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Policies for the crisis – housing

The worsening recession is taking an increasing toll on jobs, mortgages and home ownership, and threatens to bring down the entire banking system at the same time. Housebuilders are laying off workers, mortgages are virtually unobtainable while many owner-occupiers cannot afford to maintain payments and face the prospect of repossession.

Mark Clare, chief executive of Barratt Developments, one of Britain’s biggest housebuilders, says the company will lay off 1,200 out of its 6,700 employees. Yesterday, he warned that job cuts across the industry could reach 60,000 out of 300,000 people employed in the sector. The 20% fall in building jobs is only part of the story as it does not take into account the secondary effect on the supply chain, comprising manufacturers and suppliers of kitchens, solicitors, mortgage advisers, and estate agents.

Add in a free-fall in house prices – they are predicted to slump by up to a third – and you can see why the disintegration of the entire British banking system is gathering speed. The banks are loaded with bad debt, the result of playing fast and loose with the global financial system and giving mortgages to anyone who asked, irrespective of whether they could make the payments. Now the banks are finding it virtually impossible to raise new capital to shore up their balance sheets and are staring at the abyss. In the US, shares in major mortgage holders Freddie Mac and Fannie Mae have slumped to their lowest level since 1991. They hold a half of all American mortgages.

As the onset of recession turns to slump on a scale unprecedented in history, some are invoking the ghost of Lord John Maynard Keynes, who among other things advocated the printing of money by governments to stimulate growth. They despondently call for a unified approach by the world’s governments and central banks to reflate the economy by reducing interest rates, reintroduce controls on capital movements and "rebalance" the relation between capital and labour.

This is simply not going to happen under conditions of a fully globalised economy and financial system, which operates to a great extent outside of the control of central banks and governments. Just witness the paralysis at this week’s G8 in Japan for verification. The Bank of England’s Monetary Policy Committee yesterday ignored the frustrated Keynesians, and sat on its hands, unable to raise interest rates for fear of worsening the recession, or lower them for fear of accelerating the prices spiral. No solution can be found that won’t worsen the already desperate state of the economy.

Fortunately, the citizens of the United Kingdom include many millions who have lived their lives following different objectives. Those who have worked in the NHS, in education, in the social services, even the BBC, and, before they were privatised, the railways, buses, electricity, gas, post and telecommunications - and the rest of us who have used their services are aware that things can be organised differently to meet needs rather than make profits for shareholders.

It is to those millions to whom these policies are addressed, both individually, through their communities and the many campaigning organisations including unions, to which they belong.

In the meantime, we should campaign for a collective refusal to pay what amounts to mortgage debt blackmail. It’s time to turn the tables on those responsible for the credit crunch by crunching back.

Gerry Gold
Economics editor
11 July 2008

Laurence says:

Regarding the present situation with developers not proceeding with their plans to develop housing sites, one answer would be to transfer the land to the local council with government assistance. Each district could create a Land Community Trust whereby the developers would be employed by the Trust to build houses for the needs of the people. For example, in the district of East Sussex, there are 2000 people on the waiting list. Houses could be built for £75,000. The occupants would purchase at cost, plus pay a ground rent to the Trust. The occupants could only sell the houses back to the Trust. They would be paid the current cost of building such a house. This system would do away with the need of creating a so-called ladder.

Money on deposit from council house sales could be used for the project and the capital designated by the government for affordable housing could also be used for the scheme. I enclose some advantages and designs in the attached document.

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