late capitalism

Universal Rent Control is about more than tenant power, it’s about reestablishing democratic power over the market

As election day approaches, the stakes keep getting higher and the political environment keeps getting scarier. It was inevitable that the President would turn to imaginary fears and blatantly false claims to poison the climate, partly because he sees the grave risk in “losing” the midterms, but mainly because that’s who he is. It is disheartening that so many other Americans seem to share his darkest impulses. It might not be enough to prevent Democrats from retaking the House, but we’ve seen that song and dance before. 

The real question for me is: how much will change if the Democrats win? The battle in New York for Universal Rent Control is a good place to consider what needs to change, what could change, and what might not change within the Democratic Party.

(Honestly, this blog got away from me and is more about the political process around URC than specific policy proposals, but feel free to check out something I wrote about it here for more details. I will be following up this article with more about URC.)

Now, of course things will change considerably for the President if Democrats take back the House. There will be actual oversight of the administration. There will be meaningful roadblocks to the Republican agenda on the hill. There will be some reaffirmation of some democratic checks and balances. This is all great.

But, look, we’re still in a bad way. The faith in our democratic institutions has eroded because the institutions themselves have eroded. The faith we have in each other as a whole has eroded because our vision of each other as a whole has fractured. The faith we have in the American Dream has eroded because our economic reality is a world away from it. Most disturbingly, the faith we have in our climate security has eroded because our planet is clearly in grave trouble and we’re failing to face it.

None of this changes if the Democrats take back the House

It won’t change and it’s not for the obvious reasons that they might still lose the Senate, don’t control the White House, and don’t control the Court. It’s the same reason why even taking power back in New York might not result in real change.

It’s because the Democratic Party doesn’t have any real answers for these problems. They haven’t for decades. Just look at this recent interview with Rep. Nancy Pelosi (starting at 2:58.) Seriously, what the hell is she actually talking about? They are nowhere near the nihilism of the Republican Party, but that’s not hard or virtuous. 

As the party continues to make commendable strides in promoting diverse candidates that better reflect the 21st century American experience, it has been notably less successful at promoting ideological diversity. They have allowed candidates to run to the right, but have mostly isolated those that run to the left. 

It’s obvious why: Democrats have been corrupted by the same system that has corrupted the Republican Party, only in slightly different ways, by only slightly different actors. And that system isn’t working.

For decades, both parties fully embraced neoliberalism as the end of history ideology

Privatization, deregulation, and globalization have been the name of the game for 40 years in America and both parties have become beholden to the moneyed interests that wanted it, benefit from it, and jealously guard it.

To be clear there is nothing inherently wrong with a competitive private sector, a proactive regulatory regime, or a deeply connected international world. In balance these elements can make us all safer, richer — financially and culturally- and healthier. But neoliberalism hasn’t delivered that world. There is no balance. 

There is something inherently wrong with “trusting markets.” 

The obvious point is that neoliberalism by definition doesn’t trust or value democratic control of power. It’s central belief dictates that power will be competitively dispersed between rational economic actors and that that competition will inevitably produce better outcomes for society. 

Those are some major leaps of faith to build a global society on:

  • It assumes that economic actors are rational (which is far from true for individuals, firms, and even states) and discounts the consequences of when they aren’t rational, which is most of the time. 

  • It assumes that competition between these actors will be honored rather than crushed, which is what always happens (either by brute force or collusion) and is unprepared for the fallout. 

  • And it assumes that all of this will produce a better society, while it has clearly ignored the toll it takes on the planet and on vulnerable populations.

What neoliberalism has left us with is a vastly unequal and unparalleled concentration of wealth and power that we can barely see let alone hold accountable. It has left us with a wake of destructive exploitation of human populations and natural resources that we can’t prevent or replenish. It has left us with severely compromised democratic governments that can’t represent or protect us. And it has put the very-near-future of our planet in peril. 

This is because the hallmark of neoliberalism is illiberalism, a fake democracy. It’s a term that we’re starting to hear used more about countries like Turkey, Russia, and Poland, but we have been experiencing it here for a long time. The structural flaws within the Constitution, the shameful voting suppression efforts in many states, and the corruptive flow of money across all levels of politics and media have warped our government far from any definition of “self.” Neoliberalism requires this. It’s a really raw deal for most of us.

How Democrats went from the New Deal to Neoliberalism matters for how we get them out

The Democratic Party is complicit in this. The party abandoned its New Deal commitment to democratic control over the economy, to public investment and ownership, and to sharing the benefits of prosperity evenly across society with an ever wary eye towards the future.

The New Deal represented a clear, unifying theory of self-governance forged from the trauma of the Great Depression: a strong interventionist state to create and spread wealth. It became the bedrock for the greatest sustained civic growth and wealth creation in the history of the world and it kept Democrats in power for 50 years. It remained the de facto organizing principle for decades because not only was it a powerful narrative, but it did what it said it would do. People believed in it because it did make life in America better.

Mostly for white Americans. That commitment wasn’t perfect and its fatal flaw was its reliance on actively preventing other groups, domestically and internationally, from partaking in it, often violently. 

By the 1970s, the world was starting to catch up with the US economically or resist it’s influence militarily and at home the civil rights and gender equality movements, plus opposition to the Vietnam War, began to fracture the coalition. Tragically, it could not adjust to these new voices and realties. 

For the first time, many people felt that the American pie was as big as it was going to get and that it was necessary to fight over and protect your piece of it and prevent others from getting close to it. The right started exploiting these tensions to further crack the coalition with growing success. Nixon’s infamous “Southern Strategy” worked twice and has remained the Republican Party’s default playbook ever since. It has only been more naked with Trumpism.

When the New Deal seemingly ran out of answers to expand the American pie, it created a vacuum that neoliberalism filled.

Racial appeals and resentment were powerful subtext, but a movement needs actual text to rally around. Neoliberalism was a powerful narrative answer, especially in the hands of President Reagan. It was cloaked in Cold War rhetoric and spoke about expanding freedom throughout the US and the world. The way to expand the pie was to end communism and open up the world’s markets. It seemed very American.

But, unlike the New Deal, neoliberalism hasn’t done what it said it would do. Or, perhaps more accurately, it has done exactly what it was intended to do, but its supporters who said otherwise were either villains or fools. It has seized political power from popular representation and given it to a small amount of corporations and wealthy individuals. 

There is nothing “American” about enriching a tiny portion of stateless oligarchs and firms by turning people against each other, by robbing the public of our own social and economic capital, and by selling out future generations even as the current population’s slice of the pie is actually getting smaller. But that is what has happened under neoliberalism.

Although President Reagan was wildly popular and enacting neoliberalism created an air of revolutionary spirit, it never did kill the New Deal coalition. Democrats remained in control of Congress all during this period and voters remained wary of calls to totally deconstruct the welfare state (at least for white people.) 

But Democrats killed the New Deal Coalition. Bill Clinton killed the New Deal Coalition.

Though many old guards held out, a new generation of party leaders eagerly accepted the premise that the New Deal was failing, that America had turned right and that it was advantageous to go with them. Rather than try to challenge corporations’ and wealthy individual’s power, they wanted to channel it.

In the wake of several presidential losses (though, again, Dems held Congress each time) Clinton became Nixon essentially in 1992 and ushered in a Democratic machine that relied on big donor money and cosy relationships to corporations and Wall Street while distancing itself from “the era of Big Government” as though it hadn’t worked for the majority of Americans all along. Tough on crime, tough on welfare, tough on unions looked like “Serious People Making Serious Decisions” but was really slow moving betrayal of the New Deal coalition. 

The party has remained in the Clinton image ever since. President Obama included. It hasn’t been able to counter Republicans slow turn to the right because it has largely accepted their worldview and has been left arguing over degrees.

Ironically, Republicans realized the neoliberal game was up first

Despite pulling a Weekend At Bernies with the corpse of Ronald Reagan for years, it has been clear for a long time that Republicans have largely abandoned neoliberalism and replaced it with an ethno-nationalism that is really just zero-sum oligarchy with a bunch of racism and fanaticism to scrape out electoral victories.

The Democratic Party, at the national level, but also at local levels, has been left in the awkward and clearly untenable position of half-heartedly defending neoliberalism. Sure, compared to the nihilism of the Republican Party, protecting the status quo seems appealing and even noble, but it isn’t. 

Neoliberalism in the first place was a betrayal of the modern Democratic Party’s New Deal ethos and hasn’t worked for most Americans anyway. The American pie is getting bigger for the wealthy (many of which aren’t American) but fewer people are getting slices at all.

Forget #theresistance and resist the Democratic Party’s continued dereliction of duty

At all levels of the Democratic Party, the reliance on big donors and corporate coziness has killed its ability or desire to counter this and to address the issues facing our country in meaningful ways. Big, sweeping visions of societal change are anathema to these interests and thus the party has turned to bland incrementalism and technocratic insularity to keep muddling along. 

It is obvious that this has failed as a political strategy, particularly at the state level where Democrats have lost over almost a 1000 seats since 2008. But it has failed as a moral imperative. 

We need big thinking to turn things around. We need big actions to save the country and the planet. We need big ideas to overcome the cultural decadence and civic rot fueling all of this, which was encouraged by the individualist consumerism that neoliberalism requires.

That’s why the Senator Bernie Sanders 2016 campaign was so important, even if it fell short. It started much needed and much unwanted soul searching within the party because it was about big ideas. It was about what kind of country and what kind of world we can create if we control it. 

It offered a glimpse of a 21st century version of a New Deal coalition that has had a powerful impact on the party, despite every effort to resist it. It shows that there is a hunger for taking back democratic control over the economy and the environment from the market that neoliberalism trusts exclusively.

It has been slow and will continue to be, but the successes of leftist social-democrats like Alexandria Ocasio-Cortez (full disclosure: I volunteer for her on housing policy), Ayanna Pressley, and Rashida Tlaib at the national level means there will be more voices in Congress speaking for more people that have been voiceless there and within the Democrat Party for too long. This is an important development, regardless of who wins control of the House on November 6th.

Universal Rent Control is one of many local fronts in the fight for the soul of the Democratic Party

Wrestling back democratic control of the Democratic Party at the national level will be a multi-cycle project. There are, however, a lot of opportunities to impact the party’s future where you live. The real fight for the soul of the Democratic Party is happening locally as we speak over issues like Universal Rent Control.

In New York City, Ocasio-Cortez’s upset victory swept national attention and has made her an instant rockstar on the left, but she will be the first to say that she is part of a ground-up grassroots movement that is bigger than any one candidate or office.

That was on display in many New York Senate primary races on September 13th where 5 of the 6 NYC members of the infamous Independent Democratic Conference (IDC), who voted with Republicans in Albany, all lost to left-leaning candidates. All of these candidates ran on an unapologetically social-democratic agenda that includes universal rent control. They and others need help to win in the general election.

There is a real chance that despite severe gerrymandering, and real estate lobby money, Democrats will win the Senate in Albany for the first time in decades (the Assembly has long been in Democratic control) on the strength of this social-democratic agenda.

Democratic control of Albany doesn’t mean social democratic control — or that Universal Rent Control happens

If that happens, we’ll see just how much of a battle taking back the Democratic Party will be and why neoliberalism has such deep roots in Democratic politcs. The IDC and Republicans are an easy target to blame for the lack of more progressive policy in New York state, but the truth is more complicated. 

Many New York Democrats, notably Governor Cuomo, who is the poster boy for cynical Third Way Clintonism (he was HUD Secretary in Clinton’s second term after all), are skeptical of progressive policies and have deep ties to the real estate industry that make up the base of the traditional big donor interests in Albany.

Will these traditional Democrats listen to their constituents and the grass-roots movement trying to save the Democratic Party? How many Democratic voters recognize how much of the problem lies within the Democratic Party itself? The primary results show that there is real momentum, but the activists fueling this rise need to rally more Democratic voters to the cause, and it means talking about big ideas again.

URC and every progressive fight must be framed as taking back democratic control over our economic and environmental destiny

Universal rent control is a big idea. At heart, it is a series of policy proposals that aim to protect all renters in New York state from harassment, displacement, and homelessness. It’s a completely justifiable policy proposal given the structural nature of the housing crisis that cries out for more tenant protections. Half of all renters in New York are rent-burdened and there are over 89,000 homeless New Yorkers in the state. On top of this, the city and state are not ready for climate change, which will effect many of these low-income communities first.

Universal Rent Control has been and will continue to be attacked by the real estate lobby, most economists, and many members of the media as a foolish, self-destructive fantasy. That’s horseshit.

“Highest best use” has been the religion defining neoliberalism’s economic and political policy for decades, even as it has enriched faceless corporate entities at the expense of local communities and popular representation. The principles of efficient allocation of resources appear to be agnostic and empirical, but they are still subjective assessments of fundamentally moral arguments about what a society should be and whom a government should serve.

That’s why URC must be understood as being the head of a larger political spear aimed at fighting the illiberalism at the heart of neoliberalism. It is about taking back power from the high priests of the market. The goal is to give power back to the people through democratically elected leaders and popularly supported laws. 

Illiberalism has been on displace within New York State for years: blatant gerrymandering, terrible voting laws, and endless amounts of anonymous money (much of it coming from the real estate lobby) make New York’s government a truly anti-democratic institution. Only popular movements like URC can finally end this system.

To be clear, the point isn’t to suggest that ‘the people’ will agree on every issue. The point is to reestablish democracy as a forum where all sides felt heard, all views are addressed, and as much consensus is reached as possible. Only then will our self-government live up to its definition. Only then will it have legitimacy and buy-in, even if the results are compromises. That’s the whole point.

This is all a moral failure. Let’s keep calling it that.

Democrats have long abandoned the sense of morality that was the foundation of the New Deal coalition’s success. I’m not suggesting that the Democratic Party is devoid of morality. They have adopted moral language rhetorically for certain vulnerable populations and on the environment. Some of this language has resulted in real, meaningful action. 

But most hasn’t. As a result it falls into the lose-lose situation of being lambasted for its overly “PC” rhetoric and focus on identity politics while not actually taking legislative stands for those issues, harming those constituencies.

Democrats don’t need to try to revive the New Deal coalition per se. 40 years of increased diversity and increased economic burden has greatly expanded what this coalition should and could look like. But to do so will require reviving the moral clarity and civic purpose that it represented. If the New Deal came out of the Great Depression, the next version should come out of the Great Recession. 

It is a message that already polls well with Americans from all political spectrums. There will be political victory if the Democrats do, but that will pale in comparison to saving the country and the planet. The only way to do that is to wrest control back from the markets.

Let’s start with calling out the immorality of our housing policy. 80,000 of our fellow New Yorkers should not be homeless. Half of all renters should not be burdened. So many seniors should not be so close to housing disaster. Communities shouldn’t be displaced for the sake of private equity profits. 

These are choices that have been made without our consent. Universal Rent Control is the first step in taking control of these choices and fixing them. That means greater public investment and ownership of housing. That means holding the private sector accountable as a partner, not as a master. It means redefining what our society should value and who should get to debate and ultimately define that.

For all of us as individuals, this means getting out there and supporting movements and candidates that want to take control of these choices. There is still time before November 6th to get involved, but the work won’t end there. It won’t end if Democrats win or lose in Albany or DC. We must keep shaping the fight for the soul of the party and keep making it clear that this is about saving our shared future.


Late Capitalism is coming for the last pillar of the American Dream

Bullseye (nationalrealestateinvestor)

Bullseye (nationalrealestateinvestor)

Today the Wall Street Journal and its dizzying “everything is fine” tone explored the booming sector of home-buying. We’ve built our entire economy and political cultural around homeownership in the US, so you can see why this could be a good thing. But it is not. It is a terrible thing.

That’s because the people buying these homes aren’t people at all. They are “sovereign-wealth funds, insurance companies, hedge funds, pensions, [and] asset managers” and they are buying bundles of single-family homes with the clear intention of renting them for the long-term. In fact, many of these groups are raising billions of dollars to expand their portfolios. 

I’ve written about how Wall Street is becoming a lot of peoples’ landlord, and how it exposes how fraudulent US housing policy is, but the trend is only getting bigger and scarier. The biggest players in this new market own thousands of single-family homes, mostly in markets like Atlanta, Phoenix, or Nashville where populations are growing. They are squeezing out many potential homeowners in the process.

The economics are clear and deeply cynical. Mega-financial institutions are taking advantage of the average American’s inability to buy a home because of high debts and low wages on the household-side and higher mortgage rates/prices and leaner inventories on the market-side. 

If that wasn’t bad enough, these institutions still reap all the government-subsidized benefits of homeownership that were designed to be passed along to families. I’ve written about the $134 billion the US government spends a year on subsidizing homeownership, most of which goes to wealthy home-owners already. It’s insanely wasteful and deeply unfair. But does anyone want a hedge fund to get tax breaks for owning a home and renting it out to a cash-strapped family?

Homeownership policy is broken. Housing policy is broken. Our economy is broken. Nothing screams this more than late capitalism’s calculated lunge towards single-family homes, the final pillar of the American Dream. Wall Street and the investor class get how broken our economy is and respond by exploiting it. And they aren’t even pretending to care about optics:

‘“The American dream no longer includes homeownership,” said Jordan Kavana, chief executive of Transcendent Investment Management LLC, a south Florida firm that has been a big acquirer of rental homes. “You will earn your equity in other ways, not your home.”’

I’m not sure where Mr. Kavana assumes this new source of equity will come from, but given that few Americans own stock and most draw their wealth from their homes, the options appear to be limited. But that’s your problem.

The new, frightening (and baffling) development is that many of these cash-rich entities are building new housing expressly for foreign owners — expressly as rental/investment properties. Mr. Kavana goes on to say that these investors “Get that this [homeownership] is the lynchpin of the American economy.”

The paradox of identifying (correctly) that homeownership is the lynchpin of the economy while actively subverting it goes unaddressed in this article, but it gets to the core of this market play. 

These institutions know that the game is up for most Americans. They know that many young Americans can’t (and won’t) afford to buy homes and many baby boomers will eventually be forced to sell. They know that special interests have frozen any ability to politically address the structural deficiencies in housing policy or for that matter the American economy. They know that at best politicians from both parties are going to pound their chests about homeownership, perhaps offer some empty new incentives around the margins, declare victory, and move on. They know that they can continue to reap the rewards of homeownership subsides while sitting on ever-increasing housing prices as the housing crisis grinds on.

They know that this is a cash cow for their shareholders and will be for a long time.

We should all be sounding the alarm at this outrage. It’s outrageous on the face of it as this new normal goes against everything that 80 years of bi-partisan domestic policy was created to foster (as flawed and racist as it was), but its even more outrageous given that we are only 10 years removed from the damage caused from the Great Recession — damage caused by many of these same actors under these same structural realities in housing. For many Americans, my generation included, we will never recover from it.

The Great Recession may have ultimately been triggered by the exotic and fraudulent nature of mortgage-backed securities, but it really happened because people couldn’t afford their homes.

That is even more true today: household debt is $13.2 trillion, which is half a trillion dollars higher than the previous record set in 2008. Real wages for the majority of Americans have barely moved in forty years. Wealth inequality has skyrocketed over that same period. Generational wealth passed though home equity is the only path for most first-time homebuyers, furthering racial and demographic wealth gaps.

What happens when the next downturn comes? Sure, it may actually benefit some families who don’t own their homes — these institutions can in theory weather it better than individual homeowners (or get bailed out before a homeowner would). They could lower rents to keep some cash coming in. In turn that could give families more flexibility and mobility. But somehow I don’t think the average American family will be that much better prepared than last time.

Housing policy rarely gets the attention it deserves, which is maddening and disheartening. There are certainly many fires and leaks spreading across the land, but it all starts with home. If our entire economy and political structure is built on the fundamental concept that you will own a home, then we are entering unchartered water if that stops being the case. There could be benefits for our economy moving away from homeownership, but simply turning it over to hedge funds and foreign investors could further destabilize our fragmented country while only benefiting a tiny sliver of the super-wealthy.

The investor class has taken nearly all of the wealth created over the last 30 years and gotten away with it. Now it’s coming for our homes and appears to be getting away with that too. If we lived in a healthier political climate with a clear moral north star, this would be met with bi-partisan condemnation. But if we’ve learned anything about late capitalism, it’s that no one is coming to save us. We must do it on our own.

Changing Land-Use Policy Isn't Enough - Change Capitalism

The Day After...Yesterday...wait? (abc)

The Day After...Yesterday...wait? (abc)

The past two weeks have witnessed truly horrifying climate events across the US. From the wild fires in Oregon and California, the devastation brought by Hurricane Harvey in Texas and Louisiana, to the in-progress Hurricane Irma in Florida and Georgia, our country is enduring unprecedented climate damage and millions of Americans are suffering and in some cases dying.

The work now is to save and evacuate people, to provide shelter and comfort, and to endure. But the more important work, work that we should have been doing already, must begin as soon as possible. It includes a radical change to how we value land use and how the real estate industry operates, but that even that won’t be enough. We must rethink capitalism in the 21st century.

It is difficult to discuss these storms while looking out of my window at a beautiful fall day in NYC. I look at a playground that is full of laughing kids running around and parents chatting with each other. I can see the crowded tents of the farmers’ market where I’ll probably go by some apple cider after finishing this post. It is serene. It is difficult knowing that so many people across the Caribbean, the Gulf (including the victims of the earthquake in Mexico) and Florida are either trying to make sense of a society in ruins or to make sure their homes are still intact.

But even what I’m looking at now experienced some of those same fears and feelings only five years ago during Superstorm Sandy. The storm surge came frightfully close to that same playground, even though it’s a good 8-minute walk to the East River. We lost power for 9 days. The National Guard came to help us go door-to-door through thousands of apartments, checking on older residents who were trapped. By Day 9 it was getting cold out and I still sometimes wonder how bad it could have gotten if we didn’t get power back that day.

Where I live was swamp and coastline 200 years ago; it was filled in like many parts of Manhattan. The water during Sandy came up to that former coastline with remarkable consistency across the island. It’s almost as if nature had figured out where Manhattan should stop. But we ignored it and pushed further.

That we even have to endure “debate” that climate change is “real” is tragically self-destructive. Of course it is real and of course we are causing it. And of course it is complicated to measure and difficult to draw direct links between these storms and carbon emissions. But the obvious point is: our weather is changing in increasing dangerous, unpredictable, and likely permanent ways.

That we have been failing to craft public policy that even remotely protects us against climate change is irresponsible and depressing. The current administration is telling us not to discuss it while cutting research funding for it, but the previous administration didn’t do enough when it had the chance. One party is villainous, the other is cowardly. Both are guilty of failing our present and our future.

In addition, much has been written about poor land use regulations in Houston and no doubt much will be written about hyper development policies in Florida. Between the two storms, over 10 million people will have been impacted. A fraction of those numbers lived in these areas just two generations ago. Their growth happened quickly and without any respect for the environment they exist in.

Could some of the havoc been avoided if there were stricter flood zone controls, density measures, and better building codes? Absolutely. Florida and particularly Texas have prided themselves on their lower cost of living and lower government oversight. Taxes are low, but that has consequences.

Could some of the suffering have been avoided if it wasn’t so cheap for people to live in these areas? Sure. Water control, air-conditioning, and cheap travel (by car or plane) made these areas attractive and profitable. Growth is constant, but that has consequences too.

These storms were more dangerous and destructive because of climate change, which is being caused by the very things that made those areas expand in the first place. And those same decisions made it harder for the natural environment to absorb the rains and the storm surges of Harvey and Irma. It is an increasingly untenable cycle.

But the problem is even bigger. Climate change and our inability to comprehend it is the hubris of our modern capitalist system manifested. The readily accepted idea that our society should value economic growth above all else has all but eliminated our ability to think critically about how we interact with our environment. It has blinded us to the limitations that all human civilizations have faced over where they can live. It has made us think we are the sole, dominant actor on our planet. And it has put us all in danger.

A system that relies on the exploitation of the natural world (and, lest we forget, of the human body) can’t simply separate itself from that world. That system relies on the premise that certain inputs are priced according to their scarcity, while others have no price (or a low price) because they are abundant. The idea that we could run out of drinkable water, arable land, or breathable air doesn’t factor into our foundational beliefs. But those resources aren’t endless and they aren’t immune to our actions.

This isn’t about Texas or Florida, or even NYC or any place on the west coast. This is about a system that has been lying to us and this is about us letting it get away with it. It has been allowed to shield itself behind a false layer of rationality, claiming that the power of the market to price our goods and activities is the best way — the only way, in fact — to organize our society.

But capitalism has never accurately priced how we have chosen to build our world. The cost of fossil fuels isn’t captured at the pump. The cost of housing isn’t captured at the closing. The cost of disposable goods isn’t captured at the checkout counter. The true cost comes in polluted air, dead oceans, and, yes, powerful storms.

What is so disheartening, in addition to the human suffering happening as we speak, is how little will change. Our elected leaders have already promised the great recovery. Congress might haggle over funding and a few politicians might be embarrassed by past or current votes, but federal funds and private funds will surge in to these areas just as fiercely as the storms. Our political system accepts this like its a business cycle and not an existential threat.

As a result, some people will be able to rebuild, some won’t. Some will lose money, others will make it. Maybe, for a time, some cities and towns will discuss how to be ready for the next storm.

But as we learned in the five years after Sandy, even in an area that accepts climate change and has the resources to make dramatic changes, our system simply isn’t built to price the cost of future storms and future suffering.

Until we ask why and until we say no more, all we’re doing is buying time. And that’s a deal where we’re increasingly paying more for less.

Late Capitalism Caused the Grenfell Fire

This should never have happened. (grenfellactiongroup)

This should never have happened. (grenfellactiongroup)

With the death toll climbing to 72, the horrific apartment tower fire in London on June 14 is as maddening as it is heartbreaking.  Many residents died completely unaware of the danger around them, others were told to stay in their units, a few jumped out of windows.  How could such a calamity strike in 2017? The answer has implications beyond London and the UK.  The truth is, it could happen in NYC and in some ways already does.  It happens because late capitalism has driven us to collectively abandon the hard lessons of civic responsibility and the public interest that we’ve learned over the last 100 years.

The New York Times has an in-depth look at the fire and the blame falls squarely on late capitalism run amok.  More specifically, the fire appears to have been caused by a refrigerator on the fourth floor that exploded in an apartment (it’s unclear as to why yet).  Normally, large concrete towers would be able to contain such a blaze at least long enough to evacuate the building and/or for firefighters to contain it with minimal damage. However, several factors contributed to the rapid and fatal spread of the fire at Grenfell. 

First, in an effort to “beautify” the building’s exterior (more on this later), highly flammable aluminum cladding was installed around the building.  The material is made in America but is only allowed on buildings in three states (the same cladding caused the recent fire in a high-rise apartment building in Dubai).  The refrigerator was positioned on an exterior wall and the cladding quickly caught fire and spread up and out across the building.

Second, business-friendly government officials (spanning all major parties) eager to reduce “red-tape” ignored repeated warnings from fire experts on the cladding, instead favoring the arguments from the construction industry on the low cost outweighing the minimal risk.  Objective, informed expertise was secondary to a self-serving private interest.

Finally, and most shockingly, residents (most of which are low-income) were virtually ignored despite raising concerns for years over basic regulatory measures for fire inspections, sprinklers, clearly marked fire escapes.  These residents knew how dangerous their home could potentially be and organized repeatedly to change it by pressuring management and the government.  Those pleas were ignored and many of those that made them are now dead.

Neoliberalism preaches the power of the market. Deregulation, privatization, and globalization are supposed to be the three pillars of a free and prosperous golden age.  Grenfell Towers is the stark counterpoint to this illusion.

The tower was built in 1974 as social housing (pubic housing) run by the government at the local borough level.  In 1996, as part of an effort to deregulate and disinvest the government from housing, the tower became part of a newly formed Tenant Management Organization (TMO) called the Kensington & Chelsea TMO owned by the local council.  The organization’s leadership is made up of residents, people appointed by local elected officials, and several independent members. Uniquely in the UK, K & C is also an “arm’s length management organization” (ALMO) that is normally an independent property management organization. So it is landlord and manager, in fact the biggest in the UK. 

This semi-private structure is supposed to allow more local control and greater efficiency but, as many critics argue, it does the opposite.  The mission and incentive structure for the organization is to lower costs above all else.  Finding cheaper ways to run something is perfectly fine, but there are other efficiency priorities that need to be balanced, such as basic safety.  As has become increasingly apparent as more information comes out about the fire, that wasn’t the case with K & C - nor did locals have the agency within the complex to change that focus.

On the other hand, it appears that non-residents had more say in the operation of the building.  Though the tower has a working-class population, the surrounding area is one of the wealthier sections of London.  Pressure from these residents, some of which are on the leadership council, to beautify the exterior (so they don’t have to look at a stark, brutalism building) was given priority. The aluminum cladding that propelled the fire was installed last year as part of an 8.7 million pound renovation to appease these wealth neighbors rather than to fix long-standing resident complaints. 

I can’t think of a more brutal example of late capitalism than Grenfell.  A building constructed to serve the public interest and provide affordable housing was (effectively) privatized and deregulated. In the process its owners prioritized wealthy neighbors instead of working-class residents.  The result was a cosmetic change with known risks that has killed 79 people.

We have public institutions because we live in states with governments designed to represent the public interest, the shared destiny of its citizens.  However flawed these institutions are, their existence and function are central to the idea of that shared identity and shared purpose.  They are the only way to create legitimacy in a society with competing interests and values.  When we devalue these institutions, we devalue the idea of civic responsibility to each other and our society. 

Privatization is often categorized as a binary choice between incompetent, wasteful bureaucrats and efficient, expert businesses.  That’s bullshit, but it’s also myopic. Any organization, public or private, can be well run or poorly run. The difference is the bottom line.  For private companies it is to run a profitable business to maximize shareholder value, which, for the most part, is just fine.  But that’s not how we should view public institutions. Their bottom line is to provide public services to support and nurture a complex society. 

In the UK and the US particularly, we have internalized the supremacy of the market as the ultimate tool to run our society.  As a consequence both countries have been rocked by financial crises, rising social inequality, and erosion of trust in the state.  When you spend decades ripping functions out of the state’s hands, that’s inevitable.  We blame the state for this, but we should be blaming the market. Everywhere you look, whether it’s the retrenchment of monopolies, the dilution of labor protections, or the disinvestment of infrastructure, our society’s priority of short-term profit has fundamentally weakened our ability to protect our citizens from basic risks like fire. 

The true tragedy of this episode and the inevitable future episodes to follow is that we have already learned these lessons, in some cases a century ago.  The Triangle Shirtwaist Factory Fire in 1911 killed 146 garment workers in NYC. This outrage created the modern regulatory system for buildings in NYC and the US and spurred the creation of the International Ladies Garment Workers Union to fight sweatshop conditions.

Is NYC better prepared than London today? Perhaps, but I wouldn’t be too sure for the simple reason that our city, like many local governments across the country, is starved for resources.  Basic inspections are backlogged. Maintenance work is delayed. Complaints are barely registered. 

I’m not just speaking about public housing.  Frankly, NYCHA has done an incredible job maintaining their facilities under such dire restraints for years.  There are reasons for concern and diligence, but the potential risk isn’t in public housing alone. How many small, old buildings in NYC are prepared for a fire? How many large new buildings?

The problem isn’t just fires.  The problem is much larger and deeper.  We’ve gone through terrible traumas as a society, but many of them occurred before anyone today was alive.  The public institutions that were built to address these issues worked, but now we’ve forgotten why they are needed. Our collective complacency as residents, as owners, as officials, is clear and disturbing.

The lesson from Grenfell, like the Triangle Fire before it, is simple.  If we take our civic responsibility seriously, we must support the public institutions that serve it.  We can’t trust that the market will solve our problems for us. We need the market to fit into our civic needs, not the other way around. More innocent people will be killed if we fail to learn that lesson yet again.

In Debt We Trust

Going in the wrong direction (privatedebtproject)

Going in the wrong direction (privatedebtproject)

As Slate writer Henry Grabar pointed out this week, the US reached a symbolic (but, admittedly, arbitrary) milestone in March when the total amount of household debt measured by the Federal Reserve reached $12.73 trillion, surpassing the previous high in 2008.  There’s nothing inherently wrong with holding debt - capitalism can’t function without it - but the type of debt that Americans now hold has changed considerably, especially in the last ten years, and the trend is troubling.  This change is inescapably linked to the affordable housing crisis and the larger crisis of late capitalism that we are slowly waking up to. 

Home mortgages make up the vast majority of household debt ($8.63 trillion, 68%), which is to be expected, but student loans ($1.34 trillion, 11%) and car loans ($1.17 trillion, 9%) have risen as a share of total debt to a remarkable degree just in ten years (from 5% and 6%, respectively).  Credit card debt ($764 billion, 6%) and home equity credit ($456 billion, 4%) are the other large debt categories, but like mortgage debt, their relative share of total debt are about the same over 10 years.

I pointed out earlier that the milestone of $12.73t is basically arbitrary because it’s not adjusted for inflation and doesn’t contextualize the overall growth of the economy.  Relative to the size of the economy, this level of debt is 67% of GDP, down from 85% of GDP in 2008 at the height of the crash.  You could argue that this shows we are in better shape than 10 years ago, which is true, but it also shows that even “better shape” is not very good.

So what does this all mean? And how does this inform the affordable housing crisis?

Basically, all of these numbers reinforce the narrative that Americans, particularly of the younger and poorer variety, are struggling to gain security in today’s economy at an unprecedented scale – even as the economy continues to grow and corporate profits continue to increase.

Having a degree, having a car, and having a house used to be affordable ways to gain entry into the middle class.  But these assets are exponentially more expensive today than 30 years ago and we are going into greater debt to get them.  What's worse, they aren’t the guarantees of security they used to be.  That’s not a sign of a healthy economy or society.

There is one simple explanation for why this is happening: workers are not getting paid enough.  Since 1973 the average economic output per worker has grown by 72%.  That’s a steady clip of increased productivity (though it has slowed down) and is partly the result of the Information Technology revolution in the work place.

However, during that same period, average wages have only gone up by 9%.  Since 2000, this gap has gotten even bigger. Productivity has increased by 21% but wages have only increased by 2%.

As the Economic Policy Institute points out in a 2015 report, this was no accident. The explosion of compensation at the top end of the pay scale and the concentration of profit at the shareholder level (as opposed to labor) are the direct results of 30 years of federal regulatory, trade, and tax policies.  We live in a deeply unequal period as a result of a particular form of government intervention.

(As the recent American Airlines effort to raise wages shows, even corporations that try to buck this trend are punished in the market.)

It’s no surprise that by the late 1970s household debt started rising rapidly while personal savings decreased rapidly. By the early 1990s, the average Americans household had more debt than savings (as the picture at the top of this article shows). This trend has only gotten worse, despite a slight dip during the Great Recession. 

Our consumer culture didn’t adjust to a decrease in wages (or even put political pressure on increasing wages.)  It simply created new financial tools to allow us to keep spending.

There has long been the basic idea that there is “good debt” and “bad debt.”  Good debt is an investment in the future, like taking out a loan to build a bigger factory, which pays for itself in the long run. Bad debt is borrowing from the future to cover today, like a pay-day loan or covering operating costs with capital budgets. That rarely works out.

The problem today is that it’s no longer clear what debt is good and bad.  Student loans were generally seen as good debt - an investment in acquiring skills that will pay off in the long run in a higher salary - but its unclear what skills will be valued and at what salary in the near or long term economy.  The cost of undergraduate and graduate degrees have also increased dramatically as we have placed more importance on them as a society – all while their value has become more uncertain.

Nowhere is this debt doubt more apparent than homeownership. Even though homeownership rates are at the lowest they have been in 50 years, 64% of Americans still own their home. This represents the bulk of American households’ wealth and financial security.

As I’ve written before, that’s no accident or organic market outcome either.  It has been a concentrated policy effort at the federal level for 80 years.  We spend $134 billion a year subsidizing homeownership in this country – more than the entire budget of the Dept. of Justice, Education, and Energy combined.

The thinking was (and still is for the most part) that homeownership drives economic growth nationally and economic security personally.  (We really don’t know if that’s the case objectively because our society has been built around subsidizing this theory.) But, despite all of this intervention, these two basic conceits are not holding up in the modern economy. 

First, the idea that homes are guaranteed financial security is largely not true over the long run.  Robert Schiller has written often about how, despite the hype of house flipping or the recent bubble, home values on the national level haven’t increased at all.  For every hot real estate market like Las Vegas, there is a dying one in Youngstown, Ohio. 

Additionally, the foreclosure crisis never really ended.  There are still 3 million Americans underwater in their mortgages and many millions more that are dangerously close.  There has been a steady, if slow, increase in foreclosures in several markets.  Another downturn and we could see another spike.

Finally, and perhaps most troubling, there is an entire generation of suburban homeowners in certain markets (the Northeast and Midwest in particular) retiring whose wealth is tied up in homes that no one wants to buy.  The paper wealth associated with a home is only real if someone buys it at that price.  Long term demographics and economic development trends should cast serious doubt on the value of many of these homes in the near future.  

Second, the emphasis on homeownership (particularly in far-flung suburbs) is terrible for the national economy’s future.  All signs point to millennials wanting to own homes just like any other generation, but that doesn’t mean they will want to live where cheap single-family homes are available, because those areas don’t generally have a concentration of accessible, high-paying jobs.

On the flip side, high-paying jobs are increasingly concentrated in cities with highly regulated land use and, not surprisingly, housing prices have skyrocketed.  The economic benefit of high wages are largely gobbled up by big down payments and expensive mortgages, which limits the ability for a household to invest in other purchases.  

The federal government has consciously created the affordable housing crisis through debt on two fronts.  On the one hand, they have spent decades, along with billions of dollars, encouraging suburban homeownership through subsidizing mortgages among other policies, which has counter-intuitively created an asset class that has little re-adaptability as the economy changes along with demographics. Millions of Americans have wealth tied up in their homes that might simply vanish in the coming decades.

And on the other hand, they have instituted 40 years of economic policy that has frozen wages for the majority of Americans while lavishing profits on the top individuals and biggest corporations.  They have allowed increasingly exotic and pernicious financial tools to mask this scandal by allowing people to build massive amounts of personal debt.  Only after the crash did they properly regulate the mortgage market (now 60% of mortgages go to individuals with high credit scores, double from a decade ago) while other debt markets (particularly car loans) are largely under-regulated. 

Because there is no such thing as the free market without government intervention, we must re-examine what economy we want our government to create.  Do we want a debt-riddled society that is financially vulnerable at a near-permanent level? Do we want a society that politically and financially rewards a tiny percentage of the population at the expense of the rest?

Our government has created a homeownership society that is increasingly based on higher levels of debt. It has the power to create an affordable housing society that doesn’t rely on debt.  It’s up to us to make it do so.

The Urban Crisis in Late Capitalism

We can crop him out before posting, right? (elianlindt)

We can crop him out before posting, right? (elianlindt)

It’s purely a coincidence that the startling footage of a paying customer being dragged off of a United Flight by airport police went viral the same week that Richard Florida’s latest bookThe New Urban Crisis” came out, but I think the two events demonstrate the same problem.  As individual consumers, as cities, or as entire regions, we are experiencing the long building, negative consequences of “late capitalism.”  It is a force that has not only dehumanized many aspects of our society, but it has also failed to deliver its promised shared prosperity.  How we address this problem, or if we are even able to, will take more than zoning reform or affordable housing funding.

Late capitalism as a term has its origins in Marxist critiques of capitalism from 100 years ago, but has generally been applied to capitalism post-1945.  As I’ll explain, I think the term works better when focusing on the post-Cold War period.  In any case, it is meant to describe our current period of development as a limited stage of evolution as opposed to a permanent state. Eventually, as the theory generally goes, the extreme concentration of economic and political power will undermine and potentially destroy the stability of the larger society.

This is certainly a provocative way to understand what has been almost a century of relative global economic growth and stability.  No generation is fully aware of its place in broader historical cycles, but particularly after WWII, our period sure feels unique.  Famously, Francis Fukuyama published an essay, then book, called “The End of History and the Last Man” in 1992 about how liberal democracy (which is how I’ll describe our model for this blog) might represent the endpoint of human social and economic evolution.  How could such triumph be described as “late” to imply that it won’t last?

Fukuyama has at times been misunderstood (he didn’t think liberal democracy would go unchallenged or wouldn’t experience set-backs) but his belief that the economic and social model of western democracy would be the default setting for human evolution has been criticized by some as historically naïve or culturally biased.  History doesn’t “end” obviously and many systems have looked stable and enduring until they aren’t.

Fukuyama also assumed that the liberal democratic model “worked,” inherently. There are lots of metrics to point to about how much peace-and-prosperity the world has enjoyed post-1945. Of course there are also many metrics that point to this peace-and-prosperity being a zero-sum game that relied on denying peace-and-prosperity to a considerable amount of the global (and domestic) population. 

More importantly to this idea, though, is that liberal democracy produced the most peace-and-prosperity at least compared to communism. That’s the big catch to all of this.  As Churchill famously stated (or restated) about democracy, it is the worst system of government except when compared to every other form of government.  For most of the post-1945 world order, we had the Soviet Union as a competing model to compare to.  And it’s pretty easy to see which system was ‘better’ relative to the other.

However, over the 25 years since the fall of the Soviet Union and the end of the Cold War, it’s harder for us to remember just how much of our foreign and domestic policy was based on competing with communism. The US Government wanted and needed to show the world, let alone its own citizens, that liberal democracy created a better life than communism.

The New Deal coalition that emerged from the Depression to dominate domestic politics for most of the post-1945 period was based partly on the existential fear that Americans might want an alternative system if there was one to compare with. If capitalism were more brutal than communism, as it certainly appeared to be during the Great Depression, maybe the American model would fall.

This real tension served as a check against unfettered capitalism and produced public and private institutions that ensured prosperity – and power - would be shared on a large scale. This check is what allowed the greatest wealth creation in the history of the world to expand in America.

That check is gone.  (It started to breakdown before the end of the Cold War certainly.) Our politics have enshrined the supremacy of the market and our culture has so sufficiently demonized “government intervention” as ‘socialism’ that we have allowed many of those public and private institutions to be gutted or removed entirely.

Whether it’s the loss of unions or anti-monopoly agencies, the march of stateless, shareholder corporatism has continued unabated for decades.  It is no wild-eyed conspiracy to say that big, global corporations are the dominant actors in our society.  It seems like a quaint formality that it was even necessary to give them the same constitutional rights as citizens (without many of the same responsibilities.)

Many people will point to the wealth creation and job creation of these corporations (along with the cheap goods and services they create) as a clear public good.  No doubt there is some public good there.  But the cost of this concentration of power at the same time as it recuses responsibility has a clear public cost.  Wages have stagnated, health outcomes have declined, economic mobility has flatlined, and our environment continues to deteriorate at a frightening pace.  We have no mechanism politically to make those corporations pay these costs.  The public – present and future - does instead.

And, after the Cold War, there is no external pressure on our system to keep corporations and the capital behind them accountable. The idea that our system has to ‘compete’ with another system to maintain its legitimacy is laughable now.  Capitalism won. 

It shouldn’t be laughable.  Long before the 2016 primaries and election, it has been clear that many Americans across all political spectrums simply don’t believe in the legitimacy of our model.  This anger has, regrettably, manifested in different forms with different villains depending on the constituency you’re looking at, but the message is clear and universal.  Our form of liberal democracy isn’t producing the type of economic prosperity or social progress that we’ve been trained to expect as Americans. 

The social contract has broken down and been replaced by one-sided terms and conditions.  The joke is now on us, whether we fly Untied or not. That is late capitalism.

This is where the "new urban crisis" and Richard Florida’s book comes in.  Mr. Florida famously coined the term “creative classes” in his first book 15 years ago that showed how the concentration of knowledge economy jobs in cities was driving the urban revival that was destined to benefit all of humanity.  That optimism might sound hyperbolic but Mr. Florida and many urban boosters championed this in earnest and for sincere reasons. (I also believe urbanism is a better way of organizing society.)

However, late capitalism was always going to create a winner-take-all urbanism. Smaller (mostly non-coastal) cities have been gutted while larger (mostly-coastal) cities have been gilded.  The poor and working class suffer in both scenarios, but the very wealthy are the only ones benefiting from this urban revival. 

Mr. Florida has undergone a commendable self-correction. He acknowledges that the great urban revival hasn’t happened.  Outside of a few ‘superstar cities,’ too many places in America haven’t benefited from the ‘creative class.’ Even the gains made in those cities haven’t been shared and haven’t led to an expansion of opportunity for others. As a result, Most Americans still live in the suburbs or want to move there eventually. Poverty in the suburbs is in fact exploding as a result of some of these trends in cities. Cities aren’t part of the solution. If anything, they are exacerbating the problem.

Mr. Florida has also come to recognize the larger structural issues facing cities around class and race that were neglected in his original work.  Building tech and young-friendly neighborhoods with great amenities and transportation networks doesn’t help existing working-class or poor residents and makes it too expensive to attract new ones.  Too many of the benefits are going to a small pool of affluent, educated residents that are mostly white.

Mr. Florida outlines several city-level and state-level policy suggestions about how to mitigate some of these stratifying elements.  Some are worthy of support, others are not as comprehensive.

But more importantly, he acknowledges that these are larger questions that we must address as a society.  He hedges on criticizing capitalism overtly (and as far as I know has never commented on late capitalism) but it is refreshing for someone with such passion for cities and experience studying urbanism to challenge our assumptions about our liberal democratic model. More of this is needed.

The urban crisis is not a problem for technocrats.  This isn’t the fault of urban planning.  It’s the inevitable consequence of economic nihilism.  It is a political problem and a values problem.  These require value-based solutions (as opposed to ideologically-based ones) and political changes that our current model refuses to entertain or acknowledge.

As it stands now, it is likely that the unfortunate United passenger is going to get millions of dollars in a settlement.  Maybe the airlines relax some of their overbooking policies.  But the structure of the airline industry – the oligopoly – is enshrined in our laws and culture, which won’t change anytime soon.  Most passengers won’t have the option to refuse to fly United.  As consumers, we have lost the fight in late capitalism.

The urban crisis is more complicated (indeed, crisis isn't really the right word), spanning many industries, many political interests, and many stakeholders.  There is no single incident to go viral (or maybe there are too many) to galvanize the nation and there are no simple, populist solutions that can quickly satisfy it.  But there can be change. Frankly, there must be change. As citizens, the fight against late capitalism must begin. It is our only way to define what comes next.