Abstract
This article provides a commentary on the individual pieces in this special issue. It makes a distinction between the macro and micro politics of housing and uses this to investigate the extent to which a new politics of property has emerged across the cases. Evidence for both a shift to the right, as predicted by several of the authors, contrary trends, and a new intergenerational politics of housing is discussed. The analysis of the global housing bubble is itself placed in a broader theoretical context, stressing the links between housing and the prior equities and current commodities bubbles. Finally, a mechanism whereby highly liquid markets and limited asset classes combine to produce compounding and concurrent bubbles is suggested.
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Notes
After all, while it was not such a big deal for a few internet entrepreneurs to lose their shirts in the late 1990s, and while it is actually quite tragic for many more (relatively speaking) wealthy westerners to lose their homes just now, it is quite different when such bubble dynamics threaten to starve millions and set off resources conflicts across the globe.
One need only recall the leverage positions taken by LTCM just before its meltdown in 1998 to see how non-bank entities can effect global liquidity (see Lowenstein, 2000; McKenzie, 2006).
See http://research.stlouisfed.org/fred2/series/FEDFUNDS?cid=118 and http://research.stlouisfed.org/fred2/series/CD6M?cid=121. Accessed 23 June at 3:34 pm.
See http://research.stlouisfed.org/fred2/series/FREQ5?cid=93 and http://research.stlouisfed.org/fred2/series/CONSUMER?cid=100 and http://research.stlouisfed.org/fred2/series/REALLN?cid=49. Accessed 21 June 2008 at 3:38 pm.
While real demand factors play a role here, it is not as if the population of China, the main culprit in the financial press, has quadrupled in size or doubled its income in the past year and a half.
As we shall see, in Schwartz's individual contribution a straightforward rationalist account of preferences is developed, which largely ignores this sociological prior. In Seabrooke's analysis (with Mortensen) and in Watson's, this sociological dimension very much comes to the fore.
Quite what this has to do with hegemony, an inherently sociological notion concerned with domination, is not clear. If the argument is that states with similar asset bases will tend to want the same things, this is a simple story of common interests and hegemony need not be invoked. If alternatively it is used in the sense of ‘leadership qua power’ that it is used in the US IPE literature, the argument seems to say that the GDP growth achieved via securitization has made these American institutions more attractive to other states. If this is the case sub-prime crisis, where billions of dollars was lost by foreign holders of non-transparent and inherently faulty products, has surely done some damage to the sustainability of this claim.
A botched privatization of pensions in the mid 1980s has left most Britons with any adequate pension coverage since the state systems link to earnings was broken in the mid 1980s and has therefore failed to keep pace with wages or costs. See Jacobs and Teles (2007).
One could add, as I have here, that such a view underplays how the housing bubbles in both the US and the UK were causally related to the prior asset bubble in equities that no one planned either. Like Dorothy's wizard, it may be the case there are even less folks at the controls of all this than is suggested in this analysis.
This position however begs the question of how exogenous such shocks actually are. If they are actually causally interlinked to prior and post-event bubbles in other asset classes, then what is exogenous becomes more difficult to ascertain; a point I return to in the conclusion.
Exceptions are under Truman for Korean war expenditures, a policy amplified after the war under Eisenhower, and the Volker shock under Carter, which got worse under Reagan.
Discussed below in the Australian case.
A similar point could be made regarding Seabrooke's Australians, who seem to ‘prefer’ 30-year mortgages on variable rates, which becomes evidence of their ‘gambling’ nature. But one could conclude the opposite. Being given no option but to hold 30-year ARM's, Australians have, to cover the risk, become inveterate gamblers.
Against a 59% average for the sum of other liberal states (excluding New Zealand). Author's calculation.
Indeed it is particularly odd to see Gordon Brown, a prime minister who tried to harness a bubble in one asset class, deny so vehemently the possibility of a bubble emerging in another asset class.
See http://www.reuters.com/article/pressRelease/idUS156941+11-Feb-2008+PRN20080211 and http://www.bloomberg.com/apps/news?pid=20601081&refer=australia&sid=aq9xxwsBzf6k, accessed 23 June 2008, 1:58 pm. See especially http://futures.tradingcharts.com/marketquotes/index.php3?market=CL. That one does not see a drop in the next period's contracts as current contracts are traded in suggests another similarity to housing; the good in question is demand inelastic in the short run (people need something to live in, and there is no substitute for oil). As such, there is no bidding down as contracts are cashed in, only a bidding-up on the next round given future price expectations.
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Blyth, M. The Politics of Compounding Bubbles: The Global Housing Bubble in Comparative Perspective. Comp Eur Polit 6, 387–406 (2008). https://doi.org/10.1057/cep.2008.17
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DOI: https://doi.org/10.1057/cep.2008.17