affordability

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The Crowd and Affordability

Demos Kratia #12

Taking my own advice: I am re-reading Rudé.  How relevant he seems to what we are living through.

I once wrote the phrase “words unsullied by thought” in the draft of a play about Antonin Artaud the French surrealist.  Actually, he was too surreal even for the surrealists.  His madness was that he wanted his words to be unencumbered by the weight of all the various limitations that society places upon us.  He sought his speech to be free.  He never succeeded. There is an inherent tragedy in his effort and in his failure.  Which makes him such an interesting figure.  One that is a strong metaphor that entire period — between the obscenity of World War One and it’s inevitable consequence of World War Two.  

Those inter-war years are marked by the primal nature of the reaction to the excesses of industrial enabled conflict and subsequent so-called Gilded Age.  The ancient aristocratic regimes culpable for the war had been, by and large, replaced.  A new elite had emerged.  Or was emerging.    It was heavily influenced by America whose arrival on the scene from its relative obscurity brought with it an optimism, and more free-wheeling attitide  that had been crushed in the Old World because of the corruption and collapse of that old aristocratic order.  

Change was in the air.  Bolshevism lurked on the fringes.  Industrialization was a creating a new social order.  Fascism was in embryo.  Modernity was stretching its legs.  New words were in order.  New ideas were needed.

We are still living in the long shadow of what was put in place during that moment.  We have still yet to settle.  Perhaps we never will.  Change, constant and disruptive change, change that is forced upon us, change that is beyond our control, change that uproots everything, has been the norm since the great cataclysm that ended the certainties — good or evil — of the late 1800s.  

We have been without a home ever since.

No wonder anxiety has risen along with the prosperity afforded by all that upheaval.

We have become so well-off materially that we have ignored the cognitive deficit emerging alongside.

Most notably there is the stark contrast between the smooth, almost anodyne, nature of the theorizing that attempts to capture the turmoil and box it in for analysis, and the unkempt lumpy nature of the reality those theories claim to explain.

If there is one characteristic that leaps from modern reality it is its intense complexity and intertwining nature.  There are no simple relationships.  Everyone and everything depends upon everyone and everything else.  This leads us to over-theorize and over-abstract.  How else are we to tame reality and make sense of the turmoil?

Which is why, sometimes, it is wise to breath deeply and reconsider.

Which is what Rudé did.

He advises us to eschew abstractions and accept that lumpiness and detail of reality.  He tries to see the faces in the crowds he speaks about.  He tries to identify specific people and their individual motivations.  Above all he wants to re-situate “the crowd” as a social reality and avoid the blandness of words and phrases that misdirect us.  “The people”,  “The mob”  and other such generalizations mislead us away from individual motives.  They hide the particular behind a veneer that is so grey that all color and vibrancy is lost.  

And yet is it the accumulation of those particulars that constitute the social — the very object of our consideration.

More to the point, our generalizations are doomed to lag reality.  We are always catching up.  Ewe are never ahead, no matter what whatever our theoreticians tell us.  

Rudé says this:

“Whatever contemporaries may have thought about it, society is continuously evolving and developing and there is bound to be a time lag separating the emergence of new social forms and forces and their recognition in the “language of classes” used by dictionaries and encyclopedias. To take an obvious example: the appearance of new classes of factory workers and manufacturing entrepreneurs in England, the product of her industrial revolution, was a social reality long before contemporary option was fully aware of what was taking place.”

Yes.  Obvious.  Yes, relevant.

Perpetual tumult, the characteristic of our age, requires constant consideration and reconsideration.  It produces the creative destruction so admired by economists whose attempts at describing the energy of change are so pallid that they retreat behind vague terms in order to mask their ignorance.  Yet change is the central fact to explain.  And reality is always racing ahead of our comprehension.

The contradictions of modernity with its prosperity and its attendant social devastation unmoored people like Artaud.  The subsequent post-modernity with its deliberate absurdities and loss of historical connection has left us incapable of reconstruction.  We became over-intellectual for the sake of cleverness rather than explanation.  We splintered knowledge into siloes just as the division of labor alienated each of us from any semblance of common understanding or self-sufficiency.  Technocracy arose to wrangle the complex beast of the modern economy into some sense of order.  Management and method took the place of politics.  History died as we converged towards the mean of ordinariness and dedication to the abstractions needed to organize society. Above all else we submerged the crowd in order to elevate the individual as the object of analysis.  But, the individual being analyzed was a stylized and constrained version of reality.  It was never personal — we sacrificed  the personal in order to live in a so-called rational world.  For personality is not rational — Rudé is correct, personality is idiosyncratic.

Worse, by elevating the individual we destroyed the crowd as a political agent.  In so doing we destroyed democracy.

Demos Kratia, after all is people power, not individual power.  That would be autocratic and something to be feared.

What?

Back in the era that Rudé studied social changes were only beginning to shake accepted ways.  One of those ways was the activity he was most interested in: the action of the crowd.

Of great importance to us, as we absorb our political moment, are the similarities between then and now that, perhaps, surprise us.

The great food riots in England during 1766 are a case in point.

How do we describe them?

Are they genuinely riots?  That speaks, in our modern minds crafted by relative postwar political quiescence to violence and chaos.  Our words have been sullied by centuries of cultural conformity around a rejection of crowd activity as a legitimate political expression.  

But those so-called riots were not all violent.  Some were more, and some less, organized.  They were regional not national.  They were specific.  They were focused on something that has re-arisen as a politically charged issue: affordability.

That era, as we are aware, was still a Malthusian world.  Life was more precarious than it is nowadays.  We have lost the precision in our language needed to express the urgency of that precarious nature.  Rising food prices had an immediate effect — more dramatic than now — so social reaction to the movement of prices was not the supine and passive adjustment suggested by modern economists.  People didn’t simply move preferences around.  They didn’t follow the rules needed to make modern models behave smoothly.    They reacted.  Viscerally.  Individually.  And then in crowds.

Prices were set arbitrarily by the crowed as it decided what was “fair”.  Which often was what had been in the recent past and what had been viewed as socially acceptable practice.  The movement of grain and other foodstuff was halted — exports were anathema — and re-directed to satisfy local, and more urgent, needs.  In other words,  the market was going one way.  The people were going another.  So the market was interrupted.   

And here our language fails us.

So attuned are we to the supremacy of “the market” in all its glorious abstraction, that we regard any interference by “the crowd” as not only immoral, but as foolhardy.  How can it dare change the course of nature as expressed in “the market”?

Rudé was writing, of course, well before the neoliberal ascendancy of market ideology and the collapse of morality in economics.  Which makes his emphasis on retrieving social action from the abstraction of over-theorizing so relevant.

Here we are today in a society bulging with bland and commercialized prosperity.  We overflow with the material fruits of our collective ability to automate and drive our productivity to prodigious heights.  Our lives are indisputably better than those of the people who fill the pages of Rudé’s study.  They all lived much closer to the edge of survival than most of us do now.  Between then and now the so-called “social problem” has been resolved.  Mostly, at least.  The crowd has been mollified by a surfeit of material wellbeing.

And yet.

Underneath the shiny surface lurks that same old story.

Affordability is back on the front page.

It is a social reality running ahead of our ideas and modes of social structuring.  Our institutions have not resolved the relativity of affordability.  Our people — a large and growing portion of them — are priced out of participating in the flood of stuff we are so proud of producing.  Rampant inequality is undoing the social fabric once held together by that flood of material stuff fairly shared.

So “the crowd” is back in politics.

Calling it “populist” demeans it because it taints it with fringe notions that our elite finds deplorable.  Yet it is popular.  And it is re-structuring politics.

How, in the midst of such a cornucopia, can affordability have become an issue?

Look back at those food riots:  instead of fixing food prices, we now talk of fixing rents.  Instead of diverting food locally and away from export, we talk of imposing tariffs and of bringing work “home”.  The specifics are different.  The problem the same.  The crowd is restless.  It has been cast adrift by our elite.  So our equivalent of the great food riots are inevitable.

Amidst all the top down disruption, the technologically driven replacement of workers, the disruption of traditional lifestyles, the loss of continuity, and the threat of constant social alienation caused by an excess of individuality — all of which enriches our elite — there is now a bottom up reaction.

The market has failed.  Yet it still plays a pre-eminent role in the way in which our elite sees the world it rules over.  We are still told that to argue with “the market” is to display an ignorance of modern reality.  Our elite goes to inordinate lengths to protect “the market” from unruly interference.  Its independence is prized.  Its outcomes unquestioned.  Words and ideas are made to conform with the social necessity of preserving “market outcomes”.             

This conformity of thought disables our elite from perceiving the consequences of its own activities.  The etiquette of elitism prevents deviation from accepted practice.  Where accepted practice is tightly derived within peer-reviewed social and academic circles.  

And yet ..

The optimum appears sub-optimal.

The equilibrium is is in constant flux.

Contradictions abound.  

And affordability emerges as a problem for too many.

How can that be if the engine is so efficient?

What is “efficient” anyway?

Rudé would, I think, simply say reality has run ahead of our elite’s ability to grasp and organize it.  Our words and ideas need a re-vamp.  But, to do that, we need to shock our elite into breaking its conformity and its complacency.  Perhaps it is time to question ideas like “efficiency” — efficient for whom?  And why?  There is something rotten about “the market” right now.  It seems to be an engine of inequality and social malaise.

So, the crowd is back playing its traditional role.

It is sending a message.  

And, more importantly, it is not allowing its views be sullied by the thoughts of convention.  

It is, in other words, re-igniting a longstanding democratic tradition. It is disciplining the elite.

People power is usually looked down upon by elites who regard themselves as repositories of superior civility and know-how.  Every so often, though, the crowd needs to remind society at large of its presence.  Ignore the crowd and you ignore reality.  Ignore the crowd at your peril.  Our elite, over the past few decades became so self-obsessed, self-absorbed, and so involved in its own internal cultural struggles that it ignored the people below.  

But, now the crowd is back.

Hopefully the message gets through.  We need fresh ideas.  We need affordability.  

/Demos Kratia

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Affordability in a Fading Gilded Age?

Demos Kratia 13:

All of a sudden affordability is on every politician’s lips.  Somewhat regretfully in many cases.  Yet it is not a new issue — it has been brewing for ages.  Now it has burst on the scene, and only people branded as “extreme” seem willing to engage with it.  

That’s one narrative for our moment.

Another is transition.  From what to what?  From the defunct neoliberal era that fizzled spectacularly in the bonfires of the Great Recession to the uncertainties of a world lived within the confines of artificial intelligence?  Was it vanities as Wolfe suggested in his defining description of that time?  Is it a rejection of the accumulation of luxuries in too few hands — a sort of modernized version of the original Savonarola uprising?  Or is it something different but more fundamental: an immolation of ideas no longer relevant?  If the latter, where do we go now for our ideas?  Deeper into our machines?  Certainly not to our leadership that seems now more a library of the past than creator of the future.

Look at it this way:

“We were just then in an age of transition.  The opinions prevailing in the country were extremely heterogeneous, and often diametrically opposed to each other.  We had survivors of former generations who were still full of theocratic ideas, and who believed that any attempt to restrict an imperial prerogative amounted to something like high treason.  On the other hand there was a large and powerful body of the younger generation educated at the time when Manchester theory was in vogue, and who in consequence were ultra-radical in their ideas of freedom.  Members of the bureaucracy were prone to lend willing ears to the German doctrinaires of the reactionary period, while, on the other hand, the educated politicians among the people having not yet tasted the bitter significance of administrative responsibility, were liable to be more influenced by the dazzling words and lucid theories of Montesquieu, Rousseau, and similar French writers.”

That was Ito Hirobumi writing in the late 1800s. Back then there was a clash between traditional ways of doing things and the more modern; between the free-wheeling of laissez-faire and the statism of German bureaucracy; and between the pragmatism of commercialism and the high intellectualism of theory.  No wonder their transition was difficult to see through.  Sound familiar?

At least then the future appeared more optimistic than the past.  And they had real choices.  They had opportunities, which we seem to have exhausted.  So, the great spurt in growth — McCloskey’s so-called “Great Enrichment” — that began in the late 1800s, and which has run steadily at around a 2% improvement each year since, is sputtering.  Or appears to be.  

Now is very different from then: we are awash in unabashed prosperity.  But is no longer shared equably.  The crumbs falling off the high table are too meager.  Thus our crisis is one of confidence in very engine we rely upon to deliver that prosperity, security, and a better future.  Our institutions no longer provide the goods.  We are adrift.  Our leadership has failed us.

W.B. Yeats was correct when he said that the center cannot hold.  Our problem, though, is that what we call the center caused the crisis.  It needs re-creating.  And, I suspect the new center will occupy a somewhat different space from the one we are rejecting.

The problem is simple: our leadership is ill-equipped to deal with the problems we face.  It cannot comprehend them adequately enough to realize the depth of the struggle ahead, so it continues to see things through an irrelevant lens.  Its commitment to old ideas is hampering its ability to lead.  Perhaps it is time for new ideas.  That generally implies new people.  It definitely implies new ideas and not poor re-treads of the old.

Our elite is accountable for what we see around us.  It is time to make it responsible.

Yes, we need new leadership.

I have been talking about this for ages.

Of course, I am not alone.  Far from it.  Christopher Lasch said this in 1995 [posthumously as it turns out]:

“Most of my recent work comes back in one way or another to the question of whether democracy has a future”

He goes on:

“The decline of manufacturing and the consequent loss of jobs; the shrinkage of the middle class; the flourishing traffic in drugs; the decay of cities — the and news goes on and on.  No one has a plausible solution to these intractable problems, and most of what passes for political discussion does’t even address them”.

His book is called “The Revolt of the Elites — and the Betrayal of Democracy”.  So three decades ago, before the dot-com bubble, before the Iraq invasion, before the Great Recession, before the anemic post-recession recovery, and before the pandemic, there was commentary suggesting that democracy was at risk, and that the nation’s elite — our leadership — was either missing in action or was so culpable for the mess that it was unable to correct the nation’s ills.

I agree with Lasch: it was the latter.  Our elite made the mess in a frenzy of self-dealing that makes sickening reading in retrospect and which will take a while of strong and novel policy to undo.

Since Lasch wrote we all know what happened: a slow motion crisis gathered speed, produced the uprising led by Trump, and has now produced what we call an affordability crisis.

This is not new.  It is decades old.  We all saw it coming and accumulating.  But our leadership denied its existence and kept resorting to the old ideas with ever greater desperation.  At no point did those ideas stem the tide.  

Worse: there will now be a whole host of converts to the affordability issue who have no real empathy to what they mean.  But we can look forward to lots of earnest discussions about the “working poor” and what policies are feasible under our current constraints.  Where, of course, “constraints” means the least possible intrusion into elite wealth accumulation.  The entire conversation is already sounding, to me at least, a bit like the late 1800s:  we have a new “social question”.  What are we to do about this affordability problem?  Where did all these poor people come from?  Whatever happened to “self help”?

Short form of the argument:  our elite is so totally self-absorbed and self-involved — how many AirBnB properties do you own? — that it has no understanding of the life experience of the majority of people.  It took decades to create this new Gilded Age, it will take a while to deconstruct it.  Given the state of the stock market [note to you rich folk: only elitists have “portfolios”] the end might be closer than our leadership wants to admit.  They are all busy cashing in on the run-up in tech stocks.  They don’t have time to concern themselves with food prices.  Or rents.  Or child care.  Or petty things like wages.  Despite what they might say.

Yes, I know, I am a little dyspeptic this morning.

The government shutdown has exposed just how skewed our society has become.  One in eight Americans relies on government aid in one form or another simply to eat and put a roof over their heads.  Quite often that aid is insufficient. Many of our biggest employers [Walmart? Amazon?] game the system and pay inadequate wages in the knowledge that taxpayers will top them up in an attempt to push them over the poverty line.  This is very far from the industrial era when manufacturing wages  provided a step up and out of the lower levels of society.  Aspiration of a middle class life was real back then.  Not now.  Our big employers have no commitment to the middle class other than it being a source of profit.

Did we create a mass middle class in order to share the wealth, or to provide a fertile market to profit from?  Was it both?  If so, the suffocation of the middle will surely deprive the elite from its main source of income. So why do it?  Is it simply the short-term attitude of “the market”?  Not that “the market” cares— it is global, not national, so it cannot even see our middle class.

What kind of morality is that?

Shareholder morality.

Asset holder morality.

Elitist morality.

In other words, no morality at all.

After decades of neoliberal political hegemony we have, at last, arrived at the denouement of its intention.  We have created such a radical divide in lifestyles that it is no longer relevant to speak of the “American economy”.  There are two, not one.  The elite lives in one.  The rest of our people live in the other.  The one feeds relentlessly off the other.  And the divide that separates them is increasingly insurmountable.

We have destroyed democracy in any decent definition of that concept and replaced it with a hollowed out shell of its former self.  In a true democracy leadership cares about its responsibility to its fellow citizenry.  Our current leadership has no such care.  It is free of accountability because of the neoliberal mantra of “individuality”.  Our people are all supposedly responsible for themselves.  So why should the elite worry? Freed of moral responsibility of course it doesn’t.  Self-help provides a veil over the destruction of citizenship, and without citizenship there is no “entitlement” and no responsibility for the elite to share or care.

The purpose of democratic government is to provide, not simply participation, but results from that participation.  One of the key results being the provision of insurance against the occasional downsides of life.  No one, in a real democracy, is left behind.  No one is abandoned to precarious survival.  No one.

Yet that is precisely what America has done.  It is what it does.

This shutdown has exposed how callous our elite is, and how cruel it can be to our people.  

Why?

Because our elite lives in a separate world where it engages in intra-elite squabbles over cultural identity and which faction can establish its own form of dominion over what is considered “important” for policy-making.

Since our elite is unified in its desire to extract wealth from those below, any jockeying for status within its ranks has to come from different battles: hence the so-called culture wars, which are nothing more than an internecine struggle to define defensible positions over various novel, and often narrow, social rights and responsibilities. All the while ignoring broad based economic issues like affordability — an issue that impinges on the wealth the elite can retain for itself.  

Perhaps our elite contains too many educated people.  That over-supply has produced a desperate struggle for status and power within the elite and an ever growing need to demonstrate cleverness by pursuing ever more siloed and detailed thinking.  As a result our educated class has made itself irrelevant to the big issues.  It cannot cope.  It has been swallowed by its own need to justify itself and the rent it extracts.  Possession of the arcane has displaced understanding of the general as the key to intellectual success.

And now here comes AI with its compendium of all that information.  It is a gale of destruction within the educated class.  The storm is just beginning.  The elite is in crisis.  How ironic: the elite built its wealth by automating the masses and elimination the social escalator up.  The professional class, so aptly described ages ago by Burnham, was the willing partner of our capitalists as the latter drove machinery ever deeper in to our lives. And now it is caught itself in the same process.  When we automate cleverness we have precious little left for the future.  Our professional class is being cast adrift by its sponsor.  It has serve its purpose.  Now what?

Meanwhile in the real world affordability is now the focus.

Consumer sentiment is at a low ebb.

Trust in elite run institutions is at a low ebb.

Consumption is increasingly concentrated in an ever fewer hands.

Living standards are under threat.

The great American dream is over.

The post-mortem on the Reagan/Clinton consensus reveals that it has failed miserably for most Americans.  The post-Great Recession recovery, guided by old neoliberal hands, was also a failure.  It left too many behind.  The pandemic added to the disillusionment: our elite escaped to the country, while our “essential workers” were abandoned to the rotting infrastructure and high costs of our cities.  

And now the people appear to be justifiably restless.  They are even voting for politicians that don’t conform to the so-called “centrist” path.  Which is to say they owe no allegiance to elitist ideas.

But enough!  I know I am ranting.

So a concluding word:  

To all those of you discovering the affordability crisis as a new phenomenon, please recall that the elite-approved path to wealth generation has, we are told, always been paved by productivity gains.  But the growth in productivity and the growth in wages diverged decades ago.  An increasing share of that productivity was syphoned off and attributed to capital and asset ownership.  Which meant that asset prices rose with respect to incomes.  Stated otherwise: income from work was penalized in favor of income from asset ownership.  The incentive to work was cut — and you all worried why labor-force participation rates stagnated!  The rewards to work were cut.  The age-old gap between those who own and those who work opened up once more, taking democracy down with it.  The disparities that resulted now threaten the entire edifice.

Two economies: one wallowing in a self-indulgent second Gilded Age; the other living in an affordability crisis.  That is not democratic by any decent measure.  It is also unsustainable if democracy is to be restored.  

There is a reckoning ahead: either we abandon any semblance of democracy and admit we prefer authoritarian rule to keep the masses quiet; or the Gilded Age has to end.  

Either path is difficult.  A transition, though, is under way whether we like it or not because the people are restless.

To hold onto its Gilded Age our leadership has to clamp down on democracy.  It has to ignore the people.  It’s a stark choice.  Degrade privilege?  Or muzzle the people?

I know which I prefer.

How about you?

/Demos Kratia

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Weekend Round-up: Home Sales Bounce Back

This has been a quiet week for data. Today’s only significant item being the sales of existing homes report from the National Association of Realtors. And the news is good: sales rose at a 7.2% rate in July reaching a seasonally adjusted 5,240,000 level – the highest since August 2007.

The strongest growth came in the Northeast where sales jumped 13.4%. The weakest region was the West where sales actually fell 1.7%.

The numbers clearly illustrate the effectiveness of the government’s incentive program, the first time buyer tax credit drove much of the strength, which combined with the continued drop in prices – the median price of a home nationwide dropped 15.1% over the past twelve months to $178,400 – brought the low end of the market back to life.

July’s growth makes this four months in a row of rising activity, so I think it is reasonable now to say that the housing market is on the upturn; but I would not go as far as the NAR though and declare that momentum is building. There are a few rocks to navigate past before we can say that.

I would not be at all surprised to see one or two months of decline out of the next six. The reason is that the tax credit will be ending shortly, so after the surge created by the stimulus package wears off, we will be left to see what energy exists in the economy without the government prop. Obviously the massive decline in prices over the past year or so has brought housing affordability back within the realm of reality. Will that drop be enough?

Only somewhat.

The problem real estate now has is the adjustment going on across the economy as we adopt new and tighter credit underwriting standards, and as consumers continue to shed debt. That will restrict the pool of potential qualified and willing buyers.

One of the loony aspects of the bubble was that prices rose way beyond historic affordability levels only because mortgages were cheap and easy to obtain. Underwriting standards collapsed and consequently the pool of potential buyers expanded rapidly. This made real estate a sellers market for years: prices surged on the back of this flood of credit and affordability ratios were shattered.

Now we are unwinding that process. So it is natural and sensible to assume that affordability will have to revert more to historic ratios – the proportion of income allocated to real estate has to drop. Not only this, but we are going back to the days of proper down payments and the elimination of the terrible loan underwriting that brought us the sub-prime disaster.

And, of course, the basic economy is still only just recovering and unemployment remains a major problem.

So, for all these reasons, once the government’s stimulus goes away late this year, I expect the rebound in housing to moderate significantly. I don’t foresee a return to decline, but I think gains will be slow and steady. Next spring will be a buyers market – the pool of eligible buyers is shrinking, and the supply of unsold homes is still increasing despite the recent strength in sales – even in July we had an increase in the inventory of homes on the market to about 9 months worth of sales. And this doesn’t even take into account those homes whose buyers would like to sell but who are waiting – forlornly in my opinion – for prices to edge back up.

Still: it is pleasant to see housing bounce back a little. Real estate investment will play a small, but noticeable, role in getting GDP rolling over the next few quarters. If we could just get the job market back to life 2010 would be looking good.

It’s nice to end the week on an upbeat note!