I don't think the author has really thought about what anything to the left of capitalism is. They still have a capitalist mindset: growth is the most important metric of a country's success,...
I don't think the author has really thought about what anything to the left of capitalism is. They still have a capitalist mindset: growth is the most important metric of a country's success, disruption is inherently a good thing, innovation is something only capitalism does. Socialism is framed as something that goes against the natural order of things in Finland despite enough people disagreeing that there was an entire civil war over it. Upscale shopping malls and fancy cars are framed as markers of success, completely ignoring the probably-majority of people who can't afford or don't want those things.
The crux of socialist/communist critique of capitalism is that by simply having money you can make more money. By merely owning a small apartment building you can live a decent life only doing the work of managing the building's utilities and accounting and having a maintenance person to come fix things occasionally.
The concept of land ownership and rent collecting is what is at issue here. Landlords are often criticized as unnecessary features of a functioning economy who only drain money from others for...
The concept of land ownership and rent collecting is what is at issue here. Landlords are often criticized as unnecessary features of a functioning economy who only drain money from others for doing no work (aside from maintenance which must be paid for). In Vienna Austria for example they have 400,000 publicly owned apartment units and they are adding 50,000 a year. The state owns the land and so doesn’t need to collect high rents. It seems to work.
A major socialist critique is that treating land as a commodity is what raises housing prices.
Land ownership is an issue, why? The people buying that land are doing the work of researching desirable plots of land, deciding what the price for the use of that land should be, and doling out...
Land ownership is an issue, why? The people buying that land are doing the work of researching desirable plots of land, deciding what the price for the use of that land should be, and doling out access to it. Real estate doesn't manage itself.
Land isn't treated as a commodity in a capitalist economy. In fact, it's the exact opposite. Some land is naturally more valuable than others. Pricing all of it is the same is how you get stuff like warehouses in the middle of a busy downtown area where it could be put to much better use.
In Marxism a commodity is any item that can be bought or sold. So when I say land is treated as a commodity, that is my meaning. https://en.wikipedia.org/wiki/Commodity_(Marxism) I’m certainly not...
I’m certainly not suggesting that land all be priced the same. I’m suggesting that some land be held in common, outside of traditional market mechanisms, and be lent out for use based on merit. This is how they handle a lot of the housing in Vienna for example: https://www.huduser.gov/portal/pdredge/pdr_edge_featd_article_011314.html
(Looks like it’s 220,000 units, not 400,000 units as I thought)
The problem with private investment in land is that the price of the land tracks the market. With very wealthy people present in the market the price will rise well above what poorer people can afford. And while some use of markets may be best in land use and other situations, it may be a good idea to hold some land outside of that market system.
Traditionally that kind of system is managed by some sort of committee. Of course it is important to make sure the committee remains fair, but the significant advantage of this system is that poverty does not become a barrier to housing. In a market based system no committee exists because people are automatically prevented from access due to lack of funds. That makes poverty a death sentence for many, and as I have shown such a situation is not necessary.
We already have committees that decide the best use of land in most places; they're the zoning authorities in a given municipality. They, in theory, decide if an area is best served by a specific...
We already have committees that decide the best use of land in most places; they're the zoning authorities in a given municipality. They, in theory, decide if an area is best served by a specific kind of property. One of their most common criticisms is that they're prone to corruption and favoritism. That makes the idea of a committee that decides not only what type of property, but to who that property can be used by and just giving it to them for free even more problematic, and is endemic of most centrally planned economies.
When you start doling out resources based on "merit", "merit" has a tendency to become synonymous with "people I am friends with".
I would urge you to study how things are done in Vienna. They don’t give the land away for free. The government holds the property and pays developers to build housing. Then they rent the units...
I would urge you to study how things are done in Vienna. They don’t give the land away for free. The government holds the property and pays developers to build housing. Then they rent the units for below market rate.
I understand your concern for potential problems this could create, but the current system has obvious problems too. That is the problem that poverty becomes a death sentence for many. Either a literal death sentence for the many homeless who die of exposure every year, or a figurative death sentence in which the individual cannot live a fulfilled life because of the difficulty of poverty. The only way to avoid those problems is to hold some part of civic life in common for use even by the poor. Capitalism will never solve that problem through market mechanisms alone.
EDIT: I should add that I am generally anti-state. But these things don’t have to be done by the state (though there is a certain convenience to that). Land trusts and other public ownership methods can be used to hold the land in common.
It's the same thing on a smaller scale. What have they done to earn their tenants' $700 (or more) a month? No, they're not becoming fantastically rich off of it, but they can live comfortably...
It's the same thing on a smaller scale. What have they done to earn their tenants' $700 (or more) a month? No, they're not becoming fantastically rich off of it, but they can live comfortably without having to do much work simply because they already had money (in this case a building to rent).
Right, so having money makes you more money. I don't think there's nearly as much risk in renting a house/apartment as in pretty much any other way you can earn money. What is the extreme worst...
Right, so having money makes you more money. I don't think there's nearly as much risk in renting a house/apartment as in pretty much any other way you can earn money. What is the extreme worst case for a landlord? The tenant completely trashes the place? Yeah, that sucks, but they've got the security deposit for that reason. Landlords make money hand over fist in most places, and even where it's a smaller margin, it's still more money than people who work a lot harder (janitors, service workers, etc). What are they actually doing? They handle maintenance requests, they talk to potential tenants and show them apartments, and they handle the building's accounting. That's nowhere near the full-time work that the rest of us are forced to do to exist.
That affects everyone though. At the end of the day you've still got an apartment building which is a lot more than a good amount of people could say. And why is everything an investment? Why does...
That affects everyone though. At the end of the day you've still got an apartment building which is a lot more than a good amount of people could say. And why is everything an investment? Why does it matter how much the building is worth for a few years when you're still getting rent money (unless your tenants lose their jobs and can't afford rent). Plus it didn't take all that long for housing prices to get back to their 2007 level.
Because at some point you paid for that building, usually with a loan. If the price of the building dropped significantly, the rent money is nice, but you're still losing money every time you pay...
Because at some point you paid for that building, usually with a loan. If the price of the building dropped significantly, the rent money is nice, but you're still losing money every time you pay your mortgage on the building. Most landlords can't afford that, and end up selling the building at a loss, losing a bunch of money and an income source in the process.
How often does that happen though? I just find it really hard to believe that buying a building wouldn't pay for itself within a decade. And how are they losing money if the price of the building...
How often does that happen though? I just find it really hard to believe that buying a building wouldn't pay for itself within a decade. And how are they losing money if the price of the building drops? If you're just gonna flip the building in a few years, then yeah you're shit out of luck but I don't have sympathy for anyone who does that sort of thing anyway. In the meantime you're still getting rent money which is more than millions of people who lost their only source of income in the recession could say.
You're kind of misunderstanding the field. Most people who do real-estate for a living do not buy properties with cash outright. Not many people have 500k+ laying around to buy a house or...
You're kind of misunderstanding the field. Most people who do real-estate for a living do not buy properties with cash outright. Not many people have 500k+ laying around to buy a house or apartment building. They finance it through a bank just like you would through a home mortgage. They pay this loan every month, and hopefully the equity they're building in the property + rent covers the cost of the loan + maintenance + administration costs. If it doesn't, then they're actively losing money, which is worse than millions of people that don't have income, because they're not only not making money, they're actively losing money.
Most people cannot afford to lose money every month for a long period of time, so in a down market, most of these landlords sell their property at a loss, which still sticks them with a big chunk of that loan they have to pay off. It happens once every 10 years on average during national economic downturns, but locally depending on the real estate market, it can happen more often than that. If real-estate was as safe of an investment as you're making it out to be, everyone with the credit score to do it would be. It's actually a risky, heavily competitive market where you can easily lose a ton of money.
The top .1% of landlords don't have to worry about risk as much because they have enough capital to cushion themselves against it, but the vast majority of people who own rental properties are not in that boat.
I must be missing something, because it seems like a guaranteed bet. Using a personal example, I looked up the apartment building I lived in in college. It was assessed at $564,000 in value this...
I must be missing something, because it seems like a guaranteed bet. Using a personal example, I looked up the apartment building I lived in in college. It was assessed at $564,000 in value this year and the owner paid $13,000 in property taxes. I'll be conservative and say rent is the same as it was at the beginning of the decade, so the landlord is making $75,000 a year in rent, minus property taxes is $62,000 a year in profit. I'll guess maintenance is around $10,000 a year. That leaves $52,000 a year to put toward whatever you want if you're administering the building yourself, which isn't all that much work for that kind of money. If that's your only source of income, then yeah, it's gonna take a while to pay off, but you're still making good money working part-time.
Yes, you are missing something. Just because it's assessed at $564,000 now, doesn't mean it always will be. Your landlord is probably paying somewhere around $47,000 a year for the loan on that...
Yes, you are missing something. Just because it's assessed at $564,000 now, doesn't mean it always will be.
Your landlord is probably paying somewhere around $47,000 a year for the loan on that property. If over the course of a few years, the real estate market in your area plummets and that building is now worth $250,000, he's still on the hook for that $47,000 a year, even though he's not going to be able to charge the same amount for rent due to the lowered market. So now he's making maybe $35,000 a year in rent, and losing something around $30k a year on this property. That's in a perfect world where he's able to instantly fill all of the units in the apartment in such a turbulent market.
Basically, he's screwed. He can either try to tough it out and hope the market recovers (I don't know many people that can afford to lose $30k a year for any long period of time), or sell at a loss to try to settle what's left of his loan.
How many years is this loan? And wouldn't property tax go down if the value of the building goes down? He'd still be losing money, but the difference between like $23k and $30k is enough to note....
Your landlord is probably paying somewhere around $47,000 a year for the loan on that property.
How many years is this loan? And wouldn't property tax go down if the value of the building goes down? He'd still be losing money, but the difference between like $23k and $30k is enough to note.
And do any major cities actually have vacancy issues aside from maybe some Rust Belt cities? In my hometown there's an issue with too few vacancies, not too many. I went looking for housing prices over time and found this: https://fred.stlouisfed.org/series/CSUSHPINSA , which isn't perfect, but it's something. It looks like it took 8 years for the housing price index to get back to where it was when the recession started, but from the same site https://fred.stlouisfed.org/series/RRVRUSQ156N , the rental vacancy rate increased from 9.8% in Q3 2007 to a peak of 11.1% in Q3 2009, which is about a ten percent increase. I don't think that's a substantial change. By the end of 2010 the vacancy rate was back to what it was before the recession.
No, a lot of people can't afford to lose $30k a year, but the number of people that happens to is pretty small I'd guess. It's still a safer bet for a lot less work than a regular full-time job where you work for someone else.
It's a totally hypothetical scenario to illustrate risk. Real-estate is a notoriously risky investment market. If it was a sure bet like you're making it out to be, everyone would be doing it. A...
It's a totally hypothetical scenario to illustrate risk. Real-estate is a notoriously risky investment market. If it was a sure bet like you're making it out to be, everyone would be doing it. A lot of middle class investors have totally ruined themselves by jumping into real-estate without knowing the risks even in decent markets because of bad tenants or shoddy research or a million other factors that go into buying buildings. It's an extremely iliquid asset with a lot of money lost on tenant churn, mortgage processing fees, taxes, maintenance and a bunch of other considerations that people investing in financial instruments don't have to deal with.
A lot of people have made the mistake of thinking that because real-estate has appreciated in value almost everywhere in the world regularly that real estate is a relatively safe investment without taking into consideration that things like maintenance costs, taxes, insurance, and inflation have also gone up at a fairly proportional rate. It's one of the most common fallacies among newer investors.
I'd suggest reading over something like this that details all of the considerations a lot better than I can.
That's fair for if you're planning on flipping houses, but it makes no mention of renting. If you're planning on buying a house or condo to just hope that it appreciates, then yeah it's risky. But...
That's fair for if you're planning on flipping houses, but it makes no mention of renting. If you're planning on buying a house or condo to just hope that it appreciates, then yeah it's risky. But with renting it out, now you've got a stream of money coming in and you probably don't care much about the building's appreciation rate.
It applies to renting also. No one buys a property for a long period of time without planning on renting it, unless it's their residence. Most of the time if you're renting a place, the rent will...
It applies to renting also. No one buys a property for a long period of time without planning on renting it, unless it's their residence. Most of the time if you're renting a place, the rent will just barely cover the cost of the mortgage after all other costs, so unless the building appreciates significantly, you're not going to make any money on your investment.
People who buy houses to flip generally don't care about appreciation. They're looking for bargains that they can resell at a current market value, or they're attempting to put work into the house to make it more valuable. They don't hang on to it long enough for it to appreciate significantly because they'd be losing a ton of money on interest, maintenance, and taxes if no one was renting the place.
Cuba's life expectancy and literacy rate are both on par with the United States, and has a higher high school graduation rate. Edit: Those alone don't mean their brand of not-capitalism "works",...
Cuba's life expectancy and literacy rate are both on par with the United States, and has a higher high school graduation rate.
Edit: Those alone don't mean their brand of not-capitalism "works", but it counts for something at the very least.
Agreed. The “capitalism” we have today comes after over a century of fighting for workers rights. And many of the problems we have come from the erosion of those socialist protections. Though the...
Agreed. The “capitalism” we have today comes after over a century of fighting for workers rights. And many of the problems we have come from the erosion of those socialist protections. Though the story for this article highlights a capitalism with those socialist protections... which in my mind shows why a mixture of socialism and capitalism is what is working there.
Let's think about how we draw boundaries on this "population". What if it was say, the whole world that must be considered the population that capitalism must support? Are you aware that those...
It can improve a population's live
Let's think about how we draw boundaries on this "population". What if it was say, the whole world that must be considered the population that capitalism must support?
Capitalism is working in the nordic countries. Capitalism is working in Germany. Capitalism is working in South Korea. Capitalism is working in Luxembourg and Switzerland and the Netherlands and Belgium. Capitalism is sort of working in Canada where the country doesn't succumb to Americanisms.
Are you aware that those countries have built a lot of their wealth by extracting (some say stealing) it from the global south? Yes if you're lucky enough to live those particular countries you listed above, and if you're in at least middle class (ie. not poor) then yeah, it's not bad. But what about literally everyone else who is affected by the capitalism being practiced? What about the hundreds of millions of people that will become food insecure because capitalism caused climate change and still now has a role in preventing climate action? Do we just ignore those people when considering how well capitalism does?
The global south is not magically separate from the capitalist nations that interacted with them (and in many cases colonised and subjugated them). Those nations are also part of the capitalist system and capitalism has really really sucked for them in comparison to people in Germany or the Netherlands or Belgium.
I don't think this sarcasm is helpful or contributes to the discussion. I'm not going to try to argue that a primarily socialist world wouldn't have used carbon-emitting energy sources to...
Ah yes the well known colonizer's and resource exploiters Canada, Norway, and Finland.
I don't think this sarcasm is helpful or contributes to the discussion.
Capitalism didn't cause climate change. Human advancement caused climate change. Are you seriously going to try and argue a dominantly socialist world would not have made use of carbon energy sources to industrialize?
I'm not going to try to argue that a primarily socialist world wouldn't have used carbon-emitting energy sources to industrialize (I'm also not the OP, so I can't say that that is actually the entirety of their argument). However, I would point out that, while "capitalism caused climate change" might be somewhat facile and un-nuanced on the one hand, on the other hand a "growth at all costs and damn the externalities" mindset tends to go hand-in-hand with capitalism, especially in the last 40-50 years or so, and carbon emissions (and their effect on the climate) are one such externality that, absent measures like carbon taxes, tend to be ignored by participants in capitalist economies. Of course, socialist economies could easily fall victim to that same indifferent mindset, but presumably in a world where the workers own the means of production, attitudes would be more collectivist and everyone would feel a sense of responsibility for keeping the planet habitable, even at the cost of slowing growth and innovation; after all, what good is a newer, better, faster widget if the planet's going to be too hot for anyone who would use it to live on?
The point was, maybe they wouldn't have. Insofar as I'm invested in this debate at all, it's mostly as devil's advocate for the "capitalism really is the source of all the world's ills" side...
I genuinely fail to see how a dominantly socialist culture would be different from our own in this example, should they have made their society dependant on fossil fuels like we have.
The point was, maybe they wouldn't have. Insofar as I'm invested in this debate at all, it's mostly as devil's advocate for the "capitalism really is the source of all the world's ills" side (though I am no fan of capitalism either, especially the barely-regulated form that we now live under). At the same time, I don't think it's that "out there" to suggest that that's not too far off the mark. Since fossil fuels have become the main thrust of this conversation, let's use them as the poster child for malignant capitalism: look at all the fossil fuel companies who secretly funded climate change denialists even as their own scientists were sounding the alarm internally about climate change. Shell, ExxonMobil, BP, and their ilk could have been funding research into sustainable and renewable energy technology decades ago and spearheaded a more gradual transition when it might have made a bigger difference in the warming we and future generations will experience, but they didn't, because the ROI on making it seem like it was A-OK to keep burning dinosaurs was higher. They're only pivoting to renewables now because, as you say, there is profit in it. Ultimately, my point is that a system that prioritizes ill-defined "growth", and profit, over all else--even over preservation of the environment (both literal and metaphorical) that makes that growth possible--is what got us into the mess we're currently in. I think it's telling that it's difficult--for either of us--to even coherently imagine a world where the highest priority is keeping the world livable (in all senses of the world).
Even if those countries didn’t actively partake in the colonising, their economies obviously participate in and benefit from the wider system that does, yes? No I would not argue that, but...
Even if those countries didn’t actively partake in the colonising, their economies obviously participate in and benefit from the wider system that does, yes?
No I would not argue that, but unsustainable growth and resource consumption is a feature of our Capitalism. Also you’ve leapt to considering Capitalism against some hypothetical alternative socialist world order. We don’t need to do that to criticise Capitalism’s role in Climate Change.
I guess you agree though that it is a force actively preventing climate action? I said that too.
I'd rather be poor in those countries than anywhere else in the world, so adding the caveat "if you're not poor" is meaningless without a basis for comparison. Being poor is not fun anywhere in...
I'd rather be poor in those countries than anywhere else in the world, so adding the caveat "if you're not poor" is meaningless without a basis for comparison. Being poor is not fun anywhere in the world. It's much less fun in 99% of other countries.
Of course, that’s a clarification . I was pointing out that this “population” that Capitalism is “working” for is actually quite exclusive. If you’re poor in a Capitalist country im not...
Of course, that’s a clarification . I was pointing out that this “population” that Capitalism is “working” for is actually quite exclusive. If you’re poor in a Capitalist country im not comfortable saying it’s still “working” for you just because you are doing a better than other foreigners also under the system.
But yes, they are better off and it isn’t taken for granted. It’s not any reason to be contented, however.
I think there's some distinctions to be made with "X is working in Y". No matter if X is capitalism, socialism, or even an authoritarian dictatorship. Systems always works for some subset of...
I think there's some distinctions to be made with "X is working in Y". No matter if X is capitalism, socialism, or even an authoritarian dictatorship. Systems always works for some subset of people. They also always work until they don't. So you could say that communism (depending on your definition of communism) works in China. It is still around. It benefits some part of the Chinese population. The question is: a) who benefits from the current system? And b) can we do better?
Very explicit, personal, hands-on comparison between US and Finland, by Americans who moved there. A good read, especially for anyone who still buys the "US capitalism over Scandinavian socialism"...
Very explicit, personal, hands-on comparison between US and Finland, by Americans who moved there. A good read, especially for anyone who still buys the "US capitalism over Scandinavian socialism" story.
I don't think the author has really thought about what anything to the left of capitalism is. They still have a capitalist mindset: growth is the most important metric of a country's success, disruption is inherently a good thing, innovation is something only capitalism does. Socialism is framed as something that goes against the natural order of things in Finland despite enough people disagreeing that there was an entire civil war over it. Upscale shopping malls and fancy cars are framed as markers of success, completely ignoring the probably-majority of people who can't afford or don't want those things.
The crux of socialist/communist critique of capitalism is that by simply having money you can make more money. By merely owning a small apartment building you can live a decent life only doing the work of managing the building's utilities and accounting and having a maintenance person to come fix things occasionally.
The concept of land ownership and rent collecting is what is at issue here. Landlords are often criticized as unnecessary features of a functioning economy who only drain money from others for doing no work (aside from maintenance which must be paid for). In Vienna Austria for example they have 400,000 publicly owned apartment units and they are adding 50,000 a year. The state owns the land and so doesn’t need to collect high rents. It seems to work.
A major socialist critique is that treating land as a commodity is what raises housing prices.
Land ownership is an issue, why? The people buying that land are doing the work of researching desirable plots of land, deciding what the price for the use of that land should be, and doling out access to it. Real estate doesn't manage itself.
Land isn't treated as a commodity in a capitalist economy. In fact, it's the exact opposite. Some land is naturally more valuable than others. Pricing all of it is the same is how you get stuff like warehouses in the middle of a busy downtown area where it could be put to much better use.
In Marxism a commodity is any item that can be bought or sold. So when I say land is treated as a commodity, that is my meaning.
https://en.wikipedia.org/wiki/Commodity_(Marxism)
I’m certainly not suggesting that land all be priced the same. I’m suggesting that some land be held in common, outside of traditional market mechanisms, and be lent out for use based on merit. This is how they handle a lot of the housing in Vienna for example:
https://www.huduser.gov/portal/pdredge/pdr_edge_featd_article_011314.html
(Looks like it’s 220,000 units, not 400,000 units as I thought)
The problem with private investment in land is that the price of the land tracks the market. With very wealthy people present in the market the price will rise well above what poorer people can afford. And while some use of markets may be best in land use and other situations, it may be a good idea to hold some land outside of that market system.
Traditionally that kind of system is managed by some sort of committee. Of course it is important to make sure the committee remains fair, but the significant advantage of this system is that poverty does not become a barrier to housing. In a market based system no committee exists because people are automatically prevented from access due to lack of funds. That makes poverty a death sentence for many, and as I have shown such a situation is not necessary.
We already have committees that decide the best use of land in most places; they're the zoning authorities in a given municipality. They, in theory, decide if an area is best served by a specific kind of property. One of their most common criticisms is that they're prone to corruption and favoritism. That makes the idea of a committee that decides not only what type of property, but to who that property can be used by and just giving it to them for free even more problematic, and is endemic of most centrally planned economies.
When you start doling out resources based on "merit", "merit" has a tendency to become synonymous with "people I am friends with".
I would urge you to study how things are done in Vienna. They don’t give the land away for free. The government holds the property and pays developers to build housing. Then they rent the units for below market rate.
I understand your concern for potential problems this could create, but the current system has obvious problems too. That is the problem that poverty becomes a death sentence for many. Either a literal death sentence for the many homeless who die of exposure every year, or a figurative death sentence in which the individual cannot live a fulfilled life because of the difficulty of poverty. The only way to avoid those problems is to hold some part of civic life in common for use even by the poor. Capitalism will never solve that problem through market mechanisms alone.
EDIT: I should add that I am generally anti-state. But these things don’t have to be done by the state (though there is a certain convenience to that). Land trusts and other public ownership methods can be used to hold the land in common.
It's the same thing on a smaller scale. What have they done to earn their tenants' $700 (or more) a month? No, they're not becoming fantastically rich off of it, but they can live comfortably without having to do much work simply because they already had money (in this case a building to rent).
Right, so having money makes you more money. I don't think there's nearly as much risk in renting a house/apartment as in pretty much any other way you can earn money. What is the extreme worst case for a landlord? The tenant completely trashes the place? Yeah, that sucks, but they've got the security deposit for that reason. Landlords make money hand over fist in most places, and even where it's a smaller margin, it's still more money than people who work a lot harder (janitors, service workers, etc). What are they actually doing? They handle maintenance requests, they talk to potential tenants and show them apartments, and they handle the building's accounting. That's nowhere near the full-time work that the rest of us are forced to do to exist.
No. Remember the housing crisis? That. Plummeting real-estate costs makes your investment nearly worthless and cuts off your only source of income.
That affects everyone though. At the end of the day you've still got an apartment building which is a lot more than a good amount of people could say. And why is everything an investment? Why does it matter how much the building is worth for a few years when you're still getting rent money (unless your tenants lose their jobs and can't afford rent). Plus it didn't take all that long for housing prices to get back to their 2007 level.
Because at some point you paid for that building, usually with a loan. If the price of the building dropped significantly, the rent money is nice, but you're still losing money every time you pay your mortgage on the building. Most landlords can't afford that, and end up selling the building at a loss, losing a bunch of money and an income source in the process.
How often does that happen though? I just find it really hard to believe that buying a building wouldn't pay for itself within a decade. And how are they losing money if the price of the building drops? If you're just gonna flip the building in a few years, then yeah you're shit out of luck but I don't have sympathy for anyone who does that sort of thing anyway. In the meantime you're still getting rent money which is more than millions of people who lost their only source of income in the recession could say.
You're kind of misunderstanding the field. Most people who do real-estate for a living do not buy properties with cash outright. Not many people have 500k+ laying around to buy a house or apartment building. They finance it through a bank just like you would through a home mortgage. They pay this loan every month, and hopefully the equity they're building in the property + rent covers the cost of the loan + maintenance + administration costs. If it doesn't, then they're actively losing money, which is worse than millions of people that don't have income, because they're not only not making money, they're actively losing money.
Most people cannot afford to lose money every month for a long period of time, so in a down market, most of these landlords sell their property at a loss, which still sticks them with a big chunk of that loan they have to pay off. It happens once every 10 years on average during national economic downturns, but locally depending on the real estate market, it can happen more often than that. If real-estate was as safe of an investment as you're making it out to be, everyone with the credit score to do it would be. It's actually a risky, heavily competitive market where you can easily lose a ton of money.
The top .1% of landlords don't have to worry about risk as much because they have enough capital to cushion themselves against it, but the vast majority of people who own rental properties are not in that boat.
I must be missing something, because it seems like a guaranteed bet. Using a personal example, I looked up the apartment building I lived in in college. It was assessed at $564,000 in value this year and the owner paid $13,000 in property taxes. I'll be conservative and say rent is the same as it was at the beginning of the decade, so the landlord is making $75,000 a year in rent, minus property taxes is $62,000 a year in profit. I'll guess maintenance is around $10,000 a year. That leaves $52,000 a year to put toward whatever you want if you're administering the building yourself, which isn't all that much work for that kind of money. If that's your only source of income, then yeah, it's gonna take a while to pay off, but you're still making good money working part-time.
Yes, you are missing something. Just because it's assessed at $564,000 now, doesn't mean it always will be.
Your landlord is probably paying somewhere around $47,000 a year for the loan on that property. If over the course of a few years, the real estate market in your area plummets and that building is now worth $250,000, he's still on the hook for that $47,000 a year, even though he's not going to be able to charge the same amount for rent due to the lowered market. So now he's making maybe $35,000 a year in rent, and losing something around $30k a year on this property. That's in a perfect world where he's able to instantly fill all of the units in the apartment in such a turbulent market.
Basically, he's screwed. He can either try to tough it out and hope the market recovers (I don't know many people that can afford to lose $30k a year for any long period of time), or sell at a loss to try to settle what's left of his loan.
How many years is this loan? And wouldn't property tax go down if the value of the building goes down? He'd still be losing money, but the difference between like $23k and $30k is enough to note.
And do any major cities actually have vacancy issues aside from maybe some Rust Belt cities? In my hometown there's an issue with too few vacancies, not too many. I went looking for housing prices over time and found this: https://fred.stlouisfed.org/series/CSUSHPINSA , which isn't perfect, but it's something. It looks like it took 8 years for the housing price index to get back to where it was when the recession started, but from the same site https://fred.stlouisfed.org/series/RRVRUSQ156N , the rental vacancy rate increased from 9.8% in Q3 2007 to a peak of 11.1% in Q3 2009, which is about a ten percent increase. I don't think that's a substantial change. By the end of 2010 the vacancy rate was back to what it was before the recession.
No, a lot of people can't afford to lose $30k a year, but the number of people that happens to is pretty small I'd guess. It's still a safer bet for a lot less work than a regular full-time job where you work for someone else.
It's a totally hypothetical scenario to illustrate risk. Real-estate is a notoriously risky investment market. If it was a sure bet like you're making it out to be, everyone would be doing it. A lot of middle class investors have totally ruined themselves by jumping into real-estate without knowing the risks even in decent markets because of bad tenants or shoddy research or a million other factors that go into buying buildings. It's an extremely iliquid asset with a lot of money lost on tenant churn, mortgage processing fees, taxes, maintenance and a bunch of other considerations that people investing in financial instruments don't have to deal with.
A lot of people have made the mistake of thinking that because real-estate has appreciated in value almost everywhere in the world regularly that real estate is a relatively safe investment without taking into consideration that things like maintenance costs, taxes, insurance, and inflation have also gone up at a fairly proportional rate. It's one of the most common fallacies among newer investors.
I'd suggest reading over something like this that details all of the considerations a lot better than I can.
That's fair for if you're planning on flipping houses, but it makes no mention of renting. If you're planning on buying a house or condo to just hope that it appreciates, then yeah it's risky. But with renting it out, now you've got a stream of money coming in and you probably don't care much about the building's appreciation rate.
It applies to renting also. No one buys a property for a long period of time without planning on renting it, unless it's their residence. Most of the time if you're renting a place, the rent will just barely cover the cost of the mortgage after all other costs, so unless the building appreciates significantly, you're not going to make any money on your investment.
People who buy houses to flip generally don't care about appreciation. They're looking for bargains that they can resell at a current market value, or they're attempting to put work into the house to make it more valuable. They don't hang on to it long enough for it to appreciate significantly because they'd be losing a ton of money on interest, maintenance, and taxes if no one was renting the place.
That depends on if you view libertarianism as a joke system or not.
Cuba's life expectancy and literacy rate are both on par with the United States, and has a higher high school graduation rate.
Edit: Those alone don't mean their brand of not-capitalism "works", but it counts for something at the very least.
Agreed. The “capitalism” we have today comes after over a century of fighting for workers rights. And many of the problems we have come from the erosion of those socialist protections. Though the story for this article highlights a capitalism with those socialist protections... which in my mind shows why a mixture of socialism and capitalism is what is working there.
Let's think about how we draw boundaries on this "population". What if it was say, the whole world that must be considered the population that capitalism must support?
Are you aware that those countries have built a lot of their wealth by extracting (some say stealing) it from the global south? Yes if you're lucky enough to live those particular countries you listed above, and if you're in at least middle class (ie. not poor) then yeah, it's not bad. But what about literally everyone else who is affected by the capitalism being practiced? What about the hundreds of millions of people that will become food insecure because capitalism caused climate change and still now has a role in preventing climate action? Do we just ignore those people when considering how well capitalism does?
The global south is not magically separate from the capitalist nations that interacted with them (and in many cases colonised and subjugated them). Those nations are also part of the capitalist system and capitalism has really really sucked for them in comparison to people in Germany or the Netherlands or Belgium.
I don't think this sarcasm is helpful or contributes to the discussion.
I'm not going to try to argue that a primarily socialist world wouldn't have used carbon-emitting energy sources to industrialize (I'm also not the OP, so I can't say that that is actually the entirety of their argument). However, I would point out that, while "capitalism caused climate change" might be somewhat facile and un-nuanced on the one hand, on the other hand a "growth at all costs and damn the externalities" mindset tends to go hand-in-hand with capitalism, especially in the last 40-50 years or so, and carbon emissions (and their effect on the climate) are one such externality that, absent measures like carbon taxes, tend to be ignored by participants in capitalist economies. Of course, socialist economies could easily fall victim to that same indifferent mindset, but presumably in a world where the workers own the means of production, attitudes would be more collectivist and everyone would feel a sense of responsibility for keeping the planet habitable, even at the cost of slowing growth and innovation; after all, what good is a newer, better, faster widget if the planet's going to be too hot for anyone who would use it to live on?
The point was, maybe they wouldn't have. Insofar as I'm invested in this debate at all, it's mostly as devil's advocate for the "capitalism really is the source of all the world's ills" side (though I am no fan of capitalism either, especially the barely-regulated form that we now live under). At the same time, I don't think it's that "out there" to suggest that that's not too far off the mark. Since fossil fuels have become the main thrust of this conversation, let's use them as the poster child for malignant capitalism: look at all the fossil fuel companies who secretly funded climate change denialists even as their own scientists were sounding the alarm internally about climate change. Shell, ExxonMobil, BP, and their ilk could have been funding research into sustainable and renewable energy technology decades ago and spearheaded a more gradual transition when it might have made a bigger difference in the warming we and future generations will experience, but they didn't, because the ROI on making it seem like it was A-OK to keep burning dinosaurs was higher. They're only pivoting to renewables now because, as you say, there is profit in it. Ultimately, my point is that a system that prioritizes ill-defined "growth", and profit, over all else--even over preservation of the environment (both literal and metaphorical) that makes that growth possible--is what got us into the mess we're currently in. I think it's telling that it's difficult--for either of us--to even coherently imagine a world where the highest priority is keeping the world livable (in all senses of the world).
Even if those countries didn’t actively partake in the colonising, their economies obviously participate in and benefit from the wider system that does, yes?
No I would not argue that, but unsustainable growth and resource consumption is a feature of our Capitalism. Also you’ve leapt to considering Capitalism against some hypothetical alternative socialist world order. We don’t need to do that to criticise Capitalism’s role in Climate Change.
I guess you agree though that it is a force actively preventing climate action? I said that too.
I'd rather be poor in those countries than anywhere else in the world, so adding the caveat "if you're not poor" is meaningless without a basis for comparison. Being poor is not fun anywhere in the world. It's much less fun in 99% of other countries.
Of course, that’s a clarification . I was pointing out that this “population” that Capitalism is “working” for is actually quite exclusive. If you’re poor in a Capitalist country im not comfortable saying it’s still “working” for you just because you are doing a better than other foreigners also under the system.
But yes, they are better off and it isn’t taken for granted. It’s not any reason to be contented, however.
I think there's some distinctions to be made with "X is working in Y". No matter if X is capitalism, socialism, or even an authoritarian dictatorship. Systems always works for some subset of people. They also always work until they don't. So you could say that communism (depending on your definition of communism) works in China. It is still around. It benefits some part of the Chinese population. The question is: a) who benefits from the current system? And b) can we do better?
Very explicit, personal, hands-on comparison between US and Finland, by Americans who moved there. A good read, especially for anyone who still buys the "US capitalism over Scandinavian socialism" story.