A Nation of Inheritors?
A Review of the Asset Economy by Lisa Adkins, et. al.
“Riches were like [manure]: When it lay, upon an heape, it gave but a stench, and ill odour; but when it was spread upon the ground, then it was cause of much fruit,” Francis Bacon.
So I want to keep this entry short and sweet just like a little book I read by a team of Australian academics, titled The Asset Economy. I am not quite sure where to start after reading this book except to note that it definitely falls into the category of books that explain a phenomenon that is almost wholly unexplained, rather than a book that I sought out to read so as to be exposed to arguments that conflict with my views. The essential factor that I find so perplexing about contemporary political economy—often uncritically dubbed neoliberalism—is that if it is understood through the lens of a power elite engaging in commodification that ultimately encroaches on all spheres of life in ways that prove dizzying and unsatisfying, why is it so politically durable? Why do the vast majority consent to this elite project? Does it have to do with what Yanis Farofakis calls the gyges ring —new forms of commodification are wrapped in such alluring sorting technologies they are impossible to refuse?
According to these authors, all of these questions may be posed usefully on a stump speech to mobilize certain constituencies against plutocrats, but the Marxist and other left-wing tradition’s preoccupation with commodification, including Thomas Piketty’s popular account of inequality, detracts from the more fundamental problem, which they characterize according to the “democratization” of home ownership:
“[Existing theories] have difficulty comprehending why the problems that it highlights seem so intractable, and why the pro-asset inflation orientation of policymaking seems locked in place despite growing awareness of the [destabilizing] problems it creates….[We propose] that housing has played a key role in the creation of a middle class that is often seen as the backbone of social stability and that politicians….are reluctant to alienate…. neoliberal policies occurred in a historical and institutional setting where property ownership was already significantly democratized, and that they were at least initially successful on building on that legacy. This has created a specific middle class constituency that is deeply invested in the promise of asset appreciation.”
In spite of their criticism of Piketty’s work, the authors still start from his basic observation that the 21st century may quickly be becoming the Golden Age of the rentier to the point that Balzac’s dilemma newly resonates. It simply makes more sense for an ambitious person to marry into titles than to improve human capital and receive the requisite rewards in the labor market. Perversely, and belying the original intent of the Chicago school thinkers who promoted human capital theory, improvement primarily takes the form of managing assets, where human capital is just part of a diversified household portfolio. Yet, the “democratization”, or more accurately expansion, of asset ownership ensures that the new rentier does not benefit from any of the high brow leisure of the 19th century aristocrat written about in the Victorian novels Piketty mentions.
In neoliberalism, but not OG liberalism, active asset management is the name of the game. Critically, household asset management takes on Minskyian dynamics in precisely the way I learned in my States & Markets course, “Asset appreciation interacts in a mutually reinforcing way with the ability to borrow, leverage and make new investments. BUT the principle also works the other way around: asset depreciation interacts in a mutually reinforcing way the the declining ability to borrow, leverage, and make new investments (emphasis mine).” This is what is meant by the claim that it is commonly understood that asset appreciation of this kind is destabilizing. It is also what is responsible for lock-in effects regarding monetary policy as the authors emphasize in the conclusion on the preemptive fear of unleashing a depreciating spiral, “Central banks, for example are acutely aware that raising interest rates in order to contain the growth of housing prices is no straightforward matter; their anticipation of the potential fallout increasingly means they refrain from using this policy instrument.” That should settle the confusion among some why the Fed refuses to raise rates.
The political front is in some ways more interesting in that it clarifies the scope of the challenge. It is a convenient fiction, a bedtime story favored by the progressive left, that the 1%— “the millionaires and billionaires” *Bernie voice*— are responsible for the inequality that is so rapidly unraveling the American social fabric that took generations to build. The truth is far closer to the philosopher Matthew Stewart’s cover story in The Atlantic, titled The Birth of the New Aristocracy, which argues that a far larger professional class consisting of the merely affluent rather than the truly wealthy is to blame for this unraveling. Intriguingly, the common point of comparison is the aristocracy Stewart describes is steeped in the mythology of meritocracy, which like the active asset management of a broad segment compared to the passive rentierism of the Gilded Age noblemen, is more difficult to find rationales to oppose. In this sense, there is an important critical, almost Foucauldian, dimension accompanying the expansion of asset ownership and discourses of merit. In the neoliberal age marked by wage rigidity and asset inflation, power has not transformed into something more benign, but rather more pernicious because both the virtues and evils of power expand in like proportions when both the assets and cultural capital given to the new meritocrats are democratized.
Many people will remain locked out, and indeed, if the meritocrats refuse to capitulate and reverse wage rigidly, asset inflation logic, we have reason to believe that the proportion of folks left out from a stake in the game will steadily grow over time. Contrary to the neoliberal aim to facilitate political path dependence on par with their dismantling of labor unions, articulated best by Thatcher’s Chancellor of the Exchequer to mold Britain into “a nation of inheritors”, an honest analysis of contemporary forces suggests increasingly absurd housing markets that will be difficult to explain away by natural scarcity or insufficient supply. Facing this absurdity alone, a growing number of aspiring entrants will instead be left bewildered staring at the Dream hoarders, those who due to accidents of birth fell on substantial inheritances that allowed them to climb the escalator of asset appreciation.
The likely composition of these groups shines a light on the opportunity that could present itself if only a gifted politician is able to articulate the nature of the discontent driving populist fury and worries the enlightened business readership perusing the pages of The Economist and The Financial Times. I suppose the Chinese aphorism that every crisis is in part challenge and in part an opportunity is broadly correct. The challenge has already been stated in clear enough terms—it involves a sizable political constituency that is both sophisticated and high information. A left/right coalition that sought to unite say, my parent’s family friends on the left and right, would inevitably fail because that project to unwind the Fed’s unprecedented balance sheet expansions, and to reorient the economy back toward the Fordist inclination for wage inflation, is universally opposed to their material incentives. The result is that, in a twist of events that would surely surprise the monetarist reformers, the Fed has been repoliticized, but covertly, so as to ensure the asset inflation of Red and Blue America alike.
And yet there is also opportunity in precisely the way a recent LRB piece on the youth revolts of “millennial socialism” confronting the Anglo-American world, titled Bloodly Furious, indicated. Those members who are locked out from playing the game may also have the advantage of seeing the flawed strategies of the individual players more clearly. In the U.S., the groups that I imagine to form this coalition are currently so disparate they might as well occupy different continents. The first are the rural areas of the country, which are mostly populated by Trumpian populists, who protest being shutout from urban property markets by lashing out against the meritocrats. The French sociologist, Christophe Guilluy, understands this dynamic well. Hillary Clinton also understood it, but in a characteristically tone-deaf way when she offered the self-consolation that she won the dynamic parts of the country. The employment model of class so thoroughly dominates that we tend to think of the stagnation of these areas under the lens of dysfunctions that predominate when work disappears. While this may explain some Rust Belt towns, the frame of analysis advocated by the authors, suggesting that class is more fundamentally based in access to property titles in the right locations, is likely a more encompassing perspective that may explain why Trump retains support in small town America that appear to do well according to conventional income and employment statistics.
The second group, minorities and especially African Americans, is more familiarly discussed on the basis of exclusion and resulting wealth disparities. Though it is revealing that the most influential work of scholarship on the inner-city communities where many minorities reside was titled When Work Disappears, and not the alternative title When (Housing) Capital Disappears, which the academic literature understands is a more precise diagnosis. The third group, radicalized millennials, is the one that animates the most reflection from editorial columnists at legacy papers because it has the potential to be the largest and the most destabilizing. There is also an essential question of fairness—what does it mean that we are depriving an entire generation from the satisfaction derived from achieving basic life events all to squeeze an extra $200,000 of equity from our homes?
So the great challenge of Anglo-American societies should be easy enough—just a matter of conveying a vision that can unite the young, minority, and rural excluded from building wealth. But if the travails of democracy in Latin America and Southeast Asia are any indication of America’s future, as asserted in a provocative journal article on the Brazilianization of the world, it stands to reason that observant citizens should not wait until that coalition is an absolute majority to reverse the asset logics of neoliberalism. The neoliberal architects that sought to create a nation of inheritors were ultimately right, but simply misguided on the sustainability of their policy project. It is an unambiguous good thing to expand the proportion of people who have an ownership stake in the continued prosperity of society. For this reason, if the current animus is to be expressed productively it must be co-opted by the principle beneficiaries who reclaim the virtues of self-interest properly understood. There must be a critical mass who recognize that an alternative course favored by this coalition will result in a hit to their asset portfolios, but are nonetheless motivated by a Burkean sensibility to pursue social democracy for its stabilizing effects. The meek may very well inherit the Earth, but they cannot do so alone.