Yves here. Michael Hudson has graciously allowed us to publish the forward to his new book The Destiny of Civilizations. Professor Wen Teijun, Executive Dean, Institute of Rural Reconstruction of China, explains how Hudson looks at America’s finance-led hegemony contains the seeds of its own destruction, and is separately suffering from conflict with China’s very different political-economic system, which draws on an industrial capitalism model and seeks to check rentier activities....Naked Capitalism
Whither Hegemony? Prof. Wen Tiejun Foreword to Michael Hudson’s The Destiny of Civilization
Professor Wen Teijun, Executive Dean, Institute of Rural Reconstruction of China, Southwest University, China. Translated by Alice Chan
https://www.nakedcapitalism.com/2022/05/whither-hegemony-prof-wen-tiejun-foreword-to-michael-hudsons-the-destiny-of-civilization.html
See also
Inflation – A Junk Economics Perspective
Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University
https://michael-hudson.com/2022/05/inflation-a-junk-economics-perspective/
12 comments:
Michael Hudson is talking rot here in the quote below. I've bolded the offending part:
The irony: More money REDUCES consumer prices. That is because most money is bank credit, and 80% of that is used to finance real estate purchases, bidding up its price. The result is that housing’s share of a typical family’s personal income has risen from 25% in the 1970s to over 40% today. That leaves less income available to spend on consumer goods and services – a deflationary effect.
On the subject of housing's share of income, and as the following article shows with a graph, the average house size has grown from about a 1,000 square feet in 1950 to 2,600 square feet today:
Home grown: 67 years of US and Canadian house size data
[selected quotes]
I was an impressionable young boy back in 1971 when my parents were considering building a new home. I remember discussions about house size. 1,200 square feet was normal back then. 1,600 square feet, the size of the house they eventually built, was considered extravagant—especially in rural Saskatchewan. And only doctors and lawyers built houses as large as 2,000 square feet.
So much has changed.
New homes in Canada and the US are big and getting bigger. The average size of a newly constructed single-family detached home is now 2,600 square feet in the US and probably 2,200 in Canada. The average size of a new house in the US has doubled since 1960. Though data is sparse for Canada, it appears that the average size of a new house has doubled since the 1970s.
We like our personal space. A lot. Indeed, space per person has been growing even faster than house size. Because as our houses have been growing, our families have been shrinking, and this means that per-capita space has increased dramatically. The graph below, from shrinkthatfootprint.com, shows that, along with Australia, Canadians and Americans enjoy the greatest per-capita floorspace in the world. The average Canadian or American each has double the residential space of the average UK, Spanish, or Italian resident.
Then there are the issues of cost and debt. We continually hear that houses are unaffordable. Not surprising if we’re making them twice as large. What if, over the past decade, we would have made our new houses half as big, but made twice as many? Might that have reduced prices?
Finally, we need to consider questions of equity, justice, and compassion. What is our ethical position if we are, on the one hand, doubling the size of our houses and tripling our per-capita living space and, on the other hand, claiming that we “can’t afford” housing for the homeless. Income inequality is not just a matter of abstract dollars. This inequality is manifest when some of us have rooms in our homes we seldom visit while others sleep outside in the cold.
The second graph on this page shows that house prices per square foot are almost unchanged from 1973 to 2015. Not only that, they come with a lot more stuff so using hedonic adjustment, they're actually falling in price.
New US homes today are 1,000 square feet larger than in 1973 and living space per person has nearly doubled
New Housing Construction Costs.
What about the cost of new houses over the last 42 years? On a per square foot basis using median house sales prices and median square footage, the inflation-adjusted price per square foot for new houses (in 2015 dollars) has been relatively stable since 1973 in a range between about $107 and $128 per square foot at an average of about $116 (see bottom chart above). The price of just more than $120 per square foot for new houses sold in 2015 was 8.5% below the peak of $131.29 (in 2015 dollars) per square foot for a new house in 2005.
And today’s new houses, compared to those built in the past, are much more energy-efficient; they come with better, bigger and more bathrooms, closets, fireplaces, and garages; they’re equipped with better and more home appliances; and they almost all include modern features like central air conditioning today (93% in 2015) that were expensive luxury options in previous decades like the 1970s (fewer than half the houses built in each year between 1973 and 1976 had air conditioning). Americans are paying about 70% more today for a median-priced new house on an inflation-adjusted basis compared to a 1973 house, largely because the size of the median house today is larger by almost 1,000 square feet and by 62%. So on an inflation-adjusted basis, Americans are actually paying only slightly more today for a new house on a per square-foot basis ($120) than in 1973 ($114.42), for homes that are of higher quality and more energy-efficient with more features like air conditioning, fireplaces and multiple garages. Overall, the increasing amount of living space (especially when adjusted for declining household size), the improvements in housing quality, the increased number of features, and relative affordability of new houses today means that living standards continue to gradually, but consistently, improve year after year for millions of Americans.
Is he not talking about economic rent ?
When I moved to Glasgow in 1998 to rent was between £300- £400
Now today The average asking rent in the city is now £992 per month.
Considering the min wage gives you roughly after tax £1,300 month.
It doesn't leave a lot left for everything else once the rent seekers take for energy and utilities as well and communication and if you want to watch TV. Monthly travel pass and food.
Now work has changed also with zero hours contracts. You get a 7 hour contract not a 40 hour contract in retail jobs nowadays. So they can pile the hours on when they need you and forget about you when they are Quiet.
To have any chance to buy a house you now need at least a 30k deposit. Good luck trying to get that together if you have left your parents house.
Why most now stay at home for years to try and save for a deposit unless the bank of mum and dad helps them with the deposit.
The old tenement housing in Glasgow is by far superior quality than the new builds with walls made out of paper.
In the past before the public sector was turned into a rent extracting monopoly.
40% of your wage covered most things.
Now in some areas that is up to 70% of your wage is now transferred directly to the those that take economic rent.
Those who believe their taxes fund public services still can't put 2 and 2 together.
Still can't see were the real theft takes place.
How even after 101 privatisations the taxes they pay have hardly moved and yet they pay more out of their wage than ever.
So when the chancellor lowers taxes on those who are on the less than 12k a year. He does that for his party donors the rent seekers as any savings they would have made is now transferred directly to the them.
As soon as any politician announces tax cuts the big 3 or 4 in any sector who manipulate the prices between them are licking their lips. The politician has just paid back some of what they owe their donars.
If they don't get their way they'll attempt to kill the politician with a high powered rifle. As was the case in Ohio with Dennis Kucinich. Who tried to stop the privatisation of electricity in his district.
His fearless confrontation with these entrenched centers of power, swiftly saw these monied interests mount a vicious assault against him, which included a relentless smear campaign, amplified by a press that obsequiously catered to the interests of its big advertisers, a recall vote, forcing the city into default and even assassination attempts on his life.
I can show you what 1 million dollars can buy you in terms of real estate in rural Nova Scotia.
You can show me what the same amount of money will get you in Vancouver.
Is he not talking about economic rent ?
Yes. Land rent is one aspect of economic rent conceived as gain not earned through work. This accrues through legal privilege. e.g., ownership (title to property) and patents and licenses that create artificial scarcity. It also accrues through monopoly, monopsony, cartels, trusts, oligarchy and other institutional arrangements that introduce asymmetries that bias markets, e.g., information and power.
There is also a new twist to rent. It used to be that one bought and owned and therefore could resell. Now the trend is away from ownership toward renting.
Here is the formal definition fromWikipedia:
In economics, economic rent is any payment (in the context of a market transaction) to an owner or factor of production in excess of the costs needed to bring that factor into production. In classical economics, economic rent is any payment made (including imputed value) or benefit received for non-produced inputs such as location (land) and for assets formed by creating official privilege over natural opportunities (e.g., patents). In the moral economy of neoclassical economics, economic rent includes income gained by labor or state beneficiaries of other "contrived" (assuming the market is natural, and does not come about by state and social contrivance) exclusivity, such as labor guilds and unofficial corruption.
We just got out energy Bill through the first Bill since the cap was removed
Normally £80 now £150 so nearly doubled.
A lot of households won't be able to absorb that type of increase.
Now if energy was renationalised and the government never needs the revenue from the nationalised energy company. As it is now just another tax.
The government could set the price of energy to whatever it wants or needs to in order to help control inflation.
No longer would they be able to threaten investment strikes to hold governments to ransom or scare governments with job losses in the public sector. Or go running to Nanny to ask for cheap labour from abroad as soon as local workers get a bit of pricing power as their wages increase.
What appears to be an injustice in the short term disappears when you look at the long term.
Someone buys a house and has to pay a mortgage. The payment is a blend of interest and principal repayment, the latter accruing to equity. Eventually, the mortgage is paid off, and the person begins saving and lending to others and collecting interest. Over a lifetime, most people pay and collect about the same amount of interest, so it's a wash.
Or like how someone collects interest on a Kellogg's bond which seems like a free lunch, but then they remember that Kellogg's embeds the cost of that interest in the price of corn flakes, and then they remember how they've been eating corn flakes all their lives so what appears to be unearned income is just a reimbursement of all the interest they've been paying all their lives.
As an aside, I wasn't implying that Michael Hudson was intending to deceive people. He makes a common error, like when economists talk about declining household median income over time, but forget that the number of people in a household has also declined over time.
Selling your 1950s bungalow for 1 million dollars and using the money to buy a retirement villa in a tropical paradise, isn't an injustice, but it is absurd.
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