From Public Housing Soc Market

J Kemeny

• Publisher: Routledge
• Year: 2002
• eBook ISBN: 9781134888894
• Topic: Physical Sciences
• Subtopic: Geography
• Index: Geography

Jim Kemeny develops a conceptual framework to present a critical study of comparative rental markets. The framework centres around the concept of the process of maturation of cost rental housing and two policies for handling this which have been adopted by industrial societies. These are, firstly, the Anglo-Saxon "dualist" system, seen in Great Britain, Australia and New Zealand, and secondly, the Germanic "unitary market" system, seen in Sweden, The Netherlands, Germany and Switzerland. Using a comparative approach based around international case studies, Jim Kemeny shows how each system stems from different power structures, is governed by different policy strategies, and is informed by different ideological views of how markets operate. Offering a radical critique of the orthodox view, it is argued that the time is now right for English-speaking nations to abandon state control over cost renting but allow to it to compete directly with profit renting, as in the "unitary market" model. International in scope, this volume should be of interest to researchers in housing, sociology and related fields.

Part I: From implicit anglo-saxon model to a theory of change

Introduction

With the emergence of two superpowers after the Second World War, Western Europe came under the cultural influence of the USA and its English-speaking allies. Cultural dominance in Europe is nothing new. The Roman Empire, pre- and post-revolutionary France, and, for periods, Austria, Germany and other countries have exerted powerful influences on the cultural, political, social and economic organisation of European society. But the post-war anglo-saxon¹ influence has been unprecedented both in its continental-wide impact, extending since the end of the 1980s from the Atlantic to the Urals, and in the speed and depth of its penetration.

This has been possible for a number of reasons. Improved communications and electronic media have given cultural dominance a more immediate and compelling impact. It has been further strengthened because US culture and language are shared by and originate from two European countries, one of which, the UK, is a major European power in its own right.

Cultural dominance has taken clearest manifestation in the spread of the English language and the increasing influence of US and British culture, including popular music and fashions, on European society. The influence is most tangible in societies which had, until 1945, been under German and Austrian cultural influence for several centuries. In such societies—and Sweden is a case in point—Berlin and Vienna have been replaced as sources of cultural inspiration by New York and London. In everyday life this is most evident in changing tastes regarding popular urban meeting places: the decline of the previously ubiquitous Konditorei, or coffee house, in such countries has been matched by the rise of the hamburger bar, and more recently by those owned by the big international chains, such as McDonald’s.

More invidiously—yet much more fundamentally—there has been a largely unconscious assimilation of political and ideological perspectives. This has been most obvious in the impact of the new conservatism during the Reagan-Thatcher era. But that in turn is but the more dramatic and striking manifestation of deeper and more enduring political and ideological influences.

The spread of anglo-saxon conceptions of the profit-driven market is a classic example of this cultural imperialism. It contrasts sharply with the model of the market that has developed in Germany and a number of other countries. According to this ‘social market’ model, all markets—including those that are made profit-driven by hindering competition from non-profit organisations—must be policy-managed. In the social market model the economy is not seen as a sheltered preserve for unrestrained profit-making but should be exposed to direct competition from non-profit organisations. Both economic and social imperatives are recognised as of equal importance in the structuring of markets.

The starting point of this study is the way in which neo-liberalism has impacted on—indeed moulded—the dominant research agendas on comparative rental housing. I will first argue that current conceptions of European rental systems in comparative housing research are implicitly based on the profit-driven model of rental markets. In this model, social renting is kept as a government controlled residual form of housing for those least able to obtain housing provided by the profit motive. The alternative social market model is based on encouraging non-profit rental housing to compete directly with profit renting in order to dampen rents and provide a source of high standard housing on secure tenancy terms.

In applying an unexplicated neo-liberalist conceptual framework to all countries, much comparative rental housing research unwittingly contributes to the political debates in such a way as to foster and encourage the adoption by European countries of profit-driven rental markets that are sheltered from competition from non-profit rental provision. The corollary of this is that the social market system is not even recognised as existing, let alone highlighted, analysed and understood.

This is most dramatically illustrated by the impact of anglo-saxon housing ‘solutions’ on policy towards rental housing in post-communist Eastern Europe. The geo-political reality for these countries over many centuries has been that they have drawn inspiration from whichever Slav or German state happens to be politically and militarily dominant. The collapse of half a century of Soviet dominance in 1989 created a political and policy vacuum that was not filled by Prussia, Germany, Austria or some other German state, as had often been the case during historical periods when Russia was weak. Instead it was filled by the anglo-saxon dominance that was already established in much of Western Europe by that time.

Policies of privatisation, which result in the residualisation of the social rental stock have been adopted wholesale by East European countries, without any regard to the existence of possible alternatives, such as converting state-owned housing into smaller and competing autonomous non-profit housing organisations, whether owned by trusts or rental co-operatives. Indeed, anglo-saxon dominance has been so total that there is barely any awareness that an alternative to neo-liberalism even exists, let alone that any debate or discussion is possible over the strengths and weaknesses of the social market alternative.

The main part of this book comprises an attempt to develop a conceptualisation of rental markets and their historical development since 1945 that escapes from this anglo-saxon dominance. The dominant perspective in comparative rental housing research views rental systems as fundamentally more or less homogeneous with differences between countries treated as variations. This convergence model is inadequate since it attempts to force very different rental systems into the same analytical framework. As a result, the similarities are highlighted and the differences minimised and their significance is lost.

In place of this, I develop a view of rental systems in terms of the divergence of two principal types of rental systems, the anglo-saxon ‘dualist’ system and the germanic ‘unitary market’ system. These have corresponding policy strategies that I term ‘command’ and ‘market’ respectively. These policy strategies generate quite different sets of problems that must be overcome. The principal difference is that a ‘rentdifferential crisis’ is produced in the dualist system while a very different ‘rent harmonisation problematic’ is produced in the unitary system. Each system is informed by a specific ideology and view of how markets operate and is the product of different kinds of power structures. I also suggest—though much more tentatively—that each system tends to be associated with a particular kind of welfare state.

The conceptual framework presented in the following pages must therefore be seen as part of a wider endeavour to develop more conceptually aware housing research. This can best be done by doing such research rather than simple exhortation. The study must therefore be seen as an attempt to escape from the barren empiricism with its implicit—and therefore unrecognised—theory that dominates comparative rental housing research and that pervades housing research in general.

1 Profit markets and social markets

INTRODUCTION

The profit and social market models represent contrasting approaches to social policy. The profit market model has its origins in the gendered conception of what used to be called ‘economic man’,¹ although later with the rise of sociology this became transformed into the wider gendered concept of ‘rational man’. The social market model takes a more nuanced view of human nature. Economic activity cannot be seen as separate from other activities. Nor can any pure type of rationality be identified as the sole or even the major motivation for behaviour. Rather, different dimensions of personality and character are seen as constituting an indivisible whole. Economics, politics, culture, and the whole range of human experience meld in a complex and integrated symbiosis.

These two models of human behaviour underpin contrasting theories of the functioning of markets and are expressions of more fundamental world views or paradigms. Liberalism is, along with Marxism, an example of a one-dimensional economistic explanation of social phenomena in which other dimensions—social, political, cultural are subordinated. But in contrast to Marxism, liberalism sees markets as not just economically determined but more narrowly still, as driven purely by the profit motive.

The appalling consequences of the industrial revolution, when liberalism as a political ideology held sway, led to a massive reaction and to the attempt to develop alternative political economies. Two alternatives came to prominence. These were Keynesianism in which the state attempted to meliorate the effects of unrestrained profit-seeking by counter-cyclical measures and by constructing a safety net social security system and communism which attempted to replace the profit motive with state control.

Keynesianism therefore attempted to meliorate the social effects of unrestrained profit-seeking, while communism tried to replace it with state monopoly capitalism. So neither of these models escaped the economic determinism that underlay liberalism’s market theory. Both models built implicitly upon a separation of economic from social, cultural and other dimensions of social structure.

Another, less well-known, model that was not economistic but multidimensional did emerge—the social market model. It was developed in Germany and, like liberalism, it viewed markets as governed by profit-seeking. However, profit-seeking was understood in its broadest sense of the pursuit of self-interest. This was understood to include private non-profit and self-sufficient forms of provision. It was also, crucially, seen as requiring state intervention to ensure that social as well as economic goals were attained.

The social market model underpinned the ‘German miracle’ but became little known and even widely misunderstood outside Germany. The failure of the communist model, the inadequacy of the Keynesian model and ignorance about the social market model have all contributed to a resurgence of interest in liberalism and the profit motive as governing markets. The last decade or so has therefore seen the re-emergence into respectability of the concept of the misnamed ‘free’ market

The concept of the social market not only provides a successful alternative model to the profit-driven market but, more importantly, has been particularly successfully used in the social construction of rental markets that differ fundamentally from the anglo-saxon model. This chapter considers the intellectual origins of the concept of the social market and the way in which German market theorists developed the social market model that came to underly the ‘German miracle’. It then outlines in broadest terms the principal differences between profit and social market conceptions of rental policy.

MARKETS AS SOCIAL INSTITUTIONS

The peculiarly strong hold that laissez-faire ideology had on social sciences in the nineteenth century derived from the ideological dominance of a combination of a patriarchal ‘rational man’ ideology and Social Darwinism at a time when the social sciences were still in their infancy. The concept of a ‘free’ market is one in which the profit motive—pursued under conditions of competition between profit-seekers—results in the balancing of demand and supply. It assumes that markets are detached from the impact of social and political institutions and from social relationships, whether in terms of class, ethnicity, gender or other dimensions of social structure. Most particularly it assumes that markets operate best when they are detached from the state and from legislative and political intervention.

The idea that economic institutions are, or should be, untainted by the social, political and legal structures of which they are a part must be understood in the context of the long-term process of social differentiation in which the economy in particular has come to be increasingly separated out from other aspects of social structure. The degree of autonomy of a market economy has come to some extent to be a measure of its development. Classical sociology has been much concerned to describe and explain this process of differentiation. Emile Durkheim, Max Weber and other sociologists saw the emergence of the market as a product of industrialisation that was driven by the process of social differentiation.

Max Weber, for example, in Economy and Society described how the factory system emerged out of the less differentiated household economy to constitute a separate institutional sphere. In the same way, bureaucracy was seen by Weber as a ‘modern’ institution, epitomising ‘rational’ behaviour. According to this, administration as a specific task is institutionalised and detached from such extraneous ‘social’ influences as friendship loyalties, charismatic leadership, and family and kinship obligations.

Although Weber did not fall into the trap of crude economism, it is but a short step for neo-liberalists to argue that markets contain imperfections because they are still tainted by ‘social’ influences of one sort or another. They therefore retain elements of underdevelopment because they have not become sufficiently differentiated out from the wider social structure into specialised economic institutions. This is a common explanation of, for example, the existence of nepotism and corruption in Third World societies.

The solution to dealing with such ‘imperfections’ in markets is therefore to increase exertions to purge the market of all ‘extraneous’ influences. It is this that explains, to some extent at least, the vehemence with which neo-liberalists insist that the state withdraw from market activities. Yet paradoxically, few, if any, neo-liberalists would go so far as to argue that state involvement in markets can be totally eliminated: for example by repealing all legislation that impinges however remotely and indirectly on market behaviour.

Despite this, neo-liberalism’s main impact on social policy has been to attempt to remove what are considered as extraneous social and political elements from the functioning of markets, principally through minimising state involvement in markets. The apparent rationale for this is that markets are more efficient the less state interference there is.

However, the argument to minimise state intervention is not what it first appears to be. The profit-driven market can only operate effectively if non-profit forms of economic activity are suppressed or discouraged from developing in the first place. It might therefore be more accurate to say that profit markets become more profitable the more the state intervenes to encourage profitability and the more the state discourages forms of organisation that are non-profit based and that might compete ‘unfairly’ to reduce profitability.

A serious consequence of creating a profit-driven market is that social problems become more acute. It is then often politically expedient and sometimes socially necessary to construct public sector safety nets to take care of those who become the casualties of the workings of the profit market. So alongside the profit market there develops a state nonprofit sector that acts as a safety net for the profit sector. Instead of allowing non-profit forms to compete directly with profit forms, nonprofit forms are hived off from the market and organised as a residualised state sector.

Neo-liberalism therefore displays two rather different and somewhat contradictory tendencies. On the one hand markets are desired to be as heavily profit-determined as possible. On the other hand the consequences of this are that the state is pressured to construct a set of safety-net provisions. These are kept as negligible as possible to discourage their use.

How extensive they become depends largely on the power structure of society and the relative balance between the desire to maximise the size of the safety net on the part of those representing the disadvantaged in society and the desire to minimise it on the part of those who wish to minimise collective responsibility for disadvantaged groups. However this conflict may be resolved, the result is that a curious dualism emerges between a largely unregulated profit-driven market that is sheltered from competition from non-profit forms on the one hand and a tightly controlled state sector that is based on non-profit forms of social organisation on the other.

Weber’s description of the process of growing autonomy of economic and organisational spheres in society does not necessarily lead to the interpretation that this process needs to be driven to its extremes in order to enhance the development of society. Weber himself had a much more nuanced understanding of the relationship between different spheres of activity in modern society. This tradition has remained strong, especially in sociology and political science.

The concept of the ‘free’ (or more accurately ‘profit-driven’) market that has emerged from the disgrace it has suffered since the end of the Victorian era has come under increasing conceptual and theoretical attack by sociologists and political scientists since the late 1980s. Political scientists, such as Bowles and Gintis (1990), argue that markets can never be understood without reference to the exercise of power, both in its narrower political sense and in more general social terms. Fligstein (1990) argues that corporate strategy is not governed primarily by market considerations but rather by the strategic drift of public policy.

Sociologists tend to focus on the importance of informal relationships as a key enabling dimension of the functioning of markets. Silver (1990), for example, argues that friendship is not an extraneous social factor that intrudes on and distorts market processes but on the contrary underlies them, since it provides the basis for the spread of information about prices and quality without which markets would be much more ineffective. Granovetter (1973, 1983) argues that weak ties perform an essential informational function in enabling markets to operate at all. In short, the very functioning of a market is fundamentally dependent upon—and therefore cannot operate without—the existence of active networks of informal information based in the final analysis on relationships, friendships, gossip, rumour and mutual back scratching. This in turn is generated by informal relationships, between the insiders of different institutions in the give and take of news and information in informal settings such as bars and restaurants, and mediated by news-culling through networks of friends and relatives.

More recently, Granovetter (1985) launched a frontal assault on the assumption that economic institutions such as markets can be analysed or understood outwith the social structures of which they are a part. He coined the term ‘embeddedness’ to sensitise analysis to the fact that markets are inextricably part of society and that the structuring of the market is directly formed by the values, power relationships, and institutional arrangements of that society, both in terms of the social institutions out of which markets originally emerged and in terms of existing institutions with which market organisation co-exists and operates. Warner and Molotch (1993) use the concept of embeddedness to c...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Tables
• Preface
• Acknowledgements
• Part I: From implicit anglo-saxon model to a theory of change
• Part II: Case studies
• Part III: Research and policy implications
• Summary and conclusions
• Glossary of concepts
• Notes
• References