Catherine Dunlop
A book called ‘The Asset Society’ claims that what defines class now is not the relationship between employer and employee (labour), but the relationship of the person to assets. The claim is that although there are vast differences in the quantity of assets held (one house or thousands of acres), any asset owner is involved in speculation (the increase in house prices) and therefore has an interest in keeping the status quo. Hence the political situation, which is stuck with the two parties, Labour and Conservative, following the same programme.
Until Western governments cut off the supply of Russian gas due to the Ukraine war, the UK had low inflation, that is for consumer prices, the Consumer Price Index. It was called a ‘period of low inflation’. What wasn’t mentioned was housing inflation, which was astronomical. The official figures for inflation make a strict distinction between consumption and investment, and housing is considered as investment.
For statistical purposes house owners are considered as investors. And in effect, people, unless they live in poor parts of the country, can expect the value of their house to rise (with the corresponding fear that it might not). Working class people could and did become asset millionaires.
How this happened.
In the 1970s the unions were strong and able to win regular wage increases for their members; employers then put up the price of goods produced to maintain their level of profit, causing a spiral of inflation. This inflation ate into the value of assets. If £1 bought £1 worth of goods in 1973 and 90p worth of goods in 1974, then savings/assets worth £1000 in 1973 were worth £900 in 1974.
There was a tug of war between unionised wage earners and the employers/big asset owners. As Labour Affairs readers know, the former were offered a share of industrial power and rejected it (the Bullock Report). The asset owners turned opinion against the unionised wage earners and crushed them comprehensively, to the extent of making industrial workers almost a thing of the past by off-shoring their businesses. The destruction of industry caused the disappearance of hundreds of thousands of jobs, manual workers, technicians, engineers, and scientists and managers. Relevant university departments closed down.
Large asset owners then proceeded to change the tax system in order to keep more of their wealth. Now labour is taxed more than wealth, enabling wealth to increase at a huge rate while wages stagnate, causing inequality to become starker than it was before.
The big asset owners offered the population a large bribe to stay onside: you too will become asset owners: council tenants, you will have the Right to Buy (with subsidies), everyone will be able to buy shares in the newly privatised companies. Then students were invited to ‘invest in their own futures’ by taking on student debt; pensions became investments. The ideal of personal wealth (Thatcher) and Blair’s idea of the knowledge economy where everyone had a personal education capital that would bear fruit accompanied this trend. This entrepreneurial attitude has degenerated now into the situation where a large number of people are ‘self-employed,’ meaning that they depend on an online employer who does not give them employee rights.
Uncertainty and speculation have become constitutive aspects of life, not just economic life. We gamble on the price of our house, on whether our student loan will pay off, whether our ‘pension pot’ will provide a sufficient amount to live on. Zero hour contracts and the gig economy are synonymous with precarity.
The mantra that as many things as possible should be considered as a business, as an investment opportunity, has led to a cut-throat atmosphere and bullying habits to prevail in many places of work. Take the universities. With students now ‘investors in their own future’, lecturers are now instruments in that quest for profitable outcomes. Administrators deploy these instruments with productivity and efficiency in mind: time-tabling no longer allows for people taking their breaks together for example, no more common rooms, redundancies implemented as necessary. Universities put lecturers on short term contracts and shed as much staff as possible, outsourcing cleaning, catering, security, resulting in a worse service and quality of life.
Recent government interventions have made things worse. QE after the 2007/8 financial crisis increased the value of assets, making the acquisition of assets even more difficult for ordinary people, and the rich even richer. Because QE was presented to the public as an increase in public debt, the ideology of ‘a nation of inheritors’ (Nigel Lawson, 1988) gave way to the ideology of austerity: there is no money for public spending. This was always the other side of the coin.
We now have a country very divided geographically between wealthy areas (where house prices and rents are high) and poor areas, where even if people own their house, it is priced low and couldn’t be sold to move to a more expensive part. Children of the relatively well off, even if they have a good job, can’t afford a house in the areas where the good jobs are.
Wages are stagnant, which means that, given house price inflation, they have decreased. Consumer prices are going up. Public services are deteriorating.
The limitations of the ‘home-owning democracy’ have become very apparent: the children of the asset owners, (that is, asset owners who get their income from work, not the really wealthy), cannot become asset owners themselves unless their parents or grand-parents help them financially. Until recently, a good wage allowed you to put a deposit on a house and pay a mortgage. This is no longer the case. Hence the argument that it’s not wages that define class, but house ownership.
How can this situation be allowed to go on? The authors of the book ‘The Asset Economy’ would contend that too many people in the population are caught in the speculative frame of mind and have, albeit in a small way, become investors and speculators and therefore have an interest in the status quo. These mini-investors cannot feel solidarity with the class of the really disadvantaged, those who don’t own a house or any assets, who haven’t ‘invested’ in their education or in their pensions. The speculative mentality, the expectation of profit, sets the mini-investors apart, leading them to believe, like Alan Greenspan (1997), that it is one thing or the other: high asset prices or public sector abundance. They choose high asset prices, and therefore believe that austerity is necessary. They may see that austerity is a politically motivated choice, because it preserves the value of assets at the expense of ordinary people, but this is a motivation they agree with.
The argument has value but I think that people can be persuaded that the price of housing needs to stop increasing: even the quite well-off can see that it hurts the young, i.e., their children. Taxing wealth is the way to stop house price inflation: if the rich have less money, they won’t be able to buy or invest in real estate so much and the price will stop rising. This won’t hurt the ordinary house owner: the tax on profit on the main residence can remain at zero.
One result of the astronomical price of housing is that people have little money to spend after housing costs (mortgages or rents) are paid. They therefore couldn’t afford any goods made in England if there were any, and instead can only buy cheap imports. This is one obstacle to the reindustrialisation of Britain, and one more reason to stop housing price inflation. You need to tax the super-rich in order to keep a steel industry in Britain, for example.
I can see the unpopularity of the slogan ‘Bring house prices down!’ or even ‘Stop house price inflation!’ but it seems to me that small asset owners could see the sense in at least the last mentioned. Large majorities of the population also agree that many services and utilities need to be brought back under state control. So I don’t think that the home owning democracy is completely stuck politically. Even though the working class now is not what it was in the 1970s, being much more diverse and involved in different types of work, there still is a working class, a middle class that has lost some of its privileges, and a wealthy class whose wealth has reached stratospheric proportions, thanks in part to the enormous fiscal advantages given to asset ownership and to recent bouts of QE. The slogan ‘Tax the rich’ has never been more timely. The merit of the book, The Asset Economy, lies in drawing attention to the enormous role played by property owning in social inequality and a degraded standard of living, where left-wingers have tended to ignore this and concentrate on wage stagnation.
Note
- Figures for housing inflation:
1997- 2020 average property price in England went up 173% (after adjusting for consumer price inflation) and 253% in London. Real incomes of young people went up 19% in the same period.
Institute for fiscal studies
- Figures for home ownership
ONS: In 2021, 62.5%, (15.5 million ) of households owned the accommodation they lived in.
In 2023, according to an association of estate agents, this has reduced to 50%.
The falls in homeownership have been sharpest for young adults with middle incomes. In 1995–96, 65% of those aged 25–34 with incomes in the middle 20% for their age owned their own home. Twenty years later, that figure was just 27%. The key reason for the decline is the sharp rise in house prices relative to incomes.
- As of July 2023, 50% of UK adults own their own home. That’s the equivalent of 26.4 million people across the country*.
- Comparing this with previous housing market data, we can see that homeownership rates have decreased considerably over the last few years. In fact, in the two years from 2016 to 2018, 63% owned their own homes.
- The case for taxing the rich to stop them hoarding property is well made by Gary Stevenson
https://www.youtube.com/watch?v=mv2hx7wjdiA (how inequality affects the economy)
- The Asset Economy, by Lisa Adkins, Melinda Cooper and Martijn Konings, polity press 2020, reprinted 2021, 2022.
Labour Affairs 