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Tsunamis of Populism...

Could it happen here?

First Brexit and now the election of President Trump – two instances of how simmering popular discontent can quickly boil up as a fundamental rejection of the status quo, characterised in the media as “Tsunamis of Populism”.

Both boil-overs have been the result of enough people voting in protest – even if it means risk and uncertainty – because they feel they have been left behind and ignored by government policies and political elites, have been made worse off by policy directions and ideologies, and are unable to see any improvement for themselves unless there is a fundamental change forced upon “the system”. A key part of that has been the feeling that more privileged segments of society have continued to make gains, while the less privileged have fallen behind. This is the classic situation of wealth becoming more concentrated in the upper ends of the wealth spectrum, and being drained out of the lower ends – aka the rich getting richer, and poor getting poorer. 

While this societal inequality was a major driver of revolutionary change in our distant past, the possibility of it happening in First World economies in the 21st century was not really considered. However, throughout human history it seems that inequality has never been greater than it is in the early 21st century, including claims that the richest 1% now own more than the other 99% [1].

The inherent risk in such inequality is, of course, a major reason why society develops mechanisms - including progressive taxation, welfare structures and independent judiciaries - to reduce the risk of fundamental change upsetting the status quo. These mechanisms are to achieve a more equitable – usually, a less inequitable – distribution of wealth, influence and hope across the community. Society generally benefits from stability, although some benefit more than others. 

Brexit and Trump-it have both shown that the tipping points for major change are reasonably close to society’s median, and are not heavily concentrated in the lower percentile groups, as they have been in the past. The combination of unhappiness across major segments in society and the opportunity to achieve a fundamental change – through a politically inspired referendum or an election – has confounded the status quo. 

A widely-identified reason for Hillary Clinton’s unpopularity among Americans was that she represented the establishment, she would not bring about any change, and she was too close to the banks which had not been brought to account for their excesses which underpinned the GFC – cue the trillions spent to bail out banks in return for minimal changes in their regulation, and little apparent change in their practices since 2008. Many thought she would not restore the most important features of society and economy which they wanted. It seems that President-elect Trump’s simple slogans struck some chords.

A number of commentators / economists / historians see both tsunamis as being the direct result of the advance of Neo-Liberalism across western economies – an ideology that enshrines corporate takeovers, trans-national corporations, extols the virtues of tax avoidance, and the elimination of local jobs. In the US this has led to the rich getting extremely wealthy, jobs effectively exported in vast numbers, and a middle and blue collar class under extreme financial pressure – as evidenced most clearly in The Big Short (an important “documentary” on the causes of the GFC) - and feeling powerless to do anything about it. Many have felt that the “political elites” have both preached the rationale for Neo-Liberal policies – starting especially with Reaganism and Thatcherism in the 1980s, on behalf of the ultra-wealthy – and in more recent times they have more openly cozied up to the uber-rich at the expense of the population at large. This has been exacerbated by the apparent adoption of the neo-liberal doctrine by those parties most likely to oppose it on behalf of the working classes - think the British Labour Party under Tony Blair, the Democrats under Bill Clinton in the 1990s, and our own Labour Party under David Lange/Roger Douglas in the 1980s. 

In the USA, the increasing concentration of wealth and influence appears to have generated substantial discontent among those who in theory would benefit most from the Neo-Liberal ethos represented by an establishment most closely linked to Clinton - the New Republic reports “Among college-educated whites, only 39 percent of men and 51 percent of women voted for Clinton. [2]” - which may also help explain why Democrats didn’t get out and vote this time. Bernie Sanders had been the preferred Democrat candidate in a number of the swing seats which went to Trump.

Setting aside for the moment the sheer shock effect of President-elect Trump, the core message is that widespread dissatisfaction with important features of society led to major changes in two major, stable, western democracies. 

Is there any real prospect of such major change happening here? Not through the rise of some populist, but more simply from disquiet and dissatisfaction about an issue which is very important to us, and where things are currently going haywire. 

An obvious question is whether our ongoing concerns about housing are important enough to us to demand some change from our current status quo. 

Consider our history, consider how important relative equality is to most of us, and consider housing. Our history of post-1840 settlement has been the drive to achieve and maintain an egalitarian society. Many migrants - especially those from Great Britain - opted to settle in New Zealand to escape the class-based inequalities of the European societies. A core part of that was the opportunity to own land. Land owners have been the major part of our society for nearly two centuries. The relatively high level of equality which land ownership occasioned has been a foundation of New Zealand’s stable social structure [3]. High property ownership – in the order of three quarters of all households, and well over 85% of all households in the middle and later stages of life by the mid-1990s – has been at the core. People and households have generally been able to make progress materially through the property ownership route. A very important part of this has been because property ownership generally insulated us against inflation. As property owners we were part of the general tide, and most of us benefited from the paper gains which accrued to the property estate as a whole. 

Moreover, this pattern was fairly stable and persisted across several generations, as the children and then the grandchildren of property owners became property owners themselves - by no means an ideal system (Maori disenfranchisement and land confiscations still generate significant inequality), but nevertheless a relatively equitable society, for which high levels of property ownership were a major foundation.

This is why the current housing crisis is so important to us as a society. Much of our wealth is tied up in property, and much of that is in the property we live in. Inequality in property ownership is therefore a major threat to the (relatively) egalitarian social structure. The rapid rise in dwelling prices, together with the strong competition for dwellings because of very high migration gains, has seen a rapid decline in dwelling ownership levels. This has affected first home buyers most of all, many of whom have struggled to raise a deposit or find a dwelling which they can afford. The average age at which people become home owners has increased substantially since 2000. The probability of ever becoming a dwelling owner has decreased significantly (see for example, research by Alan Johnston [4], and Ian Mitchell [5]). These issues have always existed for those in the lower income groups, but now they have spread to many in the middle and even higher income groups.

Those of us who own a property have made considerable wealth gains, on paper at least. Those of us who do not own a property have fallen behind. This substantial increase in inequality, driven by the rise in housing prices, does not sit well with our New Zealand ethos. Nor do such snippets as the highly publicised fact that more than 40% of dwelling sales are to investors rather than owner-occupiers. It seems that many [6] existing property owners – who are better off in their wealth on paper – are nevertheless very uncomfortable about the clear and growing inequality across the land, and the lack of any indication that things are likely to improve by themselves in the medium term. This unease is from both societal and personal perspectives. Some are uneasy about it as a trend per se, with concerns about what our society will be like for future generations where home owners are very much the minority.  This makes it quite personal to the large baby boom generation who see that their children and grandchildren are much less likely to become property owners, and so will be unable to realise the benefits, stability and relative equality which that ownership brings. Anecdotal evidence indicates a growing trend to early inheritance, so that the next wave can at least get the deposit on a dwelling.

It appears that many are concerned that the gap is already much too big, and that the systems and structures in place will not solve the problem. Even that the inequality may not be remedied without some major active public sector involvement in housing supply – dare we say “intervention”?

Which raises the question of whether we have our own tipping point on housing. 

While as a society we appear to be not highly disposed to demand widespread fundamental change, is there a tipping point when we will demand a fundamental change even in just the housing part of our status quo? [7]

If New Zealand does want change to reverse the ‘clear and growing inequality’, it is important for it to come early enough to allow well informed intervention, and not have it driven a decade or so from now through some local tsunami of populism with the sorts of anti-immigration, racist, and nationalistic attitudes which were so alarmingly apparent in the UK and US.

(Declaration of Interest - I must confess to the hope that Mr Trump does not try to force his persona or his philosophies upon us any time soon [8].)



For further information or comment on this article, please contact Dr Douglas Fairgray (doug@me.co.nz or 09 915 5514)


Notes:

1. Oxfam, 2016

2. https://newrepublic.com/article/138754/blame-trumps-victory-college-educated-whites-not-working-class

3. We recognise that this discussion presents a simplified view, and that housing and ownership is closely inter-related with many social, cultural and economic aspects, and has many dimensions. These are not ignored, just not addressed here.

4. http://www.eventfinda.co.nz/2016/dangerous-conversations-alan-johnson/wellington

5. http://www.branz.co.nz/cms_show_download.php?id=26b0bc2f2db848142ce566249fb6ddbd80e56c2f

6. There are no recent figures as to how many people or what share of the population share such concerns, so the term “many” is applied here with considerable poetic licence.

7. At my school - mid last century - the class philosopher wrote most wisely that “the status is nothing to quo about” (he actually carved it in a wooden desk top – saving to your desk top was quite different in those days). I think he went on to become an accountant.

8. Soon = pre 37,000 AD – I’ll be gone by then)

image source: https://s-media-cache-ak0.pinimg.com/236x/b5/b0/46/b5b04693801833c92fe637d1984c4840.jpg

   

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