Video: Real Media: Property Rights, Deregulation and Think Tanks (2/2)

4 October 2017 — TRNN

Open Democracy’s Laurie Macfarlane talks about the UK government’s deregulation strategy and its effects on housing, as well as the influence of think tanks on national debate and an explanation of the ‘positive feedback loop’

Part 1

transcript

Real Media: Property Rights, Deregulation and Think Tanks (2/2)L. MACFARLANE: I think Grenfell was a really good example of this. Tragic, obviously, though it was, but the response when some people suggested that some empty properties in the Kensington area, one of the wealthiest places not just in London but actually the world, could be requisitioned to house the victims of the Grenfell tragedy.

What we saw play out here was the classic response that you get here in the UK from people who say, “This is outrageous. Property rights are sacrosanct,” and any intervention in property rights would be Soviet style communism and we just need to stop this at any cost.

What this overlooks on the first instance is that when it comes to property and property rights there’s always and everywhere state intervention. Property rights, by their nature are legal constructs. They are the rights for some people to exclude people from that space. That will then be defended through the state, through the courts.

If I walk into somebody’s house in Kensington they can phone the police and they’ll remove me. That’s state intervention. That’s the state intervening to protect private property rights. Then regardless of whether you’re doing compulsory purchase or whether you’re protecting the existing scenario, there’s always state intervention.

Then some people say, “Well, actually, this is contravening human rights because if you look at the UN Declaration of Human Rights there’s a right to property ownership. It does say that but what the UN declaration of human rights also says is that everyone has a right of access to housing.

What we’re talking about here is whose interests should the government intervene to protect? Is it the rights of the absentee landowners to exclude others from their property and for their human rights to property? Or are you protecting the rights of Grenfell victims who have a human right to housing? Are you going to do that through requisitioning perhaps on a temporary basis?

The question that the government has faced is whose interests am I going to intervene on behalf and this is really about class. In this scenario that we had after Grenfell it was clear whose side the government was on and that was of the absentee landowners over the victims of Grenfell.

I think this really just illustrates this attitude towards property that prevails in this country, which is it’s this absolute right that is sacrosanct. It’s never been the case. Property rights have always been a layer of rights, of different layers of access. They’ve never been absolute. Compulsory purchase has been an essential part of development in this country and in many others. Without which, we wouldn’t have things like the railways because landowners didn’t want to sell land. We wouldn’t have had things like plenty of towns over the country, which were built on this basis.

Compulsory purchase was introduced because it was a recognition that there is absolutely a public interest case for intervening in property rights where the public interest is strong, whether that’s because we wanted railway that benefits everyone, whether that’s because we’ve had a tragedy at Grenfell. There’s absolutely a public interest case to be had there. Yet, the idea in Britain is that property rights cannot be touched and are just invaluable and it’s just not true.

Deregulation as part of a wider ideology that started to come to the fore again in 1970s, 1980s, which is really about markets know best, which is that any meddling or government intervening in the market is necessarily a bad thing. We had deregulation, as I mentioned, already in the financial sector, which was actually, “We’ll just let the banks do whatever they want because they’ll be able to decide.” That would somehow produce the most optimal outcome.

We’ve also had, particularly more recently, significant deregulation across a whole range of things. We’ve had a mad system, which not many people are aware of that our government introduced, which is one in three out, which is if you want to bring in a new regulation you have to do away with three others. Regardless of the consequences, whether that’s social, environmental, or whatever.

The result of this in general is putting the interests of the market first, which as we know, drives away through society and often just emphasizes inequalities. I think Grenfell for me really crystallized so many of the issues that are wrong in our society and in our economy. You have this place, which is in the wealthiest part of the world with people living in conditions, which are not habitable, not safe, as a result of huge deregulation and that which they’ve suffered from.

Meanwhile the people just across the road who are the ones who have benefited from this system, who are living in multi-million pound properties who are often making more from owning them, often not living in them, and not doing anything with them.

I think this really crystallized the issue clearly. I think it’s really had a catalyzing effect in people’s minds that something is really wrong here and we really need to change.

The positive feedback loop is the relationship between the banking sector in the UK and the supply of housing and land. When you’re looking at the price of any good, you look at the supply of it and how that links with demand for it. In the UK, when it comes to housing the supply of land is inherently fixed. We can’t make any more of it. On top of that, the supply of housing has been pretty static as well for a whole host of reasons over the past four decades. We’ve just not built enough houses.

When you look at demand sites the amount of money that people have to buy property is two things. It’s one, the amount of income that they have, the amount of savings that they have, but it’s also the amount that they can borrow from banks in order to purchase property.

About four decades ago the amount that people could borrow was limited quite strictly by regulations and it was mainly building societies that did the lending. It was conservative lending from building societies. Beginning about the 1970s, though, there was quite significant deregulation in the financial sector. Banks were incentivized to come in to the mortgage lending market.

What you had there was an unleashing the flood of new credit into the housing market, into the financing of new property. What that did when you have a flood of new money interacting with something with the supplies relatively fixed [inaudible 00:06:37] have inflation house price inflation.

What that does is create a feedback loop between increasing house prices. That means that people then need to take out higher mortgages to buy more property in the first place. That obviously benefits the banks because they make their money from interest. That means that people have more household debt and that means that house prices go up further and then you have this continuous feedback cycle between ever increasing house prices, ever increasing levels of mortgage lending, and ever increasing levels of household debt.

You’re in a position today where we now have average house prices being about nine times that of average incomes across the UK and up to 20 times higher here in London. You have a situation where household debt is extremely high and a banking sector that’s extremely profitable. That’s really where the unholy alliance that’s emerged between, on the one hand, banks and the other hand, existing property in landowners who have an interest in keeping this show on the road because it benefits them.

Think tanks have played a huge, huge role and not only today but for the past four to five decades. Much of the changes, much of the problems that we have today in many ways stem from changes that have happened three, four decades ago under the Thatcher era. That whole process was really driven heavily by think tanks, by the neoliberal think tanks. The Adam Smith Institute, the Institute of Economic Affairs. Incidentally, they’re also the ones who continue to refuse to say where their funding comes from.

Today, you have whenever an issue comes up and particularly in housing but also other issues, whether that’s corporation tax or whether that’s regulation. Very quickly there will be on TV to defend a position, which says anything that threatens businesses is bad. They’re very good at what they do. They’re very strategic and they’re very good at getting in the media. Of course, you’ve got a video landscape, a newspaper landscape, and a video landscape who are very keen to get these kind of voices on TV and in the papers to put these views across.

Ultimately, from my point of view, these kind of think tanks are more or less corporate lobbyists. They don’t say where their money comes from. It comes predominantly from big business. If they’re refusing to say where it comes from then I think they should be regarded as corporate lobbyists.

Now that’s not to say that there’s not think tanks that are doing good work. There’s lots of think tanks out there who are doing good honest work and indeed glad to see they’re on the housing issue as something where there has been good work done over the years. It comes down the influence and it comes down to which voices are being listened to by the powers that matter, whether that’s the media or whether that’s the politicians.

Unfortunately, today and in times gone by, it’s been the think tanks, supposed think tanks, who don’t say where their money comes from, who are putting across views often without much evidence, as to protect the status quo, who are the ones who are getting in the media, who are the ones who are getting listened to by government. I think that really needs to change. I think a simple way to do that would just be to say everyone needs to be transparent about where their funding comes from if you want to be called a think tank. Otherwise you get called a corporate lobbyist.