"A day late and a dollar short"

In 1894 the French writer Anatole France famously wrote:

“The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread”.

Thankfully SOYMB can now provide an update some 113 years later on the basis of this recent (June 2007) news item:

A homeless man who argued that begging is a form of free speech - after he was arrested for asking a policeman for a dollar in a New York suburb - has won his case.

We trust then that this magnaminous, if overdue, change of heart in capitalist legislation is not restricted to the homeless and that the rich also may presumably be homeless and beg in the streets for a dollar.

Socialism is - on the face of it at least - attractive to many: the apparent principles of “fairness”, or looking after everyone in the community (rather just number one) have broad appeal of course. But that is often insufficient to outweigh what many consider to be the main downsides to socialism. Prime amongst the perceived disadvantages of a socialist society is the idea that socialism is an inefficient way to produce wealth. In contrast, the market system portrays itself as a dynamic, productive and creative mechanism. By incentivising the inventors, the entrepreneurs and the risk-takers (so the fairy-tale goes) capitalism liberates human beings to work harder and smarter, producing more wealth and more choice.

The only problem with this superficially-appealing narrative is that capitalism is not in fact geared to the production of wealth per se, but rather is tailored to the production of profit, a very different thing. What is the evidence for this, and why is it an important distinction?

Yesterday in the UK, the new Prime Minister Gordon Brown unveiled plans to try and encourage the house-building sector to... (wait for it)... build more houses. Now you may think that housebuilders would need little encouragement to build houses. That after all is what they do - that's what it says on the label. But apparently not. The UK homebuilding sector is already under investigation from the Office of Fair Trading because – bafflingly - they seem unable (or unwilling) to build sufficient homes.

Perhaps there is an innocent explanation for this. Are there maybe far too many houses in the UK for the number of people? Is it the case that the population of the UK all live in comfortable, spacious, well-heated and refurbished houses? Is there no demand for new housing?

Needless to say this is not the case. Millions of houses are sub-standard in terms of structural safety, condition, dampness, insulation ratings, degree of weather tightness (REF). Some 2,000 people sleep rough each night in the UK and in Scotland alone there are 30,000 homeless “households” with 3,000 children and pregnant mothers housed in B&B temporary accommodation. House repossessions in the UK are rocketing, currently approaching 400 per day.

So what's happened? Why has the market failed? Why has the magical driving force of demand not triggered increased supply in this sector?

The reason is that inside a market-based system of buying & selling, wealth is not produced to meet human needs of the entire population, but instead to meet the profit expectations of the minority who monopolise ownership and control of the means of producing wealth (in this case, the housebuilding employers). For many years now it has been in their interest to keep the brake on the rate of releases of houses to the market, as this helps keep the price up: better to make 30% profit selling one house at £200,000, than make 20% profit on two houses at £150,000. And of course every plot of land they build on is one less house they have to sell in the future, and the housebuilders don't see the price falling in the future.

In the ideal theoretical market – beloved of the apologists of capitalism – this shouldn't happen. But in the real world, the housebuilders are far from being independent economic agents, and can be more co-operative than competitive. This isn't a one-off, peculiar to the housing market. In fact there isn't a single market that is unaffected by this phenomenon. Despite the government bluster, there is little they can do to "correct" the market.

Capitalism liberates nothing. The market system itself creates nothing beyond profit and misery, and will routinely stifle or sacrifice productivity for profitability. The ideological claims for capitalism as being an efficient system just don't stand up to any sort of examination, with endemic inefficiency and wastage inherent. And attempts of governments to “correct” or regulate the market are usually cosmetic, partial and powerless in the face of the iron law of profitability.

To return to the item at the start of this piece, the good news is that at least it would appear that the homeless are indeed now permitted (under Human Rights legislation) to beg. However the man in question (Eric Hoffstead, 36) didn't have much opportunity to celebrate his legal victory – apparently he was imprisoned for a separate trespassing charge. Maybe we now need to try and make trespassing a “human right”?

BG

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