While I’ve long been passionate about economics, reading Michael Hudson’s Killing the Host was such an eye opener that it fundamentally changed the way I view our political economy. Specifically, it made me ponder why certain rentier elites – especially landlords – reap large rewards for essentially doing nothing; or, even worse, actively harming society.
As a Bay Area resident, I’ve seen the harmful effects of landlordism firsthand. Unfortunately, when discussing the housing crisis, many people tend to reduce it to a simple supply and demand problem. However, I’ve recently started to question just why landlords can raise rents so high in the first place. After conducting some research, I stumbled upon an old 1909 speech by none other than Winston Churchill. In his address, Churchill denounces land monopolies, arguing that they are uniquely harmful.
Per Hudson, we already know that unduly paying landlords weakens economies by reducing demand for goods and services. We also know that landlords do not legitimately earn their income, and that rising land values owe more to public investments and general prosperity than a landlord’s own efforts (as demonstrated by increased rents in New York). However, what makes Churchill’s speech worth reading is how he reveals that, beyond public infrastructure spending, any economic improvements will be used a pretext to hike rents. Churchill says:
If there is a rise in wages, rents are able to move forward, because the workers can afford to pay a little more…Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and return- 5 6 ing from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public conscience, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted!
As Churchill’s analysis demonstrates, even if labor movements such as Fight For 15 get their way and a $15 minimum wage becomes the law of the land, it may all be in vain. How useful is an extra $3 an hour if rents continue to rise accordingly? To be absolutely clear, I support higher wages and improved job security for American workers; but unless landlords and other FIRE sector parasites are kept in check, most people won’t be able to truly take advantage of any (modest) wage gains.
That’s why I feel that many economic progressives make a mistake by focusing too much on employee vs employer struggles. In some sense, this is understandable: most people have to work, and everyone has some horror story about an incompetent or abusive boss. However, while agitating for better workplace dynamics is vital, we must remain cognizant of the negative role landlords play. If you speak with the average Bay Area denizen, the most common grievance you’ll hear is that there’s little affordable housing. Therefore, those who purport to fight for the common man should spend more time addressing common concerns.
On the flip side, even Randroids have compelling reasons to challenge landlords. Whether or not one considers private property rights sacrosanct, it’s blatantly obvious that landlordism is bad for business. Churchill says:
The manufacturer proposing to start a new industry, proposing to erect a great factory offering employment to thousands of hands, is made to pay such a price for his land that the purchase price hangs around the neck of his whole business, hampering his competitive power in every market, clogging him far more than any foreign tariff in his export competition, and the land price strikes down through the profits of the manufacturer on to the wages of the worker.
Just think of how many more jobs productive capitalists could create if they didn’t have to shell out money for rent, health plans for employees, and other deflationary payments to the FIRE sector. Significantly reducing rents would also free up a lot more income for people to spend on goods and services – allowing both working grunts and entrepreneurs to come out ahead. Therefore, I think there’s great potential to forge strong political coalitions with a platform of curtailing landlords’ power.
Honestly, what’s not to like?