A New Landed Class?

In the bad old days in Western societies, a land-owning elite controlled everything. There was no way for those less privileged to gain enough money to buy land. Early capitalism began to change this with the emergence of a "middle class," one that grew wealthy from trade, production, finance, etc., sometimes in "free cities," rather than through land ownership. This shift away from agriculture freed people from servitude to the land and the lords that owned it. A slow decline set in among the aristocracy.

Or did it? There is a new land-owning class that has become good at keeping itself up and preventing others from joining its ranks

When we look at modern-day New York, London, or San Francisco, we see playgrounds for the rich. Housing is so pricey in these desirable places that few "normal" people can afford to live there. It doesn't stop in those world cities, either. Housing prices throughout much of England are so ridiculously high that even families with slightly above-average incomes find it difficult to buy a home. In many of the wealthier, liberal areas of the US and the UK, at the very least, housing costs an arm and a leg.

Why?

The free-market answer is: "Because more people want to live there than there is housing for them to live in, so housing goes to those who are willing and able to pay a premium for it."

So far, so good, but it doesn't really answer the question. Lots of people are moving into Houston, Texas, but housing there is still affordable. The reason is not so much on the demand side (people wanting to move in) as it is on the supply side (there aren't enough homes). The main culprit? Zoning (UK: planning) rules. Minimum lot sizes in the countryside, maximum building heights in the cities, land usage restrictions, and historical designations all serve to restrict the space available to newcomers.

There are good reasons for many of these rules, from ensuring ample ground water and septic capacity to protecting historic buildings that are worth saving. But as Edward Glaeser, in particular, has argued (check out his book Triumph of the City), many of these rules and protections seem to be excessive. They also cause hidden harm: the rise in property prices is a nice thing for those who own property, but the mechanism by which this happens is unclear to many, meaning few protest against zoning rules because of the high housing costs they create.

The real reason for the heavy-handed implementation of well-meaning rules on who-can-build-what-where, I would argue, is that they benefit a new land-owning class. It not as conspiratorial as it might sound. Here's how it works: Once people in an area have purchased housing, they no longer have an interest in affordable housing, since they are no longer looking to buy. In fact, the more expensive housing gets, the richer they feel (and this is regardless of whether they're still paying off a mortgage). If housing prices rise elsewhere and they might eventually want to move, no matter, as long as their housing rises in price at least as fast.

One way to make sure of this is to keep a place attractive to newcomers. This, on its own, is a good thing. Another way, though, is to restrict the overall amount of housing available so that only wealthier residents can move in. The two "ways" go hand-in-hand, actually: One way to keep things nice is to keep them rural. Once wealthier people move in and land values rise, tax revenues for the town rise, meaning more money to spend on better schools, nice parks, etc., making the place more attractive and raising housing prices further. This is a "virtuous cycle" for those who already own housing. It is not so virtuous for those who don't as they become "priced out" of the market.

Things can be kept "nice" without restricting building, however. This is particularly true in cities, where the argument for keeping low densities is weaker. It's important to have public green spaces like parks. But this is actually all the more reason why built-up areas should house as many people as efficiently possible: higher density in built-up areas means fewer people elsewhere. The result? Less sprawl and better conservation of nature and rural character elsewhere. A further result is that more people can afford to live where they'd like to (like Manhattan) and closer to work, meaning less commuting, traffic congestion, and air pollution, as well as less wasted time, meaning more free time and higher productivity. All this would save workers, consumers, and employers money, which would mean increased economic output per hour worked and dollar spent, and thus a higher standard of living for all.

These are massive benefits, but they are dispersed and difficult to see. That is why, so far, the new landed classes (they have "captured" the political system in rich areas as they form the bulk of an area's voters) have succeeded in giving themselves goodies at the expense of the real estate-less. It's time for some serious thought and sensible changes.

Why America is everywhere

When cynicism is used as an excuse not to believe anything anyone says who disagrees with you, it is destructive.

This post has been a long time coming. It's been brewing because of things I've heard people say or write lately. They run along a similar vein to things I actually grew up believing, namely that the United States' involvement in world affairs was because it wished to do business everywhere, secure its oil supplies, and dominate the rest of the world in a "neo-imperial" sort of way. It's a common view in many places in the world on the left, and within the US in the northeast at least (and I assume elsewhere). It is based on Marxist economic and political theory. It is also wrong.

Marxist theory attempts to explain political phenomena with economics, which is a bit like trying to explain what people like to do in their leisure time according to what job they have: The amount of money they make and the free time they have may have some influence, but it won't explain the core reason of why they like what they like. Politics and economics influence each other, but it is not possible to explain one wholly based on the other. But let's put that aside for a moment and pretend you can anyway (and don't worry, I will move away from theory to reality later, I always do).

Karl Marx believed capitalism led to imperialism. He looked at countries like Great Britain, the world's largest colonial (and capitalist) power at the time to draw this conclusion. Capitalism, as he noted, was very good at dividing labor and churning out more and more "stuff" per worker, getting ever more efficient. He reasoned that this expansion in production produced a surplus that the low-wage workers of a country could not consume. In order to keep selling their stuff and keep their businesses running and the cash flowing, capitalists would constantly have to expand their markets and find new consumers. This is a sort of Ponzi scheme, because when there were no new consumers, everything would come crashing down. Marx reasoned that capitalism would eventually destroy itself once it had developed the entire world and there were no more untapped markets. All the cash would build up on top among the rich, there would be no one left to buy goods, and everything would collapse with mass unemployment.

Sound familiar? It also sounds pretty plausible. After all, British colonialism often did begin with business forays abroad, like the East India Company's adventures in South Asia. The trouble is, Marx did not look back far enough and his theory also became a hostage to fortune as things later happened that his theory did not anticipate. On the first point, he ignored the fact that imperialism had existed for a very long time, long before capitalism emerged. That needn't be the death of the theory, of course: maybe capitalism always leads to imperialism, but imperialism can exist without capitalism. Fair enough, but then new things happened in the 20th century. One of them was that rich countries like the United States sometimes ran trade deficits! They bought the world's goods, rather than selling them to the world. The other thing that happened is that some big surplus countries, like Germany, were not imperial powers after WWII. Marx's economic insights were keen and many of them still apply today (though his theory has been twisted over time), but his political assertions were dead wrong. Things just did not happen the way he said they did. The main reason is that his two assumptions were wrong: Developed countries did not always run surpluses and, even if they did, they did not necessarily become imperialist. What to do with surpluses, if they arose, was a political decision not an inevitable economic one.

Some people refused to give up, however, and decided to modify the theory instead. OK, the West might not LOOK like an empire, but it was, through "trade dependency." The West was using its marketing and military power to suppress the development of poor countries and take advantage of cheap goods, which could also explain their imports of all those goods. Basically, then, if a country was rich and powerful, it was imperialist, even if it didn't look it according to old definitions. This sort of circular thinking is not terribly logical, but again it seemed to fit the times, as South America, Africa, and Asia failed to develop. But then Asia began to develop rapidly (think Singapore, South Korea, Taiwan, and, later, China), while Africa and South America did not. The difference was in their own policies. It wasn't that the West "let" certain countries develop and not others. Theory wrong again.

"Who cares about the theory if the shoe fits?" you might ask. "Look at the US's dominant presence throughout the world and its massive military spending! Look at 'aid for trade' and other initiatives pushed by the US," and on and on. All right, let's drop the theory and look at that, then. Why is the US military everywhere if not out of a desire to dominate the world?

Let's not pretend that people in powerful positions don't enjoy their power. I am not going to argue that the US is an altruistic but misunderstood gentle giant, a grandfatherly figure to a troubled world. The US has indeed abused its dominance, just as Britain and others before it. But it is overly cynical (and historically inaccurate) to suppose that the US and other powers have sinister, greedy motives for everything they do.

There was a relatively long period of peace enforced by Great Britain during the 19th century and up until WWI. Britain did not balance (joining alliances of weaker partners to keep stronger ones from dominating) against all wars, but it did do so in situations where it thought one power winning might pose a threat to it. It also dominated the seas with its powerful navy. WWI changed all this, leaving Britain severely weakened. The country with the greatest potential power was the one with the largest economy: the United States. The US, however, chose to return to its policy of not getting involved after WWI and left the Europeans to their own devices. Over time, Germany recovered and came to be more powerful than any of the other European countries. The United States could have prevented WWII, but it chose not to. It's management of the world economy (the responsibility for which it also refused to take on) was pretty bad, too, particularly its misguided protectionist trade policies that put high tariffs on imports, triggering retaliation and causing world trade to collapse, deepening the Great Depression. But I digress. In the end, WWII  broke out, America did not help till much later, and all of Europe and much of Asia suffered.

America eventually got involved because it came to see risks in a world with powerful German and Japanese empires. There was, of course, also much to dislike in the Germans and Japanese and the atrocities they committed. Surely it was better to prevent them from conquering everyone than to try to deal with them after the war was finished? The US needed a final push to decide to do this: Pearl Harbor. Once attacked, the country could not stand idly by.

After WWII, Europe lay in ruins. Lessons had been learned from WWI. One of these was that people whose lives are destroyed may turn toward extremist ideologies if these promise improvement (as Hitler promised the Germans). Even more important, policy makers learned that, without someone enforcing order, countries could easily begin fighting again, feeling insecure when peering over the border at their neighbor's capabilities (see the "Security Dilemma"). The Soviet Union was a rising power on the eastern edge of Europe and it became apparent that, should its armies, which occupied Eastern Europe after the war, decide to move into Western Europe, no country there could stop them. The US's allies pleaded for the US to stay and protect them. It did, and provided them aid to rebuild their economies and become stronger.

Eventually, the US became locked in what it saw as a battle with an empire with expansionist motives, the Soviet Union, which wished to dominate the world via the spread of communism. There is much to criticize about US policy during the Cold War. It meddled in a lot of countries' affairs and propped up pro-Western dictators while ignoring human rights violations, for example. The Vietnam War was unnecessary and is now usually viewed, rightly, as a costly mistake in terms of lives lost and money spent. The US did these things out of fear bordering on (or perhaps solidly into) paranoia.

However, countries under the US's protective umbrella did not bother worrying about their neighbors attacking. They could instead turn to building their economies, which partly explains why Europe, Japan, South Korea, and Taiwan did so well in the second half of the 20th century. South America has had bad policies for a long time. Chile, Brazil, and others are now improving. America didn't help the situation by propping up anti-communist thugs, but it did this because of fear of that the countries there might fall, one by one, to communism and the USSR--NOT so that it could "hold South America back." This is not an excuse for what was sometimes bad behavior on the part of the American government and business there, but it is an explanation.

If you think it's all about oil, by the way, please read my post on the war in Libya.

Americans like to see government and big business conspiracies everywhere. They are right to be suspicious, but I think we need to remember that believing in conspiracies ascribes to governments and business leaders near-divine powers that they clearly do not possess (look how much they screw up). Cynicism is good as long as it steers against naivete and is realistic. When it is instead used as an excuse not to believe anything anyone says who disagrees with you, it is destructive and a block to understanding.

"Compassion? Why bother? Poor People Are Poor Because They Deserve It." A Rebuttal of Neal Boortz's Speech

Right wing advocates are winning the argument on economic morality by using an appealing line of reasoning that seems right on the surface. It is not, and anyone who cares about justice in any form cannot let this stand.

I recently received an email with an alleged "commencement speech" by Texas lawyer Neal Boortz. Maybe you received it, too. It turns out that he never gave that speech at an actual commencement (link). The issue here is not where the speech was given or even the fact that Boortz thinks it was "more widely distributed... than any commencement speech that actually has been delivered at any college or university in the past 50 years" (something the readers of Steve Jobs's speech might find hard to believe). The point is that a lot of people have read and heard the speech (it seems he read it out on his popular radio show). The speech bashes liberals on several fronts for being "imbeciles." There are two main ideas behind his, any many right wing advocates', argument: that government spending beyond a few bare necessities is wasteful and the related idea that people who receive government benefits are undeserving and are little better than thieves.

Let's start with that wasteful spending. All of us who've dealt with governments (the US is certainly included and may even be worse than most) can be pretty sure it is not spending every dollar wisely. Farmers, who are currently doing well, receive massive subsidies. Corn ethanol, which is no solution for energy dependence, is not much better than gasoline for the environment, and the production of which helps drive up world food prices, received loads of government funding, too (though this was sensibly scrapped, I believe). These are just a couple examples, though I'd say the fact that they are both related to agriculture is no coincidence. Our legislature seems to be designed for inefficient and complicated outcomes due to the over-representation of states with small populations in the senate (giving it different priorities from those of the House), the filibuster, gerrymandering of the House, etc. etc. Maybe government spending would be more efficient if Congress were. But I digress.

Boortz talks about the US Government backing dictators with foreign aid, funding stupid research, and paying for artists whose work no one wants to buy. The first argument is a bald-faced lie (or at least a tactical misrepresentation), and I simply cannot believe he doesn't know this. Dictators have received more support in defense spending and favorable weapons deals than with "liberal" foreign aid, spending  for which accounts for around a paltry 1% of the federal budget (and thus only about 0.18% of the US's overall GDP, see link).

But what about all that frivolous research? As someone who has seen the process of applying for funding first-hand (albeit in the UK and not the US, but the UK, a more "social" place, is hardly going to be harsher than the US), I can tell you the idea that people are getting funding for all kinds of ridiculous things is laughable. There are review panels for this sort of thing, and any researcher applying for funding must show that the research is new, that the results will have a large benefit, and that the research provides good value for money (i.e. there isn't a simpler and cheaper way to reap similar benefits).

Government-funded research lead to such creations as the Internet, which has revolutionized the way the world stays in touch and does business, and the Human Genome Project, whose benefits to health and research cannot yet fully be known but which are already showing great promise. This sort of high-risk research that only occasionally brings extremely high rewards benefit lots of people. The economic benefits generally do not come back solely to those who engage in the research, making this sort of work unattractive to private companies. "Unattractive to private companies" does not, by any stretch of the imagination, equate to "not worth it," as just these two examples ought to show. Should we perform stringent tests on funding to determine who should get awards? Absolutely. Should we concentrate only on ones that will bring definite economic returns for the "investors"? Absolutely not.

Finally, those awful artists. I suspect Boortz is annoyed with the National Endowment for the Arts (NEA). It funds "projects exhibiting artistic excellence." That means it's REALLY hard to get funding. And there isn't much funding to get: It's 2011 annual budget was just under $154.7 million. That may sound like a lot, but consider that the entire US federal budget for 2011 was $3,598,000 million (that's right: take the NEA's budget and multiply it by nearly 23,258!!!)! You might also consider the number of billionaires living in the US and note that the NEA's funding is likely to be less than 10% of any individual billionaire's net worth. Just to put things into perspective. For a final perspective: The US Government spent $227,000 million just paying interest on debts it had incurred previously. What's more likely to be bothering Boortz is the NEA's funding, from time-to-time, of art that conservatives don't like. (Wikipedia was my, admittedly somewhat unprofessional, source for all information in this paragraph.) If that's the issue, say so, rather than attacking "hippie artists" no one cares about.

So the government doesn't really waste as much as many seem to think (even if you consider measly spending on the arts and foreign aid a waste (the latter can be a helpful foreign policy tool as well)). But social security, medicaid, and medicare together make up about 43% of the federal budget, and I believe states pitch in some money for healthcare, too. Unemployment benefits come on top of that. That means something like 50% of spending is on so-called "entitlements." Boortz argues you're not entitled. "That bum sitting on a heating grate, smelling like a wharf rat? He's there by choice. He is there because of the sum total of the choices he has made in his life."

This is where the real problem is. Is it annoying to watch people constantly screw up and then ask us to bail them out? Sure it is. But there are two problems with this line of reasoning, and I'm sure Boortz is aware of this but just does not wish to accept it: That homeless guy is not receiving government money, and our lives are more than the sum total of our choices. Boortz is a successful guy. He points out that "nobody really wants to accept the blame for his or her position in life." The thing is, the opposite seems to be true for credit. Boortz believes he is successful because he is just so damn awesome. If he had been born in the vacuum of space, he undoubtedly would be at least as successful as he is now. After all, no hand-out receiving freeloaders would have taken his hard-earned money to line their own pockets. It was just his good choices. Just as it is always bad choices that make people poor.

Is there personal responsibility? Absolutely, and philosophizing to the point where we question free will would cause society to collapse because the justice system could not function. People must take responsibility for their choices. But this only goes so far. What about the girl born into a poor family? What choice does she have? Can she choose to go the worst school in town? Can she choose to walk past drug dealers and gangs on her way home? Can she choose to do her homework by herself because her single father has to work long hours to pay rent and put food on the table? Is it any wonder that her teachers, who have long ago given up, partly out of fear of their own students, are not able to bring her to the next level? Maybe Boortz, who was born with an infinitely strong will and determination to succeed, which I guess had nothing to do with luck at all, would have thrived anyway. After all, some people do. That's the American Dream.

But how many actually do? The American Dream, it seems, is more of a reality in Scandinavia than in America. One very important factor correlated with economic success in later life in America (and Britain) is how much your parents earn. In Scandinavia and Canada (Germany's pretty good, too), this is much less important, meaning that more poor kids grow up to be wealthy and middle-class adults than in America. At the same time, more rich people move down the scale in Scandinavia than do in America. Are rich Scandinavians choosing to be poor more often than rich Americans? Obviously, the system makes a difference. The condition the American Dream requires is equality of opportunity (NOT equality of outcomes!). Everyone cannot and should not earn the same. It is also hard to see how everyone could be given the same opportunities in life. Surely it is rich parents' right to send their kids to private schools. The fact is, though, that opportunities in America are nowhere near equal. In fact, they're not even decent for the poorest 20%. (Source)

Boortz's attack on liberals' compassion for those undeserving of successful people's money is disingenuous. It is nice to be alleviated of the feeling of moral responsibility for those around us who are suffering. Unfortunately, though, we are all responsible for the government system we have helped to create, the same system that makes it extremely difficult for around 20% of the US population to get ahead in life. This doesn't mean the end of personal responsibility. On the contrary, we are ALL personally responsible for this sad state of affairs and the slow death of the American Dream. Do something about it. Do not let superficially plausible arguments convince you and your friends that people are rich because they deserve to be and poor for the same reason and that we should therefore cut off the poor leaches and leave them to their own devices. That's not just a lack of compassion, but the sort of lack of foresight that has brought down arrogant ruling classes throughout the centuries.