Are we witnessing a housing bubble?

House prices outside London and the South East rose by 0.8% in the last year according to the Office for National Statistics in London it was even greater at 9.9% this is an incredible rate of increase and shows a lot of the housing policies this government have brought in are aiding this property bubble. UK house prices have been rising at the highest annual rate since June 2010. The rise coincides with the government's Help to buy scheme, introduced to boost the housing market. But will the scheme create a new housing bubble? UK house prices have risen by 9.9% in the year to August, according to the Halifax's latest house price survey. The government's Help to Buy scheme, which began in April, allows buyers to put down a deposit of just 5%, and take out an equity loan from the government for up to 20% of the property's value, up to a maximum home value of £600,000. It is designed to help first-time buyers get on the property ladder and enable existing homeowners to "trade up" to larger properties by giving banks greater confidence to lend. Help to buy currently only applies to new builds but from January it will be extended to cover existing homes, with mortgages being backed by a government guarantee. The scheme got off to a "flying start", according to the Home Builders Federation (HBF) in June. But Help to buy has also been criticized for having the potential to artificially raise house prices, with Business Secretary Vince Cable warning of "serious inflationary pressures". Experts give their views on whether help to buy risks creating a new housing bubble. Dr Beverley Searle, research fellow at the Centre for Housing Research, University of St Andrews Help to Buy, or any intervention which helps pay for housing, will inevitably create a housing bubble. Providing assistance with the purchase of housing artificially props prices up. We have witnessed this twice before. When it became easier to borrow money during the 1980s house prices rose. Even after the 1990s downturn the market just kept finding ways to lend people more money, allowing prices to rise again. If people cannot afford to buy a home because they cannot afford to save for a deposit, then there is something fundamentally wrong with the housing system. The government is clearly acknowledging this by providing an additional "deposit loan". For prices to stabilise there needs to be a significant increase in the supply of housing for sale and rent and the market given time to adjust. Even though Help to Buy is aimed at new build properties, it will interfere with this adjustment process. It seeks to encourage high levels of demand, with only a very limited increase in supply. The housing market has failed, it needs government intervention, but this should be in supplying housing people can afford, not letting them borrow more money for housing they cannot. Quite clearly this is adding some of the growth we are seeing now in the UK but will this last? With the UK’s rate of profit still not recovered to anywhere near what it was like before the great recession and there seems to be no will to revive the rate of profit. Housing is one way of boosting credit but I can only see this being a short term fix. The next boom is coming which will be followed by another bust. Due to the unfixed contradictions of capitalism which are always there a bigger crisis is not far away.

The bankrupcy of economic prosperity

As capitalism lurch's from one crisis to the next we are left wondering is this system the best that we can use for all ?

Fact that capitalism has periodic and systemic faults built into it with many contradictions deep rooted that it finds hard and often cannot solve itself in my view renders capitalism a bankrupt system. A system based on exploitation and greed by the few over the many. It simply cannot provide for all of society. What Marx called the army of reserve workers is a tactic created by the capitalists to keep a hold on workers wages by pitting workers in work to those out of work with the statement if you dont want to take a pay cut to keep your job we have hundreds and thousands waiting in reserve who will be willing to work for less than you do. This is a threat and the threat of the doll queue keeps the working class's wages down so the profits of the rich continue to rise as their crisis deepens.

Built into capitalism as i said are periodic booms and busts as they are known to many. Upturns and downturns. These can be caused by various contradictions in the modes of production and so on. But within each boom therea re the seeds sown for the next bust and vice versa. This is the nature of capitalism the circumstances for the next crash are already there when production begins to pick up again. Its a continuous cycle of deepening crisis's in capitalism.

Let us briefly sum up our sketch of historical evolution.

I. Mediaeval Society — Individual production on a small scale. Means of production adapted for individual use; hence primitive, ungainly, petty, dwarfed in action. Production for immediate consumption, either of the producer himself or his feudal lord. Only where an excess of production over this consumption occurs is such excess offered for sale, enters into exchange. Production of commodities, therefore, only in its infancy. But already it contains within itself, in embryo, anarchy in the production of society at large.

II. Capitalist Revolution — transformation of industry, at first be means of simple cooperation and manufacture. Concentration of the means of production, hitherto scattered, into great workshops. As a consequence, their transformation from individual to social means of production — a transformation which does not, on the whole, affect the form of exchange. The old forms of appropriation remain in force. The capitalist appears. In his capacity as owner of the means of production, he also appropriates the products and turns them into commodities. Production has become a social act. Exchange and appropriation continue to be individual acts, the acts of individuals. The social product is appropriated by the individual capitalist. Fundamental contradiction, whence arise all the contradictions in which our present-day society moves, and which modern industry brings to light.

A. Severance of the producer from the means of production. Condemnation of the worker to wage-labor for life. Antagonism between the proletariat and the bourgeoisie.

B. Growing predominance and increasing effectiveness of the laws governing the production of commodities. Unbridled competition. Contradiction between socialized organization in the individual factory and social anarchy in the production as a whole.

C. On the one hand, perfecting of machinery, made by competition compulsory for each individual manufacturer, and complemented by a constantly growing displacement of laborers. Industrial reserve-army. On the other hand, unlimited extension of production, also compulsory under competition, for every manufacturer. On both sides, unheard-of development of productive forces, excess of supply over demand, over-production and products — excess there, of laborers, without employment and without means of existence. But these two levers of production and of social well-being are unable to work together, because the capitalist form of production prevents the productive forces from working and the products from circulating, unless they are first turned into capital — which their very superabundance prevents. The contradiction has grown into an absurdity. The mode of production rises in rebellion against the form of exchange.

D. Partial recognition of the social character of the productive forces forced upon the capitalists themselves. Taking over of the great institutions for production and communication, first by joint-stock companies, later in by trusts, then by the State. The bourgeoisie demonstrated to be a superfluous class. All its social functions are now performed by salaried employees.

III. Proletarian Revolution — Solution of the contradictions. The proletariat seizes the public power, and by means of this transforms the socialized means of production, slipping from the hands of the bourgeoisie, into public property. By this act, the proletariat frees the means of production from the character of capital they have thus far borne, and gives their socialized character complete freedom to work itself out. Socialized production upon a predetermined plan becomes henceforth possible. The development of production makes the existence of different classes of society thenceforth an anachronism. In proportion as anarchy in social production vanishes, the political authority of the State dies out. Man, at last the master of his own form of social organization, becomes at the same time the lord over Nature, his own master — free.



extracts from socialism utopian and scientific chapter 3 history of materialism by Frederic Engels

Why liberals havent delivered real change

This excellent article from socialist alternative the US part of the CWI teh Committe for workers international crossed my path earlier and deserves sharing here i thought.

By Brandon Madsen

In the era of austerity, many wish for a return to the golden age of American liberal capitalism. But it’s not coming back. Here’s why - and what we can do about it.

In the current age of unprecedented attacks on working people – tax cuts for the rich, budget cuts and layoffs for the rest of us – many long for a return to a different time.


There is nostalgia for the economic boom years following World War II, for instance, when soaring corporate profits were accompanied by a rise in real wages, at least for some workers. It is a longing for a time when it was theoretically possible to work hard and pay your way through college without being buried under a mountain of debt.


These major gains are usually considered – erroneously – to be a natural byproduct of ascendant American capitalism, handed down by good-natured liberal figures in government. In Europe, however, even further gains were able to be extracted by building mass trade-union-based social democratic parties, despite a less favorable economic situation.


Contrary to messages presented in the mass media, liberalism wasn’t actually the force responsible for this supposed golden age of progressive development in U.S. society; it was the reflection of a ruling class that was willing to compromise with working-class movements because it could afford to do so – to bend the capitalist system so it didn’t break.


Most of the reforms won in this era would not have been considered for a moment by the ruling class, much less implemented, without the massive labor struggles of the 1930s and ‘40s and the civil rights movement of the 1960s.


In a recent New York Times op-ed, Cornel West points out how today even the Democratic Party is unwilling to make these types of concessions: “The age of Obama has fallen tragically short of fulfilling King’s prophetic legacy. Instead of articulating a radical democratic vision and fighting for homeowners, workers and poor people in the form of mortgage relief, jobs and investment in education, infrastructure and housing, the administration gave us bailouts for banks, record profits for Wall Street and giant budget cuts on the backs of the vulnerable,” (“Dr. King Weeps From His Grave,” 8/25/11).


This didn’t start with Obama, though; it has been a bipartisan process taking place over decades. Democratic President Carter cut from social programs to expand the military, foreshadowing the Republican Reagan. Then it was a Democrat, Clinton, who ended the federal welfare program and twice unleashed U.S. military force on the Balkans. Now, the veil of capitalist liberalism has been ripped away, leaving only the open class warfare which has always lain just beneath the surface.


In Cornel West’s words: “The recent budget deal is only the latest phase of a 30-year, top-down, one-sided war against the poor and working people in the name of a morally bankrupt policy of deregulating markets, lowering taxes and cutting spending for those already socially neglected and economically abandoned. Our two main political parties, each beholden to big money, offer merely alternative versions of oligarchic rule.”


The Death of Liberalism


Chris Hedges, in his recent book The Death of the Liberal Class, calls out this weakening and all-but-disappearance of liberalism as a key trend in ruling-class circles.


He argues: “In a traditional democracy, the liberal class functions as a safety valve. It makes piecemeal and incremental reform possible. It offers hope for change and proposes gradual steps toward greater equality. It endows the state and the mechanisms of power with virtue. It also serves as an attack dog that discredits radical social movements, making the liberal class a useful component within the power elite.”


Hedges goes on to condemn the institutions that previously played this role – namely the Democratic Party, churches, union leaderships, the media, and academia – for purging radicals from their midst, backing the unbridled corporate assault on living standards, and thereby paving the way for a “permanent underclass” to be maintained in American society.


While all of this is true, the book fails to seek out or describe the profound shifts in global economics over the last three decades that are the underlying reasons for the shift toward an all-out corporate assault on society.


The truth is that the post-war liberalism of relatively stable long-term reforms is dead for good.


While tiny reforms may be won here and there through a traditional liberal approach, this method is extremely limited in its potential. Small, short-term gains today will either be reversed tomorrow or offset by much larger attacks in other areas – or both.


This does not mean that fighting for reforms is a waste of time. On the contrary, the point is that they must be fought for and won; they will not simply be given by the ruling class. Major reforms attempting to tackle the fundamental problems facing society will only occur as the byproduct of mass struggles that seriously challenge the wealth of the ruling elite or threaten the capitalist system.


Mass campaigning for reforms in the here and now can provide significant immediate improvements in the lives of oppressed and working people. Moreover, these struggles play an important role in building powerful movements and a growing base of activists that can challenge the system on a more fundamental level.


But for these reforms to be secured in a stable, long-lasting fashion requires breaking with the declining, crisis-ridden system of capitalism. Otherwise, capitalist logic will kick in and begin rolling back reforms in an attempt to boost corporate profitability.


The Origins of Liberalism


Because liberalism has many working definitions in the U.S., it’s important to take a moment to define what’s being discussed here. Liberalism, in its modern U.S. sense, is the idea that positive reforms for regular working people and the oppressed can be achieved gradually through the official channels of capitalist democracy. This idea received the greatest boost and most complete political expression during the postwar boom.


The aftermath of World War II had prepared the ground for American capitalism to ascend to unchallenged dominance for a whole historical period. The destruction of Europe and Japan’s industrial bases in the war left an economic vacuum that American corporations were eager and well-positioned to fill. The era that followed was one of unbridled American supremacy on the world economic stage, with the U.S. facing no meaningful competition outside of the Soviet Union.


At the same time, U.S. society was being rocked by huge labor and civil rights struggles from the mid 1930s to the late 1960s. These struggles grew to a scale that was seriously threatening to ruling-class interests, leading big business to seek ways of taking the wind out of the sails of the movement by strategic accommodation to a limited portion of the movements’ demands.


In this context, a section of the capitalist class concluded that reforms that would give at least a certain section of white male workers a halfway decent standard of living were not only permissible, but even necessary in maintaining a stable capitalist order. This was one way the ruling class tried to prevent workers from seeing the need for independent mass action or the ideas of socialism.


This was the historical and material underpinning that allowed liberalism to work its way into ruling-class institutions. Though the Democrats have never been a working-class party, in this era they were able to be pressured by their base into granting concessions to workers, and the necessity of doing so found ideological expression at all levels of the party.


Still, nothing was granted out of the goodness of the Democrats’ hearts. Social Security, the right to a union, unemployment insurance: all were won by massive, militant labor struggles in the 1930s. Civil rights were won by African Americans as a result of the tidal wave of protest and revolt in the 1950s and 1960s.


The role of the Democrats was not to support or lead these struggles, but to co-opt and absorb the force of the rising labor and civil rights movements, channeling them into a path relatively harmless to the capitalists.


They were able to do this skillfully enough that the movements in the U.S. – unlike in most of the industrialized world – never reached the stage of establishing an independent, mass working-class party. To accomplish this, a section of the ruling class agreed that, when pushed from below, it was necessary to grant enough concessions from above to keep the unions within the toils of the two-party system.


As Henry Ford II, speaking to his fellow capitalists, argued: “We must support the Democrats so we can continue to live like Republicans.”


The Failure of Liberalism


Today these kinds of concessions are no longer possible. Increased international competition has weakened U.S. capitalism’s relative position in the world economy. The U.S. has gone from being the world’s biggest creditor nation after the war to the world’s biggest debtor nation today.


With China and other economies able to out-produce, at a cheaper cost, many products the U.S. used to be able to make and sell on the world market, U.S. corporations are no longer achieving profitability primarily by investment in production and services – that is, in the real economy. Instead, U.S. corporations seek profitability by upward redistribution of wealth through financial speculation, cutting social spending, externalizing costs, downsizing their labor force, cutting wages, and reducing their tax burden. The ruling class has also used military interventions abroad to try to project geopolitical dominance, even as U.S. economic dominance continues to be undermined.


Together with the social promises left over from the previous postwar boom era, this is what has driven the massive expansion of the national debt. The U.S. ruling elite would have loved to reduce the working class to third-world conditions while maintaining a bloated military budget and low taxes on the rich, but they didn’t think they could pull it off without provoking a mass resistance that would revive the fighting traditions of the U.S. working class. This was something they were not willing to risk as long as they were still making a killing on the world market, so an incredible level of debt was their solution in the meantime.


However, this is not a state of affairs that can be sustained forever, and now there are sections of the ruling class that feel now is the time to settle accounts - especially given this recent era of unprecedentedly low class struggle in America, which makes them feel like they can get away with it.


The current economic crisis is the main fuel driving this process, putting pressure on the ruling class to act now, and it is also the main piece of cover the capitalist politicians use to justify themselves, with claims of the need for “shared sacrifice” and “fiscal discipline.”


This is the origin of the recent, seemingly out-of-nowhere bipartisan consensus on the need to make cuts to previously untouchable supports of the social safety net, like Social Security, Medicare and Medicaid. Disagreements mainly focus on the depth and pace of the cuts and on whether to provide political cover and the illusion of shared burden with nominal tax increases on the wealthy. The traditional liberal position is nowhere to be found.


In general, today the dividing line between “liberal” and “conservative” is blurred into obscurity, if it can still be considered to be present at all. Politicians like Obama who identify as liberal have a program of low taxes on the rich, budget cuts and austerity. In some cases, they will advocate for a more gradual acceleration of the attacks on workers’ living standards, but that’s the limit of their opposition.


On social issues such as abortion and LGBT rights, there still remains a distinction between the two parties. However, the domination of the Democratic Party by big business interests means that these issues tend to be addressed in the form of partial, ineffectual, top-down and temporary reforms that the ruling class can later point to as evidence that such social programs and reforms don’t work. This stands in sharp contrast to the empowering mass struggles that won civil rights in the first place.


The Socialist Alternative


Most liberal political theorists today rightly complain about deregulation, outsourcing, corporate tax loopholes and the rest, but they have a shallow analysis that leads them to a position of simply imploring the ruling class to change rather than understanding why they are incapable of doing so. They fail to recognize that capitalism was only able to provide the reforms it did in an era when U.S. economic dominance was completely assured.


Now, liberalism and the path of gradual reform are a dead end. Real gains for workers will require a fundamental break from the logic of the capitalists and their political system. As long as profit is king, workers will stay exploited. The only way capitalists will give meaningful concessions in this era is under the pressure of mass movements and revolts.


Working-class people need to organize independently for their own interests. This not only means building mass protests in the streets against the savage austerity measures and organizing democratically run unions in workplaces; it also means giving political expression to the needs and aspirations of workers through a party that represents working-class interests.


A new party of this sort could link up with and express the demands of labor and other social movements for immigrants’ rights, to protect the environment, for an end to war, and so on.


Though far and away the most important task in the U.S. right now is for working people to get organized and create a party that can be their own political voice, it will also be important to figure out what that party stands for.


Taxing the rich and corporations, single-payer health care, jobs programs, slashing the military budget, boosting education funding – many liberals share these demands. But they have the illusion that these are things which will be achieved within the framework of capitalism. This is an illusion that must be broken.


The only way to gather the money to implement and fully fund these types of social programs would be through massive taxes on the wealthy, and especially on the big corporations. But under capitalism, big business and the banks could simply threaten to take their capital investments and production to countries with lower tax burdens.


To prevent this it would be necessary to seize control of corporate and financial assets, to place them under democratic control and management by workers and the broader public.


In a word, it would require socialism. Democratic control and public ownership of the decisive sections of the economy would allow society to wield its immense resources, through planning, in the interests of human needs instead of corporate profitability. This may seem like a utopian dream, yet on a practical level it would be quite feasible to run society this way.


Corporations that are larger than entire nations manage to plan out their production, distribution, pricing and so on just fine. Supermarkets and other large stores use loyalty cards to track individuals’ purchases and plan for the future accordingly. Online shopping allows for automation and centralization in tracking purchase orders from around the world.


Basic economic functioning under capitalism already requires mass coordination according to a worked-out plan; it’s just that most have no say in that plan. Planning already takes place, but it’s fragmented, incomplete, undemocratic, and in the interests of increasing the wealth of a tiny, rich minority.


The resources exist to allow everyone to live a comfortable, fulfilling existence. Through a democratically planned economy it would be possible to massively increase the standard of living, provide food, housing, education, health care, transportation, child care, internet access, and a secure job to everyone, all while reducing the length of the working week to allow more time for participation in political and social life as well as personal development and leisure.


By retooling the economy around environmentally sound technology such as solar power, focusing on recycling and renewal of resources, and mobilizing the scientific community on tackling global warming, human needs could be met in a way that also protects the planet. A socialist world is not only possible; fundamentally, it is the only way forward out of the current capitalist crisis.


Of course, it will not be the capitalists or their politicians that will bring about this state of affairs, which would eliminate their privileged position on top of society. It will have to be achieved by the working class and the oppressed themselves, which is another reason it is crucial to have a mass party that genuinely represents the interests of workers and young people.


We have to begin to get organized right now, both to fight the immediate attacks and to build our forces so we can mount a serious challenge to the profit-driven capitalist system as a whole.