As part of our ongoing effort to bring you the best LPE work on COVID-19, today we bring you this piece from John Whitlow, followed by a roundup of LPE COVID writing published elsewhere.
The poet Langston Hughes once wrote, “I wish the rent was heaven sent.” With a record 10 million Americans filing for unemployment benefits in the midst of the coronavirus pandemic, Hughes’ words resonate now more than ever. As we hurtle toward a public health and economic catastrophe, we must reckon with the sobering fact that our federal government is helmed by landlords, real estate developers, and financiers whose fortunes have been made – and whose worldview has been shaped – by years of predatory and extractive business practices. These practices prefigured the federal response to the pandemic and overdetermine the nature of the state-led economic rescue that is already underway.
Jared Kushner is widely regarded as the Trump administration’s behind-the-scenes point person on the coronavirus. Kushner, like Trump, inherited his family’s real estate holdings, updated the business model and expanded its geographical footprint. A New York Times expose from 2017 sheds light on the day-to-day workings of Kushner’s properties in the Baltimore area, where tenants live amidst chronically poor conditions and are subjected to a relentless pattern of petty and meritless litigation. In New York City, Kushner’s residential real estate portfolio has benefited from generous tax incentives and exploited loopholes in the state’s rent laws to remove units from regulation, in the process converting affordable apartments to luxury goods.The extraction of value that is at the core of Kushner’s business model is based on the multiplication of rents-debts and the intensification of inequalities.
The business practices of Kushner – like those of the real estate industry more broadly – are emblematic of the shifting relationship between the state and the market economy over the past four decades. Beginning in the 1970s, after years of intellectual mobilization by right-leaning economists, neoliberal policies began to take hold in the US and Western Europe. The redistributive functions of the state, established during the New Deal and expanded during the Great Society, were whittled down to a nub, resulting in a tattered safety net and exploding inequalities. At roughly the same time, capital began to move more freely across borders, and once-vibrant economic centers saw massive losses of stable, relatively high paying industrial jobs.
During this period, the power of finance capital grew and real estate became a motor of economic growth. In fact, global real estate now comprises the majority of the world’s assets (worth $217 trillion)(Check out Sam Stein’s book Capital City for more detail). The economic centrality of real estate is inextricably linked with financialization, which refers to the expansion of financial services and technologies, and denotes the process through which financial markets have been unleashed, empowering creditors and expanding private debt. Across the country, private equity landlords have bought up swaths of residential properties, preying on tenants of meager means, in the name of short-term value maximization. Though the spread of financialized real estate seems bland and technocratic on the surface, its effects – rent hikes, harassment, evictions – are dislocating and violent. In the words of economic geographer Desiree Fields, the end result is the plundering of “the spaces of existence of the working poor.”
For decades, the bipartisan commonsense has been that government should be run according to market principles. The current administration takes this logic a step further, governing the country like the financialized landlord of a recently purchased ‘distressed asset’: seeking immediate, short-term gain wherever possible – via massive tax cuts and the gutting of already-depleted social programs; nickel and diming workers and poor people; exploiting racist and xenophobic tropes to erode solidarities; seizing on – and expanding – regulatory loopholes; allowing vital public infrastructure to decay, particularly in poor and Black and Brown communities; and casting itself as the insurgent populist that is cutting through entrenched and inefficient bureaucracy.
As it turns out, this mode of governance is particularly ill-suited to deal with the type of crisis we currently face. Despite having a clear window into the near-term trajectory of the coronavirus (see Italy) and a blueprint for how to contain it with relative success (see South Korea), the Trump administration, reportedly under the guidance of Kushner, initially viewed it as a hoax. Then, like a slumlord confronted with well-founded complaints about serious structural conditions, the administration failed to take action. Little to no testing was done initially, leaving the scientific and medical communities at an information deficit regarding the pace and scale of the virus’ advance. This problem was exacerbated by the interplay between our profit-driven healthcare system and our under-resourced medical and public health infrastructure.
In late February, the precipitous decline of the stock market and the inevitability of the virus’ spread left the administration with no choice but to act. The uneven, incoherent federal response can be viewed as a reflection of the worldview of financialized real estate. President Trump’s first instinct, apart from repeatedly referring to the coronavirus as “the Chinese virus,” was to slash the federal payroll tax. This would have given workers in much of the formal economy a small infusion of cash; it also would have starved social security of funding. The $2 trillion bailout passed by Congress and signed into law by Trump is a boon to large corporations and Wall Street. The fear from progressives that Trump would outflank the Democrats from the left was belied by the paltry benefits offered to workers: a modest one-time check for $1200 and extended unemployment benefits.
Extreme unemployment and a frayed safety net will inevitably lead to difficulties for tenants, particularly those living in gentrifying housing markets, where rents already outstrip wages. While several states have announced moratoriums on evictions, thus far no significant state action has been taken to freeze rents. Against this backdrop, tenant advocacy groups – fresh off of a number of recent local and state legislative victories – have begun to organize mass rent strikes the likes of which have not been seen in over a century. The prospect of citywide rent strikes, unthinkable a month ago, has the potential to upend housing markets, to paralyze eviction courts, and, ultimately, to alter the way we think about housing’s commodification, which has been sanctified by decades of policies that have removed property from the reach of democracy.
During a stay in New York City in the midst of the Great Depression, the Spanish poet Federico Garcia Lorca, shaken by the inequality and alienation of his host society, wrote, “[t]he terrible, cold, cruel part … is Wall Street. Rivers of gold flow there from all over the earth, and death comes with it.” In recent years, these rivers have coursed with lucre from the real estate industry, whose representatives wield state power in much the same way that they made their fortunes – through predation, extraction, grift, racism. As a global pandemic bears down on us all, disproportionately impacting the most vulnerable, the bankruptcy of that project is on full display. And death comes with it.
LPE on COVID-19 Roundup Vol. 3
Amy Kapczynski and Gregg Gonsalves appeared on Democracy Now, where they talked about the ways market logic has created a woefully insufficient American healthcare system, and what kind of policies could build an alternative.
They also have another installment in their work on COVID-19 up at Boston Review- this one is called Markets vs. Lives – beating back the wave of hot takes suggesting that we ignore the epidemiologists in order to serve “the economy.”
“What is happening today has no analogue in mainstream economic analysis: a rapid retraction of our paid economy, and a vast expansion of the kind of unpaid work that has never been properly valued. We are doing it for deeply human reasons, with the best evidence we have at the moment: to save the lives of people we know, perhaps even our own, and to protect our health care system”
You can also follow the work they are doing to improve our response to COVID-19 as part of the Global Health Justice Partnership.
Up recently at The Guardian, Veena Dubal draws attention the choice facing Uber and Lyft drivers in the crisis: risk contracting the disease, or starve.
On Wednesday, Saule Omarova posted on Just Money about Money in the time of Coronavirus, calling for a contemporary analog to the New Deal-era Reconstruction Finance Corporation. She has also posted a memo on SSRN – “Why We Need a National Investment Authority.”
In the absence of a permanent institution specializing in capital allocation and management, the American public is forced to rely on ad hoc crisis-containment measures that are notoriously politicized, messy, and prone to corrupt influence by private interests. The task of national economic mobilization falls mainly on the U.S. Treasury and the Federal Reserve, whose modus operandi relies heavily on direct injections of public funds into—i.e., bailouts of—financial institutions and other private firms. As the 2008 experience shows, however, bailouts are difficult to execute without reinforcing the economically and politically damaging pattern of “privatizing gains and socializing losses.” Having a permanent federal agency with the authority and expertise to manage emergency bailouts would help to ensure that this process is handled in a transparent, democratically accountable, economically efficient, and distributionally just manner.
Some of her work with Robert Hockett (and clips of his other work on money during COVID) will be part of our next roundup.
Finally, Lev Menand and Ganesh Sitaraman have a summary of lessons we should learn form the Great Recession in the face of another massive economic contraction.