Monday, September 08, 2008

Interventionism of a different kind.

After the big market melt-down on Friday, oweing to massive job losses in the US, the American government has just formally nationalised the two biggest mortgage firms in the US. Yes, Freddie and Fannie are owned by nanny. In light of this kind of drastic intervention, Gordon Brown's miniature bribe to would-be home-buyers is pretty pathetic. But, of course, that reflects the different magnitudes of the problem as perceived by policymakers. Apart from American homeowners, who were drawn into unprecedented debt by a Federal Reserve policy of driving down interest rates and allowing house prices to soar (thus decreasing the cost of debt and increasing the collateral available to homeowners), much of the world's financial system depends on these two companies staying afloat. Almost half of America's deficit is contained in those two firms. Much of its banking system is heavily exposed to the housing market. In other words, the stability of the empire is at risk. It has nothing to do with protecting vulnerable homeowners, since the government is quite ready to see them expropriated both legally and - as in New Orleans - illegally. But it just goes to illustrate one of the profound paradoxes of American politics, namely the coexistence ultra-free-market ideologies among the political and economic elites with a constant orientation toward heavy state intervention to protect corporate interests.

Britain's housing market slump doesn't have anything like the same significance. While it is clearly a problem for mainly City-based firms, the government prefers to manage bail-outs in a protracted, piecemeal fashion that satisfies no one, so as not to produce a ruling class panic about the crypto-socialism of the administration. The UK housing market is a peculiarity, in that the stimulation of mass home ownership was intended by its authors in the Thatcher administration in part to create a big declassed layer among workers, and hopefully retain their loyalty at elections. It was to create a "homeowners' democracy", much as the liberalisation of the stock exchange was to create a "shareholders' democracy". In fact, what it did was to create a perpetual housing crisis, as high prices and the lack of affordable council houses meant that the mere business of having somewhere to live consumed more and more of people's income. It also contributed to the creation of a chronic homelessness problem, with approximately 79,000 households officially acknowledged to be homeless and about 400,000 people estimated to be 'hidden homeless'. In addition, the shortfall has been exacerbated because high prices encourage property speculators to buy up homes in the hope of making a huge fuck-off fortune. And, as we learned at the beginning of the year, a big part of the housing boom of late has been sustained by rank fraudulence. Now that house prices are plummeting, would-be homeowners don't stand to benefit, because it comes with contracting credit and falling incomes, and is itself the result of a slump in effective demand. The only realistic policy, if the concern is to ensure that people can have affordable housing, is to reverse the marketisation of housing, stop the 'right-to-buy' schemes which are contributing to the shortage, and introduce a big campaign of home-building. Some of this happens to be official government policy north of the border. However, New Labour is committed to making a market-driven housing system work while avoiding scaring business with big public expenditure commitments, which is why we're being offered peanuts. And business opinion would seem to approve. The Economist, just before the latest bad news struck, expressed some relief about the fact that Brown's measures were so piddling, and assured readers that this whole 'crisis' business was being massively inflated, and that America was already bouncing back.

Amid all this economic grimness, the only possible good news is when working people organise to stop the government and business from making them pay for the crisis. In light of which, this is excellent news. Mark Serwotka of the PCS is pledging a far more sustained and intensive battery of strikes than the one-day actions that we've seen to date. It should be pointed out that the CWU has already voted unanimously for further strike action at its conference, although I'm pretty sure the bulk of the union leadership doesn't want to confront Gordon Brown at this point. After all, it's an item of faith among the TUC's best and brightest that the argument is close to being won, the Labour Party is going to be reclaimed, that Brown is basically sympathetic, that if we can only somehow shore up the government enough to keep the Tories out, all will be well...