Sorry I've been away for a while. I've been editing a memoir - very exciting stuff. But I'm back with some new thoughts and a counter-point to my only but very lovely critic. Here goes:
Mattan, you make some interesting claims. But suggesting rent control should last forever is not like suggesting the minimum wage should last forever. You seem to be echoing and oft-repeated worry on the evils of stasis. First, it’s kinda like a pet peeve and all, but no one on the left is in favor of a minimum wage. We’re in favor of a livable wage. That goes up with inflation. Furthermore, rent control does not mean one-fixed price for all. It means, a government subsidized price that meaningfully relates to a family or individual’s income.
To allow rent to be determined by the market is unreasonable to all but the super wealthy, as the market works with bloated realities. In other words, the market fails to acknowledge that a group of people should not be displaced from an area they helped build because market rents have gone up several thousands of dollars. Their apartments might be worth thousands a month, but if that price is based of a “neutral” economic model, shouldn’t it be high time we consider another model instead?
Also, you say that it’s unfair not to allow the rich or young to live in areas just ‘cause other people are living there first. Who said anything about barring the entranceway? Of course there is room for the rich and young. However, gentrification has usually resulted in the near-total removal of previous inhabitants. And it's not a reciprocal relationship. The poor and old never have the opportunity to move into an area dominated by the wealthy and young.
Also, your claim sounds a little bit like this: 'so you have a home and all, but like, I have a ton more money than you and I want to live where you’ve been living all these years, and so uh, let’s get packing buddy.' You have to respect the people who live in a place where you want to move. It’s called being nice to your neighbors. You, the private real estate market, and Israel all have a hard time with this seemingly basic concept.
LIBERTARIANS AND THE POOR
This is a tangent, but Mattan, I just have to reflect on your, "a large number of libertarians are poor" comment. Yes, many libertarians are poor. They tend to live along Appalachia (although few actually use the complicated term 'libertarian' as they suffer from abysmal education). Good point. But I would argue that these people, like most lower-income conservatives, act against their own self-interest. At the risk of sounding 'east-coast elitist,' I argue that these 'libertarians' act against their own self-interest because they have not been taught how to critically think. That is why I make and stick by my claim that libertarians (alright, alright, I'll say most libertarians) tend to be the people who benefit from unregulated capitalism.
You also said "laissez-faire capitalism is not about keeping the rich richer," but that this pattern "is a symptom of an uneducated populace." This sentence is wrong on so many levels, but let's start with the most basic: the rich do not get richer because some people in America are uneducated. I'm not sure how you constructed that one, but I think you're confused about a basic tenet of capitalism. In capitalism, the rich get richer because they control the most capital (among many other reasons). It's true that education and wealth are linear - usually, the wealthier class has the best education just as the best educated tend to constitute the wealthier class, but to suggest that the rich continue to get rich while the poor get poorer precisely because the poor suffer from a lack of education, is perverse. Their lack of education is the symptom, not the cause.
There is a constantly morphing but ever present populace of poor people in America because capitalism operates in stratospheres. There are only a few spots on top and many spots on the bottom. That’s why, in a laissez-faire market, there will always be people who are struggling to pay the rent. Rich people are rich because there are poor people. You need to know this if you’re ever going to talk economics. That's where many people have invested in alternative economic models. Max was one. You may argue that in America, the poor people don’t have it bad because, hey, they’re not as bad as the poor in India. But that is a terrible argument for many reasons:
1. There is hardly such a thing as leisure for the American poor. They may have light and hot water and even air conditioners, but they do not have quality of life or downtime to enjoy it. If they did, they would probably end up homeless.
2. These people have no clout. They are voiceless in a free market.
3. They can never be entrepreneurial or ever chase an ambition. They can’t afford to, and as government subsidies like welfare are practically nil, they have no public support to do so. Remember, the self-made men and women come from secure homes with lots of connections. Oprah is about the only one who jumped the gap.
4. Arguing that the American poor have it good compared to the Indian poor, for example, is a moot point. This is America, not India, we should not pat ourselves on the back because we are not like a nation impoverished who has suffered from hundreds of years of colonial subjugation and a rigid social caste. I hate these kinds of meaningless comparisons.
THE PRIVATE SECTOR
As we’ve witnessed, market-driven rents and home prices can drop, leaving some working families homeless, and middle-income families struggling. But let's be clear: the crash in private real estate had nothing to do with rent control. Rent control fights against the real estate bubble, it does not contribute to it. You can argue, and I know you like to argue, that it was government involvement in the real estate market to begin with that caused this crash. But that’s misleading.
Just look at Fannie Mae and Freddie Mac, two government-created mortgages companies. Both firms were a result of the Great Depression, a tell-all sign of the instability of the capitalist market, which had hitherto been unregulated, and which resulted in a crumbled private housing sector (actually, more attention should be paid to American capitalism pre the 1929 crash. It is a real life example of the failure of the laissez-faire market, unlike, for example, the ludicrous claim that Bolshevism in Russia demonstrates the failure of Marxism-in-practice).
The creation of the two giant mortgage companies single handedly rebuilt the private housing sector (a sector which screams about the tyranny of government). But let's be clear: it was only when LBJ privatized both companies in 1968 that they grew to such heights as to monopolize the business, thus rendering it susceptible to the follies of other private investing firms eager to capitalize on high mortgage interest rates. Also, I hate the argument that says, all the other private investment firms started investing in toxic loans only because Fannie Mae and Freddie Mac did it first. If the private investment field is manned by people who can't think for themselves, isn't that a sign these companies have no right to be in the market in the first place?
I would hate to see another government created Fannie Mae but that’s because I don’t want the government to work on behalf of the private sector. Instead, I would like to see government take over the whole housing market because, like health care, it should be publically owned.
If it were publically owned, I argue there would be more incentive to preserve and maintain than there would be in the private sector. Why? Just look at publically owned national parks. It is in our tax-paying interests to develop structures that will not only last but also be efficient. Private markets are profit driven; they do not heed the call of the environmentally or socially conscious.
To wrap, let’s not get carried away by our fears on stasis. Yes, some buildings need to come down and others need to go up. No one is arguing otherwise. It’s how they go up and down, who is making the decisions, and who is profiting and loosing by this change that is important to study. The poor are ever-present. Shuffling them from slum to slum just because neighborhoods need to grow and change for the young and the rich eager to move in is an instable and faulty plan. The solution is rent control.