Little wonder the report labelled these injustices a “genocide”, and certainly the testimonies show how the gap in living standards between white and indigenous Australians was forged. And, even now, Aboriginal and Torres Strait Islander populations die far younger than their white compatriots, while they struggle more with unemployment and workplace discrimination. These problems, repeated right across Australia, feel intractable — and in the end, they’re all based on the continent’s dusty red soil. For centuries, indigenous Australians have had their land snatched from beneath their feet, pushed metaphorically and literally to the outer limits of their ancestral homelands. This physical expulsion continues to have disastrous consequences, not just socially but also culturally, with communities struggling to preserve their traditions or determine their futures. Money matters here too: landlessness among many indigenous Australians means that they’ve long been shut out from the profits of the country’s vast mineral wealth.

Now, though, things may finally be changing. The Truth Commission’s final report is likely to transform life for Victoria’s First Nations peoples, with land reform just one result among many. Victoria is far from alone. It is part of a broader trend increasingly repeated from coast to coast. Taken together, Aboriginals now have rights or ownership to over half of Australia’s territory, and are increasingly being treated as partners in resource management — even if their fight for land, and the wider struggle for equality and fair treatment, is very far from done.

Indigenous dispossession has a long history in Australia. Britain started settling the continent in the late 1700s, establishing a penal colony at Botany Bay in 1788. A mix of settlers and convicts soon arrived — and what they found were some of the oldest cultures on earth. Most Aboriginal Australians were hunter-gatherers, and their ties to the land were intimate and complex. Consider the Kulin clans of central Victoria state, where tribal members traditionally inherited land access and use rights through the male line, but could also hunt and gather in other selected areas, and had additional access via their mother.

Soon enough, though, British settlers had displaced Aboriginals en masse, even as European diseases ravaged their populations. The government largely justified land seizures on the basis of racial superiority — and the fact that Aboriginal cultures didn’t have a centralized sovereign state to speak on their behalf. That native Australians lacked Western conceptions of property rights didn’t help either, with an 1837 House of Commons report summarizing Aboriginals as “barbarous” and “entirely destitute of the rudest forms of civil polity.”

Beyond official grants, meanwhile, some whites simply squatted on Aboriginal land. Ranchers claimed huge areas of the continent’s interior, setting up what became known as “stations”. Their sheep and cattle often destroyed the local ecosystems that Aboriginals relied on for food. With no good alternatives, many Aboriginals formed encampments at the headquarters of stations and worked for settlers, sometimes in slave-like conditions. Others migrated to towns or Christians missions, or else crowded into insalubrious “reserves” separate from whites.

“Protection” policies appeared from the 1860s. They quickly devolved into an ugly form of quasi-feudal control, with the mixed children of Aboriginal parents snatched away and given to white families. Segregation endured well into the Fifties and Sixties, at which point there was a shift toward assimilation. The Australian government increasingly started treating Aboriginals like other Australians before the law. But though that bolstered their individual rights, it ignored their unique ties to the land.

The Yolngu are a powerful example of a community that helped drive Australia’s transformation in its treatment of First Nations people. When the government created the “exclusively Aboriginal” Arnhem Land Aboriginal Reserve in the Northern Territory, in 1931, the Yolngu thought that their land would be safe from outside incursions. But they were wrong. The Australian government intervened in the area several decades later, with the aim of handing a piece of the Yolngu reserve over to a bauxite mining firm.

The Yolngu were not consulted in the land seizure, and in response crafted a now-famous set of petitions to the House of Representatives. Fashioned out of tree bark, their 1963 argument was simple. They’d used the land in question for hunting and food gathering “from time immemorial: we were all born here”. Even so, the government denied the Yolngu petition, while a 1969 court case they launched also failed. Over subsequent years, the mining company, “came and they destroyed the land” one Yolngu leader, Djawa Yunupingu, told me. That loss of resources put pressure on the Yolngu, while the fight to get it back strained clan relations too.

Though the Yolngu lost the case, the episode marked a turning point for Aboriginals. Native activism spread from the mid-Sixties, and episodes like the Gurindji “walk-off” at the Wave Hill cattle station brought national attention. The 1972 election swept Labor to power, with the party vowing to advance Aboriginal land rights. That culminated in a landmark 1976 bill, known as the Aboriginal Land Rights (Northern Territory) Act.

Aboriginals could now claim ownership over land in the Northern Territory — where most of them lived — if they could prove traditional association to it through songs, stories or rituals. The Yolngu took full advantage of this. After finding the head of a crocodile in an illegal fishing camp, likely severed by an intruder, in 1996 they started painting a series of tree bark images of their stories and philosophies, and how that linked to their sandy coastal home. Those paintings became key documents in a landmark court case that granted them sea rights in the Blue Mud Bay from 2008.

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Australia's divisive race referendum

By Nick Cater

The Aboriginal Land Rights Act ultimately helped transfer 50% of the Northern Territory to Aboriginal ownership, more than initially envisioned. All the same, the 1976 Act had limits. The biggest was that it applied only to the Northern Territory, which was administered by the federal government. Most of the Aboriginal population living in other Australian states, with a few exceptions, still lacked recourse for traditional land claims.

That changed in 1992, with a historic High Court decision that upended policy dating back to the British: it ruled that Aboriginal and Torres Strait Islander people could hold “native title” to land based on traditional laws and customs, and that this would be recognized under Australian common law. In Mabo v. Queensland, the court held that while the British crown, and subsequently the Australian government, could extinguish native title — it could nonetheless survive in places where the state didn’t explicitly dispose of it. Follow-up laws established a legal basis for lodging claims to recuperate land, and strengthened native title by allowing it to operate alongside pastoral or mining leases.

Some of the wins for land protections for First Nations peoples of the early and mid-Nineties were subsequently rowed back. In some places, especially in areas settled by whites, rights tended toward protecting heritage and access to sacred sites — rather than gaining full control over land. Yet, despite setbacks in parliament and in court, the return of land to First Nations people has advanced in ways that can’t easily be undone, putting Australia on a new trajectory in its relations with Aboriginal communities. First Nations people now have native title over about 40% of Australia, and that figure is only growing.

In 2019, on behalf of the Gumatj clan, the Yolngu filed a claim for native land title in Arnhem Land, and also lodged an application for compensation for the government’s decades-old land seizure in the area. The government argued that it had the authority to overturn native title — and that it didn’t have to provide compensation for property it repurposed in that corner of Australia. Ultimately, though, the Federal Court rejected all of these arguments, and allowed the case to proceed. In May 2023, in a decision with potentially wide-ranging repercussions, the Federal Court ruled that the Gumatj clan was eligible for compensation over the government land grab. In mid-March this year, the High Court upheld the decision.

Even so, the case highlights how the nature of Aboriginal land rights varies across Australia’s states and territories. First Nations people own more land and have stronger rights in the western half of the country. The Northern Territory stands out as the high point of Aboriginal land rights, notwithstanding remaining contestation over claims.

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How liberals betrayed indigenous Australia

By Julie Szego

But land rights are now expanding across prized eastern areas too. In 2021, for instance, the Queensland government returned four nature reserves, including the iconic Daintree National Park, to the Eastern Kukuu Yalanji people. Spanning nearly half a million acres, it’s only one of several local parks now owned by Aboriginals. Marking the handover, Queensland’s environment minister said the move “rights the wrongs of the past” and marks “a step forward in that path to reconciliation.” In 2023, meanwhile, the state of Victoria recognized the Eastern Maar people as owners of a considerable tract of coastal land, including part of a national park.

Despite the progress for First Nations people, however, restitution is incomplete. There remain hard and controversial limits to land returns in Australia. Most of the land recognized as belonging to Aboriginals sits in remote areas of the country, far from cities or sources of wealth. At the same time, the Australian government retains the power to limit native title to grant mining or pastoral leases. Using this power, the Queensland government squashed native title over 1,385 hectares of Wangan and Jagalingou country in 2019. For all the fanfare, Victoria’s truth commission may yet run into problems too, with the state government reluctant to reform the state’s criminal justice system, and its national counterpart under pressure to go further, faster.

History has a long shadow — and for Aboriginal Australians, that shadow is dark. Two centuries of dispossession, cultural erasure, segregation and assimilation can’t be remedied in a generation or two. Even so, the growing recognition of Aboriginal land rights can serve as a foundation for closing the gap with whites, whether in Yirrkala or anywhere else.

***

Adapted from Land Power: Who Has It, Who Doesn’t, and How That Determines the Fate of Societies (Basic Books)

If you Google the words “gentrification” and “excrement” (though mind how you go), news stories about the Golden City predominate. For instance, Forbes has an informative briefing on the issue by Adam Andrzejewski, CEO of OpenTheBooks.com. We learn that “since 2011 there have been at least 118,352 reported incidences of human fecal matter on [San Francisco] city streets”. A tastefully brown-coloured bar chart of “human feces incidents” shows that this is a growing problem – the bars get longer every year.

Last year, the San Francisco mayor created a “poop patrol” to literally clean up the city. Using payroll information, Open The Books estimate that each “human waste case” costs the taxpayer $32.75, not including “sunk costs” for steam cleaning equipment, etc.

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Down and out in the Golden State

By Peter Franklin

The fact that this, and the associated epidemics of homelessness, drug use and crime, is happening in one the most economically advanced and politically liberal cities in the world is an irony lost on no one.

As Karen Heller puts it in the Washington Post “everyone agrees that something has rotted in San Francisco”:

“Conservatives have long loathed it as the axis of liberal politics and political correctness, but now progressives are carping, too. They mourn it for what has been lost, a city that long welcomed everyone and has been altered by an earthquake of wealth.”

Erica Sandberg for the City Journal says that “many in law enforcement blame the crime wave on Proposition 47, which in 2014 downgraded possession of illegal narcotics for personal use and theft of anything under $950 in value from felonies to misdemeanors”. But clearly the impact of an out-of-control property market cannot be ignored. Farhad Manjoo quotes the key stats in a piece for the New York Times:

“One of every 11,600 residents is a billionaire, and the annual household income necessary to buy a median-priced home now tops $320,000.”

It’s not just the obvious consequences this has on homelessness, it’s also that runaway rental values are driving out the workers and businesses that a city needs to function as a community and flourish as a culture – especially a place like San Francisco whose character depends upon its diversity.

Karen Heller mentions the case of Lucca Ravioli – an Italian delicatessen that has closed its doors after 94 years; the land it stood on was sold off for millions to a developer.

Worse is yet to come. According to Alexis C Madrigal of The Atlantic “eight major tech companies” are expected to hold initial public offerings this year – all but one headquartered in San Francisco. That means a huge pay-out for the industry elite – who will, if the established pattern holds, pump a lot of that money into the local property market, driving prices even higher.

No wonder property turnover is so low in the city (“only 5,471 properties changed hands last year out of almost 400,000 units,” says Madrigal). Who wouldn’t hold on to an asset sat astride a river of gold?

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The cost of property may slowly kill Silicon Valley - but a Land Value Tax might give it new life

By Peter Franklin

Needless to say, San Francisco’s supposedly progressive politics is rotten with nimbyism. Farhad Manjoo points out the hypocrisy:

“Not-in-my-backyardism is a bipartisan sentiment, but because the largest American cities are populated and run by Democrats — many in states under complete Democratic control — this sort of nakedly exclusionary urban restrictionism is a particular shame of the left.”

Not that we can expect the Republicans to do much about the problem either – after all, there is a property developer in the White House. But perhaps the biggest failure is that of the tech industry. In one sense, they are the victims too – with landlords creaming off the value created by genuine entrepreneurs. One response is to join the landlord class. But those who still believe in generating wealth as opposed to extracting it should get up and leave.

Yes, there are reasons why particular industries cluster together in particular places. Proximity enables interaction and therefore creativity. But might there be a law of diminishing returns at work here? A point at which different perspectives become so bled into one another that they become indistinguishable?

Heller describes the “homogeneity” of the San Francisco knowledge class:

“Too expensive. Too tech. Too millennial. Too white. Too elite. Too bro.

“To take a midday tour downtown is to be enveloped by a jeaned and athleisured army of young workers, mostly white and Asian, and predominantly male. The presence of a boomer or toddler is akin to spotting an endangered species.”

There’s an argument that the tech industry, having changed the world is previous decades, is stagnating. Perhaps in hollowing out the things that made San Francisco special, big tech has done the same to itself.

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Is it all over for the big tech companies?

By Peter Franklin

America was built by pioneers who left over-crowded places to start afresh somewhere new. The tech ‘bros’ should get their get their shit together and do likewise.

George Orwell was wrong.

About class, that is.

His most important book on the subject is The Road to Wigan Pier, published in 1937. The first half is an eye-witness account of working class life in the industrial North and Midlands. Unflinching in his descriptions, he left his readership in no doubt about the misery he saw.

And yet it was the second half of the book that proved the more controversial – not because he saw socialism as the answer, but because of who he identified as one of the great obstacles to the achievement of socialism: his fellow socialists.

The doctrinaire, priggish, pretentious cranks of the Left-wing intelligentsia were turning potential allies into opponents, Orwell said. He argued that the “humbug” of “bourgeois-baiters who are bourgeois themselves” was making enemies out of people who were economically working class, but culturally middle class:

“The very last person in whom you can hope to find revolutionary opinions is a clerk or a commercial traveller. Why? Very largely, I think, because of the ‘proletarian’ cant with which Socialist propaganda is mixed up. In order to symbolize the class war, there has been set up the more or less mythical figure of a ‘proletarian’, a muscular but downtrodden man in greasy overalls, in contradistinction to a ‘capitalist’, a fat, wicked man in a top hat and fur coat. It is tacitly assumed that there is no one in between; the truth being, of course, that in a country like England about a quarter of the population is in between.”

By cutting the proletarian cant and including this quarter of the population among the oppressed, the fight against the oppressor and for socialism could be won, he believed.

And that’s where he was wrong. He portrayed this group as the “sinking middle class” – composed of people like the “the half-starved free-lance journalist, the colonel’s spinster daughter with £75 a year, the jobless Cambridge graduate, the ship’s officer without a ship, the clerks, the civil servants, the commercial travellers, and the thrice-bankrupt drapers in the country towns”. Counting himself among their number, he invited them to let go and “sink without further struggles into the working class where we belong… we have nothing to lose but our aitches.”

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Too posh to fail

By James Kirkup

The alternative to Orwell’s inclusive socialism was a dreadful one:

“It is quite easy to imagine a middle class crushed down to the worst depths of poverty and still remaining bitterly anti-working class in sentiment; this being, of course, a ready-made Fascist Party.”

The middle class, however, had other ideas. It would sink neither into socialism nor fascism, thank you very much. Instead, it would rise ever higher on a flood tide of prosperity. Furthermore, and as if to prove Orwell completely wrong, great swathes of the working class would breakaway to join them.

This is the history of millions of British families – including my own.

*

George Orwell was born in 1903; my paternal grandfather was born two years later. The former was born in India – the son of a British civil servant; the latter in the East End of London – the son of a cabinet maker.

The Orwell family was therefore middle class; my family working class. But we can refine those categories. Orwell’s grandfather was a clergyman and his great-grandfather was landed gentry. So, not just middle class, but upper-middle class. At the same time, we can see a story of wealth diminishing down the generations, which is why Orwell described himself as “lower-upper-middle class” – “the correct and elegant thing, I felt, was to be of gentle birth but to have no money.”

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Ideologues miss Orwell's greatest lesson

By James Bloodworth

I’m afraid the Franklins cannot trace their ancestors as far back as the Orwells. People born in the poorest part of Victorian London didn’t have family trees. Presumably at some point in the 19th century, or perhaps before that, an ancestor left the countryside to find work in the Great Wen. But there’s no memory of it, and so the story begins with my great-grandfather. Being a skilled craftsman, he wasn’t just working class, but upper-working class – not that he’d have described himself that way.

His son, my grandfather, left school at 14 to follow his father’s trade. That would have meant a long apprenticeship in the same workshop, ensuring the skills necessary to making furniture were deeply ingrained by doing the same tasks over-and-over again. As an apprentice he would have been paid a pittance, but by the end of it he could cut a dovetail joint with his eyes closed. Thus as a young man he’d have earned a half-decent wage, enough to save a few shillings each week. By the 1930s, he’d saved enough not only to get married, but to realise two previously inconceivable ambitions – to own his own home and to get out of the East End.

An opportunity presented itself: about half-an-hour’s train ride away, in Essex, farm land was being auctioned off in small plots to the highest bidder. My grandfather bought four of them at £5 each. And then he built a house – in his spare time (he was still working his day job in the East End). It took him two years of early mornings, late nights and weekends, but he did it – he had a home, fresh air and a family.

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Elitist Britain is a closed shop

By Paul Embery

But before this turns into the Essex version of The Darling Buds of May, I should point out the less-than-idyllic realities. Firstly, the strain of building a house while holding down a job took a toll on my grandfather’s health. Sawing through sheets of asbestos roofing material wouldn’t have helped either.

As for the rural setting, the plotlands were never fully serviced – and later plans to change this were interrupted by the war. My dad and his sisters therefore grew up in a house with no electricity and no running water (there were standpipes further down the unsurfaced road). That said, they were luckier than a lot of their neighbours. Before the war, most of the plots were used as weekend getaways – and contained caravans and shacks as opposed to anything that could be called a house. But once the Blitz started, these filled up with families living there full-time in all seasons.

These days we’d call it a shanty town, but to those who made their new lives there it meant safety, freedom and a stake in the future.

Nothing much remains of the plotlands: what hasn’t been swallowed up by suburbia is now a park.  A single house – ‘The Haven’ – is preserved as a testament to a vanished way of life. 

In the post-war period, the rest were cleared away, with people moving out to new towns like nearby Laindon and Basildon. That’s where my father went to school – and where he went to work, aged 16, in a council drawing office. His employers trained him up as a land surveyor – both on the job and at evening classes in a local college. This led to other jobs, with increasing managerial responsibility, until he and my mother started their own business and bought their own home. By the time my brother and I came along, it was simply assumed that we’d do A-levels and go to university, which duly we did.

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Brexit has exposed our education apartheid

By Matthew Goodwin

Things that were simply unimaginable to my great-grandfather became run-of-the-mill to my generation.

*

I don’t tell this story because it’s exceptional, but because, details aside, it’s the story of middle England.

At the beginning of the 20th century only 10% of homes were owner occupied; by the Millennium, it was 70%. As recently as the 1960s, fewer than 5% of school leavers went to university; the figure now stands at nearly 50%. As for what proportion of people call themselves middle class, that depends on the survey and how it phrases the question. But if one looks at occupation, the non-manual professions accounted for only a third of households in the late 1960s, but more than half after 2000.

Despite two World Wars and the Cold War, the 20th century was a time of expanding opportunities for ordinary working Britons. Writing from the perspective of the 1930s, the industrial North and his own straitened circumstances, Orwell can be forgiven for missing the trend, but he was unquestionably wrong: the middle class wasn’t sinking, it was recruiting.

In the post-war period, the cultural elites couldn’t deny what was happening – so they tragedised and satirised it instead. In America, there was Death of a Salesman, Arthur Miller’s 1949 play about the shattering of middle class delusions. In his autobiography, Miller wrote that his purpose had been to condemn a “pseudo life that thought to touch the clouds by standing on top of a refrigerator, waving a paid-up mortgage at the moon, victorious at last.”

In Britain, there was John Brain’s 1957 novel Room at the Top, in which the working class protagonist plots his social ascent by impregnating the daughter of a well-to-do family and casting aside his true love. By the 1970s, the collision of the classes was being played for laughs – Abigail’s Party by Mike Leigh being a classic of the genre.

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The closed world of the 'enlightened' middle class

By James Bloodworth

Well, fair enough – social pretension provides a worthy target for the social critic. But for the most part, social mobility is not ridiculous, it is glorious. For the first time in history, it wasn’t just the fortunate few who could dare to dream – and work hard to make those dreams come true – but the great mass of the people. So, never mind the drama and the comedy, where’s the celebration?

*

What we gained in the 20th century, we risk losing in the 21st – perhaps because we’ve placed so little value upon it.

These are not optimistic times. The young no longer expect to be richer than their parents. In part, that’s due to economic stagnation. Growth rates are slower now than they were in the post-war decades and wealth is more unequally distributed. Room at the top is not being created the way it used to be.

But we’re also making it harder for people to make their way up. The grips and footholds that allowed my family to better their lot have been chipped away. The land my grandfather built his house on cost £20 – about 10% of his annual earnings. What would it cost to get a building plot in the commuter belt in 2019? A multiple, not a fraction, of a half-decent salary – and that’s assuming you could get planning permission.

Then there’s the training my father got to become a land surveyor – which didn’t cost him anything. In fact he was being paid and, in the latter stages, given time off for formal instruction. Today, you have to go to university to become a land surveyor – or to undertake a whole range of once non-graduate professions. At least when I went to university there were no tuition fees, unlike the present era when you can expect to be charged the best part of £30,000 – whether you go to Oxbridge or an ex-poly.

*

My grandfather left school a hundred years ago. Over that time, the nature of work has changed beyond recognition for millions of people. In the space of just three generations, my family went from building things, to making accurate drawings of them, to writing about them for websites. As a society, we have dematerialised production, disembodied knowledge and placed value in the abstract.

And yet economic inclusion still depends on the same fundamentals – learning how to do something useful and finding a place to call your own. These are the twin paths to prosperity, but after a century of progress, we’ve placed tollbooths across both of them.

Click here to read the rest of our series, Class Wars, in which we asked contributors to address what is often a vexed question: what does class mean to you?

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Why home ownership is the real key to progress

By Reihan Salam

But what became of those unsold, unsellable and abandoned houses? An eye-opening long-read by Alana Semuels in The Atlantic provides a substantial part of the answer:

“In 2010, at the height of the foreclosure crisis, the federal government watched nervously as hundreds of thousands of families lost their homes. Empty houses blighted neighborhoods, their shades drawn, their yards overgrown. Without some kind of intervention, federal officials worried, the housing market would continue in its free fall, prices would keep dropping for existing homeowners, and the economic recovery, already tenuous, would be imperiled.”

The US government therefore “incentivised Wall Street to step in”:

“It worked. Between 2011 and 2017, some of the world’s largest private-equity groups and hedge funds, as well as other large investors, spent a combined $36 billion on more than 200,000 homes in ailing markets across the country.”

Rather than re-selling once the economy recovered, the homes have been rented out via property management companies.

In theory, the efficiencies and expertise that should come from letting homes on a large scale should mean a better deal for tenants – compared to renting from private landlords with no more than a few properties. However, there’s more than one possible business model here.

Model A is to strive to provide the best service possible; model B is to provide the worst possible service you can get away with – finding inventive ways to skimp on repairs or stick tenants with extra charges. Where landlords are competing for high-earning and potentially litigious customers in prosperous areas, then model A is likely to predominate. But in rental markets where people have limited means and fewer options, model B (though immoral) becomes viable.

Of course, there are many examples of small-time landlords exploiting tenants too. However, these bit-players aren’t in a position to dominate the rental markets of entire neighbourhoods. Nor do they have the lobbying clout that big companies have (especially those in which major financial institutions have direct investments).

One can see why politicians are grateful to the major landlords. If they hadn’t taken over the management of so much unwanted housing then the state would have had to do it instead. For those who prefer market-led solutions or who merely doubt governmental competence, the new status quo looks like the least worst outcome.

Furthermore, one could also argue that up-market and down-market options are a general feature of consumer capitalism – and that it’s the job of any industry to cater to all budgets. As long as tenants get what they pay for, and no laws are being broken, what’s the problem?

However, housing isn’t like other markets. Whether one owns a home or rents it has profound consequences for long-term economic empowerment. Moreover, supply is notoriously inelastic, not least because the key input – land – is the most finite of resources. The expansion of the private rented sector in the US (and the UK) has therefore come at the expense of owner occupation. So, if your idea of capitalism is a property-owning democracy, then the last ten years or so have delivered a series of setbacks.

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Why home ownership is the real key to progress

By Peter Franklin

If, on the other hand, your goal is to undermine popular support for capitalism, then presiding over the boom-and-bust of the property market, bailing-out the banks responsible and then incentivising big investors to hoover up sub-prime property and rent it back to the working class is an excellent way to go about it.

As Semuels puts it, “the trends that favoured these new landlords were largely produced by a financial crisis that Wall Street had itself abetted.”

Even when landlords provide an acceptable service to customers whose best option may be to rent for a while, it is vital this does not become a system in which ordinary working people are trapped so that the wealthy can profit.

Capitalism must not build a new road to serfdom.

Vegetables, I mean. If you do and you’re any good at it, you’ll know that homegrown produce can be much tastier than supermarket fare. And yet most gardeners, however keen, would starve if they had to rely exclusively on their own harvest. Even if they could grow and preserve enough veg for the whole year, there’s a basic calorie problem.

Fresh green produce is packed with fibre and vitamins, but when it comes to energy, lettuce etc lets us down. To get enough calories to sustain life, human societies rely on starchy, sugar-laden or oil-bearing crops and/or animal products. Since the invention of farming, ten thousand years ago, we’ve been especially dependent on cereal and root crops.

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Environmentally-friendly farming doesn’t have to be technologically backward

By Peter Franklin

Now hold on to that thought, because today’s topic is the potential of a radically new form of agriculture to feed the planet.

The idea is that we’ll be farming much, or even most, of our food indoors rather than out. Our cities will feature high-rise ‘vertical farms’ in which crops grow hydroponically under artificial lights, with the animals we eat reared intensively under the same roof – their waste products helping to fertilise the crops (some of which are used to feed the animals).

As Stephen Davies points out, in an eye opening piece for the American Institute for Economic Research, there would be many advantages:

“Because the crops can be grown very close to the point of final sale (maybe attached to a grocery store), the transport costs and associated impacts are enormously reduced while the food is much fresher. It is also of higher and more consistent quality, and because it is grown in a controlled environment there is far less of a problem with pests. This means you do not have to use large quantities of herbicide and pesticide outdoors, where it inevitably enters the wider environment…”

Unfortunately, there are some pretty fundamental problems too:

“The major challenge has always been the very high levels of energy that vertical farming with artificial lighting and heating requires. In 2016, vertically farmed lettuce used 14 times more energy than lettuce grown in a conventional heated greenhouse.”

However, the increasing efficiency of LED lighting could mean that the hydroponic vertical farming does become viable. Artificial light will always be more expensive than the free and natural version, but if the extra cost is low enough it can be offset by the benefits:

“Because the crops can be grown all year round, you can have six to seven crops a year instead of two or three, so output is higher and spread throughout the year.”

But this is where the calorie problem comes in. The hardest crops to grow hydroponically are those energy-rich cereal and root crops. But perhaps we won’t need these so much in future. After all, this is the age of the low carb diet – indeed of the ‘paleo’ diet from which the starchy, sugary foods of the first agricultural revolution have been banished. If this trend continues then vertical farming might be able to feed the cities. Irrespective of dietary fashion, our sedentary, centrally-heated, urban lifestyles don’t require us to burn as many calories as in the past.

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Animals. Are they so different from us?

By Ian Birrell

Sounds promising, but there’s a problem with the meaty side of urban agriculture. The other great dietary trend of our era – veganism – is evidence of a growing disquiet with the way we treat animals. It’s difficult to see how vertical farms help with the welfare issues surrounding intensive meat production. Indeed, the urban context brings the horror closer to home.

However, once again, technology is coming to the rescue. Stephen Davies says that the cost of producing vat-grown or ‘cultured’ meat has come down so far that it now poses a threat to conventional livestock farming:

“There are two indicators that cultured meat is on the verge of a major commercial breakthrough. The first is the amount of capital now being invested in it. The other, even more revealing, is that organized interests such as cattlemen are now lobbying against it and looking to use legislation and regulation to block it.”

There’s a parallel here to the energy sector. Ten years ago, there was an intense debate about the role of renewable power. Investors were getting behind wind and solar in a big way – stirring up a major lobbying effort to persuade governments to stick with fossil fuels and nuclear power. I’m glad to say that that the innovators won and the lobbyists lost. Today, renewable energy is the fastest growing source of new generating capacity because it’s the most competitive.

If the same dynamics are lining up behind a combination of vertical farms and cultured meat then we can expect massive disruption in the agricultural sector too.

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Brexit Britain must take back control of its countryside

By Peter Franklin

The prize is a sustainable and cruelty-free intensification of food production – allowing us to free-up and re-wild great swathes of farmland. I don’t suppose we’ll entirely eliminate carbs from our diet, but we can eliminate cereal-fed animals from our diet – and, by extension, the land required for the livestock plus that required for growing their feed.

Given the accumulating evidence of widespread ecological collapse, any opportunity to reduce our environmental footprint can’t come too soon.

In a sane world we’d call this inflation. In fact, it is inflation – and to which there are two solutions: increase supply and/or reduce demand.

Policy makers mostly ignore the demand-side, focusing on supply – i.e. how can we build more houses?

Suggested reading

Why 'peak death' won't solve the housing crisis

By Peter Franklin

Clearly, we need to remove the main constraints – of which three are the most fundamental, applying not only to housing, but to just about anything.

Firstly, resistance. A lot of people don’t want new housing near their own homes – and their unhappiness generates political pressure against new development. Solution: beautiful houses so that development makes places better not worse.

Secondly, time. There’s never enough of it, is there? In Britain, we still basically build houses by hand – and that’s a lengthy process. Solution: factory-built houses, using advanced onsite and offsite fabrication technologies to speed up the process of construction.

Thirdly, space. Always at a premium where people most want to live, this is the tightest constraint on building new homes. Solution: ‘tiny houses’ so that we can have more of them on any available site.

This last one is the subject of an insightful piece by Vauhini Vara for the Believer:

“Modest homes have existed for as long as people have sought shelter, but the tiny house—typically defined as a dwelling of 399 square feet or less, often built on a trailer, that functions as a miniature version of a regular house—is supposed to represent a deliberate design choice. The version of tiny living that is glamorized on TV and that appears in curated Instagram accounts features images of young, yogic, flannel-wearing couples lazing about in delicious little spaces. “

As well as the cutesiness of the designer tiny house, there are other, more substantial, attractions. With ever increasing numbers of us living alone or as couples without children, family-sized homes seem like a waste of space – not to mention a waste of other resources like energy. Smaller dwellings mean that more people can live in sought-after areas such as city centres or rural beauty spots, where much of life is lived outdoors not in. In urban settings, tiny homes lend themselves to modular forms of construction and can make use of every sliver of land; while in rural settings, the 21st-century version of the log-cabin treads lightly on the landscape. Finally, what better reason could there be to de-clutter your life and make Marie Kondo proud?

Suggested reading

Why home ownership is the real key to progress

By Peter Franklin

So are tiny houses the big solution? Writing from an American perspective, Vara sounds a distinct note of caution. As well as being limited in size, these homes are also limited in number:

“…the most surprising aspect of the tiny-house phenomenon might be that, while the lifestyle has never been more visible, real-life tiny-house dwellers are hard to find. Fewer than ten thousand of the homes are estimated to exist nationwide. “

Note that this doesn’t include the vastly greater number of trailer park homes dotted across the US, but then, as the author points out, the tiny house movement seeks to present modest living as a positive choice. The irony is that to get round regulations “builders have taken to putting tiny houses on wheels and building them to the less restrictive codes that apply to RVs [recreational vehicles]”.

Then there’s the issue of land, which complicates the idea of tiny homes as a solution to the affordability problem:

“The median price of a home in the US is $220,000, which most people finance with a mortgage. Tiny homes usually sell for $40,000 to $90,000 without land, and buyers typically pay cash or finance them with a property loan.”

That’s great for people who want to own their homes, but have limited access to capital. However, they also need to rent or buy the land on which their homes are built or parked on. Where land is cheap that ought not to present too much of a challenge. But where land is expensive (and thus where, by definition, the housing crisis is at its most acute) construction costs are not the main cost. Squeezing more dwellings onto a particular parcel of land – by building up or building small – only increases the number of possible tenants / owner occupiers / investors and thus the commercial value of the land.

Suggested reading

Would you trust a robot to build your house?

By Peter Franklin

In other words, we’re back to the demand-side of the housing crisis.

Tiny homes, prefabricated homes, beautiful homes – all have their benefits, but the fundamental issue isn’t what we build, but what we build it on (and how much it costs).

By the way, the rival ‘disaster capitalist’ solution to the housing crisis, which is to embrace sprawl and ugliness plus unregulated finance, will also fail – and for exactly the same reason.

Until policy makers deal with what is quite literally the underlying problem – land prices and the mechanisms by which they’re inflated, there will be no lasting solutions.

Every other initiative, no matter how laudable, is a distraction.

When it comes to what the Millennial generation are doing with their cash, there’s a lot more than bland commercial interest going on. Indeed, there’s a touchiness to the whole subject – indeed, implications of economic, cultural and political disruption.

This stems from the likelihood that many, if not most, Millennials will be poorer than their parents and already are poorer than their parents were at the same stage in life. It’s an unsettling development for a culture that had taken it for granted that each new generation would be richer than the last.

Suggested reading

The surprising losers of the Great Recession

By Peter Franklin

Another great driver of change is technology – if economic insecurity provides the reason for a radical shift in consumption patterns, then digital goods, services and markets provide the means. Many sectors have been disrupted already, not least the media businesses who publish anguished articles about what young people will and won’t pay for.

With so much at stake – and such obvious tension between the generations – it’s not surprising that silly stories, like the one about Millennials not saving because they spend too much on avocado toast, blow up into major controversies.

But when not being accused of extravagance, Millennials face charges of miserliness – indeed of opting out of previously normal features of adulthood such as buying a house, starting a family and even sex. If the first duty of the capitalist citizen is to consume and produce new consumers, then Millennials are going AWOL.

Writing for the Atlantic, Derek Thompson says there is a reason why 20 and 30-somethings are holding back:

“…the fact that young people are buying fewer houses and cars doesn’t prove that they want fewer houses and cars. It might mean they simply can’t afford them. That latter conclusion is now supported by research from the Federal Reserve.

“Fed economists found that the depressed rate of homeownership among Millennials was entirely about income and affordability… controlling for income and employment wiped out all generational differences.”

Suggested reading

Who's to blame for the 'boomerang' generation?

By Peter Franklin

Let’s start with the most obvious squeeze on Millennial living standards – the cost of housing:

“According to the Joint Center for Housing Studies of Harvard University, the typical sale price of an existing single-family home in 2017 was 4.2 times greater than the median household income; that’s 30 percent higher than in 1988. It’s even worse in some cities. “

Over much the same period we’ve also made it much more expensive for them to get an education:

“Millennials are the most educated generation in U.S. history to date. They bought into a social contract that said: Everything will work out, if first you go to college. But as the cost of college increased, millions of young people took on student loans to complete their degree. Graduates under 35 are almost 50 percent more likely than members of Gen X to have student loans, and their median balance is about 40 percent higher than that of the previous generation.

“And what has all that debt gotten them? ‘Lower earnings, fewer assets, and less wealth,” according to the Federal Reserve paper’s conclusion.’”

How’s that for a double-whammy?

So the reason why Millennials aren’t saving and/or splashing the cash isn’t because they’ve combined the worst habits of the spendthrift and the skinflint, it’s because they’re too busy paying the rent and paying off their student loans.

Noting the markedly Left-wing politics of this generation, Thompson asks “is it any wonder that Millennials are eager to overthrow a system that has duped them into a story of permanent progress, thrown them into debt, depressed their wages, separated them from the trappings of adulthood…?”

An excellent point, but I wonder if there’s that much of a difference between the neo-socialist promise of more free stuff from the state – and what neoliberal politics has offered to older, richer voters.

Think about the huge and lightly-taxed accumulation of property wealth – or the inflation of asset values caused by easy credit policies and quantitative easing. That too is ‘free stuff’ for those old enough and fortunate enough to hold wealth.

Suggested listening

Test article

By Charlie Pickles

The great achievement of neoliberalism, globalisation, automation and all the rest of it has been to lower the costs of production. Stuff has become cheap and a lot of digital stuff is free. Capitalism has produced abundance beyond our ancestors’ dreams. Unfortunately we’ve allowed those who control economic bottlenecks like land and educational accreditation to extract far too much of the value that capitalism creates.

The next generation of consumers have been left with too little to provide the demand that is the essential counterpart to supply.

Bicycles!

Suddenly, they were all over the place – in noticeably greater numbers than before. The ‘bike boxes’ (or advanced stop lines) at traffic lights are often brim-full of cyclists, shiny and raring-to-go, like netted fish in a well-stocked river.

What explains this surge? It’s not as if a congested city like London is the most cycle-friendly place in the world. On the other hand, the congestion is what makes cycling a quicker option. Furthermore, the provision of cycle lanes, bike boxes and public hire schemes hasn’t just improved safety and convenience, it’s also shifted social norms – signalling that London’s roads are not exclusive to the internal combustion engine.

Suggested reading

Left behind – life beyond the London bubble

By James Bloodworth

Perhaps, the ultimate driver (if that’s the right word) is economic. It’s now so expensive to live and work in London and other global cities that savings have to found somewhere; for many people that means swapping cars, bus passes and gym memberships for a bike. So, if you don’t like cyclists, then blame city landlords.

And, yes, there has been a backlash against the urban cyclist. In any walk of life, and any mode of transport, a given percentage of our fellow human beings behave badly and/or idiotically. Cycling is not immune.

We’ve all got our stories. Mine include the MAMIL (Middle Aged Man In Lycra) who ran a red light almost hitting me at a pedestrian crossing. When I pointed this out, he responded with some travel advice of his own. Another near miss was with a younger cyclist who came whizzing round a corner, only to complain that I was in the “middle of the road”. I was, but that’s an inevitable part of crossing one.

Pedestrians can be idiots too, of course, especially the kind fixated on their smartphones not the street. And most dangerous of all are those in motorised vehicles – not because they’re worse people, but because they’re driving a ton or more of high-speed metal.

So, mindful of the toll of death and injury suffered by cyclists, let’s try to be tolerant – and careful. It might also help to think about the ways in which we all benefit from more cycling. Consider the following from Carlton Reid of Forbes:

“New research from Transport for London (TfL) claims that people walking, cycling and using public transport spend more than motorists in local shops. Conducted by Matthew Carmona from University College London’s Bartlett School of Planning, the research reveals that those not in cars spend 40% more each month than motorists.”

Suggested reading

Our 'open' society has shut the door on shared spaces

By Peter Franklin

The rise of online retail is often blamed for the decline of the high street – and not without reason. However, the policy response should be as much about real space as cyberspace. Shops, pubs and restaurants haven’t got a chance if they occupy environments that people want to get out of as soon as possible.

That can change. Making the urban environment friendly for cycling and walking – or ‘active transport’ to use the latest policy speak – makes it more pleasant for shopping too (and other uses of shared space):

“The research was conducted in areas of London which have benefitted from Dutch-style streetscape improvements, such as the addition of cycleways…

“In those areas improved – such as the mini-Holland redesign in the suburb of Walthamstow, ten miles north of Westminster – the number of people walking in the streets increased by 93%.

“People also spent more time in the street, with a 216% increase in activity such as going into shops and cafés.

“Thanks to the increased – and improved – footfall, retail rental values increased by 7.5% and there was a 17% decline in retail vacancies.”

Of course, there are trade-offs. More space for cyclists can mean less for motorists – especially in city centres where there’s the least room to play with.

But do we really want to prioritise the speed with which we can get in, out and through our cities? This would seem to miss the point of what a city is for.

Suggested reading

The false promise of the vertical city

By Peter Franklin

But all of that is as nothing compared to Amazon’s latest achievement, which is bringing unity to America’s fractured political landscape. Leftwingers like Representative-elect Alexandria Ocasio-Cortez and Rightwingers like Tucker Carlson of Fox News now speak as one… against Amazon.

Indeed, an extraordinary range of American publications from the socialist Jacobin magazine to the centrist Atlantic through to the conservative National Review have published pieces lambasting the company. The focus of this widespread rage is something that might seem relatively innocuous – a decision over where to site the company’s second headquarters (the first is in Seattle). Compared to all the other controversies that Amazon is embroiled in, the acquisition of some extra office space might seem an odd thing to get so exercised about.

Suggested reading

Cheap consumer goods come with a high human price tag

By James Bloodworth

However, there was an awful lot at stake: 50,000 new jobs and a $5 billion investment in new construction: a huge prize for a big city; the promise of complete transformation for a smaller one.

Which is why a grand total of 238 cities (including some in Canada and Mexico) entered the competition to be chosen. This was narrowed down to a shortlist of 20 cities in January, with the final result announced earlier this month (of which, more later). The whole process was distinctly reminiscent of the competition between cities to host the Olympic Games.

Unfortunately, for Amazon, its quest to find a second home has become a symbol of corporate welfare. That’s because the company wasn’t just looking for the best possible location, it was also angling for incentives.

It is estimated that the various levels of American local government (including state governments) spend between $45 and $90 billion every year enticing businesses to invest in their states and communities (or to not move existing investments elsewhere). The sweeteners take many forms from tax breaks to targeted infrastructure investments (though what counts as a special favour and what is something that the state or city would have done anyway is not always clear). The justification is that the locality will receive much more in return once the corporate welfare recipient moves in and starts creating jobs, tax revenues and reasons for other businesses to move in. From a nationwide perspective this amounts to a system of subsidies for businesses big enough to demand them, but from the narrow perspective of the locality, it can look like a good deal.

Therefore, Amazon wasn’t doing anything out of the ordinary… for corporate America. But if they thought that the spectacle of a trillion dollar company touring the country soliciting favours from investment-hungry cities would look good, they were mistaken.

Suggested reading

The traitors and thieves of Silicon Valley

By Jonathan Tepper

The secrecy surrounding the bidding process didn’t help. One could argue that this is just how business is done – with Amazon expecting no more confidentiality from its prospective public sector partners than it would from the private sector. However, government, whether national or local, is not just another client/supplier, it is a democratic institution. While it isn’t necessary to give a running commentary on every twist and turn in a negotiation, the people of a community can’t be frozen out altogether – not when the deal is as consequential as that on offer from Amazon. Citizens need to be treated with at least as much respect as shareholders – in fact, rather more, because they not only ‘own’ but also legimitise the government side of the deal.

*

All of these concerns and others were bubbling away during the 14-month competition, but it was the final result that blew the lid on public anger.

It wasn’t that most of the cities making the bid were doomed to be disappointed. After all, with one new HQ there could only be one winner – something the 238 bidding cities will have been aware of going into the process. As it turned out, there were two winners, because Amazon decided to split its second HQ between two locations. But rather than lessening the disappointment the joint award accentuated it. That’s because neither winner was a city that really needed the break; both winners were located along the BosWash corridor – the mighty connurbation that runs from Boston to Washington. Hopes that Amazon might establish an HQ somewhere in heartland America – helping to bridge the divide between the coastal cities and flyover country were dashed.[2. There will, however, be a $230 million “Operations Centre of Excellence” in Nashville, Tennessee]

Suggested reading

What does America want?

By Henry Olsen

One of the winners was New York – always a strong contender given its global profile. But the other winner was, if anything, of greater geographical significance. Arlington County, Virginia cannot be described as heartland America. It’s not even heartland Virginia – but rather in the western suburbs of Washington. It is therefore well within the infamous ‘Beltway‘ – seen by much of America as the home of an out-of-touch political elite (though it’s also home to a great deal of poverty). The specific location is a business district of superblocks called Crystal City. Despite the name, it is not the most sparkling of places – but it is right next door to Reagan National airport. It’s also got metro stations, is just across the bridge from the Capitol and handy for the Pentagon (where Amazon has business). Jeff Bezos also happens to own the Washington Post.

So despite a high profile competition in which cities across and beyond the nation were considered, the winners were America’s biggest city and its capital city. A big-ticket investment decision that might have helped disperse the concentration of economic power in America, has confirmed it instead.

In the light of the outcome, Amazon is open to accusations of having staged the competition as a publicity stunt. Though to be fair, if it had opted for New York and Washington without the competition, it would have been accused of not giving the rest of America a chance.

Other critics see the competition as a clever way of obtaining commercially useful information about the expansion plans of candidate cities – handy when you’re in the business of building a nationwide distribution network (not to mention a chain of automated retail outlets). That said, obtaining such information is what major developers are pretty good at anyway.

Suggested reading

Who will take on the undeserving rich?

By Deborah Hargreaves

The fiercest aspect of the backlash centres on the corporate welfare aspect of the final decision. Despite picking the most ‘Amazon-ready’ locations, the company has nevertheless secured a reported $2.2 billion of additional inducements. Even the most reliable defenders of corporate America have had enough. In an editorial entitled ‘Amazon’s Golden Fleecing’, the Wall Street Journal had this to say:

“We rarely agree with socialist Congresswoman-elect Alexandria Ocasio-Cortez, but she’s right to call billions of dollars in taxpayer subsidies for Amazon “extremely concerning.” These handouts to one of the richest companies in the history of the world, with an essentially zero cost of capital, is crony capitalism at its worst.”

Fox News host, Tucker Carlson also weighed in: “the richest man in the world just got $2 billion in taxpayer subsidies. How does that work?”

And yet, some of the rival locations were offering a lot more than that. Amazon literally turned down billions of dollars so that it could locate in New York and Washington. What clearer proof could there be of the pulling power of a fortunate few locations over everywhere else.

The fact that this involves Amazon only makes it worse. This is a company with a physical footprint of facilities and employees across America. With its expertise in cloud computing services, logistics and distribution, there can be few organisations better positioned to overcome the tyranny of distance. If anyone could have made a non-obvious location work, it was Amazon.

*

The ‘Amazon moat‘ is not a water feature planned for either of its new headquarters, but a reference to the company’s well-defended position in the marketplace. Its operational infrastructure from websites to warehouses is so extensive and interconnected as to make it all-but-impossible for a serious competitor to emerge. Without the Amazon’s economics of scale (and accumulated expertise), it’s very hard for rivals to compete on price across such a range of goods and services – and if they can’t do that they can’t grow big enough or last long enough to match Amazon’s heft.

Suggested reading

What does the 'charging elephant' - also known as Amazon - want? Only everything (and beware of getting in its way)

By Peter Franklin

‘Superstar cities’ like New York and Washington also have their metaphorical moats: the connections, attractions, size and diversity that smaller and/or poorer places cannot compete with. Unlike a company, a city is limited in the scope of its geographical expansion. A city cannot grow ever onwards across the world. What it can do, however, is bring the world to the city. Companies are nothing without people and are, therefore, drawn inexorably to the places that have the people it needs, which in turn attracts more people and, of course, their money.

So is that it, then? Are nations like America doomed to a circular process of growing geographical inequality? A favoured few mega-cities monopolising a favoured few mega-corporations?

A country can’t afford to give up on its smaller cities (or to ignore the interests of its smaller businesses). However, changing the dynamics of economic concentration will require concerted action on the part of central and local government. Here are five things they should be getting on with now:

A crackdown on corporate welfare. It should be against the law to offer inducements to one business that aren’t available to all businesses – especially when it comes to their treatment in the tax system.

A transparent city planning system. All information about governmental land-use and infrastructure investment decisions should be open source – with no privileged access for powerful interests. Maximising the involvement of local citizens in key planning decisions requires radical openness anyway.

Giving communities more control over their land. One of the reasons why Crystal City was so attractive to Amazon is that much of the relevant land was owned by one developer – greatly simplifying matters for a major investment. Instead of offering tax breaks and the like, local government would be much better engaged in entrepreneurially obtaining and preparing land for development.

Rethinking the way the state allocates capital spending – which should be counter-geographical as well as counter-cyclical. Investing to maximise returns on the basis of conventional assumptions means that the same places will get most of the public investment as well as the private investment. It would also help not to include rent in GDP calculations, which counts the inflation of land values in overheated property markets as ‘growth’.

Suggested reading

The cost of property may slowly kill Silicon Valley - but a Land Value Tax might give it new life

By Peter Franklin

Introducing a land value tax. The concentration of development in a few favoured locations sends rental values soaring. Not only should this bonanza for landlords not be counted as growth, it should also be properly taxed. In the long-term, this would help shift investment out of economically unproductive, socially useless speculation. In the shorter-term, it would raise revenues that could be invested locally in social housing and community land trusts – and nationally in boosting the potential of smaller cities.

Finally a word of warning: dominant cities don’t stay that way forever – and neither do dominant companies. The tendency towards economic concentration is driven by factors that shift over time. Taking active steps to spread the productive potential of a nation isn’t just a matter of maintaining social cohesion, still less is it an act of ‘charity’. Rather, it is the policy of keeping options open in a world where change is inevitable.

Or, to put it more succinctly, don’t put your eggs all in one basket – Amazon baskets included.

However, as always, economics is a slippery business. For a start, there’s the practical challenge of measuring production. For various reasons, the most reliable way of doing so is at the point of purchase. Using this expenditure method, GDP is equal to personal consumption plus business investment plus government expenditure plus net exports. That, however, leaves the question of what to include under each of these headings.

Further Reading

Don't fight dirty with statistics

By Tom Chivers

In an article for the Global Poverty and Inequality Dynamic Research Network, Jacob Assa and Ingrid Harold Kvangraven point out that the standard methodology has changed in recent decades – and that the effect of those changes has been to make the western economies look richer (in comparison to non-western economies) than they really are:

“…changes made to GDP measurement over the past two decades have a bias towards countries traditionally in ‘the West’. As this has had a substantial impact on the assessment of comparative growth among countries in those two groups, we deem it as a form of kicking away the statistical ladder “

What changes are we talking about?

“Examples include the reclassification of financial intermediation services, Research and Development  activities (R&D) and owner-occupied dwellings as productive activities. This means finance has been ‘made productive’ (as Brett Christophers puts it), R&D is no longer considered an intermediate input and home ownership is now included in GDP in the form of the imaginary rent that homeowners would have paid to a landlord had they owned their home…”

The authors propose a new measure of “core GDP” that would exclude the funny money and focus “only what can be directly measured”:

“Such directly measured industries include agriculture, utilities, manufacturing, retail trade, transportation, and communication.”

In a fascinating paper they compare the official GDP figures to their “core GDP” measure and find that the choice of method makes a big difference to the relative sizes of the western and non- western economies. For instance, according to the official figures the non-West only overtook the West in the middle of 2000, but according to the core GDP figures the cross-over took place much earlier – at some point before 1990 (when the comparison starts).

Further Reading

Lies, damned lies and energy statistics

By Peter Franklin

Choice of statistical method doesn’t change how rich or poor people actually are, but the authors observe that the bias to the West does impact on “our perception of growth in the world” and also on the weight of western influence in global institutions like the World Bank and the IMF.

As well as this apparent unfairness to the non-West, I’d argue that the official measures of GDP are doing damage in the western nations too.

A key issue here is that of ‘imputed rent’ – which takes a bit of explaining. Official GDP figures include the rents that tenants pay to their landlords. They also include an estimate of what owner occupiers would pay if they too rented their homes instead of owning them – these are the imputed rents. It is as if owner occupiers were paying rent to themselves. This might seem fanciful, but the justification is that though owner occupation doesn’t generate an actual transaction, it still has a measurable financial value.

Assa and Kvangraven argue that including imputed rents in the measurement of GDP has “the peculiar effect of making countries with housing bubbles appear to grow more rapidly”. Well, fair comment, but on that basis one shouldn’t include any kind of rent in the GDP figures – imputed or actual.

Further Reading

Home Truths – Part III: The nine drivers of a broken market

By Liam Halligan

In fact, taking rent out of GDP would remove some deeply perverse incentives for policy-makers. Ever wondered why government does such a bad job of solving the housing crisis? Well, if it did a better job, and rental values came down, GDP would take a corresponding hit.

In the longer term, I think the real productive economy would benefit hugely from lower, more stable rents and land values – but that’s not the sort of thing factored into the models of bean-counting finance ministries.

Clayton in east Manchester is a world apart from the villages and small towns of Bloodworth’s native Somerset. The area is well-connected to the city centre – and a stone’s throw from the Etihad Stadium, home of Manchester City Football Club. And yet there are whole streets in the suburb that are all but abandoned.

Further reading

Left behind – life beyond the London bubble

By James Bloodworth

Osuh and Robson begin their report with a visit to one of the few remaining residents of Heather Street:

“Pete’s home is one of only three or four others on the street that are occupied. The rest are boarded up in brutal fashion.

“Windows and doors are covered with imposing metal grates or wooden plyboard covered in graffiti, with the occasional heavy-duty padlock added for good measure.

“And it’s not just on Heather Street.

“Both the next one along – Ben Street – and behind – Midlothian Street – are the same.

“Blighted by dozens and dozens of vacant properties, this is a neighbourhood that was at death’s door.”

These streets are just three miles drive from the centre of England’s second city (sorry, Birmingham). Can you imagine this happening three miles from the centre of London?

The root cause of the area’s decline is the old story of de-industrialisation. However, Manchester has been on the up for at least twenty years now:

“Manchester’s population has grown – leaping 28 per cent between 2001 and 2011. House prices are up 32.5 per cent in the last five years, according to Land Registry data – and younger workers want to live close to town, and are increasingly priced out of the suburbs and the city centre.”

So why haven’t places like Heather Street been reclaimed?

The basic problem is that neighbourhood decline and regeneration is an asymmetric process. The decline happens bit-by-bit, residents and landlords walking away from worthless properties one-by-one. Regeneration, however, requires a collective effort.

While a private individual may be able to renovate an abandoned property in an otherwise thriving street, they’d be ill-advised to do so in a street full of other abandoned properties. In the latter case, regeneration is an all-or-nothing proposition requiring major investment – most likely, public investment.

For Heather Street and its neighbours, that investment is now underway, but why did it take decades for the various branches of the state to get their act together?

What struck me reading the authors’ account of what happened (or, rather, what didn’t happen) was the lack of urgency on the part of those who should have got things moving. Clearly, there’s something lacking in the policy framework to prod the powers-that-be into action.

A land value tax (LVT) is exactly what it purports to be – a tax on the market value of a piece of land, not on what’s built on it. If implemented it would make sitting on a site – whether out of speculative expectation or mere indolence – prohibitively expensive. This is presented as a major advantage of the system: an LVT forces private landlords to redevelop poorly used land or sell it on to someone who will.

Further reading

Test article

By Tom Copley

But what if dereliction is so widespread that individual landlords are powerless to make a difference? What if land values have fallen so far that not much LVT is payable anyway? How can LVT be made to drive regeneration in these circumstances?

In theory, the loss of LVT revenues would give the state an incentive to act to restore land values. In practice, however, bureaucratic inertia could win the day.

But what if land value taxes included a threshold land value below which they went negative – i.e. the state would have to pay the land owner? This would turn the opportunity cost of inaction into an actual cost – a much sharper incentive to get going on regeneration. There’d be an important condition attached to the negative LVT system, which is that the state would have the right to buy the property at its negatively taxable value – thus enabling it to assemble the land packages required to make a regeneration scheme work.

Finally, on the assumption that the system were administered by local government, I’d give each local authority the right to transfer its operation in a particular neighbourhood to central government – including the liability for negative LVT payments. This would give central government every reason to make sure that local government had the powers and capital required to regenerate left-behind communities – or to do the job itself.

Further reading

How to introduce a Land Value Tax tactfully

By Peter Franklin

There’s one big exception, however: the homes we live in. Most of those are hand-made. The building materials may be machine-made, but the piece-by-piece, one-off process of construction is labour-intensive, time-consuming and frequently unpredictable.

There’s got to be a better way. Prefabrication is one approach, but that involves a trade-off between the size of the prefabricated components and their transportability. It also tends to constrain the materials that can be used and the variety of forms the building can take.

In the early 20th century, Thomas Edison wasted a lot of time and money on the development of the single-pour concrete house. Employing a set of re-usable moulds, he believed he could mass produce affordable housing for all. Unfortunately, the moulds were so complicated and expensive that it was easier and cheaper to build the traditional way. A sideline in concrete furniture also came to a predictably sticky end.

Further reading

We must stop tolerating terrible architecture

By Peter Franklin

Edison’s single pour method didn’t just fail because of the practicalities; the principle was flawed too. A solid mass of concrete creates a structure that is virtually indestructible, but also unmodifiable – great for a bomb shelter, but not a home.

In an article for The Conversation, Seyed Ghaffar says that to successfully revolutionise house building we need to “automate and improve processes that have already been proven manually.”

A century on from Edison’s doomed attempt we might just be on the brink of getting it right:

“It’s often claimed that 3D printing – known in the trade as ‘additive manufacturing’ – will change the way we live. Most recently, a team from Eindhoven University of Technology announced plans to build the ‘world’s first’ habitable 3D printed houses…

“Additive manufacturing uses a combination of materials science, architecture and design, computation and robotics. Yet in some ways, it’s not as futuristic as it sounds. The simple approach of layer-wise construction… has already been practised for a long time in the construction sector, for example in conventional brick layering techniques.”

In fact, with 3D printing we might be able to go well beyond what even the most skilled human builders are capable of:

“When the printer and the feedstock have been properly set up, they will be able to produce full-size building blocks with a smart geometry which can take load without reinforcements. The shape stability of the truss-like filaments in these blocks is an essential part of printing, which provides strength and stiffness to the printed objects.”

Nature has all sort of cunning ways of creating light but strong structures – from the spider’s web to the bones of flying birds. The rapid, but precise, movements of 3D printers could allow us to draw inspiration from evolution, and extrude building materials to achieve great intricacy and efficiency.

Ghaffar believes that smart and automated construction methods could “revolutionise the industry within the next ten to 15 years”.

Will this make houses more affordable? It may well bring construction costs tumbling down – but, remember, not even a robot can make new land. Therefore, we’ll need policies to stop land monopolists from sucking up the value created by new technology.

Further reading

The cost of property may slowly kill Silicon Valley - but a Land Value Tax might give it new life

By Peter Franklin

That said, the automation of house building may make it harder for developers to manipulate land prices by manipulating the rate at which land with planning permission is built out. With robots greatly speeding up the pace of construction, there’ll be no excuse not to build new homes as fast as demand requires and planning policies allow.

One last thought: Though Edison’s poured concrete technology was misconceived, the prototype houses he built with it could be surprisingly beautiful. The developers of today’s new construction methods would be well advised to pay equally close attention to the aesthetics.

If you want the public to accept new development, then the golden rule is that it should make places better not worse.

The basic argument is that when land prices – and, therefore rental values – soar (largely as a result of other people’s efforts), the returns to the landowner shouldn’t just be taxed, but taxed in preference to most other forms of income or wealth generation.

Suggested reading

The cost of property may slowly kill Silicon Valley - but a Land Value Tax might give it new life

By Peter Franklin

Of course, you can’t tax the value of a piece of land if you don’t know what it is. In their new book Radical Markets: Uprooting Capitalism and Democracy, Glen Weyl and Eric Posner propose an ingenious means of valuing not just land, but all other taxable assets. In a critique of the book for CapX, Sam Bowman summarises its big idea:

“Weyl and Posner suggest a system of taxation where, in principle, everything is available to buy, all the time. A homeowner or patent holder, for example, must declare the price they would sell their house or patent for – and if someone comes along and offers them that, they will have to sell. Assets are taxed annually on that valuation – they suggest a rate of 7 per cent – with the proceeds distributed evenly among a country’s citizens via a cash ‘dividend’.”

Bowman points out that the impact of such a measure would be ‘dramatic’:

“Asset prices would fall by between a third and two-thirds of their current level, since the taxes that will be owed in the future would be priced in today. The large 7 per cent tax proposed by Weyl and Posner would raise roughly 20 per cent of national income – enough to eliminate other taxes on wealth and capital, and in the US pay for a $5,300 per person ‘dividend’ as well.”

In reality, no responsible government would engineer such a precipitous drop in asset prices – which would bring the banking system crashing down too. Any shift in taxation to land and other asset values would need to be introduced gradually — with the aim of calming not breaking the property market.

Taking that as read – and focusing solely on its application to land – are there any other objections to the Weyl-Posner proposal?

Bowman argues that you don’t need a Land Value Tax to deal with land owners who use their holdings to obstruct or ‘ransom’ much needed development – compulsory purchase powers could do the job instead. A less restrictive planning system would also help, he adds.

Suggested reading

Singapore shows there’s more than one way of doing capitalism

By Peter Franklin

However, as he says himself, “we have to tax something”. That being the case, taxing land is just about the least bad option. Putting up taxes on production means less production; putting up taxes on consumption means less consumption; but putting up taxes on land makes no difference to the amount of land, which, for obvious reasons, remains constant. The only thing a land tax disincentivises is property speculation – which is economically unproductive and socially useless.

The real problem with the Weyl-Posner proposal is the same thing that makes it brilliant – i.e. getting land owners to value their own land. The brilliant bit is giving the state the right to buy the land at the self-assessed value, which incentivises land owners not to under-value it. The problem is that this is manifestly unfair. Householders and small businesses are unlikely to have the expertise required to value their land accurately. Erring on the side of caution, they’d most likely over-value – and thus end up paying more in tax than professional speculators and major landowners. Alternatively, a few might naively under-value their land and thus face the compulsory purchase of a home or a workplace at a knockdown price.

However, there is an obvious solution, which is to turn the proposal on its head. Instead of owners valuing each piece of land, the state would do it; and instead of the state having a right to buy it at that price, the owner would have a right to sell – thus incentivising the state not to over-value (and thus over-tax) the land. This would be less oppressive, putting the onus of accurate valuation on the state and without placing ordinary property owners under a general threat of compulsory purchase. 

I’ve come to believe that some form of Land Value Tax is not only feasible, but necessary. However, new taxes are always controversial. To introduce them requires not just cleverness and courage, but also wisdom and tact. 

For instance, here he is in conversation at an event hosted by the Economic Club of New York. The interview lasts about 50 minutes and is fascinating throughout.

Reporting on the event for Yahoo Finance, Julia La Roche leads with his most striking comment:

“One thing I’ve been thinking about as a venture capitalist in Silicon Valley is the vast majority of the capital I give to the companies is just going to landlords. It’s going to commercial real estate and even more to urban slumlords of one sort or another. And that’s an odd thing to be doing as a venture capitalist. That’s so disproportionate…”

Thiel is a free market libertarian – he’s got no problem with people getting rich through their own efforts. Indeed, he’s not exactly poor himself.

However, the landlords of Silicon Valley and its environs aren’t primarily benefiting from their own efforts. Land values in and around San Francisco haven’t reached ridiculous levels because of what landowners have done, but because of what others have done – above all the innovators and entrepreneurs of the tech industry.

It is the geographical concentration of talent, knowledge, investors and supporting infrastructure that makes particular locations so attractive to incomers – the San Francisco area being a classic example:

“Back in 2005, Thiel was asked during a panel discussion at Stanford University where the next Google (GOOGL) might emerge.

“At the time, Thiel answered that he thought there was a 50% chance that the next Google would be within a 5-mile radius of that room. Unbeknownst to him, that company was Facebook (FB), which was just 1.8 miles away and a company he had invested in early.”

Now, Thiel thinks that the high cost of living is helping to drive innovators and entrepreneurs out of the area – therefore making it less likely that the next big thing will happen locally. Rent extraction doesn’t just suck value out of what local economies have already achieved, it also inhibits the ability of those economies to reinvent themselves – i.e. it is a force for stagnation.

But is there anything to be done about it? Like any limited resource, space in a sought-after location needs to be allocated somehow. Assuming we don’t want a centrally-planned state system in which the state gets to decide who works where, there seems little alternative to the property price mechanism.

What can be done however, is to levy a windfall tax on surging rental values. Properly structured, a Land Value Tax would automatically fulfil this function.

Recommended reading

Could a Land Value Tax tame unscrupulous landowners?

By Liam Halligan

Such a tax would be paid by the landlord not the tenant. It couldn’t be ‘passed on’ to the tenant in the form of higher rent, because rent levels would already be at whatever the market can bear. The tax would therefore he paid out of the landlord’s income and by making land ownership less profitable should have a calming effect on property prices – and ultimately rent levels.

Furthermore, the revenue from the tax could be used to fund the regeneration of other parts of the country (or even the same city) – thus increasing the supply of suitable space for business.

Alternatively, the revenue could simply be used to cut other business taxes, in particular employment taxes – thereby shifting the burden of taxation from job creators and on to rentiers.

Recommended listening

Test article

By Charlie Pickles and Tom Copley

The idea is that, free of EU legislative constraints, a right-wing Conservative government would slash spending, cut taxes and rip-up regulation.

Though they’re not in a majority, the Conservative Party does have its free market fundamentalists who’d love to do all of those things – but why is Singapore held up as the model?

It’s a question that Matt Bruenig asks in a piece for the People’s Policy Project. He begins with the conventional answer:

“In the Heritage Foundation’s Index of Economic Freedom, Singapore ranks as the second most ‘economically free’ country in the world just behind Hong Kong.”

A small island nation of about 5 million people and very few natural resources, Singapore is now one of the richest countries in the world and a centre of global free trade. But is it really “one of the closest countries to the capitalist ideal”? Not if you equate capitalism with the private ownership of capital:

“The Singaporean state owns 90 percent of the country’s land. Remarkably, this level of ownership was not present from the beginning. In 1949, the state owned just 31 percent of the country’s land. It got up to 90 percent land ownership through decades of forced sales, or what people in the US call eminent domain.

“The Singaporean state does not merely own the land. They directly develop it, especially for residential purposes. Over 80 percent of Singapore’s population lives in housing constructed by the country’s public housing agency HDB. “

And there’s more than property in the state’s investment portfolio:

“…there are the state-owned enterprises, which they euphemistically call Government-linked Companies (GLCs). Through its sovereign wealth fund Temasek, the Singaporean government owns a large share (20% or more) of 20 companies (2012 figure). Together these companies make up 37% of the market capitalization of the Singaporean stock market.”

Bruenig calculates that if, relative to GDP, the US government had matched Singapore in building up a sovereign fund, then it would be worth $12.4 trillion. That’s not quite as big as the US national debt, but it’s in the same ballpark.

For these and other reasons, Bruenig believes that Singapore has been misrepresented:

“Call me old-fashioned, but I don’t generally associate state ownership of the means of production with capitalism.”

On the other hand, the Singaporean state spends a remarkably small proportion of the country’s GDP – less than 20% in 2017. That’s roughly half US or UK state expenditure levels.

As for Singapore’s sovereign wealth, is a government that builds-up assets less capitalist than one that runs-up debts?

I would say not – especially when those assets are accumulated in the process of making strategic investments in the country’s economy – something that Adam  Smith, the father of free market economics, was entirely cool with.

And where land is in short supply, public ownership may be the best of way of stopping rentiers using monopoly control of that supply to suck value out of the productive part of the economy. After all, it’s not as if private ownership of land helps to make any more of it.

When the state acts to make markets work better, we shouldn’t regard that as anti-capitalist. An enterprise economy should be one in which everyone is enterprising – including the government.