the future state of Western Australia, astonished to find there was such a thing as a black swan. 11 This subject—the degree of usurpation and violence—has recently become a highly contested scholarly, educational and political issue in Australia, part of the modern ‘culture wars’.

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exclude most small artisan producers and workers, the latter who would be forced to sell their labour power to the landowning capitalists, to work their farms and workshops. The more successful artisans could accumulate sufficient savings to purchase land and in turn become capitalists in their own right. The key was to set the price of land high enough to make it difficult for most to jump that hurdle. The proceeds of land sales through time would be used to transport more free immigrants from England and Ireland to grow the working class fast enough to keep a check on wages and thus release the brake on capital accumulation. Once started, the system would become self-funding on a growing scale. Like all paper plans, this one quickly ran into trouble. By 1836, the British government was forced to take over control from the financially embarrassed company and in 1842 declare South Australia a new Colony of the Crown. This failure of capitalist utopia was not unexpected. Its principles had been laid down by Wakefield in his 1829 ‘A Letter from Sydney’, in fact written while its author languished in London’s Newgate Prison having unsuccessfully attempted to abduct a young heiress to replace a dead wealthy wife with another live one. It is the great merit of E.G. Wakefield to have discovered not something new about the colonies, but, in in the colonies, the truth about capitalist relations in the mother country. Just as the system of protection originally had the objective of manufacturing capitalists artificially in the mother country, so Wakefield’s theory of colonisation, which England tried for a time to enforce by Act of Parliament, aims at manufacturing wagelabourers in the colonies. This is what he calls ‘systematic colonisation’. (Marx, 1976, p. 932)12

For Marx, ‘the Wakefield Plan’ unintentionally laid bare—albeit in a farcical manner—the inner secret of capitalism, the centrality of the capital-labour relation of exploitation, the birth under specific historical conditions of a class of workers freed of all save their capacity and dire necessity to create value for their capitalist employers. But we should also note that the plan and experiment also point up the role of land

12 Marx’s contempt for Wakefield is evident in a footnote in which he notes that his few insights were anticipated by the French physiocrats and unnamed ‘earlier English economists’, probably Adam Smith and Sir James Steuart.

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and landed property in acting as the midwife of capitalism, even when stillborn.13 To conclude this brief historical side trip, the land question is inseparable from the forces that condition the flow of capital and revenues though the urban built environment, in real historical time. The many ways in which this happened in different countries and eras provide the individual paths to the urban structure of today’s cities, small, medium and global, and the constraints that their history exerts on their future shape.14

References Cockshott, P. (2019). The story of human labour: From prehistory to the modern day. Monthly Review Press. Engels, F. (1845). The condition of the English Working class in 1844. Otto Wigard. Kocka, J. (2016). Capitalism: A short introduction. Princeton University Press. Marx, K. (1973). Surveys from exile. Political writings (Vol. 2). Penguin Books. Marx, K. (1976). Capital (Vol. 1). Penguin Books. Munro, D. (2022). Marx’s theory of land, rent and cities. Edinburgh University Press. Ward, R. (1958). The Australian legend. Oxford University Press. Wood, E. (2017). The origin of capitalism: The longer view. Verso Books.

13 It also hints at the way in which landed property and capital merge in the ‘person’ of the eighteenth century English and Scottish squires and the later capitalist corporation. The importance of the role of the state also shines through. 14 Munro (2022) provides further historical insights into the role of landed property from a broadly Marxist perspective.

PART III

Housing and Social Reproduction

Housing represents a cluster of use values for residents. Access to adequate housing is a necessary though not sufficient condition for a bearable life, with the criteria of ‘adequacy’ differing across and within societies and periods. From the point of view of capitalists, the workers they hire must be healthy enough, pliable enough and close enough to make their labour power contribute to the production and circulation of commodities. Housing is thus of great indirect import to capital. Poor housing leads to poor quality labour power, and a reduced capacity to extract and realise (surplus) value. Here capital strikes a system contradiction: no individual capitalist firm has the incentive to provide adequate housing for its workers since it would cut into its profits and place the firm at a competitive disadvantage with its rivals in the struggle to survive. And yet, capitalists as a class have a joint interest in ensuring that the vast bulk of workers are well enough housed to reliably turn up for work and raise new generations of workers. There are historical exceptions of course. The ‘company town’, where the employer owns and provides houses to their workers, tends to be tied to exploitation of a particular resource or technology. Mining towns are a case in point, as are communities like Cadbury’s Bourneville village funded by capitalists of ethical or religious bent but still bent on profits. Capital has sought to confront this contradiction in various ways. One is to rely on the intervention of charitable institutions, another to involve the state, though as we will see, state intervention raises other issues, contradictions and political conflicts, including among different fractions

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of capital itself. The critical fact here is that the capitalist is interested only in the worker’s capacity to supply labour power, and not in other aspects of his or her life. This functional relationship is expressed in purely monetary form: the wage relation is the sole focus. Whether or not the worker’s wage is sufficient to buy/rent adequate housing, is as irrelevant to the individual capitalist as what he or she eats for dinner or what they do with their time outside the confines of paid work. But inadequate housing is relevant to capital as a class, a prerequisite for the reproduction of the capital-labour relation and, hence, the viability of capitalism as a whole and consequently the survival of individual capitalists. The view from the other side is different. The house for the worker, and other household residents, signifies much more than a base from which to launch themselves daily into the capitalist’s embrace. The social construction of the home depends on accessing the material structure of a house and plot but extends well beyond to embrace patterned values, beliefs and norms embedded in deep wells of emotional significance and commitment. The type, location and quality of housing impacts on these emotionally charged determinants of home life. The house as home has come to define and redefine a domestic division of roles in the household. In other words, the home as a cultural artefact has changed and is changing its internal cultural configuration as the broader structure of advanced capitalism is being transformed into the third decade of the twenty-first century. Long-established patterns of specialisation in domestic labour are fraying as women, in particular, combine paid and unpaid work creating complicated time-geographies of living. A more diverse environment of household types represented by same-sex households and increasing numbers of single-person households is placing strain on the capacity of building and property capital to supply appropriate stock. The demographic ageing of populations across the Western world, even before COVID-19 slowed international migration flows, poses major housing problems when the cultural dimensions are considered. How are ageing and disabled household members to be adequately housed and cared for when social norms and the redivision of domestic labour challenge preexisting social patterning? The barriers to adequate outcomes here are being raised by the locked-in dynamic of house price inflation, which is also impacting adversely on the housing opportunities of young people seeking independent living. The aged (and disabled) are part of a ‘surplus population’ from Capital’s viewpoint, a mass of humanity that cannot

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be profitably employed, useful only as consumers in the realisation cycle. However, adequately, or at least minimally, housing these groups exercises the efforts of all societies for which we have records. Cultural emphases vary but in all cases it has not been and is not ethically acceptable to leave these and other marginalised groups homeless. It is true that in the neoliberal era, a misplaced reliance on market provision (see next chapter) has stretched this moral imperative to the limit, but even here, few voices are raised to defend a situation of mass indifference to the needs of these groups. By broadening the view of housing as a functional element in the reproduction of labour power, we can grasp its central role in the developing class structure of capitalism. Developments over the last century and a half have wrought major and irreversible changes in the class system. Both major classes identified by Marx have fragmented resulting in an increasingly differentiated mosaic of functions and patterns of remuneration. Rising income inequality has resulted which solidifies into continuing wealth concentration and polarisation. Increasingly, in the neoliberal era, the bulk of the gains from economic growth is accruing to a small proportion, the super-wealthy. The current housing stock and the land on which it sits, forms a major share of total wealth. Moreover, the manner in which it is produced and consumed, the relations into which owner/landlord and resident stand to each other (and, in the owner occupiers case, to him or herself), contribute to the resulting inequality and the opposing real interests generated. The exploitation of skilled labour creates significant wage differences that underlie the progressive increase in housing prices, as property capital seeks to transform space to meet the demand of the relatively well-off. This also broadly meets the needs of capital but at the social cost of rising exclusion. Housing tenure arrangements are implicated in the sense that those unable to buy a house, must rent from someone who can; the alternative is homelessness. The latter term is instructive; to be without a house is to lose the opportunity to live in a home and experience a domestic arrangement of ‘deep emotional feeling’. Poor access to education, health and other urban services ensures that social disadvantage is entrenched inter-generationally. What Part III demonstrates is that housing cannot be grasped in its entirety, as an object of social life by focusing only on the circulation of capital through the built environment (Parts I and II). Conversely, the role of housing in constituting the class structure and the sinews

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of the home cannot be understood without grasping the way that the price of the land-house package is determined, and the dynamic process of urban land rent-seeking changes housing form and access. Rentseeking and income inequality together lock urban housing prices into an inflationary trajectory that perpetuates income inequality, and is thus, self-perpetuating. However, to fully appreciate the economic place of the house in realexisting capitalist societies, it is not possible to avoid a detailed discussion of the impacts of the state in liberal democracies of the West. The myriad ways that governments intervene, and the gaps or silences in policy, influence how capital flows through housing and the built environment, and hence, how the class structure evolves, and the home is socially produced. Part IV takes up this narrative.

CHAPTER 8

The Extended Reproduction of Labour Power

As a result of the ebb and flow of capital and labour, the state of the dwelling of workers of an industrial town may today be tolerable, tomorrow frightful. (Marx, Capital, Volume I)

For Marx, human labour is the defining characteristic of what it is to be human. Labour represents the ‘spark of fire’ that enables people to produce the means of survival in a material environment marked by scarcity. The niggardliness of nature provides the material means of production, but they must be transformed by intentional human activity. That is, human beings are driven by material necessity and opportunities to use their evolutionary advantages to mould nature to their purpose, that of survival. “He develops the potentialities slumbering within nature and subjects the play of its forces to his own sovereign powers (Marx, 1976, p. 283)”. The parable of God driving Adam and Eve from the easy life of Eden into the harsh world of work served as a useful metaphor for what Marx was getting at. Work was a serious business. Unlike Fourier’s emphasis on work as fun, play and delight (in the right circumstances) Marx depicted it as being closer to the Christian image, though with the mandate of material nature rather than the punishment of a supernatural God goading ceaseless human activity. Work was an inescapable condition of human existence, a foothold in the ‘realm of necessity’ as a potential springboard to ‘the realm of freedom’ once the productive powers of humankind had been sufficiently developed and applied. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_8

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The production of and from nature often involved—and in the vast stretch of history has involved—arduous physical activity and harsh discipline to the tasks at hand for a majority of people who have ever lived. But even the most menial of tasks involves a peculiarly human manner of working, summed up in Marx’s famous metaphor: “A spider conducts operations that resemble those of a weaver, and a bee puts to shame many an architect in the construction of her cells. But what distinguishes the worst architect from the best of bees is this, that the architect raises his structure in imagination before he erects it in reality (Marx, 1976, p. 284)”. Human labour is marked by its intentionality, the mental processes that direct purposeful physical activity of the body.1 The labour process in its general form breaks down into three components. “The simple elements of the labour process are (1) purposeful activity, that is work itself, (2) the object on which that work is performed, and (3) the instruments of that work (Marx, 1976, p. 284)”. The manner in which labour is organised to transform nature into the means of life, and distribute its fruits, defines for Marx the different modes of production that have hitherto existed. Capitalism, as we have seen, entails the creation historically of two main social classes, the capitalist who directs the labour process and the workers who carry it out. This is a social but not personal bond; each needs the other in order to achieve their aims of survival. But some are more needy than others. That is, workers bereft of the crucial second and third conditions, the objects and instruments of work, are individually at a disadvantage in relation to the capitalist employer who can acquire them in the commodity market. Left only with their ability to work, workers must sell themselves on a contractual basis to work for the employer. Marx was careful to stress the contractual impersonal nature of the wage bargain. This meant that the only responsibility of the employer to the worker consisted in the payment of a wage. The former was not responsible for any other duties towards the latter. In particular it was no skin off the employer’s nose if the worker became homeless, ill and unable to work. There were plenty of replacements. All social exchange between worker and boss was mediated by money, the cash nexus. Even slaves fare better in this respect as the slave owner has an interest in keeping them minimally housed and healthy

1 Recent developments in the neurosciences and anthropology have begun to question the strict binary nature of this distinction. See Critchlow (2019) and Ingold (1983).

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enough to work the fields and mines, unless there was an inexhaustible supply of replacement slaves on hand. For capital, workers are a business proposition, involving a transaction of limited liability. It is none of their business if they are unable to reproduce themselves, more particularly if they are not able to turn up for work, day after day, year after year. At the individual level of worker and employer, this is the case. But the danger to capitalists as a class arises when workers as a class are unable to work, if for example, infectious disease so thins their numbers and productivity that the smooth operation of capitalist production and exchange grinds to a halt or is significantly disrupted. Any cause that disrupts the circulation of capital as described in Chapter 4 is a concern. This terror was visited upon capital during the recurrent economic crises that became evident during Marx’s lifetime and is a permanent feature of this mode of production to this day. The costs borne by workers, especially the lowest paid, are more severe, personal and immediate.2 In other words, as a total system for self-perpetuation, capitalism falls short. It does so because there is no inherent mechanism to endure that the energy driving the economic machine of material production will always be firing. The strategic weakness of the position of workers, even if they are not collectively organised, is rarely if ever sufficient to guarantee their productive contribution to meet capital’s requirements. Worst still for capital, the process of surplus value extraction, of exploitation, tends to undercut whatever native capacity workers have for getting by. Increasing inequality and the rising demand for urban land tended to create the appalling overcrowding and homelessness characterising the Victorian industrial city (Engels 2021). The situation in the twenty-first century has improved for some but by no means all urban dwellers. To be homeless or trapped within overcrowded and dangerous housing today for those, especially women, is no great improvement on slum life in Manchester and Glasgow in Marx’s time. Yes, government policies and improvements in public health have cushioned the worst excesses but

2 In Chapter 25 of Capital, The General Law of Capital Accumulation, Marx draws

on copious contemporary studies of working-class housing conditions to make this point. The classic modern description of housing and living conditions in industrial England can be found in Gauldie (1974). Today, we have a tragic example in the highly uneven impact of COVID-19 on those workers, the marginalised and their families displaced and facing homelessness caused by the pandemic and consequent surge in unemployment.

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this is scant compensation for the remaining urban evils that persist. In some ways, the fact that the main costs of urbanism are concentrated on a minority of disparate groups makes bearing those costs and the stigma associated with them more unbearable. (Note the comment about tomorrow being worse than today in the quote at chapter head.) I return to these issues in Chapter 11. If we unpick the functional requirements of ‘fitting out’ workers for their productive contribution—that is, what it takes to reproduce their capacity to labour in an adequate state to sell on the labour market—the list would include: a regular intake of calories sufficient to carry out a range of tasks; at least minimal shelter from the elements; near-average manual dexterity and mental facilities; absence of debilitating congenital or acquired medical conditions; and a work ethic that encourages a compliant attitude to their allocated work tasks. These are minimal conditions for the delivery to the point of production and exchange of a fit-for-purpose workforce; fit for the purpose of producing value and surplus value, that is. “The reproduction of labour power means not just the reproduction of a labour force (a demographic or physiological question, i.e. ‘simple’ reproduction) but of a labour force which is adequately housed, fed, clothed, cared for, etc. to provide the work capacity (and acceptance of existing relations of production) required to perpetuate the productive system (Pickvance, 1976, p. 19)”. But even these relatively low barriers to labour power reproduction are threatened by the free-wheeling nature of ‘pure capitalism’, the logic of capital accumulation in the absence of institutional props and protections. Leaving aside for the moment the role of the state in regulating, to a degree, this ‘pure’ process—interventions that date from late in the nineteenth century—there arose developments from within the growing working class that provided and still provides a degree of self-protection, a defensive shield against the untrammelled rule of capital. The appearance and for a while growth of worker cooperatives are a case in point. Hopkins (1995) provides a useful discussion of the rise and role of worker cooperatives and friendly societies in nineteenth-century Britain. He also relates the other great institutional innovation, trade unions, to those cooperative ventures and to the rise of a distinctly working-class cultural identity. This is a story of a collective defensive reaction to the brute facts of capitalist urbanisation and the demands of urban-industrial life. Harvey notes that Marx was not overly concerned in his time with this problem of ‘the brutal and simple politics of class reproduction’. “The

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maintenance and reproduction of the working class remains a necessary condition for the reproduction of capital. But the capitalist may safely leave this to the worker’s drive for self-preservation and propagation (Marx, 1976, p. 718)”. Harvey (2010, p. 252) comments: The huge and fundamental question of the reproduction of the working class involves questions of propagation, self-preservation, social relations within the class and a host of other issues that Marx conveniently leaves to the workers themselves to sort out because that is supposedly what capital does. Actually, even in a state controlled by capitalists and landlords themselves, and certainly the conditions of the class struggle and ‘the degree of civilization’ in a country enter in here with at least the same force as they do with respect to questions of the working day, if not with greater force.

Poor housing conditions and land tenure conflicts have long been causes of serious social unrest and insurrection, well before the rise of capitalism. The Peasants’ revolt of 1320 threatened to end the reign of the Plantagenets in England two centuries before Richard III lost his horse at Bosworth Field. The proliferation of rent strikes during the Great Depression and the rise of urban squatting movements during the 1960s in cities throughout the Western world are testimony to the ability of workers and their families to disrupt the business of capitalism as normal. For example, during that period and after, a radical branch of the construction industry imposed ‘green bans’ on urban development projects in Australian cities that threatened working-class housing districts, heritage sites and environmental assets like nature reserves and parks. Furthermore, the dynamic competitive pressures to accumulate places a premium on innovation and the replacement wherever possible of human labour power by non-human resources, routines and organisational control, all aimed at increasing the extraction of relative surplus value, and/or the capture, however fleetingly, of monopoly profits. This meant the emergence of new labour skills, a fragmentation of the industrial working class into skill-differentiated fractions, fractures that were reflected in and reinforced by the broader trade union movement. The demand for new labour skills created a serious problem for capitalist employers. How were these skills to be imparted in a zero-sum world of endemic competition between capitalists? Labour power had to be reproduced on an increasingly larger and more skill-heavy manner; this is the sense of speaking about the extended reproduction of labour power

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to meet the requirements of the extended accumulation of the capitalist process. From the view of the capitalist class, workers cannot be left to sort things out. Castells (1974) lumped together the bundle of use values that workers as a class need to consume in order to be fit-for-purpose for capital circulation and live life at an historically conditioned accustomed standard of living, in a given instance and calls them the objects of ‘collective consumption’. To the extent that capital collectively undersupplies this bundle, in that instance, the deficit both disrupts the sphere of production and encourages the rise of ‘urban social movements’ ‘outside’ in the sphere of the community. The former struggles within the workplace result in periodic economic crises; the latter struggles over consumption extend the crises into full-blown social crises.3 To summarise, then: there are two functional requirements underpinning the reproduction of labour power. First, the labour force must be sufficiently large and suitably skill developed and differentiated to fuel the process of capital accumulation under the prevailing technological and organisational regime of the day. Second, the workforce must be suitably acquiescent and disciplined to routinely participate in the processes of production and exchange. In the former case, this includes being in the ‘right’ locations. Workers with the required skills must be accessible to employers in order to play their part. As the city grows and spreads over space, the issue of urban transport becomes critical. As the land price gradient intensifies, pushing housing uses further and further away from the point of production the systemic problem of worker access grows. Investments in mass transport services provide profit opportunities for capital but, as experience soon taught, not necessarily in ways that ensured an ideal outcome for capital; partial and uneven provision characterise most systems of private mass transport. To an extent, government steps in to plug the gaps. However, given the complexities of coordinating the disparate and fluid plans of individual land users and the information failures and blockages in government policies, unexpected and dysfunctional outcomes abound. The profession of town planning arose early in the twentieth century to address the discontinuities and dysfunctionality of 3 See also, Castells’ contribution to Harloe (1977). Castell’s work gave rise to a large body of literature on urban social movements associated with participants in the International Sociological Association research committee on urban and regional development. For example, see Harloe and Lebas (1981).

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the capitalist city. Although boasting some success for a time in small new town developments in various countries, the overall return has been modest. Today, large global cities rock to the tunes of forces much larger than the massed piccolos of city and state governments.4 Historically, cities have developed in ways to accommodate the private motor car, a massive twentieth-century innovation in urban transport, opening up access to much more complex patterns of employment across the city. Huge ‘public–private partnerships’ have delivered major road and rail networks but not always on time, on budget and in the right places. Moreover, these transport developments come with a raft of negative externalities like air pollution and self-generating congestion. They also tend to exacerbate the inequalities of access across the urban population, partly through the creation of new maps of land rent appropriation.5 This state of affairs can be depicted as a classic paradox or fallacy of composition. Each capitalist has a vital interest in securing access to workers; but each competes to survive and grow, resulting in chronic underinvestment in the means of securing worker access for each of them. This is not merely about numbers of undifferentiated workers but access to workers with the right levels and types of skills to compete successfully in an innovation-driven environment. Individual workers are in the same bind. They must compete for housing against each other, without any mechanism for ensuring the houses they can afford are in the right places for the jobs, schools, shops, health and other facilities they need to fit themselves for the purposes of employment by capital. The relevance of the previous analysis of urban land rent now comes to the fore. The creation and capture of rent, as we have seen, influence the distribution of land uses and the residential structure across the city. Land prices influence the cost of living of the land-house package that workers and other residents consume and hence, where they can live relative to where job opportunities arise.

4 The US savings and loans scandals in the 1980s led to massive over-construction of multi-dwelling housing in cities like Dallas and Austin. A contemporary documentary on the situation complemented visuals of empty tower blocks and major raised roads that ended in space with a soundtrack adapted from the song ‘we built this city on rock and roll’. The last phrase was replaced by the words ‘high yield bonds’. 5 Harvey (1972) describes this latter phenomenon in terms of the effects of the changing spatial structure of the city wreaking dynamic changes in the distribution of ‘real income’ or what we might call ‘effective life chances’.

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Locational factors also figure in meeting the second functional requirement. Inadequately configured and located housing threaten the attitudinal and motivational conditions for worker acquiescence. In particular, although the capitalist is employing an individual worker, the latter is (in many cases) working to support a household. Reproducing the workforce means paying wages sufficient for the raising, care and education of children, tomorrow’s workforce. In this, as we will see in the next chapter, women have historically come to play multiple roles in the home. The degree to which the changing skill requirements of capital circulation are met will partly depend on how well the size, quality and location of workers’ housing adapt to those demands. Historically, the link between ill-health and poor housing has been the major problem. Indeed, history has provided many natural experiments. The rampant outbreaks of typhus and cholera in late nineteenth century cities were directly traceable to housing overcrowding and lack of clean water ‘to the node’. In the 1990s, a conservative government in New Zealand completed the effective privatisation of public housing. The resulting hike in rents and overcrowding of the dwindling stock sparked a mini-epidemic of meningococcal disease among pacific Islander tenants.6 The adverse health linked to poor housing reaches into New Zealand’s private housing sector too. People living in crowded homes are more likely to have low socioeconomic status and high unemployment. Infectious diseases like meningococcal disease, rheumatic fever, tuberculosis, respiratory infections, haemophilus influenzae and Helicobacter pylori infection have been identified as more prevalent and difficult to contain in overcrowded households…Privacy and personal space are often compromised and may affect the educational achievement of children in the household, as well as the mental health of both adults and children. (Howden-Chapman & Wilson, 1999)

In 2020 and 2021 Australia’s two largest cities went into COVID-19 lockdown. The cases were over-concentrated in the lower socioeconomic regions of both metropolitan areas, the northern and western suburbs of Melbourne and the South-western segment of Sydney. These areas house

6 Subsequent New Zealand governments were forced to reverse the neoliberal policies and take back control of public housing.

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large numbers and high proportions of low income and migrant households. They have been the areas to which the flow of recent refugees has gravitated and represent many ethnic and language communities. The people who live in these suburbs are overwhelmingly employed in the construction, wholesale, logistics operations that house, feed and power the whole metropolitan economic machine. The social and economic dysfunction created by COVID-19 has been upsized like an order at McDonalds by the existing residential structure of these cities. The level of dysfunctionality was heightened by the difficulties that a population traditionally (and understandably) fearful of government pose to public health attempts to vaccinate residents. This fear, that goes beyond hesitancy, is understandable in view of where some of these communities have emigrated or fled from. To conclude, housing under capitalism is a central component in the extended social reproduction of labour power. This is the most critical commodity on capital’s shopping list and the only commodity that it does not produce. Capitalists, in this context, are collectively dependent as a class of a host of other social mechanisms to do with the human properties of people outside their persona as producers of value for others. Many of these mechanisms operate within the domestic sphere of the house as home and within communities operating as partly distinct sub-cultures across the city. This unavoidable—and for capital, unfortunate—fact of life is taken up and developed in the next two chapters.

References Castells, M. (1974). The urban question: A Marxist approach. Edward Arnold. Critchlow, H. (2019). The science of fate: Why your future is more predictable than you think. Hodder and Stoughton. Engels, B. (2021). The poverty of planning: Property, class and urban politics in nineteenth-century England. Lexington Books. Gauldie, E. (1974). Cruel habitations: A history of working-class housing, 1780– 1918. Allen and Unwin. Harloe, M. (Ed.). (1977). Captive cities: Studies in the political economy of cities and regions. Wiley and Sons. Harloe, M., & E. Lebas (Eds.). (1981). City, class and capital: New developments in the political economy of cities and regions. Edward Arnold. Harvey, D. (1972). Social processes, spatial form and the redistribution of real income in the urban system, In M. Stewart (ed.) The City: Problems of Planning, Penguin Books.

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Harvey, D. (2010). A companion to Marx’s capital. Verso. Hopkins, E. (1995). Working class self-help in nineteenth century England. Routledge. Howden-Chapman, P., & Wilson, N. (1999). Housing and health, https:// www.moh.govt.nz/notebook/nbbooks.nsf/0/F6338BF7171E3F904C256 96D001318EE/$file/SIHch7.pdf. Accessed 19 September 2021. Ingold, T. (1983). The architect and the bee: Reflections on the work of animals and men. Man, New Series, 18(1), 1–20. Marx, K. (1976) Capital, Volume 1, Penguin Books. Pickvance, C. (1976). Urban sociology: Critical essays. Tavistock.

CHAPTER 9

The Social Construction of the Home 1: Culture

My home is in Heaven. I’m just traveling through this world. (Billy Graham) Home is where the heart is. (Pliny the Elder)

As capitalism developed from an urban structure that clustered worker housing at high densities around the factory gates to today’s decentralised and multi-centred metropolis, the house assumed a distinctly separate socio-spatial existence and, thus, the material basis for the division of life into two spheres—home and work. Increasingly, those household members required to participate in the capitalist labour market and fields of petty bourgeoisie activity, developed a time-geography entailing physical movement across space from home to work and back again. En masse, the individual perambulations to and from work assumed the form of blood flowing along the arteries of public and private transport. Large social consequences accompanied the socio-spatial separation of the two spaces, work and home. Separate social norms and patterns of behaviour, interaction and even dress characterised each sphere. Work culture and home culture parted ways. Think of a typical 1960s television sit-com. The father arrives home, parks the family car in the garage, comes through the front door with a smile, sighs and flops down on the couch. His wife rushes to greet him, enquires after his day—‘how was it, darling?’—as she passes him a stiff drink. ‘exhausting dear, that swine from purchasing …’. Various children flit in and out, ‘leave your father alone, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_9

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he’s had a hard day’. Flick the dial to next morning. Breakfast is a tableau with father being served a hearty meal to gird his loins for the trip in the outside world to work. Children finish their Kellogg’s cereal, grumbling, Shakespeare style, readying to drag satchel unwillingly to school. Clearly, this ‘Leave it to Beaver’ image is far removed from real life, but it does pick out elements of domestic homelife in mid-century American capitalism. Most particularly, it makes the point, albeit unintentionally, that the home is a site of work, just not work carried out under the discipline of the capital-labour relation, that is, under the supervision of the capitalist employer. And, of course, it makes crystal clear that most of the domestic labour is carried out by women in the traditional nuclear family. The intention is clear in this case—domestic labour is and should be the exclusive role of women. The gendered division of labour in the home is discussed in detail in the next chapter. It is raised here because it is not possible to adequately appreciate the role of housing in socialising behaviour, in establishing identity and mutual patterns of social interaction at the neighbourhood level without keeping the gendered nature of domesticity in mind. Historically, the house or physical shelter has always played a role in providing ‘psych-social shelter’, a sense of belonging, of identity, along with family, community, church and trade. Organised organically into hamlets and villages, people clustered in order to find solace in living with others like themselves who can both validate their own being in reflection, as it were and offer mutual support in times of need or common threat. The nineteenth-century German sociologist, Ferdinand Tönnies (2001),1 coined the distinction between Gemeinschaft (community) and Gesellschaft (society). The former refers to patterns of close, direct and frequent interpersonal relations defining clear social roles based on shared norms, beliefs and values that were held to organise everyday life in small rural villages. The latter, by contrast, was defined by patterns of indirect interaction of people assuming formal roles based on generalised values and beliefs that may or may not reflect traditional ones. People met in many circumstances as strangers, coming to know each other in highly restricted, one-sided ways. Unsurprisingly, this way of life was applied

1 First published in 1887. At about the same time Emile Durkheim made a similar distinction between ‘mechanical solidarity’ and ‘organic solidarity’ in his book, The Division of Labour.

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at the time and beyond to the social structure and ethos of growing industrial and commercial cities. Following Tönnies, Max Weber (1968)2 formalised the distinction, stressing the meaning of community as a ‘subjective feeling’ that can be ‘affectual’ or ‘traditional’; that is, Gemeinschaft could exist in ‘modern settings’. Community is less about settlement type and more about shared ways of looking at the world, shared experiences of the world that create and reinforce existing roles and behaviours. The house, however changed its material form and facilities, has continued to be a home for its occupants, the place in three-dimensional space where the subjective feelings of its members, their deeply held values are born and nurtured. The home is the crucible of identity and the time-conditioned process of primary socialisation, the process by which people gain their values, beliefs and sense of self. This continuity in the social significance of housing does not necessarily lead to a notion of ‘the house as a haven’, the idealised view of ‘Leave it to Beaver’ and ‘Packed to the Rafters’.3 Outside the case of total war, most violence occurs in the home. Again, this pattern is persistent through history and is gendered. Subjective feelings include hate and envy, as well as love and compassion. Close proximity in intimate space (and thick curtains) can facilitate violent behaviour. The socialisation process may derail under the ordinary pressures of shared living spaces, particularly between members of different generations—‘get over it Dad, I’m sixteen’. Teenage rebellion and conflict within the extended family are common tropes in mass entertainment, and to a degree reflects ‘real life’. The home is also a staging post for the development of affectual ties beyond its boundary to neighbours and fellow participants in commonly valued activities. The role of the local football or netball club and churches may reinforce common values and beliefs that help form common identities and emotional commitments to each other. Such ties can be local, focused on the immediate locality in the city, or reach across the region. Even in large decentralised metropolitan regions, people can commute in order to build and maintain ties of mutual identity. For many if not most 2 First published in 1921. 3 The latter was a popular Australian television series in the late 1990s and early 2000s.

Ramsey street in the long-running Australian television soap opera is another example of close neighbourhood ties of affectivity and conflict.

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urban dwellers, patterns of affective connection are tiered, emanating out from the home, to ‘close’ activities in the neighbourhood and suburb, to broader regional, national and even international levels. Age and stage of the life cycle are an important factor. As children grow, they tend to extend their ‘commuting range’ of activities, attachments and identities. An individual can become part of several communities. This is especially so for members of particular professions, like science, academia, medicine and religious sects. Think of the regular conference meetings of medical researchers, scout jamborees, and the massed faithful at meetings addressed by the Pope, Billy Graham and the Dalai Lama. Or, if you prefer, think of mass pop concerts. Social media has further decentralised patterns of community formation and the spatial reach of socialisation. The sociological concept of ‘closure’ and the division of ‘them’ and ‘us’ assume greater salience in the internet age. The home has become both more and less central to the stimulation of ‘subjective feelings’ of belonging. The wireless home connects individual household members to a broader world of human contacts, while carving back close interactions within the household; ‘junior, shut down your computer, the meal’s on the table’. At the same time, the house as a bundle of material use values provides a wired base from within which the internet can be accessed. The wide dissemination of mobile devices limits the importance of the house as a base for electronic connectivity, as does the emergence of ‘third spaces’ in shopping centres, schools and other places in the ‘creative economy.4 The rise of the internet has begun to break down the strict separation of work and home in many industries and sectors. Work can now be carried out on the commute from home to the conventional office or factory. Moreover, work at home can be intensified and electronically supervised removing the need for ‘home workers’ to leave the house at all. The panopticon gaze of line managers can be organised remotely by algorithms that count keystrokes. The COVID-19 pandemic has supercharged new forms of organising work in and from the home. To some extent, we are seeing a return to a form of the ‘putting out” system, complemented by a break down in fulltime contractual arrangements due to the intervention of sub-contracting 4 See Richard Florida’s (2019). It should be noted that ‘third places’ have always been relevant to the work of some ‘creatives’. Writers and artists (and political agitators) have always met in coffee houses and pubs to work.

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and labour hire intermediaries. These organisational arrangements hide the reality of continued exploitation of workers by those who control the means of production. Homework may become the major means of extracting more absolute surplus value and impoverishing relatively speaking a larger proportion of the working population.5 How permanent these work-home changes are will only be known in the fullness of time as the long-term consequences of the great pandemic unfold. The multi-faceted nature of community can create internal tensions with respect to identity formation and external conflict when those tensions ‘go viral’. A businessman and respected member of the local congregation may move from strict religious observation at the weekend to his day job embezzling funds from his company during the week.6 The incidence of religious elders being caught up in sex scandals has become commonplace. To some extent the spatial separation of work from home provides personal space to navigate and manage identity-stress. But it’s the same person moving back and forth between spheres; psychological separation is never complete, nor is protection against ‘outing’. The comeback of cottage production can also create internal tensions and role ambiguity within the household, raising conflicts over the allocation of domestic labour, who cooks the meal tonight?. The socio-spatial segregation of large cities, driven by the processes of capital circulation and rent extraction, has facilitated the creation of sub-regions of community. I have earlier mentioned the phenomena of the gated community and the slum. These socio-spatial forms require the construction of new purpose-designed and arranged houses and private open spaces, in the first case, and the progressive piecemeal depreciation and devaluation of houses and streets, in the second case. But in the space between, segregation clusters households of similar class and ethnic backgrounds in ways that serve to reinforce the identities of the residents concerned.7 Immigrations from the rural hinterland and other countries

5 Relative surplus value extraction will only eventuate if the organisational and technological changes impact on the production of wage goods, the bundle of consumption use values that are historically standard for the mass working class. 6 Spectacular cases include Bernie Madoff, Jim Bakker, Ted Haggard, and the deceased father of the Australian ex-leader of the Hillsong Church, Brian Houston. 7 This trajectory has been likened to the reinvention of the village within the metropolis. Herbert Gans’ (1963) book, The Urban Villages, makes the point in its title. He tracks the lives of Italian-Americans living in the West End of Boston, in order to critique

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tend to further build on the urban residential patterns established. The phenomenon of chain migration can see whole communities relocate over time across regions and internationally, settling in and around people from similar backgrounds. Progressive change to the pre-existing social character of an area, as in the case of path dependent gentrification, can spark local resistance; I have mentioned the green ban phenomenon in Australian cities. The reverse movement of lower socioeconomic residents into high status areas can also result in similar conflict between newcomers and established residents. In part, the conflict will be about the threat to local property values. But at bottom, concerns will focus on the values and behaviour of the newcomers as perceived by the current residents. This is particularly likely when there are clear racial or ethnic differences between the groups. This underscores the cultural significance of the home in its local milieu. Overwhelmingly, the change is perceived locally as a threat or invasion, and responses, emotional and material, are defensive. Similar responses can occur when property capital moves into an established area, particularly if the move involves large-scale transformations in local land uses, as when a major shopping centre or hospital is mooted for a residential area currently supporting small local commercial businesses. But at least in these cases, existing landowners can be compensated by uplift in their land values, allowing many to exercise the ‘exit’ option (Hirschman, 1970). However, where land values are low and existing residents have limited resources, the only option may be to stay and fight, to exercise the ‘voice’ option. Resistance can be passive or draw on the actions mentioned earlier, namely barricades and squatting. It can spark broader social movements. Hirschman’s third option when faced with threats to current lifestyles—loyalty—can strengthen the affective commitment to resist change, especially when the exit option is closed. Loyalty and voice can interact to emotively charge resistance and make it more likely to succeed. Strong affective ties to home and territory can prove great impediments to the circulation of capital through the urban environment and can complicate the lives of local government planners and elected representatives. In hierarchical systems of government, conflicts between levels can have planning interventions by the city government in search of ‘urban renewal. Robert Goodman (1972) in After the Planners offers similar arguments against breaking up urban communities by driving major freeways through them.

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major impacts on developments on the ground and the rent and profit returns appropriated (see part IV). Marx himself had little to say about the domestic sphere, a topic picked up by Engels. The former was famously the self-projected Head of a household of women—wife, three daughters and a female servant with whom Marx fathered an illegitimate son.8 It is hardly Marx’s fault that he did not and could not have foreseen the ways in which capitalism would develop after his death, though his patriarchal rule in the household has certainly attracted posthumous criticism. Most of his confident predictions turned out wrong; the changing structure of the family and the economic and social role of the home was just one example. What remained was a method for looking at the development of capitalism, on the basis of the foundational analysis of capital circulation and accumulation. Hence, the social significance of the house as home surfaced a century later in the work of second-generation feminist social science and the work of economic anthropologists like Pierre Bourdieu. Bourdieu’s (2005) influential book, The Social Structures of the economy, explicitly applies his concepts of ‘habitus’, ‘social capital’ and ‘symbolic capital’ to the production and consumption of the single-family home. In his terms, the ‘economic field’ of the house is structured by social practices that make sense only within that field of human experiences and action. Gradually, over time and space, the social practices in one field, like the home, can be converted to practices and beliefs that better suit another, like the world made over by capital. “The word ‘conversion’ which may seem inappropriate or excessive, forces itself upon us once we realise that the universe into which the newcomers must enter is also, just as much as the one they are leaving behind, a universe of belief (Bourdieu, 2005, p. 6)”. Bourdieu developed his field anthropology in the field, so to speak, observing the colonial ‘conversion’ of Algeria. This was a test case for the way that (French) capitalism, as “…the spirit of calculation… gradually wins out over all fields of practice over the logic of the domestic economy, which was based on the repression, or more precisely the denial of calculation (Bourdieu, 2005, p. 6)”. Bourdieu’s analysis of the single 8 Engels (1909) The Origin of the Family, Private Property and the State was originally published in German in 1884, the year after his friend’s death. Engels also covered for Marx by allowing the world and his daughters, if not his wife, to believe that he, Engels, was the father. A number of Marx’s other children died during childbirth or while infants.

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family house raises many insights into and between the spheres or fields of the capitalist and domestic universes, including the survivals, tensions and conflicts engendered within each sphere and through the conversion process and its resistance. It is beyond the scope of this book to do justice to his cultural dissection of housing, other than to suggest that it is a good example of how analysis within alternative theoretical frames can raise fruitful ideas and problems for developing a Marxist theory of housing. His focus on non-commensurate universes of belief and meaning promises a much deeper understanding of ‘ideology’ than the ways in which that concept has been traditionally wielded in academic social sciences, and, it must be said, by many traditional Marxists. What is particularly missing in an appreciation of the home as a combined mix of cultural and symbolic capital, in the strongly internalised sense of emotional attachment to one’s domestic domicile; the phrase ‘putting one’s stamp on my home’ is a commonly expressed sentiment in the property shows that litter television, and the object of the sale of numerous commodities and self-help guides on YouTube. Unpicking the psycho-sociological significance of this fact provides a challenge to urban anthropologists, utilising deep qualitative research. Tying the insights so gleaned back into a Marxist (or any other) coherent analysis then beckons. In summary, the land-house package has always had huge emotional and motivational significance for residents. It has served for most of the capitalist era as a haven from the formal discipline of the workplace. Conventionally gendered it was the intimate space within which household members acquired their most basic beliefs and values. Cities fragmented spatially to support distinct sub-cultures, based on income, occupation, ethnicity and race. These processes of urban evolution have generated new lines of cleavage and conflict in the city, based on both different locations in the capitalist economy and different values and beliefs that structure the domestic sphere of the home. More recently, the home has increasingly become the site of work dragged back under the capital-labour relation through the use of new information and communications technologies and organisational innovations. Although the home still struggles to play its part in primary socialisation, it does so within a context marked by an increasingly complex set of social relations in which traditional roles are scrambled and community boundaries are being redrawn. This counter-conversion underway is, as we will see, creating new patterns of inequality, discrimination and a host of unintended and undesirable outcomes.

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References Bourdieu, P. (2005). The social structures of the economy. Polity Press. Engels, F. (1909/1845). The origin of the family, private property and the state. Charles H. Kent & Co. Florida, R. (2019). The rise of the creative class. The Free Press. Gans, H. (1963). The urban villages. The Free Press. Goodman, R. (1972). After the planners. Penguin books. Hirschman, A. (1970). Exit, voice and loyalty. Harvard University Press. Tönnies, F. (2001). Community and civil society. Cambridge university Press. Weber, M. (1968). Economy and society: An outline of interpretative sociology (Vol. 1).

CHAPTER 10

The Social Construction of the Home 2: Gender and Age

He is happiest, be he king or peasant, who finds peace in his home. (Johann Wolfgang von Goethe) A man’s home is his wife’s castle. (Alexander Chase)

It has not been possible to discuss the house as home without playing the gender card, although much housing analysis and policy manages to do so quite well. As I noted in the preceding chapter, the home is a social construct intimately tied to dominant views about the proper role of women in society. That role or persona has through most of recorded time (and as far as archaeological research can tell, well before then) been intimately associated with pregnancy, childbirth, child raising and servicing the material, psychological and sexual needs of men. The two headline quotes above together hint at the key dimensions of this enduring pattern. Regardless of an adult man’s social position and status in the wider world, within the home he rules. But this rule is not uncontested. The home is also the sphere where a woman, by dint, of her very confinement (the echo of pregnancy is deliberate), can concentrate her full attention and capabilities. ‘Don’t mess with the nest’ is another pithy reminder that women in some limited sense, times and places, ‘rule the roost’. Of course, the key word is ‘limited’. Being denied access to many opportunities outside the home, including an independent income source and legally enforced property tights, tends to reinforce a homecentred life and mindset. This is most obvious in an extreme form, like © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_10

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Afghanistan under Taliban rule and other Middle Eastern societies like Saudi Arabia. But similar, if more subtle, forces are at work in advanced capitalist societies today, where women, ‘liberated’ from the home, are over-concentrated in low-paid, insecure-paid jobs, while continuing to perform most unpaid domestic labour in the home. The dual productive role and relative powerlessness of women have characterised most forms of society, today and throughout history. Capitalism did not invent the gender division of labour, but it did seek to mould its form (not always successfully or without unintended consequences) to suit the evolving functional requirements for the circulation of capital on an expanding scale, in the particular historical circumstances prevailing. This was evident in the far from voluntary drift of rural workers to the new cities early in the industrialisation process. Factory organisation of the labour process recreated the domestic division of labour in a form conducive to the appropriation of surplus value, confining women to tend the great steam-driven production system. Children’s small stature and dextrous fingers were applied to tasks that required fine motor movements in confined spaces in mine and factory; an early example of ‘scientific management’. Later innovations in control of the labour process have seen the progressive deskilling and reskilling of productive and exchange activities spatially redivided between the central workplace and the home. Both the earlier spatial centralisation and the current process of decentralisation enhance value production in the specific social and technological circumstances of the day. Today, in Bourdieu’s (2005) terms, the capitalist home converts the logic and power relations of the factory into the realm of domesticity. The home as the cradle of socialisation demonstrates or models on a day-by-day basis, the proper role of women, in ways that help inculcate those roles, and the values and norms supporting them, in the children growing up within the home. Viewed from within, the house can be seen as both a sphere of intimacy between its members, stimulating subjective feelings of communion and antipathy, and a set of resources for carrying out domestic production. The human labour of its members is applied to the objects and instruments of labour. Carpets are vacuumed; meals are cooked; bathrooms are cleaned; outside space is tended by secateur and lawn mower. Two points jump out of this incomplete list. First, the bundle of means and instruments of domestic production have demonstrably and significantly increased in number, variety and quality. Most are purchased in

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commodity markets, meaning that capitalist production and exchange exists in a symbiotic relationship to the mobilisation of domestic labour in the home. Without washing machines, refrigerators and the panoply of household appliances, the domestic labour carried out by women would be as heavy as in the past and still is in many societies; and huge sectors of the capitalist economy would not function. But the gains in time and energy released are partly appropriated by capital in ‘freeing’ women to take up paid employment outside the home. The second, point as already stressed, is that these tasks are in many homes heavily gendered; tasks associated with ‘housekeeping’ are feminised and tasks requiring heavy physical labour like car repair and lawn mowing are largely left to men, at least this tends to be the ‘norm’ in heterosexual nuclear families. This inside-outside division is not fixed or uncontested, and some women will be under the bonnet with a spanner, while some men cook and clean. Particularly within higher socioeconomic and some ethnic groups, intense negotiations over the division of household production occur. However, even within households where two adults hold high income and senior jobs in the capitalist economy, the job of caring for children tends to heavily devolve to the woman as ‘mother’. In spite of the legacy of second and third wave feminism and the (it must be said) tardy efforts of government in most advanced countries to encourage the sharing of these tasks, studies consistently show that traditional patterns persist.1 There are ample opportunities for intra-household conflicts to arise around the division of domestic labour. A key threshold appears to be in the transition to parenthood. The arrival of a child shakes up pre-existing arrangements between the new parents (Yavorsky et al., 2015). Taken-for-granted roles are put under pressure. Role conflicts can break out within the home and between work and family.2 A degree of role ambiguity sets in, providing scope for win–win renegotiation, albeit within a framework of unequal bargaining power. But where the conflicts cannot be mutually managed, violence within the home tends to erupt. Women are overwhelmingly the victims of domestic violence. Intra-family 1 There is an immense and growing literature on the issues of the gender division of labour, both between and within the paid workforce and domestic sphere. I don’t intend to summarise this field. For a guide to these debates and original research on the Australian scene: see Baxter and Hewitt (2013); for the United States, see Brines (1994). 2 Cerrato and Cifre (2018) provide an interesting Spanish study of how different forms of conflict intersect.

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conflict can spill over to the paid workplace, and men and women can bring conflicts at work home. This is another sense in which the separation of workplace and home produced in early capitalism is slipping away, as the logic of capital accumulation expands its reach, colonising or converting the home to its rhythms. For women who are mothers or stepmothers in heterosexual relationships, the modern home threatens to once more become a prison, stifling their opportunities in the public world. Having fought hard throughout the twentieth century to gain access to education and paid employment, they now face the challenge of juggling a growing portfolio of domestic tasks, while bearing and raising children. For women in affluent households, with highly-paid jobs some relief comes in the form of a new subclass of servants, low-paid nannies and au pairs (usually female), often imported from recent immigrant groups and the passing parade of young global backpackers. But for the vast majority of women living in working class and marginalised social locations, there is no such relief. And even well-supported women still face the gender, power and responsibility gaps in the paid workforce and must deal with deeply entrenched and partly internalised values and perceptions about their proper role in the home. What was implicit in the earlier discussion of the home as a productive crucible, is the importance that land and land ownership play. The size, quality and location of the land-house package influence the levels of domestic productivity. Large lot sizes are conducive to local food production and ‘the backyard’ in Australia’s fabled ‘quarter-acre block’ has traditionally been the locale for home-produced leisure activities— bar-b-ques, swimming pools, trampolines, ‘cubbies’ and backyard cricket. With increasing densification, partly encouraged by rising urban land rents, average lot sizes, even in highly suburbanised areas of home ownership, are shrinking the scope for such activities. Household members are increasingly dependent on the commodified supply of similar experiences and publicly provided alternatives, or retreat to the cyber world of entertainment, with its dark underworld of possible dangers. Land ownership is also a further source of gender inequality and risk of violence. Women are still in countries like Australia and Britain less likely to have clear individual property rights in the house. This makes negotiating a division of housing wealth complicated during separation or divorce proceedings with outcomes dependent on the uncertain operation of the legal system, including access to competent legal advice. Women

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escaping violent homes often face difficulties in finding alternative accommodation, temporary and permanent, especially if they have children (and/or treasured pets). Rental markets can discriminate in subtle and not so subtle ways against women fleeing violence, especially if they can’t provide suitable references and financial guarantees to landlords. Absence of suitable alternative housing is, I would argue, a potent cause of women being trapped in violent and coercive situations. The relatively weak position of women in the property market has a long history. It’s barely a century since a married woman could own property in some countries like Britain, a right that still escapes them today in other countries. House price inflation has forced households with two adult members to seek employment in the paid workforce, both to save sufficient wealth as a house deposit and to service the mortgage. This doubles the risk that one member will subsequently lose his or her job thereby threatening their housing tenure. This is a risk in addition to one member ‘choosing’ to resign in order to care for children. The other key demographic group that experiences barriers to accessing decent housing are older people, especially what we might call ‘the old old’, people over eighty years of age who face declining physical and cognitive functions and the rising risk of terminal illness. This group intersects with people with physical and intellectual disabilities, in the sense that they share many of the same housing-related problems, which include: . A lack of choice with respect to housing designed to meet their needs. The market segments that might provide for this diverse group are too small and fragmented to attract capital seeking the average rate of profit. This represents a clear ‘market failure’ of supply. . Restricted choice due to lack of affordable, as well as appropriate housing. . Poorly located housing with respect to medical and other daily needs. This is tied up with problems of immobility and access to transport services. Age and gender factors co-mingle with respect to the question of housing. In many societies, multiple generations share the dwelling, and

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daughters or daughters-in-law add care of elderly, infirm and disabled relatives to their list of daily household productive jobs. As the logic of capital has penetrated the home, women are being drawn away from what are increasingly perceived as ancillary jobs, either because they are working directly under the control of capitalist employers inside or outside the home or with effectively the same result through the faux-avenue of subcontracting and outsourcing arrangements. In all cases, women are being ‘forced to choose’ between paid employment and the continued care of the old and young. This adds a further rich source of role conflict in the everyday lives of women in mid-life. As a particular case, consider a woman aged in her forties or fifties who separates from a long-term partner (of any gender). Depending on her previous life course, she may face an uncertain future with respect to financial situation and employment prospects. Where the couple were homeowners, the challenge of dividing their main asset, the house, while discharging mortgage and other debt, can create significant conflicts, even when the separation is ‘amicable’ and is not sparked by violence and coercion. Both separating partners will require housing but will not necessarily be equally situated to acquire it, especially when violence is involved and the need for the woman to leave her current dwelling is urgent. Unless she has independent financial resources and paid employment, she may find that limited options are available in the private rental sector, another example of market failure. Financial disadvantage can and research has shown, persist over the long term, well after the initial shoals of disaster are negotiated. This factor has several dimensions: A women . not in full-time paid employment or self-employment prior to the split will often struggle to live independently thereafter. . may have low personal savings, apart from the ‘family home’. In particular, superannuation or pension fund savings are heavily skewed against women, even in countries like Australia where a mandatory universal scheme exists. This follows from the combination of factors already noted: over-concentration in low-wage jobs, a bias towards part-time employment and periods out of the paid workforce due to unpaid child and other care-related jobs. . may experience difficulties in securing paid employment as they age, due to competition from younger, more educated workers and oldfashioned discrimination.

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. may bear continuing financial responsibility for children or aged relatives. In an Australian study, Babacan et al. (2006) found that women over fifty years of age who ‘lose’ a partner, through divorce or death, are likely to experience lasting significant problems of housing affordability and financial stress, especially if they are renters. (I discuss issues of discrimination on gender and racial grounds in Chapter 13.) The researchers found that women are heavily over-represented in this cohort. However, as noted, not all women are placed in the position where they must choose between care for young or older family members and their position in the paid workforce. In order to pursue full-time participation in the latter, those well-educated women from affluent households can draw on the domestic labour, usually female, of a ‘new servant class’. Capitalist enterprise also enters this new market by employing and deploying cleaners, dog walkers, shopping assistants, nannies and the like. In most cases, whether employed directly or by capital, such workers tend to be poorly paid with weak job security and occupational safety supports. Returning to the ‘old old’, the increasing average life span is resulting in rising numbers of people, particularly women living past conventional retirement age, well into and beyond their eighties. With the declining supply of daughters and nieces willing and able to devote themselves to caring for their ageing relatives, the latter are thrown back on surviving for as long as possible in their often large family home, or moving into purpose built ‘retirement villages’, and in the final instance, God’s waiting room’, the aged care or nursing home. This segmentation of the housing system is temporally progressive, as the ‘young old’ move from private house to retirement village, to aged care facility, experiencing what my deceased father called ‘a final roller coaster ride to the boneyard’; a trip my father in due course completed. Retirement villages are clever inventions designed to appropriate maximum differential rent from middle-class households, often called ‘empty nesters’, in return for modest current charges and access to a series of on-site facilities and a trouble-free lifestyle. The former can include swimming pools, restaurants, games rooms, manicured open space, health facilities and 24-hour security; the latter is manufactured through careful recruitment, helped by high entry costs and draconian village rules. In reality the residents are on long-term leases. The land ownership is retained by the company, by the capitalist who acts, in effect, like the

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eighteenth-century English rural squire leasing agricultural land long term to his tenant farmers. On leaving the village on the next stage of their housing careers, the resale proceeds of the residents’ houses are split on a basis highly congenial to the company. What is left to the resident can be rolled over into a bond or deposit (in Australia called ‘a returnable accommodation deposit’) to gain access to the aged care facility, provided by both charitable and for-profit capitalist organisations. Aged care housing for the ‘old old’ is in countries like my own, more of a ‘set and forget’ option than a viable and effective stage in one’s housing career. They are, in effect, filing cabinets for people past their usefulness in the productive labour force. A recent Australian Royal Commission into this sector found evidence of systematic abuses, physical and mental, chronic understaffing and underfunding, inadequate nutrition, a lack of qualified staff, high access costs, poor resident health, social isolation, weak regulation and compliance by operators and a host of other shortcomings leading the Final Report to comment: “[t]hose who run the aged care system do not seem to know about the nature and extent of substandard care, and have made limited attempts to find out. There has been a reluctance to measure quality (Royal Commission into Aged Care Quality and Safety, 2021, p. 72)”. The appalling treatment of aged care residents with dementia, Australia’s (and the world’s) fastest-growing disease, was marked out for special condemnation. And again, women are significantly over-represented in this housing segment. In Australia, as in many similar societies, aged care facilities are over-dependent on poorly paid and trained recent immigrants, adding to the emerging new servant class noted earlier and creating cross-cultural problems for ageing residents from the dominant Anglo-white community. Housing disadvantage under the neoliberal yoke has also become concentrated at the other end of the demographic spectrum. Young people trying to set up their first, independent home must compete with older households and investors who have acquired significant wealth and healthy credit and rental histories. Once again, family background interacts and favours the children of the most affluent and well-housed households, especially when it comes to gaining access to mortgage finance (the ‘bank of Mum and Dad’ to the rescue). In addition to being in line to inherit parental wealth, the advantages of good schools and healthy diets, the children of the rich enjoy a boost onto the housing wealth ladder.

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In summary, the nature of the house as home has changed radically since Marx’s time. Not only are there many more household types to be housed, the structure and rhythms of domestic labour have been transformed, even before the current pandemic drove capitalism back to the home in new and stressful ways. Women, in particular, are negotiating increasingly complicated and demanding labour tasks, in both the paid and unpaid realms of work; capital is penetrating both increasingly interconnected spheres through the provision of a range of domestic producer goods, tools and materials and the decentralisation of tasks to the home, under new regimes of surveillance and control. These changes are occurring in a chaotic and highly differentiated manner, expressing and reinforcing the emerging class structure of contemporary capitalism. The centrality of housing provision and ownership to this story is the focus of the next chapter.

References Babacan, A., Chamberlain, C., Cullen, G., Dockery, M., Stoakes, A., & Wood, G. (2006). The implications of loss of a partner for older private tenants, positioning Paper no. 93. Australian Housing and Urban Research Institute https://www.ahuri.edu.au/research/position-papers/93. Accessed 12 July 2021. Baxter, J. & Hewitt B. (2013). Negotiating domestic labour: women’s earnings and housework time in Australia. Feminist Economics, 19(1), 29–53. Bourdieu, P. (2005). The social structures of the economy. Polity Press. Brines, J. (1994). Economic dependency, gender and the division of deomestic labor at home. American Journal of Sociology, 100(3), 652–688. Cerrato & Cifre. (2018). Gender inequality in household chores and work-family conflict. Frontiers in Psychology., 2021. https://doi.org/10.3389/fpsyg.2018. 01330.Accessed26September Royal Commission into aged Care Quality and safety: Final Report – Executive Summary. (2021). https://agedcare.royalcommission.gov.au/publicati ons/final-report-executive-summary. Accessed 26 September 2021. Yavorsky, J., Dush, C., & Schoppe-Sullivan, S. (2015). The production of inequality: The gender division of labor across the transition to parenthood. Journal of Marriage and the Family, 77 (3), 662–679.

CHAPTER 11

Housing and Class in the Neoliberal Era

I haven’t found anybody in seven and a half years shake their fist at me and say, ‘Howard I’m angry with you for letting the value of my house increase’. (Australian Prime Minister John Howard, 2007) The starting point for a first home buyer is to get a good job that pays good money. (Joe Hockey, Australian Federal Treasurer, 2015)

The two comments above were made a decade apart by senior Ministers in conservative Australian governments. They bridged the most serious financial crisis in the capitalist world since the 1930s, which had revolved around failed housing markets, and they both were made in response to rising community concerns about the increasing unaffordability of housing in Australia, particularly in the major capital cities, Sydney and Melbourne. They were ‘let ‘em eat cakes’ moments. Without being aware, both politicians were reducing the housing question to the interests of residential property owners and unintentionally, in a highly mystified way, highlighting the interconnection of housing provision and social class position. The primary class structure that Marx anatomised in the second half of the nineteenth century—the polarising growth of capitalists and proletarians—has subsequently fractured into the complex pattern we observe today. The capitalist class has divided along two main fault lines, in addition to the functional separation of productive, commercial and financial capital discussed in Chapter 4. First, there is the specialisation of © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_11

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entrepreneurial and rentier fractions, where the former reaps profits from the direct circulation of capital, and the latter appropriates ‘unearned incomes’ in the form of interest, rent, dividends and asset speculation. Second, the process of the concentration and centralisation of capital that Marx focuses on as the defining feature of capitalism in his day has not been complete. Small capitalists and self-employed businesses have survived, finding competitive niches in areas of the economy difficult to penetrate by larger competitors. The petty bourgeoisie has proved more resistant and resilient than perhaps Marx expected, including in parts of the housing system. Likewise, the remorseless degradation and deskilling of labour that Marx observed in industrial England was not an irreversible trend or ‘law’. The very forces that Marx highlighted—technological advances and the drive to accumulate—created the need for new skills and higher-order labour power. The internal organisation of the labour process created new divisions of responsibility and, consequently an increasingly differentiated and hierarchical grading of wage remuneration. Income inequality across the working class mirrored income inequality across the entrepreneurial capitalist class, as conflict between managers and workers focused on both the generation of value and its division across and within the two broad classes. I have argued that income has come to define or denote class fractions, and income inequality now drives the process of class fragmentation with implications for the lived experiences of people under real-existing capitalism (Berry, 1986). The importance of grasping the nature of class structure is that people similarly situated socially tend to have at least partly common real interests, that at least partly oppose the interest common to people in other situations. How does this apply to housing? One’s class-income situation largely determines the range of choice of housing situation. For those with highly paid and secure employment, the choice is wide ranging, with respect to tenure, location, security and the quality of housing. For the low paid and unemployed, choice in the extreme collapses to a singularity, homelessness. It is in this sense that the headline quotes to this chapter pick out something profound, albeit in the ideological straight jacket of the privileged. It is here that housing tenure plays a particularly important gatekeeping role in sorting households into class fractions. Owner occupiers, as property owners, come to see their material interest tied up with those of property capital, since they all benefit from rising land-housing prices. Likewise, home owning workers come to see their

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interests in opposition to tenant workers, since lower rents mean lower prices, and vice versa.1 Developments, especially government interventions, that lower rents, threaten housing values. Although a house owner, whether owner occupier or rental investor, may not complain about rising house values, tenants and their advocates do. This basic fault line in the housing system lies at the heart of housing politics and policies. Adkins et al. (2020) present an argument proposing a five-class typology to describe inequalities within Sydney’s housing system: investor landlords, outright owner occupiers, mortgaged owner occupiers, renters and the homeless. These social groupings, they argue, enjoy significantly different experiences over their lifetimes. In an obvious sense, this is true. I have already shown that the mechanism of rent extraction prices the land-house package differentially with respect to quality schools, jobs and the good things of urban life. Housing tenure is an intermediate transmission belt that transforms one’s position in the complex contemporary class structure into housing position and outcomes. The Adkins approach, however, presents a static ‘categorical’ conception of class, rather than a ‘generative’ stress on how households, at all levels in the working class, gain access to and move between the five (or more) different housing categories identified. The key driving forces (causal mechanisms) are those that determine who gets what jobs and incomes, and who has access to family wealth and mortgage credit.2 Moreover, the five categories proposed are not mutually exclusive. I have already noted the partly overlapping interests of private landlord investors and owner occupiers. More importantly, people move between the categories over time, in all directions, and can occupy more than one category at any point in time. In Australia, most rental investors own one

1 It should be obvious from the context whether I am referring to land rent or the

price paid by a tenant to the landlord. 2 The distinction between ‘categorical’ and ‘generative’ theories of class was first made by the Australian political sociologist, Connell (1977, pp. 4–5). Specifically referencing Marx’s approach, he argued: “(h)ere is a theory of class as a structure generated by the operation of some fundamental and highly generative processes, whose effects ramify from the labour market into all other spheres of life. We may call this type of theory ‘generative’ (on the analogy of linguistics) to stress its most distinctive feature, the way in which elementary structures and processes are seen to generate a huge and complex reality. The stress here is on the processes producing social groupings, rather than the categories they produce; and on the activity of people, not merely their location in social space”.

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or two properties, as well as the house they live in (Beer, 1999; Berry, 2000). As one’s income increases in the labour market and the managerial hierarchy of entrepreneurial capital, entry to owner occupation and rental investment beckons. This is where the family, not the individual, emerges as the basic unit of social class. Labour market position follows from the educational and emotional careers of children in the home as they move towards independent adulthood. Those from impoverished family backgrounds, marked by the various indicators of poverty—unemployment, domestic violence, single-parent upbringing, educational disadvantage, discrimination, homelessness, etc.—become locked into poor housing situations on a continuing basis. This, in turn, reinforces their exclusion and intensifies existing patterns of overall inequality. The children of parents in affluent housing and stable family situations benefit from multiple financial, educational, health and cultural advantages that place them in a position to navigate highly favourable housing careers. The class-biased nature of health burdens has been startlingly revealed by the COVID-19 pandemic, as noted in Chapter 8. In a labor market hierarchy that, in any case rewards abstract, disembodied labor, the coronavirus crisis massively compounded existing inequalities. If you had the capacity to extract yourself, you were okay. You could work remotely. You could shop remotely. You could travel in your mind to remote locations… All of this abstraction was easier if you had a comfortable place to which to retreat with a good internet connection and an efficient, well-stocked delivery service. (Tooze, 2021, p. 98)

The interaction of housing provision and class structure has been ‘weaponized’ over the past fifty years, the era of neoliberalism. The balance of class power has bent in favour of capital over labour, reflected at the national level by the polarising change in relative shares of GDP. Stagnating wages have accompanied booming profits and rents.3 The effect of increasing income inequality has been to further bias housing provision towards the uber-affluent at the expense of lower- and middleincome earners. This has also imparted a process of hysteresis to urban 3 Detailed data on the nature of growing inequality, especially in the wealthiest 10, 20,1 and 0.1 per cent cohorts can be found in the World inequality Data Base. This and related data have been analysed in historical depth by Thomas Piketty in his two influential books (Piketty, 2014, 2020). See my comments on the lively contemporary debate on rising inequality, Berry (2017, Chapter 13).

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housing markets, by which I mean that house price rises tend to be locked in normalising house price inflation.4 Of course, there are periods in which house prices fall, though not usually at the same rate across all housing segments, other than in times of massive shock, like that caused by the global financial crisis. Losses are usually quickly reversed, at least in growing urban economies. In part, house price inflation stokes bullish expectations of future increases, a self-fulfilling process (Shiller, 2008). House price inflation is also deeply embedded in the basic circulation of capital and revenues through the residential sector, as described in Parts I and II. Due to the lengthy and uncertain nature of the production of the land-house package (and the prevalence of MRII), demand for housing tends to run ahead of the supply of housing in the short to medium term. Demand in a growing city is driven by the immediate needs and choices of workers and the entrepreneurial and rentier fractions of capital. The supply of new housing is constrained by the time taken and sequential commitment of labour power required to produce and realise the complex land-house commodity. The supply of existing houses depends on the (constrained) choices of current residential landlords and owner occupiers to sell. The sale of existing houses mainly represents a reshuffling of existing households within the existing stock, rather than an extension to the current stock, except where the sale leads to redevelopment at higher densities. David Harvey (1973) has provided a useful ‘space-packing’ metaphor to capture the time-constrained and inequality-enhancing operation of the urban housing system. We can begin to incorporate considerations stemming from the conception of absolute space if we envision allocation occurring across an urban space divided into a large but finite number of land parcels. Land-use theory then appears as a sequential space-packing problem (with the possibility of adding space at the periphery) [and one must add, vertically]. In the housing market with a fixed housing stock the process is analogous to filling up seats in an empty theatre. The first who enters has n choices, the second has n-1, and so on, with the last having no choice. If those who enter do so in order of their bidding power then those with money have

4 ‘hysteresis’ refers to the tendency for effects to persist into the future. It is a term applied to general inflation.

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more choices, while the poorest take up whatever is left after everyone else has exercised choice. (Harvey, 1973, p. 168)

We can tease this metaphor out a little to get a better idea of how it casts light on the operation of observable urban housing outcomes. . Participating in the metropolitan housing market is like trying to get a seat inside the theatre. People line up in order on the footpath according to the amount of money they have in their pockets. People file in paying at the door until the “house full” sign goes up. Those still outside miss out. . In rapidly growing communities the number of people queuing increases faster than the number of additional seats being added inside, so more and more people miss out. Ticket prices rise locking more people out. . People with more money pay for bigger and more luxurious seats, so attention shifts from the downstairs stalls upstairs to expanding the lounge and dress circle. . Rich people buy seats for their children. . In communities becoming more and more unequal, the queue outside lengthens as cheap seats in the stalls are ripped out and replaced with more luxurious upholstery. New arrivals in town with money push into the queue halfway up, while poor immigrants are politely told: “the queue starts at the back”. . Those at the back of the queue are too far from the entry door to know how far from the door they are. . Some near the back of the queue sneak in the back door of the theatre and stand up at the back out of sight. Others club together to buy a ticket and share by sitting on one another’s lap. Many give up any hope of getting into the show. . An attempt is made to extend the market by offering more viewing sessions. But the wealthy choose to see more films. . More cinemas are built further out in poorer areas, but the wealthy have cars, the poor still can’t afford the ticket prices and the planners take forever to approve construction and grant occupancy certificates. And so on….

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This metaphor refers to a number of phenomena like housing market segmentation, housing supply shortages and lags, socio-spatial inequality, inter-generational inequality, gentrification, overcrowding, peripheral marginalisation, homelessness (hidden and overt), information asymmetries and other forms of market failure. It is a useful narrative for focusing on why the poorest groups miss out and are most likely to have their situation worsen through time. “In a sequential allocation of a fixed housing stock in order of competitive bidding, the poorest group, because it enters the housing market last, has to face producers of housing who are in a quasi-monopolistic position…. Lack of choice makes the poor more prone to being squeezed by quasi-monopolistic policies (a process not confined to the housing market, but which extends to job and retail opportunities, and so on)” (Harvey, 1973, p. 170). And as the points above make clear, the power of those quasi-monopolistic forces is reinforced by the tendency of urban population growth and the increasing relative purchasing power of the richest groups to jump ahead in the queue, pushing less affluent patrons back towards a disappearing end, while also bending the architecture of the built form and the content of the programme to suit the demands of the affluent existing and newcomer households. The slow catch up of new supply constrains but does not resolve the inflationary dynamic of the urban housing system or its exclusionary impacts, nor does it relax the grip of hysteresis on prices and rents. Where the structure of demand for new and renovation of old dwellings changes in favour of the tastes of the affluent, increasing the quantity of labour power driving the basis of the house-land package, prices will inexorably rise. Every improvement in the facilities afforded by the dwelling increases end prices. Just as provision of sewerage to a developed block increases the land price component, so too does, for example, building in-home theatres, basements and spas increase the house price component. The extent to which design features become standardised, the price of the package rises across all or most segments. This has been described as ‘a mansion or no home syndrome’, usually as a criticism of government regulations.5 Clearly, as the upward price trend and the structure of inequality intensify, so residential social segregation assumes a baked-in spatial cast. The 5 Of course, not all design changes are inflationary and those that are may have broader societal benefits. I am thinking here of energy-saving innovations.

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neoliberal city is a deeply unequal urban artefact. The Australian historian Hugh Stretton (1970) in his influential book Ideas for Australian Cities argued that the two decades since World War II had seen the housing system contribute markedly to greater social equality in Australia, through the rapid growth of owner occupation. Colonial patterns of socio-spatial inequality persisted but were being gradually ameliorated by the process of suburbanisation that extended a range of life experiences to workingand middle-class households, never experienced in their pre-War concentration in the inner city. Whatever truth this thesis carried for that time neoliberalism subsequently crushed the life out of it. Metropolitan regions like Sydney and Melbourne have become more and more segmented as those in privileged positions in the labour market and wealth order have provided the flows of capital and revenue coursing through the built environment to create the new urban landscapes of inequality we observe today. The Australian situation is just one example of the forces generating the changing socio-spatial structure of the capitalist city globally. Nevertheless, the talisman of home ownership continues to be held out to workers and the marginalised as a valuable and realistic goal by democratic governments. For those who are struggling to access and once successful, maintain ownership of their house, the discipline imposed by the requirement to service their mortgage debt tends to focus attention (including at the ballot box) on gaining and maintaining secure full-time employment. The growth of owner occupation in countries like Britain and Australia has produced a significant class fraction of debt-encumbered households. Conservative governments consistently celebrated the fact and pushed policies to encourage the trend, with the hope that by giving workers a material property stake (and a mortgage debt to service), their proclivity for anti-capital combination and agitation would wane, contributing to the reproduction of capitalist property relations and institutions overall. It’s clear that this strategy has worked to some extent, driving a wedge between those who can and those who cannot access owner occupation, sharpening the fractional divide within the broader non-capitalist classes. But, by focusing the immediate attention of indebted homeowners on meeting their upcoming mortgage repayments it also makes them vulnerable to the intensification of exploitation in the workplace. Neoliberalism has delivered rising income inequality, stagnant real wages and growing employment insecurity, putting at risk the tenure security of homeowners (and the stability of the financial system built on mortgage finance).

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However, an interesting study of housing tenure and political activism in Melbourne, Australia during the early neoliberal period found that under some circumstances owner occupiers were more politically active in opposing public policies than similar households in the rental sector. Winter (1994) in his book, The Radical Homeowner, presents cases in which homeowners combined to oppose particular urban developments and wage policies of the state government. In particular, a prolonged strike by nurses in public hospitals was more strongly supported by nurses who were in owner occupation than by their renting colleagues. That made double sense in the Australian context where (as in the United States) tenant rights and protections are very weak. This suggests that, at least in some situations, the impacts of particular tenure relations are complex and unstable, from the point of view of the social reproduction of capitalism. As Chapter 4 makes clear, housing finance plays a key role in the production and realisation of housing under capitalist conditions of social reproduction. The huge institutional growth of the financial system— the ‘process of ‘financialization’—during the neoliberal era has seen loan finance play an ever large role in all spheres of economic life, including the housing system. Movements in interest rates, driven by speculative surges on global money markets, have imparted an increasing degree of risk and uncertainty to the challenge of adequately reproducing labour power. I develop the implications of this for housing and the broader economy in Chapter 14.6 At this point, it is only necessary to say that the process of deregulation and explosive financial innovation that gave us the Russian debt crisis, dot.com bubble and bust, the GFC and the subsequent Great Stagnation, ushered in a prolonged period of superlow interest rates that have supercharged rampant demand for housing, among other assets, contributing to the affordability problems caused by lagging supply and, thus, energising the housing-inequality feedback loop. The worldwide move of central banks led by the US Reserve to progressively jack up interest rates through 2022 is placing growing numbers of mortgaged homeowners in severe housing-related poverty. Neoliberalism has had a structurally important effect on the nature of urban land by converting it into a financial asset (Harvey, 1989; Haila,

6 It is not possible to fully appreciate the impacts of financialisation until we bring the state back in Part IV.

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1988). Just like the ownership of equities and bonds, land is a mechanism for appropriating income from the circulation of capital and revenue throughout the economy. In holding the whip hand,7 so to speak, financial capital can coordinate the circulation of capital and revenues through the built environment by enabling landowners to maximise rent extracted from the current and prospective uses to which land is put. Not only is the appropriation of rent socially necessary under capitalism by virtue of the key coordinating role it performs, but landowners must also treat the land as a pure financial asset, a form of fictitious capital, and seek, thereby, an active role in coordinating the flow of capital onto and through the land. The effect is to free up the land to the circulation of interestbearing capital and to tie land markets, land uses, and spatial organisation into the general circulation process of capital. (Harvey, 1989, p. 97)

Of course, some landowners are more active than others. The agents of property capital are forever on the lookout for chances to convert land and its current buildings into other configurations that can capture more rents generated through the urban system. But from time to time, sitting owner occupiers can also bestir themselves to improve or convert their land-housing asset to enhance future rents expressed in a higher current market value; every homeowner has a developer’s calculator in his or her carpet bag. Most don’t even have to stir. When a developer buys a singlehouse property in a neighbourhood, say, and replaces the house with four townhouses, the rental value of similar lots nearby rises. This process of ‘passive enrichment’ is partly responsible for the pronounced pattern of inter-generational inequality characterising contemporary urban life. Households who have aged in houses purchased in once new outer suburbs now benefit from rising DRI capitalised into current market prices as the urban fringe continues to move outward. It also helps to explain the forces driving gentrification in areas of rent-rich areas of the city, that has so typified the urban class structure in recent times.8 This chapter has focused on the role of housing and housing tenure in reflecting and reinforcing the complex class structure of the modern

7 By this I mean that banks and other credit providers determine who gets to own land and who does not. 8 To reprise the points made in Chapter 6, I am here referring to both differential and monopoly rent.

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capitalist city. Housing functions as a financial asset, in the sense that land rent represents an income return to the landowner in the same way that ownership of equities and bonds returns their holders income (explicit or implicit). The land-housing asset also provides an avenue for owners to store and accumulate wealth through time, as the spatial form emerges under the owners’ collective land use decisions (and the policies of governments). The era of neoliberalism has increased the fluidity of capital and revenues flowing through the built environment, hardening patterns of inequality forged in labour and financial markets. Researchers like Piketty (2014) have argued that this period has ushered in a new age of ‘patrimonial capitalism’ in which increasing income inequality and wealth concentration is leading to political domination by the superwealthy, and that this dominance is being entrenched through inheritance. As a major form of inherited wealth, housing plays a central part in this dynamic. Other long-lived commodities like gold, rare coins and art play a similar though quantitatively speaking, much less important role in the transmission of class inequality and power. It is my contention that it is unwise, if not impossible, to attempt to grasp the nature of contemporary capitalist class relations without placing housing at the centre of one’s view. Christophers (2020) points in a similar direction with his analysis of ‘rentier capitalism’, the trend in the neoliberal era of asset inflation, for ownership of ‘scarce’ assets like land, heritage housing, intellectual property, natural resources and digital platforms—all avenues for monopolising the flow of revenues—to entrench and intensify economic inequality, status differentiation and political domination. In highly urbanised countries like Australia that are integrated into a highly specialised position in the global division of labour, asset inflation is strongly focused on the built environment and mining sector, especially for fossil fuels and iron ore.9

References Adkins, L., Cooper, M., Konings, M. (2020). The asset economy: Property ownership and the new logic of inequality. Polity Press. Beer, A. (1999). Housing investment and the private rental sector in Australia. Urban Studies, 36(2), 255–269. 9 Similar arguments are put forward by Reich (2015, 2020); see my comments in Berry (2000).

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Berry, M. (1986). Housing provision and class relations under capitalism: Some implications of recent Marxist class analysis. Housing Studies, 1(2), 109–121. Berry, M. (2000). Investment in rental housing in Australia: Small landlords and institutional investors? Housing Studies, 15(5), 661–681. Berry, M. (2017). Morality and power: On ethics, economics and public policy. Edward Elgar Publishing. Chistophers, B. (2020). Rentier capitalism: Who owns the economy, and who pays for it?. Verso Books. Connell, R. (1977). Ruling class, ruling culture: Studies of conflict and power in Australian life. Cambridge University Press. Haila, A. (1988). Land as a financial asset: The theory of urban rent as a mirror of economic transformation. Antipode, 20(2), 79–100. Harvey, D. (1973). Social justice and the city. Basil Blackwell. Harvey, D. (1989). The urban experience. Basil Blackwell. Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press. Piketty, T. (2020). Capital and ideology. Harvard University Press. Reich, R. (2015). Saving capitalism: For the many not the few. Alfred A. Knoff. Reich, R. (2020). The system: Who rigged it, how we fix it. Picador Books. Shiller, R. (2008). The subprime solution: How today’s financial crisis happened and what to do about it. Princeton University Press. Stretton, H. (1970). Ideas for Australian cities. Orphan Press. Tooze, A. (2021). Shutdown: How covid shook the world’s economy. Allen Lane.

PART IV

Housing and the State

Capitalism as a societal system for organising the reproduction of material life emerge slowly and unevenly across the world, from its early career as a commercial bubble on the enterprise of feudalism during the middle ages, through its burst into the industrial mode analysed by Marx in the nineteenth century, all the way to today’s globalised form in the twentyfirst century. From the beginning, this was a slow burn revolution that reached across regions and the gradually evolving system of nation states. As such, and in each period, capitalism came in many forms and varieties, each marked by the manner in which the capital-labour relation gradually came to dominate the process of social reproduction. I argue in this section of the book that the way that housing provision is organised in societies like my own, a middle-level capitalist outlier in the Asia-Pacific region, is massively influenced by the modes of state intervention through ensuring the underlying institutional order for markets to function, instituting polices that modify how urban land and housing markets work, and sometimes stepping in and replacing the operation of markets when political forces allow. However, I also stressed that these modes of intervention, although emanating from a relatively autonomous institutional sphere, are constrained by the overall scale and scope of capital circulation in the economy. The fiscal operations of the state depend on deriving a regular stream of revenue from the circulation and accumulation of capital in the economy. Who pays the taxes and imposts, and how the proceeds are spent, is determined by the unequal distribution of power in society? These are inherently political questions answered

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in the rough and tumble of democratic politics. In the era of neoliberalism, where the institutional supports for oppositional politics have been undercut, the answers strongly favour the well-off, who use their wealth to drive capital accumulation and bias public policy and its gaps to their own advantage. Neoliberalism has been the perfect political-ideological regime for utilising and enhancing their class power. The freedom granted capital under neoliberalism has encouraged the financialisation of capitalism over the past thirty years. Large multinational financial institutions have come to dominate national economies, accounting for a growing share of corporate profits and unleashing the creation of an avalanche of ‘fictitious values’ that are inherently prone to cascading devaluation, with dire consequences for the real economy. Economic crises are increasingly likely to be sparked by financial breakdown. Attempts by national and international government agencies to rein in the excesses of financial speculation and corporate tax crimes, and hence reduce the near-certainty of future global crises, have to date been unsuccessful. A minor (very minor) exception could be the agreement among a number of countries to impose a minimum ‘on-shore’ corporate tax of 15 per cent on multinational firms like Google and Facebook. It remains to be seen if the army of tax advisers will beat off this latest attack on their clients’ wealth and their own, as they have in the past. In general, however, the debate over enhancing the prudential controls over the financial system have quietly been organised off political agendas around the world. The sound sleep of the regulator will only be interrupted by yet another ‘unforeseen’ financial implosion or another external shock like Covid-19. In the longer term, the slow-burn of climate change may consign these developments to the margins of concern. The chapters in Part IV place housing and land specifically, and the built environment ingeneral, at the centre of the impact of the interdependent (relatively autonomous) forces of the economy, civil society and the state in societies where the capital-labour relation predominates. This has been so since the late nineteenth century when governments began to be concerned about the negative social, health and productivity costs of poor and inadequate housing provision through purely market processes. These concerns matured through the disastrous experiences of the first half of the twentieth century, culminating in the rise and later demise of welfare capitalism after World War II, resulting in considerable state involvement in housing provision through all three modes of intervention identified, most of which were progressively dismantled after the

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early 1970s. Neoliberalism may now have run its race, depending on how Covid-19 impacts the world’s economies. The future may lie with varieties of illiberal state capitalism and even the mafia regimes of the ‘new despots’ (Keane, 2020). If so, housing provision and policy may come to look more like the transformation of the urban built environments in countries like China or Singapore. Assuming that this is not on the cards (immediately), the final section (V) of this books looks at some of the ways that housing provision under the varieties of capitalism that exist in democratic societies might be reformed to better meet the needs and enhance the life chances of the substantial majority of citizens who have borne declining real opportunities during the past three decades. In. keeping with the aims of this book, presented in the Introduction, these thoughts are indicative of where future analysis and political practice might go.

Reference Keane, J. (2020). The new despotism. Harvard University Press.

CHAPTER 12

Housing and the Myth of the ‘Free Market’

Far from improving the housing of the poor, as its proponents expected, public housing has done just the reverse. (Milton Friedman) Because affordable housing doesn’t yield acceptable profits to real estate investors, the only way a substantial amount of it is going to get built is if it’s publicly funded. (Shelterforce)

The two headline quotes represent positions at opposite ends of the long-standing debate over the appropriate role of democratic governments in housing provision, and indeed, whether there is any need for government involvement at all. Both positions are underpinned by particular views of the nature and role of housing in contemporary society, and the ways that housing systems function under capitalist conditions of production, exchange and consumption. At base, each approach to the housing question implicitly adheres to a particular view of human nature, taking a stand on what it is to be human. They also express different and opposing ideological and ethical viewpoints. This chapter attempts to sort out the differences in terms of the Marxist framework established in earlier parts. Clearly, as the chapter title suggests, the result will seek to undermine the Friedmanite reliance on market answers. Milton Friedman was a Nobel Prize winning economist, who for most of his life worked at the University of Chicago. Along with colleagues, Frank Knight, George Stigler and Jacob Viner, he formed what became known as ‘the Chicago School of Economics’. Friedman, Knight and Stigler also belonged to ‘the Mont Pelerin society’(MPS), formed in © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_12

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1947 by the classical liberal political philosopher and economist Friedrich Hayek1 . This initiative was intended to be, and has functioned as, a loose group of like-minded thinkers (mostly men) committed to maximising the rule of individual freedom by minimising the role of government. Their creed is apparent in the basic ‘statement of aims’ presented at the founding meeting on Lake Geneva, Switzerland at the bottom of Mont Pelerin. Over large stretches of the Earth’s surface the essential conditions of human dignity and freedom have already disappeared. In others they are under constant menace from the development of current tendencies of policy. The position of the individual and the voluntary group are progressively undermined by extensions of arbitrary power. Even that most precious possession of Western Man, freedom of thought and expression, is threatened by the spread of creeds which, claiming the privilege of tolerance when in the position of a minority, seek only to establish a position of power in which they can suppress and obliterate all views but their own. (Quoted in Wikipedia, https://en.wikipedia.org/wiki/Mont_Pelerin_Soc iety; accessed 4 October 2021)

For most MPS members, ‘government’; meant ‘arbitrary authority’, the control and constraint of the individual by a bureaucratic structure backed by sanctions including taxation and property confiscation. ‘Freedom’ meant absence of constraint on individual action, later called ‘negative liberty’ by the political philosopher Isiah Berlin in his inaugural professorial lecture at Oxford in 19582 . The ethos of and impetus for MPS derived from Hayek’s (1944) book, The Road to Serfdom, that painted a dire picture of the West, having defeated Fascism, now succumbing to a creeping socialism, in which large sectors of the economy and everyday life would come under the control of the regulatory state. This was a ‘slippery slope’ argument. Bit by bit the accepted freedoms of individual life would be pared away until life for the vast majority would

1 Other prominent foundation members were the Austrians, philosopher Karl Popper and economist Ludwig von Mises. Mises and his student, Hayek, were proponents of austere Austrian economics and viewed the looming ascendency of Keynesian fiscal policy as sounding the death knell of liberal society. As faithful methodological individualists, they denied any distinction between micro and macroeconomics and policy. 2 The lecture was titled, “Two Concepts of Liberty.’

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return to a type of feudalism in which the scope for individual choice and flourishing would wither and die. The prophetic arguments of Road to Serfdom were clearly overstated and in fact conflicted with Hayek’s major concern to prove the impossibility of predicting future developments due to inadequate information about how the uncoordinated actions of individuals would collectively work out over time3 . But they represented a clarion call to action in defence of free markets that were believed to resolve the informational problems of coordinating the myriad individual decisions of producers and consumers. By ‘leaving it to the market’, citizens would be protected from overbearing regulation of economic transactions that would always threaten to leak into controls over other aspects of the citizen’s life. Friedman(1962) in his most famous book, Capitalism and Freedom, took this position to argue that political freedom required, was impossible without, economic freedom defined by unrestricted operation of the forces of supply and demand across the capitalist economy. His basic premises were that freedom in any transaction requires voluntary agreement by all parties. Market exchange is the ideal typical case of mutual agreement since buyer and seller will only seal the deal if both benefit from the transaction. No one holds a gun to the head of either or both parties—unless it’s the government through the coercive power of regulation. Interestingly, for our purposes, one of Friedman’s first academic analyses of public policy referred to housing, most particularly to rent control as a means of improving housing affordability for low income households. Together with his Chicago colleague (Friedman & Stigler, 1946) he presented reasons why rent control in peacetime would actually increase the shortage of affordable housing by removing the profit incentive for developer-builders to increase the supply of new stock4 . Over time, rising populations would press on stagnant supply, locking existing low-income tenants into their current dwellings, since if they left where would they 3 This view was later formalised and generalised in the mathematical language of chaos theory. 4 This argument has survived the test of time. It is the automatic response of the prop-

erty lobby and their political representatives whenever public concern is expressed about the poor level of housing affordability. Their policy prescription is inevitably, increase supply by reducing/scrapping existing land, building and planning regulations that were originally introduced to control negative externalities and improve living standards. I shall have more to say about this in the next chapter.

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go, and locking new households out of the market completely, since there would be no vacancies. Far better they argued, to let rents rise reflecting demand for low rent accommodation, encouraging builders to build new rental dwellings. Rents would gravitate upwards at the low end but would reach an equilibrium point at which all those who were willing and able to pay the rent just necessary to return landlords and builders a ‘normal profit’ would be housed. The implication was that those unable or willing to pay that rent would become homeless. Rather than face this unfortunate outcome Friedman and Stigler suggested that such unfortunates could get a job and earn income sufficient to pay rent (recall Australian Treasurer Joe Hockey’s quote at the beginning of the previous chapter) or failing that, rely on private charity. It was no part of government to interfere with particular markets like housing. The government’s role was to set the appropriate fiscal and monetary policies to ensure stable growth. Preventing general inflation, rather than worrying about inflation in one sector, notably housing, was the extent to which government should be involved. Later, Friedman wound roll back government’s role even further by denying it had a mandate to indulge in Keynesian fiscal policy. Focusing on controlling inflation by a single policy measure, growth in the quantity of money in the economy, became the only game in town. This simplified vison of the free rein of the market treats housing like every other commodity. Whether it’s a house or an ice cream cone, the basic economic principles are the same. The twin forces of supply and demand together determine the price charged and quantity bought and sold. As if by a hidden hand, the market brings the wants and desires of workers as consumers into line with the profit drive of producers. Marx’s retort to all this (shorn of invective) was to the effect—but what determines the level around which supply and demand oscillate? What are the underlying real causal mechanisms and tendencies that influence the observable movements in prices? I attempted to outline in Parts I and II that under capitalism, the law of value regulates the circulation of capital in housing as for other commodities. But I also stressed that housing is different to commodities like ice cream cones, most notably because of its necessary material connection to the land. I also, in Chapter 11, stressed the significance of housing in capitalism’s evolving class structure. Marx’s distinction between the worker and his or her labour power allows us to see that all markets are not the utopias of equality in which both parties to a ‘voluntary’ transaction benefit. In what sense does a worker voluntarily agree to work 18 hours a day in

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dangerous conditions six days a week for barely enough to live on? This question occupies a significant part of Volume 1 of Capital dealing with working conditions in mid-nineteenth-century factories and battles over the working day. What is the real choice for workers here? It is to work for whatever wage the capitalist offers or starve. Free to choose (a title of a later book by Friedman) is, on the flip side, free to starve. Accumulated wealth grants real choice to the wealthy, either to live off the dividends of their wealth, throw their wealth into capital circulation in pursuit of self-expansion or consume it. Those with only their labour power only have the choice to sell it to an employer5 . If successful, they will be in a position to buy or rent a house, depending on the level of wages in relation to extant housing prices. If unsuccessful, homelessness looms. This is no ‘choice’ in any sense of freedom from coercion. Imminent starvation is as effective as a gun to the head in sealing exploitative transactions. The inherently unequal bargaining situation in labour markets has become much more lop-sided in recent decades, as the grip of income and wealth inequality has tightened, driven by institutional restructuring in favour of labour market ‘flexibility’. In Part III, I stressed the particular characteristic of the house as a home, a partly independent sphere of social existence for the members of the basic unit of social class, the family. The class-income situation of those working in the capitalist economy and their dependents will have their choices constrained by their position(s) in that public sphere. But the choices and life chances of individual members within the household will also vary. Under traditional patriarchal arrangements men will have a wider range of choices than women. Feminist analyses of the housing situations of women argue that the apparent opening up of paid employment for women has not overcome the culturally embedded gender inequalities in the home that are reinforced by discrimination, harassment and exploitation in the public sphere. In many cases, it has intensified the impacts of inequality. The increasing penetration of capitalist relations into the home is, as we have seen, blurring the separation of the domestic and capitalist spheres of life.

5 I have hammered this point throughout this book because it is central to demystifying the chief ideological defence of liberalism and orthodox economics.

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The exclusive focus of economists, like Friedman on the sphere of market exchange, represents a wanton disregard for the unequal (systematically biased) social context within which the wants, needs and aspirations of people are determined and the impacts on real lived outcomes realised. Such matters are relegated by orthodox economists to the realm of ‘exogenous factors’, the focus for other social scientists; the implication being that those disciplines are ‘softer, less ‘rigorous’, less ‘scientific’ enterprises than economics. The leader of the Chicago school of economics, Frank Knight, once commented that sociology was a case of ‘bad talk driving out good6 ! The strategic social and economic importance of housing is a particularly inappropriate arena for this collective, intellectual act of disciplinary self-denial. By shrinking the scope for analysing the political role of state intervention to a concern for setting and protecting private property rights, orthodox economics ignores much that is critical to an understanding of how housing systems ‘work’ under capitalism. This is no accident; nor is the lacunae innocent in its consequences. By refusing to seriously and systematically address the role of the state in housing provision, economists unintentionally reinforce the unequal real outcomes on the ground. Simple demand and supply analyses of housing obscure what is happening and prevent progress on identifying and rectifying weaknesses and gaps7 . It is only with great self-restraint that I have been able to reach this point in the book with only passing reference to the state, and the many ways in which government policy and its absence contributes to housing outcomes under capitalism. I have done so, in line with the methodology outlined in the Introduction, working systematically from the most basic structural mechanisms and tendencies to layer overdetermining tendencies in order to get closer and closer to understanding (explaining) the complex outcomes on the ground. Consequently, in the remainder of this chapter, I outline an approach that integrates state intervention with the

6 This aphorism is a play on Gresham’s law that says, ‘bad money chases out good’, a reference to the debasing of the currency in earlier times. Knight’s university was also home to the Chicago school of (urban) sociology. There must have been some interesting faculty lunches. Separate tables? 7 Of course, reliance on inadequate analysis can be used ideologically to advance the material interests of those parties vested in actual outcomes. Focusing public attention on the free, unregulated operation of property markets suits some interests very well.

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provision of housing in a developed capitalist economy, characterised by the features discussed in previous chapters. The vibrant and politically charged debates on ‘the Marxist theory of the state’ in the 1960s and 1970s, associated with Nicos Poulantzas and Ralph Miliband, sparked a renaissance in the critical assessment of the nature, role and impacts of state intervention in society and the economy8 . This represented a rejection of the liberal interpretation of the state as a neutral institutional sphere of operation, separate from civil society and the economy. The State in liberal democratic political systems assumed not just its own identity and functions but could and did operate as a sort of umpire, arbitrating between the opposing interests arising within the economy and broader society. In this view, economic citizenship (everyone equal as consumers) and political citizenship (everyone with a vote), overall harmony ruled. The work unleashed by the MilibandPoulantzas debate centred on what the latter called ‘the relative autonomy of the state’, the idea that the capitalist state was neither an independent and neutral presence nor what earlier Marxists had claimed, drawing on a sweeping comment in The Communist Manifesto, that the state was nothing but a committee for managing the common affairs of the whole bourgeoisie. This rhetorical flourish in 1848 by the young Marx and even younger Engels had hardened by the 1960s into Stalinist dogma. The recent approaches just noted sought to break this intellectual straight jacket and tease out the ways in which government institutions and policy interventions were both moulded by and acted upon the economy and broader society. This is unfinished business, and debates continue, sometimes flaring up and sometimes dying down. From the early 1970s, neoliberalism undid most of the political and intellectual underpinning of welfare capitalism and ‘the mixed economy’ that prevailed in Western capitalism after World War II. Neoliberalism, in turn, has come under increasing attack since the global financial crisis, austerity imposed policies to deal with resulting economic stagnation, the neoconservative geopolitical and military failures, the rise of authoritarian capitalism, and mounting concern over global warming. I make no attempt to summarise or critique this huge body of work9 . Instead, 8 Key texts were: Poulantzas (1973) and Miliband (1969). Later developments in state theory can be found in Jessop (1982, 1990, 2015) and the work of the French ‘Regulationist School’, associated with Michel Aglietta (1990). 9 But see, for example, Steger and Roy (2021); Springer et al. (2016).

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I focus on the ways that the state in capitalist societies like the US and Britain intervene in housing provision, modifying outcomes, not always or even usually with desired or intended consequences. What does the state through its various legislative and administrative avenues do in the housing space? And, just as critically, what does it not do? And why? I suggest that the actions of state institutions operating in a society where essentially capitalist relations of production predominate can be conceptualised in terms of their ‘modes of intervention’, defined by ‘form’ and ‘market orientation’10 . Form refers to whether intervention occurs by way of either regulation or allocation—that is, through authoritative command backed by legal sanction, or the use of fiscal instruments of public finance. Orientation refers to the three ways that the state relates to commodity production and market exchange in the economy. . Market-constituting actions or policies without which markets could not operate at all. . Market-supplementing policies alter some of the parameters within which capital circulates, leaving capitalists, workers and others ‘free’ to interact within the changed political economic environment. . Market-replacing policies suspend or exclude market criteria of profitability in favour of administratively determined measures of ‘social good’. Regulation and allocation are imbricated in all three types of market orientation. For free market exchange to operate in any society including capitalist ones, it is necessary for someone or something to define property rights; who has the generally accepted mandate to decide who controls scarce resources, how they are used and how they can be transferred to others? This is the prime market-constituting requirement. In traditional societies, values and norms emerge and solidify over the long period to answer these questions and hence regulate social exchanges in both market and extra-market contexts. Elaborate rituals of reciprocity and respect usually accompany and legitimate such social interactions. Behind the norms arise in tandem structures of authority and institutionally imposed sanctions aimed at those in the community who breech them. In 10 I introduced this notion of ‘modes of intervention’ in Berry (1986).

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growing commercial societies, the norms are formalised and codified to facilitate myriad market exchanges between strangers, often at a distance. The sanctions for breaking contracts are likewise formalised in legal codes enforced by specialised judicial systems. Even in societies with minimal government, Robert Nozick’s (1974) ‘nightwatchman state’, property rights, private and public, must be defined, protected and enforced in order for markets to function. This inescapably requires state institutions to regulate citizens and their economic activities11 . It also, inescapably, requires government to flex its fiscal or allocative muscles. Taxes and public borrowing must fund the expenditure necessary to establish and run the legal and enforcement agencies that enable market transactions to routinely occur on a secure and expanding scale. This includes financing the wages of ‘guard labour’, the judges, gaolers and politicians who monitor and enforce compliance. In the case of the land-house commodity, this means establishing land titling and registration procedures, that denote who owns what property at any point in time, who has access to or a claim on property on what terms and over what period. Historically, these seemingly mundane issues often sparked violent disagreements. In predominantly agricultural societies, access to land was central and arguments could lead to serious social unrest bordering on insurrection, as in the great peasants’ revolt in fourteenth-century England that almost brought down the Plantagenet dynasty and the commercial society that then flourished in London and tribal warfare today in countries like Papua New Guinea. I’ve already mentioned the land clearances and enclosures in eighteenthcentury Britain. In modern urban contexts, development depends on clear title to the land and its improvements. All agents engaged in the circulation of capital and revenues through the urban built environment must know exactly where they stand. Land developers advancing their capital to purchase raw land, labour power and earth-moving equipment must be reasonably certain that having turned their wealth into means of production and set labour to work, they will be able to sell the land once developed to the builders who in turn must be sure that they will be able to sell the completed houses to the house buyers, be they owner occupant or investor-landlord. Likewise, lenders to developer, builder and 11 Nozich plays with the idea of these functions being carried out by the emergence of cooperative private collectives, a long-held dream of anarchists, but nowhere has history suggested its long-term viability.

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buyer must have their expectation of being repaid with interest registered and protected. The various enablers, gatekeepers or exchange professional need reassurance that they will be paid for their contracted assistance in facilitating the sale of the land and its improvements, as will those who produce and sell the fixtures and appliances that go into the completed dwelling. This primary constitutive responsibility of government is not given. Historically, it took a long time for effective systems to develop and become standard. Different systems evolved across countries depending on how the land question figured in the growth of indigenous capitalisms. A new system of land registration was introduced in South Australia in 1858, generally called the ‘Torrens title’ after the politician who was most prominent in its promotion12 . It created a simple way of recording and registering land ownership, and an agency, the state land titles office, for facilitating its exchange between parties, while also registering the interests of third parties like mortgage lenders. Its simplicity and efficacy in avoiding disputes over the rights to land have meant that the Torrens system has been introduced in a number of countries13 . Beyond the land, a number of regulatory regimes impinge on the rule of market exchange pertaining to the house, the dwelling structure. For example, the contract law and its enforcement provide builders, buyers and suppliers to both parties with confidence that their mutual claims will be met. Procedures exist for arbitration and redress should they be required to settle disputes. Laws governing fair trading and consumer protection also provide a degree of comfort for market participants. Laws against fraud and its detection and punishment are important to establish an environment in which ‘free markets’ can operate. An advanced capitalist society could not function without these state managed marketconstituting arrangements in place. And all such pre-conditions must be 12 Sir Robert Richard Torrens was an Irish immigrant who eventually became South Australian Treasurer and Premier. Notoriously rude, litigious and violent, he spent time in gaol, was convicted and fined for common assault and won a libel suit and awarded a farthing in compensation. Returning to Britain, he was elected to parliament where he unsuccessfully tried to replace England’s creaky system of land exchange by deed, steeped in the common Law, with the South Australian system he claimed as his own. In fact, a number of people had worked to introduce the Torrens title, their names long forgotten. 13 The second take-up occurred in 1861 in the British Crown Colony of Vancouver Island. Ireland followed in 1892 and Scotland in 2003. Illinois was the first jurisdiction to introduce the Torrens system in the United States.

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financed. The capitalist state, like all regimes of government, is a tax state. Nozick’s image of an anarchist utopia in which these arrangements emerge organically through the goodwill cooperation of free individuals relying only on their ‘natural’ capacities to ‘truck and barter’ is as far from the class-divided reality of advanced capitalism as the two poles of planet Earth. Land use planning emerged in late industrialising Britain, in part to alleviate the negative externalities befouling the new industrial cities and in part to attempt to impose a degree of rational regularity on the chaotically developing metropolis. This was a heavily politicised and only partly successful exercise (Engels, 2021). The prospect for manipulating land uses to extract land rent has meant that planning has always been a politically contested terrain (see further comments below). The capitalist state is involved in a large range of market-supplementing interventions that impinge on housing provision. Given the internal institutional organisation of the state, these policy-based activities are often carried out by different agencies, raising the likelihood of different aims, conflicting outcomes and confusion. This is particularly so in federal systems of government, like the United States, Australia and Canada. For example, state government land use planning strategies may clash with the policies and implementation actions of local government agencies. The latter tend to be highly sensitive to the interests of local rate payers and electors, including land developers, while the state government looks to a broader urban development agenda. This contrast often leads to inter-government conflict over who has jurisdiction in matters, say of residential densification and infrastructure provision. The familiar cry of NIMBYISM by developers and the politicians they support pits them against existing residents wishing to preserve the current form of their built environment from the construction of high-rise apartments in their neighbourhoods. Significant angst and conflict accompany state or federal government plans to fund major transport and other infrastructural developments affecting particular locations in the city. Developments proposed for major extensions of ports, hospitals and retail facilities also stoke responses from local government and civil society organisations. Land use planning decisions are particularly prone to contradictory steering imperatives. This is because the stakes are so high. As I argued in Chapter 6, urban land rent generation and appropriation offer large potential gains to landowners. The property lobby of developers, builders, financiers and urban gatekeepers stand to gain significantly from policies

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that facilitate the ‘churn’ of urban land uses and ownership. As we’ll see in the next chapter, urban politics and the residential structure of the city are incomprehensible without taking this factor into account. Analytically speaking, land use planning regulations provide an institutional basis for the formation of what Marx called ‘absolute rent’ (noted in Chapter 6), a charge exacted by the landowner for access to the site of production stemming from the chronic shortage of such sites. In this case, the shortage is politically created through the administrative action of government agencies. This charge is capitalised into the sale price of the site that is offered with the planning approval attached. Hence, the basis of absolute rent in the urban context differs from the concept Marx tried unsuccessfully to apply in the case of agriculture. For planning decisions (especially re-zonings) that enable large-scale urban developments, this rental component can be hugely significant, both as to scale and broader impact across the city. This is observable in cases like the approval granted to major shopping centre developments, the designation of new urban transport corridors and mass re-zoning of agricultural land to support new suburbs on the urban fringe. The scale of the development gains to be made energises urban politics. A host of rules constrain the actions of mortgage lending, land conveyancing, the behaviour of real estate agents, surveyors and others providing services to buyers and sellers. Some of these are formally enforced through government regulation, some through the codes of conduct of professional organisations. But the effect, if not always the intent, is to influence the ways in which capital and revenues flow through the built environment and impact on the nature, location and price of the resulting dwelling stock. At the federal or national level, the monetary policies of the central bank have a massive impact on the overall outcome. A low interest rate environment, such as exists in the post-GFC state of a global glut of savings, encourages rapid land development and housing construction and house price inflation, as confected demand runs ahead of expanded supply. Conversely, the efforts by central banks to break the inflationary spiral of the 1970s led to a period of high interest rates for the following decade, that stifled housing production and the capacity of households to buy14 . In both periods housing affordability shrank but for

14 As the world experienced a sudden large inflationary spike in mid-2022, central banks around the world, led by the US Federal Reserve, began hiking official interest

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different reasons. In the first case too much, and in the second too little, capital and revenues flowed through the built environment. The taxation and expenditure policies of government agencies have major impacts on housing markets and outcomes. Taxes levied at various stages of the production and exchange of the land-house commodity include land tax, stamp duties, land registration fees, planning fees, subdivision levies, building certification fees, environmental and public health levies, open space levies and so on. These imposts collectively represent a deduction from the mass of surplus value extracted across the urban economy. Some of this revenue is ‘ploughed back’ into the built environment to facilitate housing production and exchange, some disappears into general government revenue, and figures effectively as a public charge for a licence to operate in this sector. But all such charges will, in total, be limited by the capacity of productive capital, including developers and builders, and their commercial and financial adjuncts to realise average profits over time. In other words, the price of the finished commodity will have to be high enough to return profits at appropriate levels to all capitals involved along the chain from breaking the first sod on raw land to the handover of keys to the final purchaser, plus the payment of government charges. In this way, the price of new housing is inflated, and its supply constrained by the intervention of government. However, without government intervention through regulatory and allocation mechanisms, housing markets would cease to function at all. People would return to the cave or more accurately, to self-providing shelter, reliant on non-capitalist communal structures of cooperation and collective selfprotection. Communities like the Amish and hippy communes of the 1960s and 1970s give a picture of what that might look like. State expenditures also influence housing outcomes, especially with respect to the provision of infrastructure like roads and recreational facilities, mainly through the generation of land rent for owners. The more government charges and expenditure facilitate the circulation of capital through housing production and exchange, the weaker the inflationary impacts on house prices and the supply constraint on new stock. Likewise, the more these urban facilities are funded by general taxation, the

rates. Mortgage rates quickly followed. It is not clear at the time of writing how far interest rates will rise, nor how impacted housing outcomes will be.

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weaker the direct impacts on house prices and new supply constraints15 . Other expenditures, for example, on technical training of building trades workers, have impacts on the supply of this skilled labour power pool and indirectly on the outcomes in housing markets16 . Governments also offer a range of subsidies to various agents in the housing system, including grants to selected purchasers, often as part of ‘first homeowner’ schemes. ‘Tax expenditures’ or rebates may be concentrated on agents, capitalists and non-profits, providing housing to particular groups as part of ‘affordable housing programs’, for example. These forces also reverberate through the markets for existing houses, as noted in Chapter 4. Broader government policies in the fields of immigration and social welfare also impact on the social demand for housing. Controlling the flow of migrants is one of a national government’s primary roles and responsibilities. Directed primarily at labour market supply and macroeconomic management, immigrant numbers are also a direct determinant of household formation and hence the demand for suitable dwellings. In a neoliberal world, excess demand for housing caused by high immigration tends to be exacerbated by the failure in the housing system to keep up. Leaving this system requirement to the property market only heightens house price inflation and affordability problems17 . Enough has been said here to demonstrate the broad scope and importance of state intervention in the housing system under capitalism. A consideration of the ways that the state intervenes in housing provision raises a vital insight about the nature of the capitalist state in general, notably, the dependence on the scope and scale of its activities on the steady flow of capital through the economy producing the mass of surplus value from which state revenues can be appropriated. Productive capital is the goose that lays the eggs which feed the many mouths employed in the public sector. In times of economic crisis, the flow of productive capital

15 This tendency is itself influenced by the general process of the formation of prices of production throughout the economy (see comments in Chapter 3). This further complication modifies the underlying dynamic described in a quantitative rather than qualitative sense. 16 A similar point can be made for the indirect impacts of government policies in the fields of health and education generally, in terms of the social reproduction of labour power discussed in Chapter 8. 17 Similar system lags will be felt in underfunded health, educational and welfare provision.

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is disrupted and state revenues decline. State expenditures, including in housing-related fields, are squeezed depressing housing market activity overall. The opposite can occur in times of economic boom18 . This observation stems from Marx’s distinction between productive and non-productive expenditure. The former refers to the advancement of capital in the production of value, including surplus value. The latter refers to expenditure that is sourced from revenues previously extracted from commodity (value) production, including expenditure by state agencies. Non-productive expenditure does not mean useless or superfluous expenditure. I have argued consistently that for capitalism to function at all, productive capital must complete its circulation through exchange to final consumption (realisation), relying on the commitment of various agents of commercial and financial capital and, I now add, the state in order to complete the circuit. Much ‘non-productive state expenditure’ is ‘indirectly productive’ in the same sense as the circulation of commercial and financial capital. The indirect impacts occur through shortening the average turnover time of productive capital. Public investments in urban transport infrastructure and services are particularly crucial in accelerating the circulation and accumulation of capital by, in Marx’s words, ‘the annihilation of space by time’. Finally, we are left with the third mode of state intervention in housing—market-replacing—involving direct provision to residents. Government agencies can directly wreak changes in the built environment, especially if the changes are large scale and require large investment funding. Throughout the twentieth century, public roads and port authorities remade large cities in the advanced capitalist world. Public housing authorities were active in some countries, notably post-world War I Britain. These authorities employed workers at wages, roughly comparable to the private sector, although some variation was due to the benefits some public servants received by way of job security and pension rights. Where strong trade unions represented public sector workers, their wages and conditions may have diverged from private sector standards. However, it is important to note that these long-term investments do not form part of the circulation of productive capital but are driven by the circulation of revenues extracted by taxation or public borrowing from 18 I refer here to tendencies. Counter-cyclical fiscal and monetary policies, some aimed at encouraging housing construction, are among the tools governments have used in times of crisis.

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the private sector and urban population. The advantage of public provision was that the end product was shorn of its full commodity status, since its price did not have to return the government agency a profit or even full costs. Although many capitals contributed to its production, through the inputs of serviced land, building materials, skilled trades and fixtures and fittings, government agency could, on public policy grounds, charge public tenants rents that failed to fully cover costs. That is, housing could be provided to targeted household at lower than market rents and the deficit born by the general taxpayer, as in the case of public schools and hospitals. This is a case of a proportion of accumulated social wealth being ‘devalorised’ or taken out of the circulation of capital. The popularity of public sector ‘direct labour’ provision of public housing by government agencies, corporations or QANGOs increasingly fell out of favour as neoliberal ideology captured public finance debates, especially in Britain during the Thatcher governments. Even before that, governments were actively looking for ways to disinvest in housing, preferring to rely on private sector provision, and the slow decline of public housing standards by underinvestment in maintenance19 . Neoliberalism provided ideological cover for dispossession by neglect. Government was no longer the solution but the problem in the pitchy performative phrase of President Reagan. In an equally direct attack on the public sector, a minor right-wing commentator stated “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub20 ”. The rolling waves of privatisation across countries with once vibrant, or at least breathing, public housing programmes partly re-commodified the sector by expanding the scope of capital circulation in the sector. Even when reforms relied on the drafting of non-profit housing associations and arms-length private property managers, the result was invariably

19 In the immediate aftermath of World war II, the Australian and state governments instituted a joint agreement to provide public housing to low income tenants funded by federal government loans, with rents tied to tenant income not market levels. However, within a decade, by the late 1950s, the scheme was changed to divert a significant share of the funds to support the sale of existing and new stock to homeowners (Berry, 1988). By the turn of the current century, the remnant public stock had shrunk to less than five per cent of the total dwellings, much of it hopelessly obsolete and unfit for purpose. 20 The quote was attributed in 2001 to Grover Norquist, President of Americans for Tax Reform.

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higher rents and reduced supply of housing affordable to low income households. From the viewpoint of the third decade of the twenty-first century, it is difficult to imagine an earlier world in which the living standards of the average worker and family rose consistently, when their most basic needs were provided by a combination of capitalist enterprise and government intervention; a world where all but a substantial minority (around 10 to 20 per cent in most Western countries21 ) were comfortably housed, and where average housing careers realistically offered the prospect of outright homeownership to most. But that was only fifty or so years ago. A stronger social housing regime and policy commitment has persisted in some European nations, by comparison to the Anglosphere, but within a collective environment that is increasingly subject to the neoliberal ethos and calculus. It has taken the world’s worst pandemic of modern times to remind international organisations like the IMF and policymakers everywhere that governments are the vital backstop when the routine circulation of capital is disrupted. People still have to be housed, fed and protected from disease. Governments everywhere have responded with emergency measures like rent and eviction freezes, income supplements, pressure on banks for mortgage moratoria and grants to emergency housing organisations. The problems of supply chain breakdown and the cessation of income flows to capitalists, workers, dependents and government itself remind us all of the tenuous nature of reliance on capitalist life-support. A simple-minded belief in the universal, untrammelled efficacy of free markets is no substitute for understanding what is actually happening in our housing systems of the twenty-first century, nor what we might do about improving matters. By introducing the state to the picture, housing provision is seen to be conditioned by the interactions between three relatively autonomous structural spheres of determination embedded in the capitalist economy, the recesses of civil society, including the home, and the state. None is in any sense ‘ultimately determinant’, as some Marxists following Engels would claim for the ‘economic’. The complex truth of the matter lies

21 This minority varied, of course, over time and across countries. In the United States, for example, racial factors discriminated against black Americans, reflected in lower owner occupation rates and significant socio-spatial segregation, including until the 1960s, exclusion from federally funded public housing.

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in the concrete ways that the three spheres interact in all their historical contingencies, expressing unintended and unforeseen outcomes. But, critically for a Marxist understanding, the forces driving the circulation of capital through the built environment are—to borrow a phrase from Ralph Miliband—determinate ‘in the first instance’. That is, capitalist relations of production generate tendencies that constrain broader social outcomes that in turn react back on and substantially modify what would otherwise arise. These tendencies and counter-tendencies cause real (actual) effects, the net result of which are observable empirically in housing production, sales, prices and socio-spatial patterns over time in the city. This position was stated in general terms in the method section of the Introduction and is reflected in the chapter order of this book. It has been the aim of this chapter to demystify the ideology of the free market, especially in the context of the housing system. Like all ideologies, the free market myth is far from innocent: “(t)his is the basic thrust behind what is known as neoliberalism or the market revolution—to depoliticize distributional issues, including the very unequal consequences of societal risks, whether those be due to changes in the global division of labour, environmental damage, or disease (Tooze, 2021, p. 11)”. Having cleared away the detritus of free market ideology and established the central role of state intervention in housing provision under capitalism, I turn to a more focused analysis of how housing is implicated in the developing wealth order and power structure of advanced capitalist societies. The significance of housing provision in this social dynamic will then become apparent.

References Aglietta, M. (1979). A theory of capitalist regulation: The US experience. New Left Books. Berry, M. (1986). The political economy of housing tenure: Critique and development of urban social theory, PhD thesis, University of Melbourne, Melbourne, Australia. Berry, M. (1988). To buy or rent? The demise of a dual-tenure policy in Australia, 1945–60. In R. Howe (Ed.), New homes for old: Fifty years of public housing in victoria: 1938–1988. Melbourne: Ministry of Housing and Construction. Engels, B. (2021). The Poverty of planning: Property, class and urban politics in Nineteenth-century England. Lexington Books. Friedman, M. (1962). Capitalism and freedom. University of Chicago Press.

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Friedman, M. and G. Stigler (1946). Roofs or ceilings: The current housing problem. Foundation for Economic Freedom. Hayek, F. (1944). The road to serfdom. Routledge & Kegan Paul. Jessop, B. (1982). The capitalist state: Marxist theories and meditations. M. Robertson. Jessop, B. (1990). State theory: Putting the capitalist state in its place. Polity Press. Jessop, B. (2015). The state: Past, present, future. Polity Press. Miliband, R. (1969). The state in capitalist society. Wiedenfeld & Nicolson. Poulantzas, N. (1973). Political power and social classes. New Left Books. Nozick, R. (1974). Anarchy, state and Utopia. Harvard University Press. Springer, S., K. Birch and J. Macleavy (Eds.). (2016). The handbook of neoliberalism. Routledge. Steger, M. and R. Roy (2021). Neoliberalism: A very short introduction. Oxford University Press. 6th ed. Tooze, A. (2021). Shutdown: How covid shook the world’s economy. Allen Lane.

CHAPTER 13

Housing, Wealth and Power

Along with the educational and fiscal regime, the property regime determines the structure and evolution of social inequality. (Thomas Piketty, Capital and Ideology) Wealth is power. An extreme concentration of wealth means an extreme concentration of power. The power to influence government policy. The power to stifle competition. The power to shape ideology. Together they are the power to tilt the distribution of income towards one’s advantage— in the marketplace, in governments, in the media. (Saez and Zucman, The Triumph of Injustice)

In the last chapter, I demonstrated that government intervention through regulation, taxing and spending influences what housing is produced, where and for what price, as a result of the policies of agencies located at the different levels in the political system. One important result has been to entrench and reinforce patterns of house price inflation observable in most capitalist societies over the past thirty years. In part this has resulted from popular demands for better, safer housing standards, in part from lagging productivity in the building and development industries and endemically from household formation running ahead of supply responses. Broader social demands for cleaner environments and more energy and eco-efficient emission-free living have also resulted in continuing price-enhancing changes to the dwelling stock. However, in this chapter, I am going to go beyond this market-focused view of housing to consider how the ownership of residential property © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_13

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fits into the broad structures of the wealth order and the expression of political power that reinforce the central position of the humble house as a case suitable for analysis and action. In the early 2020s, the current total market value of housing and land in the Western world at least equals and in some cases exceeds the total value of all other asset forms of wealth. This represents a relatively recent historical reversal. From World War I to the late 1970s, and especially following the massive destruction wrought during World War II, the patrimonial wealth order of the belle-epoque era (1880–1914) atrophied (Piketty, 2020). But in the neoliberal era, as argued earlier, patterns of inequality of income and wealth have hardened. Housing has become a financial asset and all asset classes have become fungible, transformable into social power through the market. The resurrection of the rentier is upon us. Like all class-divided societies, our current situation sees great wealth buy great social power, including the capacity to bend government action and inaction to suit the interest of the superwealthy. In liberal democratic societies, this manifests by way of unequal influence over elected governments and their bureaucratic structures. Patrimonial capitalism in which a very small wealthy minority becomes ever wealthier through the circulation and accumulation of capital and the appropriation of revenues is, if left unchecked, an almost perfect example of a self-perpetuating mechanism. I say, ‘almost perfect’, because the flaws are inherent in the contradictory nature of the basic structure of capitalism—its tendencies to economic crises and social unrest. Wealth held in the form of real estate offers particular avenues for extracting future wealth by using political power to bend urban development in ways that enhance land rents. Mobilising influence through property lobby groups, business associations and political donations and bribes, resulting planning and building regulations and infrastructure investments, can drive up the market value of individual plots that past a tipping point unleash a self-reinforcing areal logic. Wealth begets power that begets wealth that results in wholesale transformations of the urban spatial economy and ways of life. From this perspective, urban politics appears as a scramble to extract maximum land rents through state-facilitated redevelopment. However, it’s not simply a case of a wealthy elite whose members attend the same schools and universities, intermarry and routinely pass on their status and power to their children. Such elites exist and in some democratic capitalist countries can be seen to form a dominant

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class. But as important as the current patterning of income and wealth is at the top is, it is the overall evolution of the fractured class structure noted in Chapter 11 that has created a mosaic of cross-cutting interests that impinge on housing provision and its significance for politics and government policy. In short, material interests have been scrambled to an extent that politics cannot be simply ‘read off’ the primary class divide between capital and labour. The basic causal mechanism identified by Marx is now assailed by counter-tendencies that are having real (actual) effects. Processes of predatory capitalism involving force, fraud and coercion have “…become internalised within capitalism through, for example, privatisation, deindustrialisation or the erosion of pension and welfare rights orchestrated through the credit system and the deployment of state powers. Since this is an on-going internalised process, I prefer to call it “accumulation by dispossession” rather than primitive accumulation (Harvey, 2006, pp. xvi-xvii)”. In the same way that the interests of British workers in nineteenth-century textile factories were enhanced by the demise of traditional Indian handicrafts, the incomes, values and political commitments of skilled knowledge workers, middle managers and workers in strategic or monopolised industries partly oppose the individual interests and organised actions of the bulk of lower paid and insecure workers in other sectors.1 Internal division of the broad class of salary and wage workers into a hierarchy of income segments with different incomes, working conditions, lifetime income prospects and housing opportunities, weakens potential political opposition to the overall logic of capitalist circulation and reproduction. Around these major class segments, small capitalists and self-employed members of the remnant petty bourgeoisie scratch out an insecure income under the threat of crushing competition of large capital and the demands of the state and organised labour.2 Democratic politics magnifies the divisions in ways that enhance and protect the position of the wealthy elites. It does

1 In countries trading on natural resources, miners and those working heavy equipment can command rents on mining leases of strategic locations. This is particularly the case in Western Australia and Queensland with respect to Australia’s major global position in the export of iron ore and coal. 2 Organised labour has over the past century been the major counter-tendential force constraining the free rein of pure capitalism, and as such the main target for the attacks by large capital (as in union-busting) and conservative governments. These attacks were remorseless and highly successful under neoliberalism.

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so in different ways under the specific historical and institutional conditions that form each political economic instance. Thus, the ways that the pollical dynamic plays out in Britain, the United States, Germany, France, the Netherlands, Australia and New Zealand, for example, will reflect the particular trajectories that capitalism has carved out in each case. Consider, first, the United States. A constitutional republic, capitalism grew out of the transatlantic exports of small agricultural producers, immigrant workers and slaves. Accumulation proceeded initially from an initial specialisation in the British imperial system, and through dispossession of first nation peoples. The concentration and centralisation of capital gathered momentum after a revolutionary war of independence and a later civil war that ended slavery as a viable mode of production but at the social cost of a permanent racial divide, discrimination and conflict. By early in the twentieth century, economic inequality had reached its peak in the form of a rentier society before world wars and economic depressions destroyed its property base. But, as researchers like Piketty and others have demonstrated, rentier capitalism has made a comeback under neoliberalism, an era in which accumulation by dispossession has cannibalised domestic US working-class communities and on a global scale, workers and marginalised groups in ‘emerging economies’. The fate of a growing ‘precariat’ (Standing, 2011) and small investors in pension funds can be seen in the collapse of predatory capitalist companies like Enron. In this case, lifetime workers lost not only their jobs, and many their houses too, but also their retirement savings. This was only one example of a rash of bankruptcies, buyouts and plant relocations that turned once thriving company towns into social wastelands but not before companies like Ford and General Motors had ripped huge taxpayer bailouts from the US government and favourable planning and deregulatory regimes from lower reaches of the state. Bending taxation regulations has become an effective way for highincome and net-worth Americans to shore up (perhaps it would be more accurate to say, ‘off-shore up’) and enhance their incomes and wealth. By 2018, Saez and Zucman (2019) estimate that the lowest income groups pay an average total3 tax rate of about 30 per cent, the middle-income groups around 40 per cent and the billionaires (top 0.1 per cent) 23

3 ‘Total’ here refers to all taxes, not just tax levied directly on incomes.

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per cent. In other words, the US political economy works by government reinforcing, rather than reducing, economic inequality forged in the capitalist economy. To some extent, this effect is ameliorated through spending programmes that provide services and welfare support to much of the broad ninety-nine per cent but this in turn is constrained by the bias towards the higher reaches of the middle and working classes. The most malign impact of the ‘deadly simple mechanics’ of increasing inequality in the United States is explicit in the second chapter headline quote. Wealth is power in representative democracies. McLean (2017) and Mayer (2016) detail how wealthy US individuals like the Koch brothers financed the rise of the radical right and with the help of the Murdoch media facilitated the election of Donald Trump to the Presidency. Wealth exerts direct influence over elected representatives, helping to get them elected. More indirectly, the implicit threat of its future withdrawal or diversion to political opponents causes self-imposed limits to government action, including an orientation to non-action.4 More indirectly still, the possibility of lucrative post-government jobs in the capitalist economy encourages compliant behaviour while in government. These direct and internalised influences also apply to public servants, working day to day in the agencies whose policies materially impact on the wealthy. Many of the avenues of influence are legal in the sense of ‘normal’ lobbying which the wealthy are individually and through a complex set of trusts and think tanks well placed to exploit. Beyond that, great wealth can be turned to borderline and straight-out illegal methods of influence. Corruption flourishes, especially where media interest is focused elsewhere. But the political influence of wealth is not confined to moulding the internal structures and policies of the state, and the behaviour of its commanders and foot soldiers. Wealth buys media access to voters. An extreme example in Australia was provided by a mining billionaire, Clive Palmer, who started his own political party, standing candidates with no hope of winning but allowing him to spend almost A$100 million at the 2019 federal election aimed at defeating Labor Party candidates in Queensland, the state that proved decisive in delivering a victory (unexpected) for the incumbent conservative government. In the years since,

4 Lukes (1975) calls this ‘the second dimension of power’ or ‘agenda power’.

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Palmer has continued to bombard the Australian commercial media with a rolling series of anti-Labor messages.5 Palmer’s strategy is aimed at preventing effective government action on climate change and energy policy. But other less visible interests associated with property development exert a behind-the-scenes influence on housing and urban policies. In the same 2019 Australian election, Labor proposed a suite of policies aimed at curbing house piece inflation, including removing tax incentives for rental investors. Property interests mounted a telling ‘scare’ campaign against these policies by claiming that they would ‘crash’ housing values. This message resonated not only with the million or so petty-landlords but also with the owner occupying majority. Age was also a factor. Most retired Australians are homeowners, although increasing numbers retire still with some mortgage debt outstanding. The ‘family home’ is exempt from the asset test for the old age pension and acts as a potent mechanism of inheritance. Part of the message of the property lobby was that a future Labor government would remove this exemption and so threaten retirees’ pensions. This was imaginatively badged as ‘a death tax’. For the majority of current retirees, this would markedly reduce the lifestyles that they had planned for. It also upset younger members of the family, since the asset that they had expected to inherit would have to be liquidated to pay for the aged care of their aged relative. The Australian Labor Party learned its lesson. It ditched its progressive housing policy reforms in the lead up to the 2022 federal election. This clearly demonstrates that the power of property segments of the capitalist class extends to effective control of the political agenda, to determining what is not acted upon.6 The previous conservative federal 5 More recently, Palmer has extended his political attacks to the conservative federal government for being ‘too active’ on climate policy, by which he means insufficiently supportive of the domestic mining, especially coal, industries, from which he draws his personal wealth. The impact of his and other pressures from mining billionaires, supported by politicians representing mining regions, has been to turn Australia into a global laggard in the fight against climate change. Australia’s pariah status was publicly endorsed at the 2021 Glasgow COP 26 meeting. The new Labor government elected in 2022 has set about redressing Australia’s poor performance in this area. Palmer’s huge spend this time was insufficient to influence the electoral outcome. 6 The politics of non-decision-making also helps to explain the chronic inability of conservative Australian governments to take decisive action on climate change. The sectional interests of a minority of voters in rural electorates, represented by a minority political party defending large mining companies, especially in coal extraction and export,

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government had instituted yet another parliamentary inquiry into policies to reverse declining housing affordability. The chair of the committee conducting the inquiry had already, before the deadline for receiving public submissions, declared that the solution is obvious—more land supply, less government regulation. This is the song sung loud and strong by the rent-seeking interests comprising the property lobby. It is a clear demonstration of the role that ideology and inequality play in capitalist housing provision in countries like my own. Central to the dominance of the property lobby, the banks and other lenders play a vital role. Chapter 4 noted the dependence of all agents in the housing system on the routine circulation of financial capital. When that routine is broken, as it was during the GFC, all hell breaks loose, and the state is required to step in and restore some semblance of normality. In the residential sector, the balance sheets of Australia’s commercial clearing banks are heavily dependent on mortgage loans to house buyers and business loans to builders and developers. In the investment and shadow banking sectors, housing also figures as the key real asset backing all manner of financial securities. The self-interests of financial institutions and their compliance with the regulations of government prudential agencies bias lending towards the most credit-worthy borrowers, strengthening the patterning of inequality generated by the overall circulation of capital. The banks, like other members of the property lobby, have no interest in controlling house price inflation. Rising property values strengthen their balance sheets and increase their capacity and willingness to expand lending, resulting in greater profits built on the speculative accumulation of ‘fictitious capital’. The use of political power (whether direct or indirect) to drive policy in directions congenial to the wealthy is as effective in deterring state interventions that would harm those interests. The GFC offers ample evidence of this point. Not only was the massive bailout of the financial institutions under the Obama administration focused on the banks and their creditors, funding that could have been committed to saving lower income households from being evicted from their homes through a nationwide programme of debt forgiveness dried to a trickle. Although some economists wailed about the ‘moral hazard’ of rewarding those who

have been able to stymie major parties from addressing the issue in ways approached in other advanced capitalist political-economies.

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almost drove the economy off a cliff, most quietly bought the government’s line that they had to put out the fire first—that is, prevent the freezing of short-term credit from igniting a chain process of bankruptcies in the financial markets of the world that would bring down the whole economy. The problem with this metaphor is that in real life, after a fire, people rebuild an improved environment for the people who live and work there. In the aftermath of the GFC, however, once a degree of stability was achieved through massive fiscal intervention by national governments, it was back to business as normal. Moral hazard was not relegated to the dumpsters. No major financial executive went to gaol. They will do it again. The ideology of the free market still dominates public policy discourse in advanced capitalism. This ideology masks the realities of the real winners and losers in society, by tying the material and emotional lives of the majority to the economic roots of the power of the dominant class elites. Part of this ideological trope draws on memories of social mobility experienced during the middle decades of the last century. The idea that one can work hard and ‘get on’ and that one’s children will climb the economic ladder has been cruelly crushed for the majority, but the hope lingers and helps defuse potential anger and resistance. The fracturing of the working class and petty bourgeoisie in the face of the rise of monopoly power and the associated rent-seeking circuits of asset inflation has weakened the capacity of ordinary workers and marginalised groups to resist. Contemporary global capitalism has effectively stripped away the gains made by labour during the long post-war boom. Stagnant real wages, persistent unemployment and underemployment, homelessness, ill-health and failing health stalk the bottom two-thirds of the class structure. In the scramble for the lifeboats, many drown. For those clinging on, homeownership remains the main means of salvation. For the elderly, single women and the young, permanent tenure in the private rental sector means a life of chronic insecurity and powerlessness. No one is looking after their interests. The current institutional structure of material and ideological interests relegates them to the periphery, a growing pool of people ‘excess to requirements’, a new reserve army, but with no hope of eventually being redeployed. This last point is important. Homelessness and poverty are two sides of the same coin, a coin debased by the political power of wealth. The lack of appropriate housing, like being poor, is not an accident or due to individual moral failings. It is to be expected in a system

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where most of society’s material resources and stored wealth (including that embedded in the built environment) are controlled by the political economic dynamic of capital accumulation. The deliberate starving of tax revenues to the capitalist state limits the extent to which adequate social provision can be achieved for those people who miss out, the people who do not manage to get and hold onto ‘good jobs’. The triumph of the neoliberal state is marked by the success in instilling a widespread belief in the possibility and desirability of cutting taxes, especially on the rich. Whenever the progressivity of the personal income tax is reduced, inequality thrives, as it does when broad-based consumption and poll taxes are levied. One of the most lucrative and unproductive activity in today’s global economy is provided by the ‘tax planning’ industry, the bevy of accountants and lawyers that mine tax codes to find ways of minimising their clients’ tax liabilities. As the dumps in 2016 and 2021, respectively, of the Panama Papers and the Pandora Papers demonstrated these activities are complex, opaque and range from the legitimate to the borderline to the outright criminal. Complex webs are used to hide, or disguise incomes generated in some jurisdictions where they would otherwise incur substantial tax liabilities. The exposés also showed that property, residential and commercial were prominent vehicles for avoiding and evading taxes by participants in both the formal capitalist and the black economies. That is, large multinational companies with household names and drug cartel lords, alike, draw on the services of the big four accounting firms and a host of lesser bottom feeders in the race to strip revenue from the capitalist state. “Today, close to 60% of the—large and rising—amount of profits made by US multinationals abroad are booked in low-tax countries. Where exactly? Primarily in Ireland and Bermuda (Saez and Zucman, 2019, p. 22)”. These authors note that the diversity of tax havens and country source of tax cheats, and the complexity of the arrangements prevent an accurate geo-location of the hidden wealth involved. They, therefore, refer to the resting place of hidden wealth by the generic term ‘Bermudaland’, an island somewhere in the Atlantic Ocean. The consequence of the fact that some 30 trillion dollars or more of wealth has evaded legitimate taxation is threefold in our context.7 First, the incomes laundered to Bermudaland come back to the developed 7 This is the initial estimate given in the leak of the Pandora papers in October 2021. Some thirty-five political leaders and a hundred billionaires, business leaders, media

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world through the purchase of assets in the built environment, swelling the demand for land assets in large cities and resort regions and driving up prices. In some cities like London, New York and Sydney, this is arguably a major cause of house price inflation.8 Second, and consequently, the prospects of those in the lower reaches of the income distribution find it even harder to get housed. Finally, the shrinking revenue base of government further constrains attempts to provide a minimal social base for all, in terms of health, education and shelter. But the most devastating consequence of increasing wealth concentration at the top is that it undermines the structures and performance of liberal democracy itself. New forms of illiberal representative political regimes are demonstrating that capitalism can function well enough without the ideological cover of democracy. To be sure, new ideologies that replace liberal notions of freedom are being constructed around ideas of the nation, religion or ethnic identity, as in countries like China, Singapore, Turkey, Poland, Hungary and Russia. As it becomes clear to an increasing number of voters that the system-as-it-is has become toxic to their interests, their aspirations, their futures in favour of those living in a separate world of luxury and opportunity, they lose the trust necessary for democratic politics to cohere. This withdrawal of faith in the democratic institutions of the state reinforces the power of wealth to selfexpand through unconstrained capitalistic enterprise and rent-seeking. As noted earlier, the inequality project is self-energising. Capitalism is, as Marx stressed, a deeply contradictory beast. Inherent in its DNA lurk flaws that threaten to derail the smooth process of capital accumulation. I have already quoted Piketty’s claim that contemporary capitalism is on the road back to a form of extreme inequality reached in the decades before World War I. Now as then, capitalism has become too successful. Labour has been cowed and the state that grew out of two global wars and the Great Depression, hamstrung by a combination of forces has led to its shrinking ability to regulate the excesses of and provide a floor under the polarising impacts of free-running capitalism. This is not without consequences, for capital and the state. A new populism is haunting the advanced capitalist world. It manifests in liberal companies, organised crime figures and celebrities are named, from almost one hundred countries. [https://en.wikipedia.org/wiki/Pandora_Papers; accessed 15 October 2021]. 8 Of course, this inflow of income is also being parked in other assets like art, fine jewellery and Premier League football teams.

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democracies as a growth of extreme right-wing political movements and leaders. This was dramatically revealed by the election of Donald Trump to the US Presidency and his subsequent takeover of the Republican Party. It also arose in Britain over Brexit, in the increasing popularity of ultra-nationalist political movements in Austria, Germany, France and the Netherlands, and in even more authoritarian forms in Poland, Hungary and the Baltic States, where a new model of illiberal capitalism is partway towards the state capitalist world of China. Much of this populist backlash against capitalism-in-the-container-of-liberal-democracy has been cast in cultural, ethnic and racial terms. But sheer material want and insecurity is also energising popular resentments and revolt. For the first time in almost a century, most people in the West cannot see themselves headed for a comfortable retirement and their children for a better life than they had.9 In the teeth of the COVID-19 pandemic, the economic historian Adam Tooze commented, looking at the remarkable events of ‘shutdown’ in 2020: It was hard to avoid the sense that a turning point had been reached. Was this, finally, the death of the orthodoxy that had prevailed in economic policy since the 1980s? Was this the death knell of neoliberalism? As a coherent ideology of government, perhaps. The idea that the natural envelope of economic activity could be ignored or left to markets to regulate was clearly out of touch with reality. So too was the idea that markets could self-regulate in relation to all conceivable social and economic shocks. Even more urgently than in 2008, survival dictated interventions on a scale last seen in World War II. (Tooze, 2021, p. 13)

It is an open question as to how stable and conducive to the survival of capitalism, the new political regimes will prove to be. New forms of understanding and analysis not dreamed of in Marx’s philosophy will be needed in coming years to get a grip on what is happening. If history is a guide, some of the axes of inequality and social conflict around accumulation by dispossession will focus on land, housing and the nature of the urban environment. It is only by widening one’s view that we can fully appreciate how important finding answers to the housing question in a volatile world now is. Extremes of housing standards and opportunity

9 I discuss these developments in detail in Part II of my book, Justice and Democracy (Berry, 2021).

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are very visible indicators to the dispossessed of their subservient status in today’s world, and a powerful inducement to do something about things. The ownership of residential property is a central component of the wealth order and the flexing of political power in the contemporary world. The house as home is also potentially a locus for populist resistance to the impersonal and socially dysfunctional flow of capital through the built environment of the capitalist city. It also offers resources, material and mental, at the household and local community levels to attack inequality and improve environmental sustainability. Such potential needs to be mobilised. Some ideas along these lines are presented in the final part of this book.

References Berry, M. (2021). Justice and democracy: A progressive agenda for the Twenty-First Century. Edward Elgar Publishing. Harvey. D. (2006). The limits to capital, the Verso edition. Verso Books. Lukes, S. (1975). Power: A radical view. MacMillan. Maclean, N. (2017). Democracy in chains: The deep history of the radical right’s stealth plan for America. Viking. Mayer, J. (2016). Dark money: The hidden history of the billionaires behind the rise of the radical right. Doubleday. Piketty, T. (2020). Capital and ideology. Harvard University Press. Saez, E., & Zucman, G. (2019). The triumph of injustice: How the rich dodge taxes and how to make them pay. W.W. Norton & Co. Standing, G. (2011). The precariat: A new dangerous class. Bloomsbury. Tooze, A. (2021). Shutdown: How covid shook the world’s economy. Allen Lane.

CHAPTER 14

The Housing-Macro Nexus

The complexity of modern finance has been designed, and has operated, principally to benefit financial intermediaries rather than the users of financial services. (John Kay, Other Peoples’ Money)

At various points in the analysis to date, I have commented on the central role that finance plays in housing provision. Much of this focus has been to do with the way that interest-bearing capital is advanced to capitalists, small businesses and final owners to produce, exchange and own the land-house package. Although not directly productive activity, it is inconceivable that the scale and scope of transformations in the urban built environment evident in cities around the world would have been possible without the intervention of this fraction of the capitalist class. Credit, as Marx was the first to clearly articulate, is critical to understanding capitalism as a dynamic, coherent (though contradiction-prone) way of organising social reproduction, though he did not get around to fully explaining why.1 Just how important Marx thought this piece of unfinished business to be is difficult to tell. He thought the analysis of money of sufficient importance to place it before his investigations of the circulation of capital. But he 1 Though as Harvey (2006) notes, Marx’s notes on money were left in an incoherent tangle and we only have access to those fragments included by Engels in volume 3 of Capital.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_14

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also insists that the origin of profit (in surplus value) could be understood without appealing to any of the categories of distribution. The analysis of credit, finance and the circulation of interest-bearing capital is therefore left until after the analysis of general movements in even the rate of profit. It is doubtful that this tardy introduction of credit can be justified. Even en route to his derivation of the tendency of a falling rate of profit, Marx frequently indicates that this or that problem could not be resolved without consideration of the role of credit. (Harvey, 2006, p. 239; emphasis in the original)

As I demonstrated in Chapter 4, financial capitalists mobilise the accumulated wealth resources unequally spread throughout society and advance them as money capital to productive and commercial capitalists (and consumers) in return for a promise to be repaid with interest when the yet to be commodities are produced and finally sold. This advance is made against a future contingent event, a ‘fictitious value’, rendering the advance ‘fictitious capital’. Everything has to go smoothly for that capital to be rendered ‘real’, ex post facto. Until realisation by sale, the capital of all agents is frozen in the commodity form. Once produced and sold, assets in the built environment like houses can undergo devaluation or revaluation through processes of physical depreciation, functional obsolescence, renovation and land redevelopment to ‘higher uses’. Movements in the terms of financing, the range of interest rates, reflect judgments among lenders as to the risks involved in holding promises based on the inherently uncertain fictitious values of new housing and the changing market values of existing houses, and on the probability that borrowers will meet their loan commitments. In general: The result is a world that Marx calls ‘fictitious capital’ circulation. Banks leverage their deposits to lend out a multiple of the assets [actually, liabilities] they actually possess. Their loans can be three times or in periods of ‘irrational exuberance’ as much as thirty times the assets they have on deposit. This is money creation over and beyond that needed to cover current value production and realisation. This money creation takes the form of debt and debts are a claim on future value production. An accumulation of debts is either redeemed by future value production or devalued in the course of a crisis. All capitalist production is speculative, of course,

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but in the financial system that characteristic is heightened into a supreme fetish. (Harvey, 2018, pp. 40–41)2

This way of looking at the anatomy of housing provision under capitalism takes what might be called a micro and meso stance, the view of the agents involved, individually and at the sector level. But housing is a good example of the dictum that ‘the whole is greater than the sum of the parts’. Housing and land development have important implications for how the economy as a whole performs and, on occasion, breaks down. The forms of fictitious values and paper instruments expressing them that have been spun from housing are legion. So too are the risks of default and devaluation of those ‘securities’. Economic crises are often, even usually associated with ‘financial distress’ in credit markets supporting housing production and purchase. The GFC is only the most extreme example of the way that housing finance almost brought down the global capitalist economy. Historically, this unfortunate instability in real-existing capitalism was addressed by national governments instituting central banks, which act to control interest rates and liquidity though regulatory and ‘open market’ operations. Cooperation between the central banks of the major economies is usually successful in managing instabilities that might reverberate through the global capitalist system. This was achieved when, for example, under the leadership of the US Federal Reserve, the 2008 credit crunch in short-term money markets, built on a pyramid of housing-related securities, threatened the solvency of the large banks throughout America, Europe and Japan.3 The same fire-fighting phalanx of central banks rode to the rescue during the COVID-19 pandemic, as a permanent regime of low interest rates was instituted to complement expansionary fiscal policy of national governments thrown onto a warfare footing.4 2 Marx adds that the financier has ‘the nicely mixed character of swindler and prophet’ (quoted by Harvey, 2018, p. 41). 3 See Tooze (2018) for a detailed account of the actions of the central banks in this case, and the continuing aftermath by which global liquidity was maintained. Wolf (2014) is also a useful guide. 4 Tooze (2021) also provides a compelling analysis of the fiscal and monetary policies directed by the central banks and Treasuries of the world’s leading economies to counter the economic impacts of COVID-19; the total fiscal injection totalled a mindboggling US$14 trillion and official interest rates were pushed down to zero, dwarfing the interventions unleashed in response to the GFC.

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It is this macroeconomic pattern of intervention by governments that has been a material driver of entrenched house price inflation in the major cities. At a deeper level, the circulation of capital into the built environment expresses what Harvey (1982, 2006) called ‘capital switching’ from the primary to the secondary circuit of capital, from the production of commodities the use values of which are immediately consumed to those like housing and items of fixed capital that are ‘used up’ over the longer period. The structural sources of capital switching stem from the three deep causes of economic crisis in capitalism: the limited consumption of the working and marginalised classes, disproportionalities between industry sectors and the tendency for the general rate of profit to fall. But there are limits as to how viable capital switching is. Eventually, ‘crises of disproportionality’ render further advances to produce new houses unprofitable. Lagging labour productivity and stagnant wages impact negatively on total consumption and the profit rate. Capital flows dry up. Wealth goes to sleep. More accurately, it goes in search of safe havens or speculative gains, depending on the risk appetite of the wealthy. Thus, as the mainstream economy flounders through declining innovation, productivity and investment opportunities, the shadow accumulation of asset values takes flight. The market values of houses, land, equities and other traditional targets of security and speculation soar, while the profits of capitalist enterprise and wages stagnate. It is in this sense that John Maynard Keynes (1973/1936, p. 159) uttered his famous comment: “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done”. This quote is justly celebrated and repeated as a pithy and well-targeted arrow to the heart of orthodox finance and economics. What is less remarked upon is the passage that immediately follows, namely: The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism—which is not surprising, if I am right in thinking that the best brains of Wall Street have been in fact directed towards a different object. (Keynes, 1973/1936, p. 159)

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This sardonic observation applies prophetically to the arguably criminal performance of the shadow banking system during the GFC, when large players like Godman Sachs actively bet against their clients to reap huge speculative gains. ‘The Big Short’ made billionaires out of the losses of millions. The received theory of banking is that the banks exist purely as a conduit to concentrate the disparate savings of depositors and direct them to borrowers to finance productive, growth-enhancing investments, in the way suggested in Chapter 4. In fact, banks and other financial institutions have, under advanced capitalism, increasingly come to use ‘other peoples’ money’ to boost their own wealth. Having become ‘too big to fail’ without bringing the whole economy crashing down, they have held the whip hand, not only over borrowers and savers, but also over national governments and international organisations. The GFC added another layer to their supremacy; it came to light that they were also ‘too interconnected to fail’. If one domino fell, so to would they all, bringing the world’s economies with them. By the second decade of the twenty-first century, only around 10 per cent of global financial transactions were tied to the sale of commodities; the vast bulk was accounted for by money flows of an increasingly speculative nature between financial institutions on a global scale. Modern capitalism has seen a partial decoupling of productive and speculative capital circulation, facilitated by the financialisation process.5 The creation of fictitious capital through the credit system has always figured as an important, in fact necessary, bone in the anatomy of capitalism. But the unhealthy ‘calcification’ resulting in the disproportionate growth of finance in recent times is undermining the viability of capitalism as a social system of reproduction, while stoking its inherent instability. The chain of interacting effects goes as follows. When capital is circulating and accumulating apace, when as Keynes put it, animal spirits are up, the disposable income of workers, managers, senior executives and wealthy rentiers are driving buoyant demand for commodities in general and selective lifestyle commodities like housing in particular. Patterns of enhanced household chain movement in ‘hot’ property markets see considerable upgrading and new household formation occurring. The more unequal 5 “Finance is an especially attractive field for fraudsters and shysters. And some consumers are mugs—greedy and credulous people who naively conspire with those who intend to steal their money” (Kay, 2016, p. 260). There is a growing literature on this topic. See Aalbers (2016); Kalman-Lamb (2017; Ye¸silba˘g, M. (2020).

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the distribution of incomes during the boom, the more biased demand and upgrading is towards the luxury end of the housing market. Land rent values in favourable locations rise disproportionately, attracting property developers to brush off architects renderings and phone the banks. The latter direct their business and mortgage lending towards the rising numbers of capitalists and households seeking to enter the housing race, to get in before it’s too late. FOMO (fear of missing out) permeates the property market, affecting all agents and the media. Housing booms are a classic case of the triumph of ‘irrational exuberance’.6 In fact, from the point of view of the banks, there is nothing irrational at all. They are simply doing their job, lending against the rising collateral market value of assets, existing or in the process of becoming. From the house owners’ viewpoint, the increasing market value of the dwelling encourages ‘equity withdrawal’, re-mortgaging to renovate and/or invest in rental housing, and purchase other commodities like new cars, white goods and holiday travel, for instance, with the active encouragement of mortgage lenders and a host of investment advisers, many of whom receive commissions from the lenders to which their clients are shepherded. There are, however, deeper currents. As credit pours into the built environment driving up land-housing prices in the short term, the banks’ balance sheets are strengthened, allowing them to lend more against their enhanced capital base,7 further fuelling buoyant housing markets. Bottom feeders in the housing finance sector are attracted by easy pickings, offering borrowers turned away by the mainstream banks finance at higher than bank interest rates. Government inducements and subsidies can reinforce rising demand. Financial engineering provides a host of new loan instruments, poorly understood by borrowers and government regulators. The ‘smartest guys in the room’ are working for the whales and sharks. There are three other forces feeding into the housing boom. First, the jump in house prices leads to a ‘wealth effect’. People feel wealthier, more secure about the future and so take on more debt to enhance their 6 This term was the title of a book by Robert Shiller (2000) drawing on a comment made by US Federal Reserve Chair Alan Greenspan in 1996 ostensibly to calm nervousness about rampant equities markets during the internet bubble. In the third edition of this book (2016), Shiller extended his analysis to account for the role of housing in sparking the GFC. 7 I am referring here to the normal model of ‘fractional reserve banking’, where banks keep only a small proportion of their deposits on hand, lending out the bulk to borrowers determined to be ‘credit worthy’.

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current lifestyles, reinforcing rising housing demand and prices in a positive feedback loop. Second, rising incomes and wealth spills over into increasing demand for consumer durables like white goods and home cinemas. Finally, as noted, the inflation in the prices of existing houses prompts new construction and the renovation of existing dwellings. All factors, enhanced collateral value of the housing stock, increasing wealth, increasing demand for consumer goods and new construction together boost aggregate demand and growth in the economy, with rising incomes generated fed back into a continuing self-reinforcing spiral upward in output, income, credit provision and housing prices, the whole process exhibiting pronounced characteristics of positive feedback. The boom lasts as long as the general climate of irrational expectations persists. A small shock, like a developer bankruptcy or bank failure, can bring the upward spiral to a sharp halt and spark a reversed spiral down in demand, prices, construction, lending and wealth. The falling collateral value, income, credit, household consumption and construction factors coalesce to deliver a property market crash. In the case of the GFC, the forced takeover of a couple of small French investment banks in 2006 and the first depositor run on a British bank (Northern Rock) in a century woke the financial sector up. The subsequent insolvency a few months later of one of the big five American investment banks, Lehman Brothers, sent financial markets into freefall. Short-term credit dried up, and contagion threatened to bankrupt some of the largest financial institutions in the world. Now, the process of positive feedback had a malign depressive effect, as animal spirits were quelled, and FOMO turned into FOBT (fear of being trapped). Like a stampede in a burning theatre, investors rushed to get out. The US government and Federal Reserve were forced to step in and bail out the banks to save the system. The music died. The party was over. The real American pie was on the table. As the dust settled, and the post-mortems began, it became clear that housing lay at the base of the collapse. This was the real asset from which a mountain of fictitious value was conjured in a positive feedback loop that brought the whole capitalist world to the brink of a 1930s-style depression. The circuit of financial capital had decoupled from the circulation of productive capital, the casino was in full swing, with disastrous consequences for everyone, except those insiders who got out first. It turned out that no one knew where the risks of default on the esoteric menu of financial securities actually lay. Regulators, it became clear were

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also in this club of the blind, as were the private credit ratings agencies whose risk models the big investment banks had comprehensively gamed. The risk models themselves were found to have been based on unsound parameters. This was a classic case of where crisis in the real economy was ignited by developments from within the bowels of the globally articulated financial system: Although this could not have been foreseen at the time when Marx was writing, the development of the capitalist system was not towards the ‘subordination’ of finance to industrial capital, but in fact towards the subordination of industrial capital to finance. Hence, the sluggish development of industry in capitalist countries that have come to be dominated by rentier capitalism, most notably in the United Kingdom and the United States from the 1880s through to the 1930s and from the 1980s onwards. (Toporowski, 2020, p. 23)8

In short, the GFC made crystal clear what had been slowly emerging for generations—‘The Great Reversal’ had arrived. Finance was now in the driving seat, economically and politically. This ran against the received wisdom in macroeconomics, both orthodox and Keynesian. For New Classical economists, the problem of economic crises had been despatched to the vaults of history. Didn’t their models prove that such events were impossible? So twentieth century! New Keynesian economists admitted that mild recessions were possible but equally they could be treated by mild policy interventions. Keynes himself regarded regular recessions as likely, due to persistent underinvestment by the private sector that could be treated by government monetary policy to keep long-term interest rates low and fiscal policy to boost public investment in infrastructure, including housing. The Polish Marxist economists Michel Kalecki, drawing on Marx’s circuits of capital analysis in volume 2 of Capital and his analysis of ‘underconsumption’ (two of the three crisis theories to be found in Capital ), argued that the tendency to underinvestment sparking crisis was due to over-savings by consumers, government budget surpluses and balance of payments deficits, all leaking purchasing power away from being realised as capitalist profits, the source of capitalists’ investment.

8 The concentration of rentier capitalists in the top 1% of the wealth order has been noted in Chapter 13, along with their malign, self-serving influence over elected governments.

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Most of these theories lodged the source of economic crisis in the real sector of the economy; monetary issues reflected but did not spark the structural sources of capitalist crisis. Keynes alone argued that ‘money mattered’. Once, the GFC blew away the seeming consensus on this issue, it became obvious that institutions, public and private also matter. Crises could and in fact did break out in and spread from the broad financial system that consisted of private actors, (including credit rating agencies as well as banks of all sorts) government commercial enterprises (Fannie Mae, Freddie Mac) and the financial agencies of the state (central bank and treasuries). Rereading Kalecki, in particular, it became clear that his analysis was based on an overstatement of the capacity and ability of large limited liability companies to self-finance their investment plans through retained monopoly profits, while understating their increasing dependence on external debt and the ability and willingness of consumers to finance their consumption through debt, particularly to finance owner occupation.9 Enter a previously ignored post-Keynesian economist, Hyman Minsky, who took the work of the master on securities markets and developed models that provided the channels by which income was ‘parked’ in vehicles delivering interest and dividend flows to their owners. Corporations structured their balance sheet of assets and liabilities to factor in the costs of finance taken on through credit institutions and the stock market. The overall aim is to maximise profits (after tax) on their equity, while remaining solvent.10 Minsky focused mainly on the three stages of increasing corporate (over)dependence on loan finance. In periods of buoyant optimism with current cash flows easily financing their loan and other liabilities, such companies were depicted as employing a ‘financing

9 This bias is understandable in that Kalecki was writing with a view of capitalism as it had developed in the fifty years since Marx’s death, the age that covered the growth of the great monopolies in industry like Rockefeller in oil and Carnegie and Krupp in Steel. What also happened, of course, was the growth of huge financial empires like J. P. Morgan and the House of Rothschild. The latter development, however, took time to take over. 10 Taking on corporate debt was profitable since interest paid on it reduced income tax paid to governments—but only to the extent that the interest payments could be made on time. The challenge of an optimal financing structure for corporations was stiff, since there were many uncertainties that could suddenly threaten repayment capacity and solvency.

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structure’ of ‘hedge finance’. They were hedged against future downturns by building up reserves from current net cash flows. However, when business turns down, current cash flows are no longer adequate to cover all liabilities and the firm must run down reserves built up during better times, waiting for business to turn back up. This situation Minsky termed a ‘speculative financing structure’. If the situation does not improve, eventually the reserves are exhausted and current liabilities must be met by rolling over current debt and taking on even more debt, blowing out the liabilities side of the balance sheet until no lender or stock market investor can be found to keep the corporate ship afloat. This is the era of ‘Ponzi financing’, after the famous fraudster Charles Ponzi who in 1920 invented the scam of paying off interest to existing depositors with the deposits from the influx of new lenders. Minsky’s argument was that the lure of profit growth would cause hedge financing to morph into speculative financing and finally into Ponzi financing that would inevitably result in a financial crisis that could ignite a general economic recession. Progressively increasing financial instability lay at the heart of modern capitalism’s crisis tendency. This is generally touted as Minsky’s ‘financial instability hypothesis’. It provides a complementary analysis of the corporate side to the household debt explanation of the GFC. Financial institutions, especially the large hedge funds and investment banks, loaded up on debt securities, much of which proved to be worthless. Once wholesale credit markets froze, corporations in the real economy could no longer rollover their existing short-term debt, still less finance new investments. It was not just Bernie Madoff who was following in the footsteps of Charles Ponzi, esq.11 The whole system threatened to implode. One further recent development has increased the instabilities identified by Minsky. Under the doctrine of maximising shareholder value, corporate managers have a strong vested interest in boosting the value of the shares in the companies they manage in order to reap managerial bonuses linked to the market value of those shares. This has led to various means of pumping up share prices by buying back shares using retained

11 For a detailed discussion of the macroeconomic dimension, see Toporowski (2020). Noel Hynd (2021) provides a fascinating semi-memoir of his father Alan, who reported on the case of Charles Ponzi at the time.

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profits. This then reduces the corporation’s hedge against future downturns in cash flows moving them more expeditiously into a speculative financing structure on the road to Ponzi-land. As usual, the worst costs of the GFC were inflicted on the mass of working and middle class people and the marginalised minorities. These were the victims who lost their jobs and often their houses, along with savings tied up in personal pension plans and equity holdings. Estimates by organisations like the International Monetary Fund of total losses in the tens of trillions of dollars hid the real losses in depression, mental illness, suicide and lost dreams—and the build-up of anger, resentment and a desire to make ‘them’ pay. The fallout from the GFC has still not settled. Economic inequality has further intensified as the politically unstable nature of democratic politics moves further and further to the right. The rise of Trumpism, it is not too fanciful to say, owes a debt to the role of the capitalist provision of housing in sparking the breakdown of 2008–9 and the aftermath of austerity and growing inequality. Popular distrust and disgust with the beneficiaries of the capitalist boom and bust world has allowed dark currents of racism, misogyny and rage to rise to the surface of the body politic. The consequences of the Great Pandemic are even more opaque, since the world is still living through it. However, it is safe to speculate that ‘it can’t be good’. The economic losses are sunk, they can’t be retrieved. The jolt to the growth of capitalism may have slowed the pace of the forces leading to climate change. But the ‘bounce-back’ of the major economies after COVID-19 is likely to reboot the climate crisis. Nor are the deep tendencies driving economic and political inequality likely to moderate. If anything, they will intensify as powerful conservative interests strive to avoid dealing with pressing social and environmental problems (and threat of future tax rises) in favour of reducing the enormous overhang of public debt incurred to get through the pandemic.12 Many small businesses and low and middle income owner occupiers are hanging on because central banks have kept lending rates very low. This situation is changing as I write.

12 The July 2022 decision by the US Supreme Court to prevent the Environmental Protection Agency from forcing fossil fuel companies from reducing greenhouse gas emissions adds to the barriers of dealing with climate change.

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Sparked by the Russian invasion of Ukraine, and the persistence of global supply chain blockages, general inflation spiked during the first half of 2022. The Federal Reserve has led the way in raising official interest rates, long after hindsight suggests they should have acted. This will reverberate through the economies, impacting most heavily and immediately on those borrowers in the most marginal situations. The commercial banks will need to tighten their lending, deal with rising mortgage arrears and potentially repossess and sell the properties of defaulting borrowers. The forces interacting that led to rising housing prices would then be kicked into reverse, with falling housing prices leading to falling demand for houses and consumer durables, declining wealth and collateral values, in a self-reinforcing spiral down, in the way described above. The fall in the housing sector will be reinforced also by the depressive effects of interest rate rises throughout the economy. Inflation reduces the real income of households and limits their capacity to spend on housing and other basic needs. As an inherently regressive impost, it disproportionately affects low income people, especially older tenants on fixed incomes. Ironically, the same conditions of low productivity, stable money wages and low interest rates that drove housing and equities markets to record levels during the property boom, due to the dissociation of finance from productive accumulation, will now fall out in collapsing prices in the property and equities markets, another demonstration of how land-housing has become a pure financial asset. The quick turnabout in central bank rhetoric and action on interest rates has occurred as headline inflation in Western economies approaches ten percent. Regular official rate rises are forecast into 2023 and 2024, further depressing real wages for the vast majority of workers. These rate rises will be passed onto borrowers, including mortgagors, threatening a major economic recession. The effect on house purchasers is to boost their mortgage repayment costs, thereby sharply reducing their remaining disposable income and consumption. And there are worrying signs that inflation may become baked in. With the sharp cut in immigration during COVID-19, it may not be possible to quickly pull the immigration lever in Western economies.13 Domestic wages held down for a decade by the inflow of cheap imported 13 Long-term demographic trends in the Western economies see the share of residents in the working age cohort falling relative to older non-working cohorts. There is likely to be intense international competition for immigrant labour, especially skilled workers.

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workers, weak investment in productivity enhancement and the power of employers over workers may slowly edge upwards, especially in industries with pronounced shortages of skilled labour, driving prices up and threatening a familiar wages-prices spiral. Secondly, the cost of dealing with the transition to a carbon-free world will be significant. Massive investments in infrastructure will be necessary to exit from fossil fuels. In electricity sector alone, materials and labour necessary to build the wind farms, solar arrays and battery parks, while retrofitting the transmission and metering systems, will intensify labour shortages and supply bottlenecks, raising wages and prices, adding to inflationary pressures and further rate rises. However, there is one last factor to consider that underscores just how complex and problematic the issue of housing under capitalism is. There appears to be an asymmetric cast to the volatile movements of landhousing prices. The spiral upward in prices tends to be more pronounced than the reverse movement downwards. Viewed over time, prices tend to be a bit ‘stickier’ on the downside. What goes up, comes down— but not as much or as quickly. Housing is not the only example of this phenomenon. Economists have borrowed the physicists’ notion of ‘hysteresis’ to explain the slowness of general inflation to subside and unemployment to fall after the interest rates rise and fiscal expansion bite, respectively. Hysteresis refers to the situation where a system stays in a constant state after a force has been removed; there is a lag between the input and output in a system upon a change of direction, as occurs during the process of magnetising ferrous materials. The system ‘appears’ to have memory. What might dampen the downward spiral of housing prices? One possibility is that a sharply deteriorating market and economy may cause land-housing owners to shelve the decision to produce new stock and owners of exiting stock to withhold their property from the market until conditions become more propitious. These decisions reflect more than a movement in along an existing static supply curve but a collapse inward of the whole supply curve in view of different expectations about uncertain future market conditions. Conventional analysis assumes fixed demand and supply curves given a whole host of constants, including expectations about future prices.14 But if owners are convinced or hopeful that the current dive in prices is temporary, they will wait out the dip, if they 14 Similarly, expectations about the future level of general prices (inflation) can take time to filter through once interest rates rise.

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can afford to continue meeting mortgage repayments. A second moderating factor can come from the actions of financial capitalists. Lenders may lessen the impact of interest rises by delaying their introduction, renegotiating loan agreements, introducing a repayment moratorium or taking an equity stake. Third, the state may directly intervene by regulation to prevent lenders from repossessing properties in loan arrears and prohibit landlords from evicting tenants, as occurred as part of the response to COVID-19. It is, of course, very much in the interests of the banks to prevent having to repossess properties en-masse and flood the market through forced sales. That way, insolvency lies. But asymmetry also occurs in financial systems marked by oligopoly. Large mortgage lenders react to rises in the official (cash) rate in a wellestablished way described as ‘rockets and feathers’. When the central bank increases the official rate, the banks quickly pass on the rate rise in full to borrowers—rates rise like a rocket. But when the bank drops the official rate, mortgage rates fall gently like feathers. The case is opposite for bank savers. The interest rate on their deposits drops like a stone.15 Monopoly power enables the commercial banks to appropriate excess profits in the financial sector, as elsewhere in the economy. The other factor that might limit the fallout from the inflationary threat concerns the ‘art of central banking’, or the deliberate manipulation of consumer and business expectations about future rate rises. The art consists in convincing capitalists, workers and others that the situation is so dire that the heavy guns of rate rises will be rolled out—that the agency will ‘do whatever it takes’—in the hope that spending and wage demands will moderate as consumers batten down to face the upcoming storm. In that way, the bank will be able to halt rate rises earlier than they had signalled. This is important because central banks have a bad habit of overshooting, keeping rates too low for too long and too high for too long, thereby adding to the inherent instability of the capitalist system; this is a case of the central banks being ‘too slow to overreact’. This weakness follows from the basic social ontology of time. Central banks have no reliable knowledge of the future and only very limited knowledge of the present. They make current rate decisions now based on data describing the world as it was several months ago. Continuing to jack up rates after

15 The opposite is true when the official rate rises again; savings deposit rates move up by less than the central bank’s move.

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the economy has turned down risks driving an ‘orderly readjustment’ into a runaway bust. From the broad macro view, housing figures as a central component of the crisis-prone life of capitalism. The national government’s influence, via fiscal policy and its central bank, over the forces that drive capital and revenue circulation through the built environment seeks to dampen the dynamic instabilities inherent in capitalism. This aim is not always achieved, as conservative political interests and institutional routines block relevant policy interventions and/or the bank gets its timing wrong. Housing market booms and busts are at the centre of positive feedback processes emanating from within the increasingly complex and dysfunctional financial system that have intensified with the increasing decoupling of finance from productive accumulation. It is not possible, I would argue, to understand (explain) either the full nature of economic, social and environmental crises in the capitalist world or the full significance of housing as a major component, along with fixed capital, in the evolution of that world economy without grasping the multi-dimensional nature of the housing question, at the micro, meso, macro and global levels. This book is a contribution to that end.

References Aalbers, M. (2016). The financialization of housing: A political economy approach. Routledge. Harvey, D. (1982). The limits to capital. Basil Blackwell. Harvey, D. (2006). The limits to capital, the Verso edition. Verso. Harvey, D. (2018). Marx. Oxford University Press. Hynd, N. (2021) The summer of Charles Ponzi. Noel Hind. Kalman-Lamb, G. (2017). The financialization of housing in Canada: Intensifying contradictions of neoliberal accumulation. Studies in Political Economy, 98(3), 298–323. Kay, J. (2016) Other People’s money: Masters of the universe or servants of the people? Profile Books. Keynes, J. M. (1973/1936). The general theory of employment, interest and money, collected writings vol. VII. Cambridge University Press and Macmillan. Shiller, R. (2000). Irrational expectations. Princeton University Press. Toporowski, J. (2020) Credit and crisis: From Marx to Minsky. Edward Elgar. Tooze, A. (2018). Crashed: How a decade of financial crises changed the world. Viking.

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Tooze, A. (2021). Shutdown: How covid shook the world’s economy. Allen Lane Press. Wolf, M. (2014) The shifts and the shocks: What we’ve learned —and have still to learn —from the financial crisis, Penguin Press. Ye¸silba˘g, M. (2020). The state-orchestrated financialization of housing in Turkey, Housing Policy Debate, Issue 4 https://doi.org/10.1080/10511482.2019. 1670715 accessed 16 October 2021.

PART V

Navigating the Future

CHAPTER 15

The Project: Architect Not Bee

Proposals like the one I will discuss later (for a progressive wealth tax coupled with a universal capital endowment) could also create new majorities, alter the balance of power and equalise participation in the economy. (Thomas Piketty, Capital and Ideology)

I have sought in this book to demonstrate that the housing question under capitalism has many dimensions, and that to understand (explain) the scope and significance of housing in the contemporary world requires a systematic realist approach. Marx’s analysis of capitalism, suitably developed, offers one such avenue of understanding. Furthermore, I would argue, by developing an understanding of how housing ‘fits’ within contemporary societies conditioned by the circulation and accumulation of capital, we gain a clearer picture of how those societies are themselves changing. Finally, as the title of this final part suggests, only by unlocking the significance of housing provision under capitalism can we hope to find ways of reducing the barriers to human flourishing that current housing outcomes throw up. It is true that over the past one hundred and fifty years, housing conditions and much else have improved for many people living in the West. However, it is also true, as earlier chapters have argued, that inequality of outcomes has intensified, while the opportunities and the power to influence outcomes and opportunities have markedly declined for most people, especially over the past thirty to forty years, as housing has come to reflect and reinforce modern patterns of class division. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_15

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How then, might housing as a primary object of capital accumulation and a primary element in the material and mental lives of people be turned to deliver more fulfilling and just outcomes. By ‘fulfilling and just outcomes’, I mean creating a situation where all people have a reasonable expectation that they will be able to pursue meaningful and worthwhile lives, that they can develop their capacities to achieve what matters to them and their intimate personal connections, and that the institutionalised barriers that limit the extension of these conditions beyond privileged elites are progressively removed. Rather than acting like bees, instinctively accepting the way things are now, the project is to begin drafting a design for a better world, to consciously imagine what that would look like and take steps to bring it about. Marx was not one to speculate about the future ideal communist society he thought would eventually develop out of the remorseless intensification of class conflict. He only dropped his guard once or twice, most famously in his denunciation of the manifesto presented at the initial meeting in 1875 of the new German Social Democratic Party. Here, Marx criticised the German socialists for pinning their hopes to the generalisation of bourgeois individual rights, arguing that ‘the all-round development of individuals’ can only be achieved when the capital-labour relation is overthrown; then and only then, ‘…can society wholly cross the narrow horizon of bourgeois right and subscribe on its banner; from each according to his abilities, to each according to his needs’ (Marx, 1974/1891, p. 347). In his book, The Housing Question, Engels applied a similar judgment to housing: As long as the capitalist mode of production continues to exist, it is folly to hope for an isolated solution to the housing question or any other social question concerning the fate of workers. The solution lies in the abolition of the capitalist mode of production and the appropriation of all the means of life and labour for the working. class itself (Engels, 1975/1872, pp. 73– 74)

We know that Marx’s (and Engels’) confidence in ‘the logic of history’ was misplaced, as was his implicit misogynistic message signalled by the gendered language of the quote. Capitalism (and sexism and racism) has proved remarkably resilient, especially within democratic nations, the world of liberal-bourgeois rights of citizenship. So, there is no getting

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away from the challenge of consciously exploring ways of improving the world as it is. In the first part of my book, Justice and Democracy (Berry, 2021), I suggest four requirements for a ‘robust theory of social justice’ in democracies that might guide such a quest. First, there must be general recognition that a plurality of ‘comprehensive moral doctrines’ exist across society, based in religious, ethnic and cultural traditions, that differentiate the values and norms of behaviour of social groups; but that these differing value orientations do not prevent the degree of social cohesiveness necessary to support a government guarantee of basic security or social order.1 There must be room for dissent and opposition to the interventions of the state but not to a situation of delegitimising government itself—except in the extreme case of a takeover of the state by a dominant class or elite, at which point political revolution is likely. Second, there needs to be developed a view of ‘distributive justice’, the rules and norms justifying the sharing of the fruits of ‘social cooperation’ that resonate the moral sentiments of a majority of citizens, regardless of their different comprehensive moral world views. Sharp disagreements will occur over particular norms and rules, and over notions of need, desert, entitlement, contribution and so on, but not to the extent of the breakdown of social order. Under current capitalist conditions, as I have argued, the rules, norms and outcomes are systematically biased against the interest of most citizens, placing a spotlight on the imperative to challenge and change the status quo. Third, since capitalism routinely reproduces patterned inequality of income and wealth across society divided along class, racial, ethnic, religious and gender lines, a non-neutral role for government is necessary.2 Unequal income and wealth differentiate the life-chances of households to develop and use their capacities, while also underpinning political inequality—the unequal ability of different class fractions and organised vested interest to influence government interventions and noninterventions, to mould the contours of policy. The circulation and 1 This is the problem of social order prioritised by the seventeenth-century English philosopher Thomas Hobbes. 2 In other words, the current non-neutral impact of democratic governments favouring the dominant class fractions and elites must be converted to favour the majority. The ideology of ‘an equal playing field’ simply ignores and hides the current ‘tilting’ of the playing field.

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accumulation of capital creates constraints and barriers to the scope and direction of policy. But given the relative autonomy of politics, civil society and the economy, there are spaces, actual and potential, for oppositional collective action. This requires an understanding of how the system works; to misquote Marx’s ‘Eleventh Thesis on Feuerbach’, one has to interpret the world in order to change it. This after all was Marx’s reason for spending much of his life in the British Museum reading room. An important component of greater understanding is to reject the liberalpluralist ideology of an ‘even playing field’ in both the spheres of the state and the economy. Finally, we must recognise the social reality of time. Marx stressed the critical importance of the turnover time of capital in driving accumulation and the vast production of material output and profits. But time also has an irreducible ontological significance—it only flows one way, from the past to the present to the future. This fact is embedded in the structure of the physical universe, as captured by the second law of thermodynamics (the entropy law). As social actors, we exist in and through time. We have a partial and incomplete knowledge of the past and what is happening within our view today, and no knowledge (as opposed to hope and expectation) at all of what is to come. Our hopes may be realised or dashed by what happens beyond ‘the veil covering the future’. The unexpected and often unwelcome outcomes that occur in the future are rendered more unforeseeable by the complex ways in which social interaction emerges and from the contingent shocks administered by an uncaring natural world. Thus, any collective actions to bend government policy, on housing or any other field, will occur in a sea of uncertainty.3 The inescapable fact that the future is open means the ever present possibility of successfully opposing and changing business as usual. I am arguing in this final part from an explicitly ethical or moral viewpoint that capitalism is an inherently unjust system, that left unchallenged it stunts and limits the lives of most people under its sway. “In summary, justice matters because the structures of social life generate and perpetuate unequal life chances to enjoy secure, dignified and flourishing lives in all

3 I’m here using ‘uncertainty’ as distinct from ‘risk’ to relate to situations in which there is no possibility of (no defensible basis for) attaching probability values to alternative outcomes of events; indeed, there will often be no basis for comprehending all or most of the possible outcomes. I develop this point in Berry (2021). See also, Kay and King (2017) on the notion of ‘radical uncertainty’.

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societies at all times and places. Although the future is open and radically uncertain, path dependence at the macro-social level tends to perpetuate inequalities unless social forces challenge and change them. A robust discussion over and development of strategies in the economic, political and cultural realms can inform progressive forces for change (Berry, 2021, p. 29)”. It should be obvious from the argument developed throughout this book that housing can’t be carved off as a separate target for policy reform, as if it is simply one of a menu of policy offerings suitable for treatment. Housing and the land on which it sits are central to how capitalism as a holistic system of social reproduction functions. ‘Fixing’ housing means ‘fixing’ capitalism, or at least blunting its anti-social cast to the extent of liberating human capabilities sufficiently to result in significant and permanent improvements. Because housing exists at the intersection of economy and civil society it offers strategic vantage points from which to mobilise collective resistance to the dominance of the logic of capital. The conflicts between the necessity to offer one’s labour power up for sale to capital and the desire to lead fulfilling private lives at the family and community levels, means that most people are to some extent aware of their predicament and to some extent open to doing something about the barriers that constrain, and for many, crush their ambitions. The home as a site of awareness and resistance also provides a base from which to come together in organised form to oppose changes to the urban built environment that emanate from the dominance of capitalist interests tied to transforming the environment and appropriating increased land rent. Forms of opposition can and do include defensive actions to obstruct or delay developments that impact most severely on less affluent areas of the city and their residents. Such actions can also be mobilised to oppose the impacts of changes in government planning policies associated with rezoning or major urban infrastructure projects. In the 1970s, a branch of the construction industry union in New South Wales, Australia, imposed, at the request of resident action groups, bans on building developments on sites of environmental and heritage value. They were rebranded as ‘green bans’, analogous to black bans in the workplace, and were also used to prevent wholesale ‘slum reclamation’ programmes in working class and migrant neighbourhoods. This terminology explicitly recognised and empowered a differentiation between the public spheres of work and home/community, but by linking organised labour with community organisations provided a new axis of power to

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confront the capitalist logic of urban development.4 This political development coincided and was encouraged by the property booms underway in the major Australian cities at the time, and the efforts of state government public housing authorities to marry the provision of high rise towers with ‘slum clearance’ or more accurately, the destruction of the remaining stock of affordable housing in inner city suburbs, which was also in the process of changing socioeconomic character through the process of gentrification.5 It was also a time when ambitious plans were being drawn up to build freeway networks linking the central city to the expanding suburbs as public transport gave way to the growth of car ownership. The ‘slum’ housing removed, and the areas resumed for major roads were predominantly located in areas housing the least advantaged populations. The suburban boom rode the demographic wave of the post-war baby boomer cohort forming new households and the influx of foreign immigrants. Struggles at the point of valorisation inevitably have a class character (which is much theorised and well known). Those at the point of realisation focus on buyers and sellers and trigger fights against predatory practices and accumulation by dispossession in the marketplace (e.g., against gentrification and foreclosures). Such struggles are not well theorised. (Harvey, 2018, p. 48)

The key point about these collective actions is that they were defensive reactions to the attempts by private developers, public housing authorities and transport planners to substantially change the built environment with the consequence if not the intention to directly or indirectly facilitate the circulation and accumulation of capital.6 Thus, the construction of urban freeways encouraged the faster rise in car ownership made ‘necessary’ by the opening up of new residential suburban and industrial areas on the city fringe. Rising car ownership and increasingly decentralised land-housing development ‘justified’ the projects transforming

4 For an account of this movement by one of its principal movers, see Mundey (1981). 5 Gentrification reflected the emergence of a rising generation of urban professionals

and other fragments of the middle class embracing a new urban aesthetic that was also in part a cultural reaction to the supposed ‘dullness’ of mass suburbia. 6 This movement reprised the wave of rent strikes by sitting tenants and their industrial unions during the 1930s Great Depression.

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the urban environment and encouraged further such transformations in a positive feedback loop through time and space. The same transformations were justified by governments as creating jobs and wealth, without ever detailing who got the jobs and who got the wealth. Opponents to change were denigrated as being ‘opposed to progress’ or NIMBYs, residents wedded only to their own interest at the expense of ‘the public interest’. Penetrating below the ideology of progress, critics saw the raw reality of the vested interests of developers, builders and land speculators and the active collaboration of public officials.7 It is the case that some of the defensive reactions impacted middleincome suburbs and households. This potentially raised the possibility of cross-class fraction coalitions as in the case of the first green ban in the leafy upper class, harbour-side Sydney suburb of Hunters Hill. Similar coalitions formed around efforts to protect heritage houses and precincts and certain cultural or environmental icons. In the latter case, the most famous movement resulted in stopping the damming of the Franklin River in Tasmania to build a hydroelectric power station by the state government electricity agency, spruiked by three state government as necessary to promote regional economic growth and jobs. The great weakness of such approaches is their episodic, localised and reactive nature. They occur because they are kicked into gear by the routine operation of the capitalist juggernaut. As such, they start at a disadvantage. The grounds for opposition are staked out in ways favourable to the status quo, to the routine logic of capital accumulation and the facilitative political community and ideological climate prevailing. The aim should be to turn the tables, or rather to set it with dishes favouring the palates of the majority. State institutions and policies must be changed to achieve greater social justice. This would set in motion changes in values and norms permeating contemporary capitalist societies in a ‘virtuous’ self-reinforcing spiral. Secure and affordable housing is a critical component of a just regime and this dynamic. Before focusing on this sector, I will summarise the broad institutional framework required to start the real reform process towards what I have termed a ‘real social democracy’ (RSD).8 7 Political corruption was not unknown. In Melbourne during this period, public housing officials were implicated in the corrupt rezoning of rural land on the metropolitan fringe to residential development. See Sandercock (1979); Kilmartin (1988). 8 This section draws on arguments presented in Berry (2021, Chapters 3 and 6).

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First, there is a role for progressive intellectuals to turn their talents to debunking the remnant scars of neoliberalism and to ruthlessly bring data and analysis to unmask the injustices and irrationalities of current policy frameworks of government. This is no easy task, as the weight of decades of mystification lies heavily on the domain of public discourse. The rise of science denial and the populist clamour for the political saviour mitigates against the task. Nevertheless, scientists and public intellectuals have an overwhelming duty to ply their trades. Achieving gains on this front undermines the appeal of the demagogue, but only if the next step is also achieved. Second, there needs to be introduced an adequate guaranteed income that would give everyone the opportunity to meet their basic needs for food, shelter, good health, education and other ‘merit goods’ to the extent that they can be effectively provided through the market, that is by the circulation of capital. A basic income granted to everyone has been proposed to meet this requirement (see Van Parijs & Vanderborght, 2017). I have argued against this particular universal approach in favour of a guaranteed minimum income scheme (GMI) with a ‘generous’ base (see Berry, 2021, pp. 97–105).9 The rationale for a generous GMI is first, to make a step towards improving the market access of the bottom half of the population to housing and other necessities, by providing a profit incentive for capital to deliver to these class segments that the current extreme level of inequality precludes. But the main reason is to break down, to an extent, the very basis of capitalist class power, the lack of choice as to whether and on what terms the majority must sell their labour power in order to survive. With a guaranteed income sufficient to live moderately well, to house oneself and family, to access school and health services, workers individually and as a class are in a stronger bargaining position to choose the jobs and accept the wages and conditions that really allow their lives to flourish.10 It changes the deadly simple logic of real existing capitalism. But there are other factors to address. By raising the cost of 9 I also favour a once-off ‘endowment’ grant to young adults for reasons similar to those advanced above. Similar suggestions are made by Piketty (2020) and Reich (2015). 10 This is an extension of an old tradition in Australian public policy, harking back to

the ‘Harvester case’ of the early twentieth century in which a national system of arbitration and conciliation was introduced to ensure minimum wages were set at levels adequate to ‘feed, clothe and house an unskilled worker, his wife and three children’. This applied to over half the population at the time. An adequate GMI today would need to be set at a considerably higher level, relatively speaking, given the major changes in skill levels,

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labour power, it also places the weights on capital to drive improvements in productivity through innovation. This outcome is justified if and only if the fruits of technological and other innovations are justly shared and take into account reducing the dire negative effects on the environment. This may mean a slower or even negative rate of economic growth as conventionally measured (GDP per capita) with the positive result of rising gross national wellness. As an aside, the COVID-19 pandemic has had the unintended effect of causing many workers to reassess their personal priorities, to the extent of not returning to their old jobs as the economy recovers. ‘The great resignation’ and drop in international migration has seen employers in countries like the United States struggling to fill job vacancies at their previous wage levels. Some workers, it appears, have found not working in low paid, dirty and dangerous jobs appealing and are either negotiating wage rises or voting with their feet. This provides workers and their allies in civil society with a temporary window of opposition. Of course, the window may close as capital clamours for international migration to ramp up. Nevertheless, this example suggests that opportunities for collective progressive opposition is possible. Third, even with a generous base income, markets may still undersupply the less affluent majority as the massive wealth accumulated during the new gilded age of patrimonial capitalism is turned to monopolise the production and exchange of commodities like luxury houses and estates. There is still a role for governments to directly intervene through the regulatory and allocative modes identified in Chapter 12. For example, limits placed on the floor area of mansions and their acreage, backed by punitive poll taxes if those limits are exceeded would reduce this risk of land-housing undersupply to the general population.11 More generally, progressive taxes on very high income and wealth holdings, including residential property and vacant residential land, would further equalise real opportunities, while providing the fiscal basis for the GMI. Steep taxes demographics and living standards, while recognising the re-gendered nature of modern household formation. 11 A GMI would also miss out on the need for supplementary government assistance for

some marginalised groups, notably those people with physical and intellectual disabilities, and those suffering extreme discrimination. Sen (2009) distinguishes between differing capacities to convert given income or resources into meaningful lives. Just as important as housing, there remains a strong argument in favour of a publicly provided universal health insurance scheme and strong regulation of the medical and hospital systems.

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levied on very high wealth holders, including the billionaires’ club, would have a progressive impact on reducing power inequalities in the sphere of the state. Inclusive progressive income taxes that removed the welter of loopholes would boost the fiscal base of government and lead eventually to the euthanasia of the tax planning (aka avoidance and evasion) industry, a deeply unproductive sector of the advanced capitalist economy. Radical changes are required to both the income and wealth fields. Referring to the United States, Saez and Zucman (2019, pp. 172–73) argue: Among the many policies that can curb the power of established wealth and contain rent-seeking, the quasi-confiscatory taxation of very high incomes has proved effective. But it faces a major limitation: as we have seen, it becomes easy for the very rich to own a lot of wealth while reporting little taxable income. Reinstating a 90% top marginal [income] tax rate would not make a meaningful difference to the tax bills of America’s billionaires. Overcoming this limitation means taxing top wealth at high rates.12

Tax dodging (avoidance and evasion) is a prime example of accumulation by dispossession. The value created in the production of commodities (goods and services) is appropriated and hidden from the government tax office. Part of the profits and monopoly incomes received by the dominant class fractions—the entrepreneurial and rentier capitalists—that could and should provide the fiscal base for the provision of public and merit goods is hijacked and deposited in property and financial securities in tax havens. The leakage of ‘savings’ (unspent income) of the wealthy is tied up in the speculative accumulation of financial assets, including real estate, instead of returned to the circulation of productive capital with deleterious macroeconomic consequences pointed to in the previous

12 I have suggested, following Halliday (2018), that a quasi-confiscatory wealth tax could be introduced that phased in over three generations. This was first proposed by the Italian economist Rignano (1925).

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chapter.13 This is inevitable given the link between the excessive concentration of wealth and the extreme inequalities of political power; it is the link that must be broken or at least substantially weakened. Accumulation by dispossession is assuming ever greater salience in contemporary capitalism. The conditions and location of the realisation and appropriation of value are very different from those of production. The Netflix original may be made in Los Angeles, but the realisation takes place in media markets all over a country or even the world….Opportunistic forms of capital also intervene at the moment of realisation to appropriate more value than is warranted. When large hedge funds take over pharmaceutical companies or buy up large swathes of foreclosed houses and then turn around and make them available to needy consumers at exorbitant prices, then realisation becomes a moment for the systematic organisation of accumulation by dispossession. (Harvey, 2018, p. 199)

The question remains—how can changes of this magnitude be brought about in real existing liberal democracies? Again, the centrality of the house as home in societies like Britain and the United States provides a socioeconomic base from which to start. Because the home is such an emotionally charged social environment, housing can be the focus for proactive oppositionist political activity to mobilise around. In the era of accumulation by dispossession, the core strategy should be to attack on two fronts—in the workplace and the home place. The two-front war didn’t turn out well for Hitler and the Kaiser but the prospects in this case are brighter. The capitalist world system is beset by the coming together of multiple crisis tendencies. Some are internal to the logic of capital—notably, the remorseless polarisation in income, wealth and influence—others to the impact of external shocks that are only partly caused by the unfolding of that logic. Climate change, pandemics and nuclear annihilation are three looming macro-level threats to not just capitalism in its various forms

13 Lost tax revenue restricts the extent to which governments can indirectly speed

up the circulation of productive capital by the under-provision of infrastructure, educational and training facilities and scientific research and development services that support increasing productivity. It also reduces the fiscal scope to secure the social reproduction of labour power through negotiating a ‘social settlement’ or ‘contract’ with the bulk of the population.

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but to the prospect of human existence.14 The very scale of terminal potential disaster is a strong spur to a radical reconsideration of priorities at the personal and institutional levels. While much of the debate over such matters takes place within scientific and high political circles, such as at international meetings of government heads (the G7, G20, UN), those leaders require constant pressure being applied by voters, progressive interest groups and mass movements like extinction rebellion and the rolling series of popular opposition to the lethargy of national government leaders on addressing the recommendations of the IPCC. Quieter means of fight back are also underway through the back channels of diplomacy and the changes in leadership and recommendations of key international organisations like the IMF, World Bank, WHO and OECD.15 The climate change crisis provides a clear example of why housing is important. The home and urban form are the loci of where the population consumes most of the commodities and use values that are causing rising temperatures. Electricity generation, transmission and use, and urban transport based on fossil fuels account for most of the greenhouse emissions in many countries.16 The conventional materials and construction methods used in the housing sector, and the spatial configuration of a city’s housing stock, support the emission-heavy imprint of modern life. There are clever design solutions that would markedly reduce this footprint but are largely absent due to the power of the property lobby interested only in profit and rent-seeking. In the next chapter, I take up the question—how can the grip of the property lobby be broken, as an

14 I have discussed the implications of these threats to the future of democracy in Berry (2021, Chapter 5). 15 As an example, the recently appointed Director general of the OECD, Matthias Corman, was for many years one of the senior Ministers in Australian governments that struck down Australia’s emissions trading scheme and steadfastly refused to put anything in its place. In the week before COP26, he publicly articulated the OECD position that such schemes were necessary to attack keep temperatures rising beyond the 1.5–2 degree limit agreed in earlier international meetings. Things can change. 16 Countries like Australia that are major exporters of fossil fuels also contribute to global warming well beyond its shores. The power of major resource companies and their lobbyists has to date prevented meaningful action by the Australian government, culminating at the COP26 Meeting in Glasgow in November 2021 in its refusal to set a sufficiently strong and enforceable target for reducing emissions by 2030, or agreeing to phase out coal mining and export. The Labour government elected in mid-2022 is promising to strengthen Australia’s action on climate change.

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example of how broader axes of opposition to unbridled capitalism be achieved?

References Berry, M. (2021). Justice and democracy: A progressive agenda for the twenty-first century. Edward Elgar Publishing. Engels, F. (1975/1872) The housing question, Moscow: Progress Publishers. Halliday, D. (2018). The inheritance of wealth: Justice. Oxford University Press. Harvey, D. (2018). Marx. Oxford University Press. Kay, J., & King, M. (2020). Radical uncertainty: Decision-making for an unknowable future. The Bridge Street Press. Kilmartin, L. (1988). ‘The land deals’ In R. Howe (Ed.) Fifty years of public housing in Victoria, Victorian Ministry of Housing. Marx, K. (1974/1891). Karl Marx: The first international and after, Penguin Books. Mundey, J. (1981). Green bans & beyond, Angus & Robertson. Piketty, T. (2020). Capital and ideology. Harvard University Press. Reich, R. (2015). Saving capitalism: For the many, not the few, Alfred A. Knoff. Rignano, E. (1925). The social significance of death duties. Noel Douglas. Saez, E., & Zucman, G. (2019). The triumph of injustice: How the rich dodge taxes and how to make them pay. W.W. Norton & Co. Sandercock, L. (1979). The land racket: The real costs of land speculation. Silverfish Books. Sen, A. (2009). The idea of justice. Allen and Unwin. Van Parijs, P., & Vanderborght, Y. (2017). Basic Iicome: A radical proposal for a free society and a sane economy. Harvard University Press.

CHAPTER 16

Countering the Counter-Attack

The whole history of inequality regimes shows that what makes historical change possible is above all the existence of social and political mobilizations for change and concrete experimentation with alternative arrangements. (Piketty, Capital and Ideology)

The process of rent seeking through land-housing development is tied to the disproportionate power wielded by property interests over government planning and other policies. This dynamic must be broken. So pervasive did the corruption associated with land become in New South Wales earlier this century, two state Labour government Ministers were gaoled, along with family members and, as I write the state’s anticorruption body is investigating the conservative Premier who resigned when details of her intimate connection with a disgraced parliamentary member of her party who was involved in a corrupt property deal, came to light. The long history of corrupt links between property developers and governments at state and local levels in Australia caused an earlier NSW government to introduce a law banning political donations by developers. Other jurisdictions have not followed this lead. This offers potent possibilities for political mobilisation around issues of corruption and control over urban and housing development. But the property lobby—that mix of land developers, builders, speculators and the organisations that represent their views and interests to government and the broader public—is powerfully embedded in the political economy of now. Their practitioners and proponents are well © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_16

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connected, well-resourced and not about to give up their privileges without a fight. They have become used to having an inside channel to policymakers, and to calling on the comfortable, self-serving ideology of free markets. They are adept at hiding their real power behind a veneer of public interest puffery. They openly subscribe to a simplistic ideology of progress, with the metaphor of ‘trickle down’ benefits and a rising tide lifting all boats. As I’ve argued in the previous chapter, a progressive strategy of change must operate on two or more fronts. A housing-only focus will not work. Even if successful gains are made in individual cases, the overall structures of inequality and injustice will persist. The key target should be to undermine the basis of class power and inequality—the power of capital over labour—by pushing for the institutional changes noted previously, namely introduction of a guaranteed minimum income scheme, and the public provision of undersupplied public and merit goods. Historically, capital moved to strengthen its class power through: (a) the introduction of labour-saving technologies; (b) the centralisation of control of the labour process in large factories and other workplaces; (c) influence over government; and (d) the construction of ideologies of equal opportunity. More recently, strategy (b) has been supplemented and in part replaced by the decentralisation of labour through outsourcing to low-wage and tax havens and to the reconfiguration of the house as a site of production. This latter development has allowed new information technologies of surveillance to effectively create a workforce of electronic outworkers, who are separated in space and time from each other, and hence subject to new forms of exploitation, such as wage theft, casualisation and intimidation. The effective subjugation of labour in the contemporary world is driven by conservative political forces that stress social division based on ethnicity, race, gender and sexuality. These ideologically driven actions reinforce the ‘natural’ processes of class fragmentation that have evolved under modern capitalist conditions. Housing situation forms one important dimension of the fragmentation process. Advantageous labour market position maps onto advantageous housing situation which reinforces advantages in the labour market. As long as workers in lower paid occupations believe that they and their families have or will have the opportunity to move up the housing ladder, in particular to become owner occupiers, their acquiescence in the current regime of inequality tends to persist. Conservative commercial and political interests

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trade on this increasingly unrealistic expectation. But the world of capitalism under neoliberal forces is crumbling, beset by internally generated economic and political crises and bombardment of the external shocks already noted. The resurgence of patrimonial rule by wealthy elites puts the lie to the increasingly fragile justificatory myths of liberal democracy. Once, social mobility seizes up and is seen to do so, it becomes more and more difficult for privileged interests to hold the line in the face of the gradually dawning realisation by the majority that their children will not become better off than themselves—unless things change. The ideologies of equal opportunity, expressed in arguments (claims) about the rule of individual merit and the even playing field, are ringing hollow (Sandel, 2020). This opens up opportunities for countervailing power to be mobilised.1 Countering the powerful conservative forces that will inevitably regroup to fight real system changes will require conscious collective efforts to use conflicts over community, environmental and ‘lifestyle’ interests, values and worldviews to challenge the entrenched logic of accumulation by dispossession. This requires the strengthening of nonprofit community organisations, their linking together and with what is left of the trade union movement and progressive political parties. Media, particularly the new social media, offers resources accessible to progressive social movements, as well as commercial moguls and populist voices. A growing network of progressive forces can link to and draw on the successes of environmental opposition to climate change, deforestation, species extinction and modern slavery. The ‘degrowth’ movement and analytical explorations of alternative measures of human flourishing and well-being provide political resources to push for basic and permanent gains by challenging conventional arguments privileging conventional jobs and material consumption. Guaranteeing appropriate housing for all would establish a secure base from which to oppose the inevitable conservative counterattack on progressive change. Government and community sector cooperation in affordable and appropriate housing provision would draw on the former’s fiscal and regulatory powers to ‘de-capitalise’ a more equally distributed housing stock. The guaranteed minimum income scheme would provide the cash 1 The key point is that approaching housing policy reforms as a sole focus is a political strategy bound to fail, an invitation for the dominant ideology of property rights based in the class structure to prevail. Madden and Marcuse (2016) make a similar point.

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flow to support rental access to the stock for a substantial minority of households not in or not yet in home ownership. More equal post-tax distributions of income and wealth would reduce the built-in dynamic of house price inflation and reduce the power of financial capital. Policies to allow households to step-change into home ownership could be introduced for those who wished to become their own landlord, while tenants would be protected from predatory landlords (including the government) by a charter of tenant rights and long leases. This would mean that tenants would not necessarily be ‘trapped’ in the tenure but would be there by genuine choice, just as those who worked for capitalists or themselves would choose their hours. Innovations in production and social life could see a blurring of the work/life split and an overall reduction in hours spent on ‘necessary labour’. The rise of social media, like all radical technologies, cuts both ways. On the one hand, they empower capitalists to oversee, measure output and discipline workers at wherever the point of production is, as a component of ‘surveillance capitalism’. On the other hand, they offer the means of oppositional communication and coordination between residents distributed across space, locally, regionally and internationally. New technologies of encryption can inject a degree of uncertainty, even futility into attempts by capital and government agencies to counter such mobilisation (Of course, the same technologies empower criminals and terrorists to collaborate as well). Democratic governments of a conservative cast may seek to adopt repressive policies to counter progressive political action but are limited from doing so to some extent by the institutional checks and ideological regime of democratic politics. The means of control over all media, new and old, in countries like China are not yet extant in Western capitalist democracies. To challenge, with a hope of success, the power of the urban property lobby will require built environment professionals—architects, designers, project managers, planners, engineers and their professional associations—to directly engage in practices of monitoring proposed major transformations of urban space, and in analysing their impacts, including but looking beyond direct effects on employment and economic growth as conventionally measured. Techniques of multi-dimensional project appraisal are available to assess socioeconomic and environmental impacts. Currently, even when utilised, their findings are relegated to the footnotes of reports to government, obliterated by a sole focus on the ‘economic

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costs and benefits’. Cost benefit analysis provides a deeply biased methodology for hiding and encouraging the neglect of ‘intangible’ impacts.2 By making sophisticated analysis of proposed urban developments, including housing, available in timely fashion to community-based organisations, opportunities are created to organise collective opposition to narrowly conceived, rent-seeking urban transformations and also allows the development of alternative developments which have broader socially just outcomes. Inevitably, this would draw into the public arena people not normally so inclined. Marginalised urban populations like women from working class and ethnic minorities, Indigenous peoples, homeless people, and organisations seeking to assist them can be empowered to articulate their needs and demand their satisfaction, as full citizens. The working majority of people employed in the capitalist economy, currently experiencing an increasingly precarious position in both the workplace and in the housing order, would have opportunities to improve their situations through collective action, both in the workplace and at the residential level. The politics of resistance and change also requires mobilisation across class lines and other axes of cleavage in the broader community.3 Political pressure can be placed on elected governments at all levels to change the rules of urban development to include a much broader consideration of socioeconomic and environmental factors in development and planning policies. The historical weight of private property in law and popular consciousness must be continually challenged. The notion of an individual’s private property rights has been a foundational moral principle in Western liberal democracy since first articulated by the English philosopher John Locke

2 See Berry (2017, Chapter 8) for a detailed critique of the theoretical basis of cost

benefit analysis. 3 Piketty uses the term ‘classes populaires’ for which, according to his English translator, there is no good English equivalent. “What is meant here is roughly the bottom 50% of the social hierarchy, a concept that is employed throughout this book. It is not accurately captured by ‘working class’ or ‘lower class’. It may include a variety of social groups with many disparate characteristics in terms of education, income and wealth, as the text makes clear. Hence the translation will resort to the circumlocution used here, ‘least favoured classes’ or ‘disadvantaged classes’. (Piketty, 2020, p. 720, fn.1, translator’s note). I would add that Piketty’s detailed data suggests that the disadvantaged classes number more like 70 to 80%, as wealth is becoming more and more concentrated among the top 1%, with trailing commissions to the next ten to twenty percent of functionaries.

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and enshrined in the US Constitution. It resonates deeply the moral sentiments of most Westerners today. The problem is that when such rights lead as they increasingly do to the concentration of private ownership in a small minority, the vast majority’s dejure rights to property are rendered null in practice. To the principle of private property rights, we can oppose the principle of just outcomes, anchored in an explicit theory of social justice. I have argued throughout this book that an adequate system of housing provision should be at the heart of such a position. This can include a commitment to majority home ownership but only if effective policies are in place to ensure adequate housing outcomes for those in alternative tenures at various points in the life cycle. The Thatcher government’s policy of public housing sales to sitting tenants was designed to split the working class further and turn labour-voting council tenants into Tories, further marginalising those who couldn’t afford to take up the offer to become homeowners. A progressive extension of owner occupation, contra Thatcher, would be part of an overall strategy of reducing wealth inequalities, while improving the effective tenure choices and conditions of the majority. But, as noted in Chapter 11, the success of such policies remains unclear and the temporary successes of Thatcherism created barriers to realising its aims in the longer run.

References Berry, M. (2017). Morality and power: On ethics. economics and public policy, Edward Elgar Publishing. Madden, D., & Marcuse, P. (2016). In defence of housing: The politics of crisis. Verso Books. Piketty, T. (2020). Capital and ideology. Harvard University Press. Sandel, M. (2020) The tyranny of merit, Farrar, Strauss and Giroux.

CHAPTER 17

Concluding Comments—The Limits to Capital

The basic starting point for a Marxist analysis of housing under capitalism is the labour theory of value. Once, the social division of labour has ranged capital against labour, the owners of the means of material production against the sellers of the human capacity to create use values, a specific structure of provision emerges and strengthens. The house appears as a commodity, a material artefact supporting multiple potential use values, produced at arms-length by strangers for strangers. The social link between people, producers and consumers is broken and hidden (‘fetishized’, in Marx’s word) in the commodity form. Money has come to broker the divide, to recreate in disguise the underlying social bond between people. As in all societies, people as social creatures depend on each other for mutual survival. In capitalism, being housed relies on a complex chain of events unfolding in real time that turns raw plots of land into finished structures, through the concentration of accumulated wealth thrown as capital into circulation through the built environment. The active value creating agent is human labour, itself commodified under capitalism. But the commodity form in which equals exchange and both parties to the exchange ‘benefit’, must not blind us to the fact that, as a class divided society, ‘some benefit more equally than others’. Capitalist commodity exchange in the labour market expresses an underlying inequality of power. Owners must sell now, buyers must eventually buy. Freedom to starve by withdrawing one’s only resource, labour power, is no freedom at all. The social power of capital as a class allows individual © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1_17

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capitalists to routinely extract more value from the workers they hire than the value in the form of wages they pay, and the latter receive and take out in search of housing and the other use values supporting their accustomed standard of living. The labour theory of value is an historically specific form, confined to mature capitalist society, of the basic biological and philosophical anthropological truth that homo sapiens emerged and evolved as a large-brained creature with a strong spine and opposable thumbs. The former allowed language and the proclivity to socialise to emerge and the latter parlayed those faculties into the deliberate transformation of nature to ensure their survival through time. Human labour at all times is the collective means of human survival. But only under capitalism has it appeared as an impersonal commodity. Thus, labour value theory can only make sense as the deep real causal mechanism, the starting point for analysis, in societies that have become fully capitalist.1 Even within well-developed capitalist societies there exist elements of alternative housing provision systems, as in the persistence of self-build and communal-build practices. However, such survivals of earlier social formations are marginal to the main property game in contemporary societies like the United States and Britain. To understand how housing is and was provided in other social formations, alternative approaches and theories must be advanced. The housing of people in medieval England, ancient Rome, Japan before the Meiji Restoration and the Zulu village require altogether different frames of understanding and are, rightly, the preserve of historians, anthropologists and others. The same is partially true in the case of the recently emerging variants of state capitalism, notably China, Brazil, Singapore, Russia, Poland, Hungary and Turkey, ‘peoples’ democracies’ or what Keane (2020) calls ‘The New Despotisms’. In these societies, housing, especially in the cities, is produced, financed and sold through the intervention of profit-seeking capitalists at prices seemingly determined as normal—under capitalism. Yet, to some extent, the circulation of capitals

1 As I go on to argue, this doesn’t rule out situations where other, earlier forms of

housing production and consumption co-exist at the margins. Self-building by individuals and local communities persist in all societies. ‘Sweat equity’ complements capitalist house building and renovation in contemporary societies like Britain. But the DIY trend is heavily influenced by the commodified home improvement sector whose products (commodities) congregate in the large hardware franchises.

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also operates as an extension of and cover for the power of a politicalmilitary class that has the final say. Capital circulates and accumulates in ghostly form. This dynamic is clearest in Myanmar, where the army leaders make no pretence about controlling the economy and civil society. The neat institutional and ideological division between government and civil society, between the sphere of free exchange and the coercive force of political authority, that characterises liberal democratic capitalist societies of the West, has not taken root in these ‘hybrid’ cases. As Keane has argued, in the new despotic or authoritarian capitalism popular support of the regime is manufactured through a mixture of hard and soft repression, within a matrix of ubiquitous patron-client corruption. Access to the means of production of material life passes to those who build and maintain a ‘managing up’ relation to those at the top, the alpha political boss—think of Putin, Xi, Erdo˘gan, and Lee. These relations are fluid and at risk of sudden change as people rise and fall in the overall power scramble. Access to good housing is here an outcome of one’s shaky position in the political matrix of power, privilege and patronage; shaky because everyone is vulnerable to the loss of privileges and position, cut off by those higher up the chain of command, culminating in the paranoid reach of the top dog. The overall result is a subtly enforced regime of ‘voluntary servitude’. The new despotisms are plutocracies, but their extreme concentrations of wealth are camouflaged by the deployment of scrambled political languages that have the tactical effect of enabling rulers to gaslight their subjects by being different things to different people at different times. The new despotism is a new form of state-regulated surveillance capitalism. It musters the latest tools of artificial intelligence and robotics to hack and spy on their subjects. It also functionally depends on loyal middle classes who are prepared to trade some liberties for comfortable peace and quiet. Periodic elections and digital media storms offer a voice to subjects, whose quiet subservience is reinforced by handouts, official talks of the need for legality and order, and the public camouflaging and privatisation of violence. (Keane, 2020, p. 237)

As a close reading of the passage above suggests, the differences between the new despotisms and twenty-first-century Western capitalism are increasingly matters of degree. The liberal democratic carapace within which the latter developed is showing signs of being shucked off in failing

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democracies like the United States.2 Of course, degree matters. The allocation of housing in America and like democracies has not yet been overtly tied to position in the web of patronage. But the limits to liberal democracy—the always present contradiction between equal political citizenship and economic servitude—is trending towards the limits to capital and replacement by some hybrid performative despotic regime. But looking beyond the internal dynamics of the times, I argue elsewhere (Berry, 2021, Chapter 5) lurk three existential threats to the capitalist provision of everything, housing, fresh water, food and holidays in the sun—everything. The first threat is, of course, accelerating climate change. The report by the International Panel on Climate Change (IPCC, 2021) has underlined the extreme nature of the multiple impacts, and the urgent need to mitigate and adapt to them. The second threat is the increasing likelihood of viral and bacterial pandemics, of which the coronaviruses are but one possible pathogenic future. The third threat is one that went to sleep for a while but never went away—namely the increasing possibility of extinction through nuclear weapons, a threat ratcheted up when Putin sent Russian troops into the Ukraine in February 2022. Democratic capitalist societies seem to have particular difficulties in confronting these existential threats. Democratically, elected leaders appear unwilling or unable to face down politically powerful groupings whose immediate interests might be threatened by effective and prompt action to deal with the problems, even to the extent of recognising that they exist. Denial has become a common political currency in many Western societies. It may be that despotic capitalist regimes— like ‘capitalism with Chinese characteristics’—are in a better position to take the lead in responding to existential threats, in part because it could strengthen their geopolitical ambitions. However, because many of these societies are still emerging from relative poverty, their ruling elites will be loath to act in ways that slow the economic development process in the particular variants of capitalism pursued. Improving the housing standards of their populations will loom large in the immediate policy agendas of the next few decades, in part because of the links discussed in Part III between good housing, good health and high productivity. Housing poses a series of conundrums for the routine reproduction of capitalism in its Western variants. Its multidimensional character feeds 2 For a more detailed discussion of the threats to democracy, existential and other, see my book (Berry, 2021).

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into the structural contradictions that bedevil this mode of organising social life on this planet. As an essential component of the social reproduction of labour power, its unequal and uneven allocation undermines worker productivity and subservience. As a major reservoir of accumulated wealth, it locks resources away from circulating as productive capital. As the location of the home, it provides the material, ideological and emotional base from which to organise opposition to capitalist hegemony. As a financial asset, it figures in the increasing instability of capitalism as an overall system during the current era of financialisation. As a major land use in the urban space economy, it contributes to the excessive ecological footprint and hyper-congestion of modern urban life. I argued at the beginning of this book that to understand housing provision it is necessary to grapple with the total social context within which it arises, and in order to achieve the latter, we must unpick how housing is produced, sold and consumed under capitalist relations of production and realisation. This dual task required a systematic and sequential analysis that began with the circuit of industrial (productive) capital, resulting in the creation of value in the form of the house as a bundle of use values (Chapters 2 and 3). We continued by observing how commercial and financial capital intervene in order to assist in the realisation of that value, with the appropriation of part of it in the form of profits divided between the lender, exchange professionals and builder (Chapter 4). We then introduced the critical input, land, meaning that it is the land-house package delivering usable space that is the commodity to be analysed. Unlike other joint-products like a sheep that produces meat, wool and sheepskin rugs but does not necessarily have to, a house must have a three-dimensional footing on the earth. But a particular house structure may at any time be divorced from its lot, replaced by another house or an alternative land use (Chapters 5 and 7). These complications necessitated a robust theory of urban land rent that emphasised the importance of ‘rent-seeking’ as a powerful means of (re)organising the urban built environment, while also stressing the importance of the speculative circulation of revenues, accumulated wealth held outside the sphere of the circulation of capital (Chapter 6). The process of rent-seeking was seen to form the material basis for a coalition of vested interests able to exert influence on political agendas and policies (Chapter 13). Part III stressed the place of housing in the overall or extended reproduction of labour power, the central commodity necessary for capitalism to function (Chapter 8), while raising the inconvenient fact for capitalists

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that the house, however humble, is the home in which the possibility exists for a counter-cultural social existence, one that at least partially escapes the close supervision and surveillance expressed by capital at the points of production and exchange (Chapters 9 and 10). This further raised the manner in which housing both expresses and can challenge the evolution of class divisions, cleavages and fragmentation under modern capitalist conditions, with implications for political action (Chapters 11, 15 and 16). In Part IV, the state assumes centre stage. Housing has in most capitalist societies and at most times been provided by the active intervention of productive, commercial and financial capital, notwithstanding the vital facilitative supports delivered by governments, through the means of regulative and allocative modes of intervention articulated in Chapter 12. The state has been far from a neutral agent in this cooperative venture, with intervention tending to favour the interests of well-organised landowners and developers over those of the broad urban population (Chapter 13). The grip of neoliberalism over the past fifty years has allowed the increasing dominance of financial capital at national and international levels to absorb housing as just one more, albeit major, financial asset to be accumulated by the privileged elites at the expense of the majority, while injecting new and powerful sources of instability into capitalism itself (Chapter 14). The brute fact that housing for the masses is necessary for capitalism to survive, since capital can’t circulate and accumulate with workers dead from exposure, means that there are spaces for resistance and counter logics to prosper. An attempt is made in Chapter 15 to suggest how and why. The beneficiaries of the capitalist logic of housing provision are certain to oppose such challenges and Chapters 15 and 16 suggest how they might manifest and be countered. It is patently evident that roughly a fifth of the population in advanced capitalist countries are poorly housed, ever at risk of homelessness. Another large section of the population is inadequately housed with respect to the ability to realise their individual human potential. Housing, therefore, offers a potent potential beachhead from which to push for a socially more just world. There are limits to the power of capital that emanate from its internal contradictory nature, its inability to totally subdue the subversive pressures locked in civil society and the potential for popular mobilisation and the progressive use of state power.

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In the twilight of the neoliberal era and the catastrophic environment of the climate and pandemic emergencies, there are promising opportunities—and a driving necessity—to mobilise political forces to move governments in democratic capitalist countries to radically alter the terrain in favour of the broad majority by a frontal attack on the structural sources on inequality and want. The swelling anger in Western countries caused by Russia’s invasion of Ukraine has super-charged inflation in those countries delivering massive super-profits to the global energy corporations, reinforcing inequality and impoverishing growing strata of their citizenry, while fuelling the environmental crisis on which these super-profits rest. The scene is thus set for that anger to be mobilised among the ‘classes populaires’ in favour of punitive taxation of both the companies and their owners who are quietly piling up wealth currently kept out of the sight of their fellow citizens and the governments who have allowed this to happen. The growing pool of public revenues can then be redirected to begin making up accumulating shortfalls in housing provision, education, health, age care, childcare, infrastructure and other key services which create a life worth living. But as ever, while capitalist relations of production prevail, the limits to the extent of social rectification will be drawn by the process and dynamic of the exploitation of labour by capital. I have attempted in this book to offer a Marxist analysis of housing provision in advanced capitalist countries, starting from the point of view of the deep causal forces expressed in the commodity form. Although overdetermined by other causal tendencies and contingencies in real-life situations, it is the ceaseless search by building-developer capitalists, along with property and financial capitalists, to extract profits from refashioning the built environment that drives urban and regional change. The extraction of surplus value in land development and housing construction by exploiting living workers is the source of profit that is distributed among capitalists through the general competitive scramble in the economy. But the urban economy provides plentiful sources of uneven development through time as property developers and builders seek to extract surplus profits through monopolistic practices, captured by market manipulation, leverage of strategic positioning and undue influence over state intervention, thereby modifying the impacts (that is, the empirically observable outcomes) of the operation of the law of value. Further development of the analysis along the lines pursued in this book would seek to deal with the broader consequences of the global role of multinational capitals, including the strategic reach of the large financial players. But however

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complex and distant the causal forces operating, the analysis must always recognise the basic Marxist insight—namely the reality of class exploitation at the point of production in the housing system and more generally through the capitalist economy. As a final note on method, I accept that there are other viable theoretical frameworks and approaches that can cast light on aspects of housing provision that are ignored or poorly covered by the analysis presented here. Methodological pluralism has a place in seeking to fill out a fuller and more useful understanding of the complexities that the importance of the housing problematic deserves. But, to repeat my comments in the Introduction, I would caution against the mindless eclecticism that sometimes bedevils the field, when concepts and data and thrown together willy-nilly, without any attempt to sort out the levels and interactions of causal tendencies operating. For example, studies have pointed to important phenomena like the rise of second homes, the intergenerational transfer of wealth via housing ownership and the use of land and housing to avoid taxes and launder the proceeds of crime, including the crimes of oligarchs and dictators. These are not isolated events but can be and should be properly integrated into overarching frameworks, such as the one offered in this book. As always, such an exercise is a joint venture between housing scholars, activists and policymakers, it being remembered, of course, that the aim is to change the world for the better, not merely understand it.

References Berry, M. (2021). Justice and democracy: A progressive agenda for the twenty-first century. Edward Elgar Publishing. Keane, J. (2020). The new despotism. Harvard University Press.

Index

Note: The page numbers followed by ‘n’, represents footnotes. A Aboriginal peoples, 68, 97, 98 absolute rent, 74, 76, 161–163 absolute surplus value, 92 accumulation by dispossession, 172–182, 210–213, 217 accumulation, primitive, 89–100 acquisitions, 61 activism, political, 142–144, 211 Adkins, L., 137 affective connections, 118, 120 affordability of housing, 153n4 aged care housing, 132 age, housing provision and, 135–141 agricultural externalities, 74 agricultural rent, 73–80 allocation, housing market, 158–168 Australia aged care in, 131, 132 agricultural practices in, 79 climate policies in, 176n5 colonisation of, 95–100 Covid-19 in, 113 green bans in, 109, 205–207

house price boom in, 51 Indigenous peoples in, 66n3, 97 land registration in, 160 monopoly rent in, 83–85 public housing polices in, 166n19 rental sector in, 49, 130 socio-spatial segregation in, 142 wage legislation in, 208n10 wealth–power inequality in, 175–177 authoritarian capitalism, 222–224 B Babacan, A., 131 Ball, M., 77–80 banks, 54, 59–61, 60n13, 65n2, 144n7, 177–179, 185–193, 185n3, 188n7 Banks, Joseph, 97n10 basic income, 208 belonging, home and feelings of, 118–120 Berlin, Isiah, 152 Bhaskar, R., 4–7

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 M. Berry, A Theory of Housing Provision under Capitalism, Marx, Engels, and Marxisms, https://doi.org/10.1007/978-3-031-24471-1

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230

INDEX

Blackfeet tribe, chief of, 67 Bourdieu, Pierre, 121–122, 126 Bourneville village, 69 builder-capitalists, 60–62 building industry, 30, 36–40, 57 built environment, development of. See development, land buyers, house. See landlord-investors; owner occupiers

C capital class power of, 216 commodity, 30–32 fictitious, 61, 184–192. See also credit financial. See financial capital housing production and, 29–32 industrial circuit of, 30–35. See also capital, circulation of money as, 30 primitive accumulation of, 89–100 productive, 31–40, 49–51, 50n8 property, 43–57 real, 61 social division of, 57 turnover time of, 53–54, 53n9, 204 wealth as, 46–48 capital, circulation of disruptions to, 107, 167 financial capital in, 54–62, 184–186 housing as commodity and, 22, 26–28, 221 industrial circuit of capital, 30–35 productive capital in, 31–40, 43–54, 50n8 social division of capital and, 57 capitalism challenges to logic of, 226 class and. See class crisis tendencies in, 211

democracy and, 180–182 emergence, history of, 92–100 evolution of, 197 existential threats to, 224 inequality in. See inequality land use influenced by, 73–77, 107–113 non-western societies and, 95–97 patrimonial, 145, 172 political variants of, 224–227 populism and, 180 predatory, 173 pure, 108 rentier, 145, 174–176, 190 short falls of, 107 surveillance, 218, 223 welfare, 2, 157 capitalist builders, 60–62 capitalist class, 49–51, 94–97, 135, 136, 145, 208 capital switching, 186 Castells, Manual, 110n3 causality, theories of, 4–6 causal mechanisms, 4–6, 10, 48n5 causal tendencies, 4–7 central banks, 185n4, 193–197 centralisation of capital, 36 Chase, Alexander, 125 Chicago School of Economics, 151 Childe, Vere Gordon, 23 children, raising of, 22, 128 Christophers, B., 145 circulation of capital. See capital, circulation of Civil War (U.S.), 95–97 class capital’s power and, 216 capitalist. See capitalist class categorical conception of, 137n2 disadvantaged (classes populaires), 219n3 elite, 178

INDEX

fragmentation of, 216–218 generative conception of, 137n2 health burdens and, 138 housing and, 135–145 inequality, effects of. See inequality landowner, 74, 90, 95 structure, 106, 135–145 theories of, 137n2 wages and, 35n5 worker/working. See worker/working class classes populaires, 219n3 climate change, 211–213, 212n16, 224 climate policy, 176n5 collective action, 144–145, 219 collective consumption, 110 colonisation, 96–100 commodities housing as, 21, 22, 26–28, 220 human labour as, 221, 222 industrial circuit of capital and, 30–32 material, 49, 50n8 services as, 49, 50n8 commodity production, 26, 32, 72, 158–168 communities gated, 82–84 multi-faceted nature of, 119 socialisation and formation of, 117–119 sub-regions of, 119 utopian, history of, 69–71 companies, failure of, 36–38 competition, law of, 32, 59 complementary devices, 24 Connell, R., 137 construction industry. See building industry consumption, 50, 51, 57, 110, 191 consumption fund, 24, 39

231

contract law, 160–163 Cook, James, 97n10 Cook, W., 37 cooperatives, worker, 108 Corman, Matthias, 212n15 corporate debt, 191–194 corruption, land-related, 207n7, 215 Covid-19 class-biased health burdens of, 138 economic effects, 38, 181, 193, 194–196 unpredictability of, 38 work conditions affected by, 121 credit, 54–62, 183–195 crises of disproportionality, 186 crisis tendencies, 211 cultural significance of housing, 23–25, 120–122, 154

D debt, 142, 184–186, 191–194, 191n10 deductive-nomological theory, 4 defensive expenditures, 50n8 delays, in house-building process, 36 demand for housing, 27, 139–141, 164 democracy, capitalism and, 180–182 Democratic Party (U.S.), 94n7 depreciation of housing, 39 design features, of houses, 141–144 despotic capitalism, 223–225 devalorisation, 64n2 developers, land, 72, 82 development, land corruption associated with, 207n7, 215 impact analysis of, 218 land banking and, 33, 84 opposition to, 205–207 passive enrichment and, 144

232

INDEX

planning, 110, 161, 205–207, 215 profits influenced by, 33 in United States, history of, 93–95 use value and, 72, 78–80 wealth–power correlation with, 171–182 differential rent, 74–77, 78, 80–82, 85 direct value, 32n4 disabilities, people with, 129–131 disadvantaged classes, 219n3 discrimination, housing, 209n11 disproportionality crises, 47 distributive justice, 203 division of labour, 53 DIY production, 40n8 domestic labour, 25, 116, 125–129 domestic productivity, 128 domestic violence, 127, 138

E economic crises, 107, 110, 172, 185–196 economic field, 121 economic freedom, 153 economies of scale, 53 economy, forest metaphor of, 37 elections, influence over, 175 elite class, 178 empiricists/empiricism, 4 Engels, F., 23, 92, 121n8, 202 England, 90–92, 222 Environmental Protection Agency (U.S.), 193n12 equilibrium price, 32 equities, house prices’ co-variance with, 52 Euripides, 67 exchange value of housing, 26–28, 32–35 of labour power, 31–33

expenditures, state, 50n8, 163–167 explanation, prediction compared to, 3–7 externalities, 78–80 F factory production, 92–93 failure, of companies, 36–38, 47 family living, 23 Federal Reserve (U.S.), 185, 194 Feyerabend, Paul, 7n7 fictitious capital, 61, 184–192. See also credit financial capital, 54–61, 86n13, 184–197 financial crises/instability, 58, 185–196 financial disadvantage, 130–132 financial instability hypothesis, 192 financial institutions. See banks financialisation, 2, 58, 143, 187 financing structures, stages, 191–193 form (modes of intervention), 158 Fourier, Charles, 69–72 fractional reserve banking, 188n7 Franklin River, 207 free labourers, 89 free market ideology, 153–166, 168. See also neoliberalism Friedman, Milton, 151, 153–155 frontier myth, 95 functional capitalists, 57 G gated communities, 85–87 Gemeinschaft (community), 116–118 gender division of labour and, 25, 116, 126–129, 145 inequalities related to, 136–139, 155

INDEX

social significance of housing and, 102 generative theory of causality, 4 gentrification, 80–82, 144, 206n5 German Social Democratic Party meeting (1875), 202 Gesellschaft (society), 116–118 Gilmore, Mary, 70 global financial crisis (GFC), 177, 185, 187–189, 192, 193 global warming, 212, 212n16. See also climate policy Goethe, Johann Wolfgang von, 125 government role, in housing provision, 151–167, 183, 217. See also policies, housing provision Graham, Billy, 118 green bans (urban development), 205–207 Greenspan, Alan, 188n6 guaranteed minimum income, 208n10, 209n11, 216, 217 guard labour, 50n8 H ‘Harvester case’ (public policy), 208n10 Harvey, David, 7, 24, 26, 27, 61, 75–77, 85–87, 108, 109, 139–141, 143, 144, 184, 185 Hayek, Friedrich, 152n1, 153 health, 24, 107, 111, 112, 132 hedge financing, 192 Hirschman, A., 120 Hockey, Joe, 154 Hollis, M., 3 homelessness, 178 home ownership, 171–174, 218 home, social construction of, 24–27, 115–120, 125–133 Hopkins, E., 108

233

households, 22, 23. See also home, social construction of house, the (structure), 21–24, 159–161 housing affordability of, 153n4 capitalism and centrality of, 211, 221 defined, 102 as a financial asset, 145 fulfilling and just outcomes related to, 202 labour power and. See labour power land package with, 141 market. See market exchange prices of. See prices, land-housing production of, 29–39 public. See public housing realisation of, 43–59 research on, approaches to, 6–9, 8n8 social significance of, 23–25, 117–122 supply/demand in, 27, 139–141, 154 value of, 25–28, 27n2, 31–33, 172, 189 housing booms, 47, 187–191 housing provision alternative systems of, 220 class and, 135–145 finance’s role in, 183–193 free market ideology and, 13–14, 151–167 health and, 24, 106 policies. See policies, housing provision space packing metaphor and, 139–141 statistics theoretical frameworks, 8, 9n9, 228 theoretical frameworks, 4–8

234

INDEX

housing tenure, 129, 136–145 Howard, John, 135 human labour. See labour Hume, David, 4, 5 Hunters Hill (Sydney), 207 hysteresis, 139n4, 195

I identity, community and, 119 immigration, 119–121, 164, 194n13 income basic, 208 guaranteed minimum, 208, 216 inequality. See inequality post-tax distributions of, 218 incommensurability (theoretical frameworks), 7n7 Indigenous peoples, 66n3, 98 industrial circuit of capital. See also capital, circulation of industrial circuit of capital, 30–34 inequality data on, 138n3 government’s role in addressing, 210–213 health burdens and, 138 housing and entrenchment of, 13 labour market position and, 138 wealth–power nexus and, 171–180, 220 inflation controlling, approaches to, 154 government intervention and, 171 housing market impacts of, 135, 188–192 interest rates and, 161 moderation of, 193–195 prevalence and enmeshment of, 139 price volatility and, 83 rent theory and, 86 innovation, 33–36, 37, 58

input-output matrix, 48 instability, crises and, 59, 185–196 interest/interest rates, 48–51, 52, 56, 143, 161, 162, 184, 193–196 International Panel on Climate Change (IPCC), 224 internet, 118–120 intervention, modes of (state), 156–166 investor landlords, 48–51, 137

J justice, 203–208

K Kalecki, Michel, 190, 191 Kay, John, 35 Keane, J., 222–225 Keynes, John Maynard, 83, 186–188, 190 Knight, Frank, 151, 156

L labour commodification of, 221 degradation and deskilling of, 136 domestic, 25, 113, 129–133 exploitation of, 32, 216–218 housing production and, 37, 44 human existence defined by, 105 immigrant, 174, 194n13 intentionality of, 106 organised, 106, 173n2 primitive accumulation and, 89–92 process of, 29, 107 productive/unproductive, 50n8 sweat equity, 40, 222n1 labour market position, 137–139, 216

INDEX

labour power, 30–34, 31n1, 34n5, 60–62, 98–108, 205. See also productive capital land developers of, 2, 80 development of. See development, land domestic productivity and, 128 as financial asset, 143–145 locational advantage of, 75 market value, 144 prices. See prices, land-housing registration of, 163 use of, historical, 67–72, 89–99 use value of, 72, 78–82 land banking, 33, 84 land-house package, 72, 183. See also prices, land-housing landlord-investors, 48–51, 139 landowners (class), 36, 74, 75, 85, 86 land ownership, 76–83, 128 land reform, 89 land rent theory, 73–84, 111 land rights, 67, 68 land tenure conflicts, 109 land use planning, 161, 225 Lane, William, 70 laws, housing market, 160–163 leakages, 44, 46n1, 52, 86n12, 210 Lincoln, Abraham, 94 liquid wealth, 83 loan finance. See financial capital locational advantage (land), 75 Locke, John, 35

M Manchester (England), 91 manufacturing, 91–94 Maori People, 65n3 marginalised populations, collective action of, 219

235

market exchange, 26–28, 153, 156–166 market orientation (modes of intervention), 158–160 market power, 33, 60n13 market value, of housing, 25 Marshall, Alfred, 37 Marx, Karl on American civil war, 93 on centralisation of capital, 36 children of, 121n8 on credit, 183, 184 on disproportionality crises, 47 on domestic sphere, 121 on E.G. Wakefield, 98, 99n12 on equilibrium price, 32 on expenditure, 163 on fictitious capital, 177 at German Social Democratic Party meeting (1875), 202 on industrial circuit of capital, 30–32 on innovation, 33 on interest-bearing capital, 48, 57 on labour, 27, 29, 85–87, 105, 106, 154, 155 on land ownership, 76–79 on primitive accumulation, 89–92, 95 on private property, 35 on production of houses, 29–32 quotes from, 125, 136, 151 on rent theory, 73–85, 161 on services, 49 on simple reproduction, 46n1 theoretical approach to, 7–10 on turnover time of capital, 50 on value(s) (use/exchange/surplus), 25–27 on working class housing, 107n2 on working conditions, 155 material commodities, 49, 50n8

236

INDEX

Mayer, J., 175 McLean, N., 175 means of production, 27–28, 48, 90. See also productive capital mechanisms, causal, 4–6, 48n5 media access, wealth and, 175–177 mergers, 61 migration, 119–121, 209 Miliband, Ralph, 157 mining, 176n5, 176n6 Minsky, Hyman, 60n12, 191, 192 modes of intervention (state), 158–167 money, 26–28, 44 money capitalists, 57 monopoly power, 58, 60n13 monopoly rent, 8n8, 74, 76, 77, 83–87, 144n7 Mont Pelerin Society (MPS), 151–154 moral doctrines, plurality of, 203 Munro, D., 8n8 Myanmar, 223

N Nell, E., 3 neoliberalism, 2, 135–145, 157, 164, 166, 167. See also free market ideology New Australia (community), 70 new despotisms, 222–226 New South Wales (Australia), 96, 205, 215 New Zealand, 65n3, 96, 112 nightwatchman state, 158–161 non-liquid wealth, 83n8 non-productive expenditures, 165 non-productive labour, 50n8 non-productive services, 49–52 norms, market exchange, 158, 159 Norquist, Grover, 166n20 Nozich, Robert, 158–161, 159n11

nuclear weapons, 224 nursing homes, 131 O OECD (Organisation for Economic Co-operation and Development), 212n15 old people, housing provision and, 128–133 oligopoly power, 51–53, 58, 60, 196 Omerod, Paul, 37 ontological security, 24 open systems, 5n3, 6 option value, of existing houses, 37–40 Organisation for Economic Co-operation and Development (OECD), 212 Outhwaite, W., 5, 6 Owen, Robert, 70n1 owner occupiers, 48–51, 136, 137, 143, 193 ownership, land/home, 89–97, 128, 167–168, 218 P Palmer, Clive, 175, 176n5 Panama Papers, 179 pandemics, 211 Pandora Papers, 179n7 passive enrichment, 144 patrimonial capitalism, 145, 172 petty-landlords, 49 philosophical liberalism, 35 Pigou, Arthur, 79 Piketty, Thomas, 172, 219n3 planning, land use, 110, 161, 162, 205–207, 225 Pliny the Elder, 115 policies climate, 176n5

INDEX

housing provision, 1, 2, 133, 161, 167, 168. See also government role, in housing provision wage-related, 208n10 political activism, 143 political power, 171–179, 182, 211 Ponzi, Charles, 192 Ponzi financing, 192 poor housing conditions, 24 Popper, Karl, 152n1 populism, 180 positivists/positivism, 4 Poulantzas, Nicos, 157 poverty, 178 power law, 37n7 power, wealth and, 91, 171, 210, 211 predatory capitalism, 173 prediction, explanation compared to, 3–7 price differentiation/gouging, 51–53 price, equilibrium, 32 prices, land-housing circulation of capital and, 31 equities’ co-variance with, 25 inflation and. See inflation innovation and, 29–32 new vs existing, 38–40 profit equalisation and, 60 tendencies influencing, 32–35, 78 urban land rent theory and, 73–84 volatility of, 38, 83 prices of production (commodities), 32n4, 33, 57 prices, share, 192–195 primitive accumulation, 89–98 private property, 34–37 privatisation, public housing and, 112, 166 production of housing, 29–40 productive capital, 49–51, 211n13 productive expenditures, 163 productive labour, 47n4, 50n8

237

productive services, 48–51 productivity, of workers, 107–112, 171 profits of banks, 59, 60n13 builder-capitalists’, 44–48, 54–57 competition and, 33 corporate debt and, 191n10, 192 credit and, 54, 184 equalisation of, 60 industrial circuit of capital and, 30–32 innovation and, 33–35, 58 labour process and, 30, 31, 50n8 leakage of, 44, 46n1, 52, 57 market power growth and, 33 in production of housing, 29–33, 35, 36 property capitalists’, 43–46, 49, 50 in realisation of housing, 43–48 reduction factors, 34n5 reinvestment of, 44, 46n1 total, 45, 54, 56 progressive taxes, 209 property capital/capitalists, 43–53 property lobby, 212, 215 property rights, 128, 156–159, 218–220 public housing, 2, 112, 165, 166n19, 206 public provision, 166 purchasing power, 83 pure capitalism, 108 Q quality of housing, 18 quasi-confiscatory wealth tax, 210n12 R race, housing discrimination and, 167n21

238

INDEX

radical uncertainty, 6 real capital, 61 realisation of housing, 43–57 realised values, 57 realists/realism, 4–7, 5n3 real social democracy (RSD), 207–209 rebates, government housing, 164 Reconstruction (U.S.), 94n7 regulation, housing market, 24, 158–168 Reiss, J., 4, 5n2, 5n3 relative autonomy of the state, 157 relative surplus value, 119n5 renovation, home, 40 rent absolute. See absolute rent agricultural, 73–77 differential. See differential rent gentrification and differences in, 80, 81n7 monopoly. See monopoly rent theoretical approaches to, 8n8 theory of land, 79–87, 139 rental investors, 48–51, 137 rental sector (Australia), 49, 130 rent control, 153 renters’ rights, 137 rent gap, 81n7 rentier capitalism, 174–177, 190 rent strikes, 109 Republican Party (U.S.), 94n7 retirement villages, 131 revalorisation, use value and, 80 rezoning, 205–207, 207n7 Ricardo, David, 74 rights, property, 128, 156–159, 218–220 Rignano, E., 210n12 Robinson, Joan, 35 role conflicts, domestic, 127

S Saez, E., 174, 179 Samuelson, Paul, 71n2 savings, 44–46, 56, 57 savings and loans scandals (U.S.), 111n4 securitisation, 25 self-building, 222n1 services, as commodities, 49–52, 50n8 share prices, 192–195 Shelterforce, 151 Shiller, Robert, 188n6 simple commodity production, 26 simple reproduction (profit leakage), 46n1 Skinner, B.F., 71 slavery, 93–95 ‘slum reclamation’ programs, 205–207 Smith, Adam, 26, 53 social character, of an area, 120 social division of capital, 57 socialism, 69 social justice, 203–209 socially necessary labour power, 30, 31n1, 32–34 social media, 118, 217–219 social mobility, ideology of, 217 social significance of housing, 23–25, 117–122 society (Gesellschaft ), 116–118 socio-spatial segregation, 92, 115–120, 142 South Australia, 98–100, 160 speculative financing, 192 staged release, 33 state role, in housing provision. See government role, in housing provision Stigler, George, 151, 153, 154 Stretton, Hugh, 142 subsidies, government housing, 164 successionist notion of causality, 4

INDEX

supply of housing, 139–141, 167 Supreme Court (U.S.), 193n12 surplus value, 31n2, 47, 49, 50n8, 86, 119 surveillance capitalism, 218, 223 sweat equity, 40, 222n1 Sydney (Australia), 96, 97, 207

T Tasmania (Australia), 98, 207 taxes/taxation evading (tax dodging), 179–182, 210 housing market and, 163, 164 progressive, 205 quasi-confiscatory wealth, 210n12 rates, 184 reducing, 174–177 regulations, 174 tenant rights, 218 tendencies, 4–7, 27n2, 211 terra nullius, 97 Thatcher government, 2, 220 theoretical frameworks (housing provision), 4–8, 8n8, 228 third spaces, 118 time production of housing and, 32, 37 social reality of, 9, 204–206 turnover, of capital, 53–56, 204 Tönnies, Ferdinand, 116–118 Tooze, Adam, 181 Toporowski, J., 57 Torrens, Sir Robert Richard, 160n12 ‘Torrens title’ (land registration), 160 Torres Strait Islander peoples, 68 town planning, 110 trade, 68 trade unions, 108, 109, 165 transportation developments, 111 turnover time of capital, 49–51, 204

239

U uncertainty, radical, 6 underconsumption (crisis theory), 190 unions, trade, 108, 109 United States Environmental Protection Agency, 193n12 Federal Reserve, 185, 189 land development in, history, 93–95 political parties in, 176n6 savings and loans scandals in, 61 Supreme Court, 193n12 wealth–power inequality in, 171–174 urban land rent theory, 73–85, 92–95 urban managerialism, 8 urban revolution, the, 23 usable space (developed land), 49 use values commodity production and, 26 housing, 21–27, 57, 58, 219 land, 68, 73–77 revalorisation and, 80 utopian movements/communities, 70–72 Utopia Ohio, 70

V value(s) direct, 32n4, 33 exchange, 26–28, 31–33 of housing, 21–25, 27, 32, 172, 184 of labour power, 30–33 Marx’s theory of, 31 option, 38–40 realised, 57 surplus. See surplus value use. See use value Victoria (Australia), 98 Viner, Jacob, 151

240

INDEX

violence, domestic, 127, 138 Von Mises, Ludwig, 152n1

W wages, 30, 35n5, 53, 57, 92n3, 208n10 Waitangi, Treaty of, 66n3 Wakefield, Edward Gibbon, 98–100, 99n12 Walden Two (Skinner), 71 wealth capital as, 51–53 dormant, 46 housing as store of, 26 post-tax distributions of, 218 power and. See power, wealth and protection of, 99 purchasing power and, 98 wealth tax, 210 Weber, Max, 117 welfare capitalism, 19, 148 Western capitalism, new despotisms and, 218–220 Winter, I., 143 women domestic labour of, 25, 116, 125–129, 133 inequalities facing, 136–138, 155

social significance of housing and, 125–133 Wood, E., 90, 91 wool, 97 worker/working class acquiescence of, 111–113 choices denied to, 46, 155 collective consumption by, 110 credit and, 54 employer relationship with, 98–100 factory production and, 92–94 guaranteed income and, 208 housing conditions, 109, 201 labour power of. See labour power primitive accumulation and, 89–92 productivity of, 106–109, 171 skills of, 109–113 wages. See wages worker cooperatives, 108 work, home’s relationship to, 107, 115, 118, 119. See also labour Y young people, housing provision and, 131–133 Z Zucman, G., 174, 179