At some point in human history, there was no wealth, only survival based upon individual and collective capacity. Wealth was not a conceptual reality. But over time as communities formed through human settlements, land became a valuable asset. And still later, there came a prevalent belief that all wealth was derived from land.
This prevailing belief continued through the industrial period, until a classic struggle helped to identify the beginning of the diminution of land value. This was the struggle between Andrew Carnegie’s form of industrial capitalism and James Pierpont Morgan’s alternative finance capitalism approach. Andrew Carnegie engaged in a kind of cannibal capitalism, where, if continued likely would have destroyed this country. J.P. Morgan sought to halt this trend of constant technological upgrade, forced obsolescence, market dominance by a few individuals, industry consolidation, and price undercutting in an attempt to moderate the worst aspects of capitalism. J.P. Morgan prevailed.
With that victory, our capitalist economy was on the road towards a form of finance capitalism, which I would define, in its extreme, as capitalism where money no longer is a utility serving production and services, but rather a system where production and services serve the needs of finance. In other words, the accumulation of finance capital and the “products” developed to manage and profit from the different ways to package money, become ends in and of themselves. Money as a symbol of wealth becomes reified as wealth.
Fast forward to 2008 when The Great Recession offered proof of finance capitalism’s complete dominance, demonstrating, among other things: (1) the political dominance of financial institutions; (2) the political insignificance of the average citizen, and (3) the reality that we live, not so much in a democracy, but rather in a political system defined by Rousseau as an “elective aristocracy,” except that as opposed to a system where the self-serving Senators of Rome used legislation to enrich themselves, the corporate sponsors of government use our Congress, White House and other elected offices to enrich a very small minority of our citizens, a class of people whose interests seem to most closely align with our “elected representatives.”
And where is the evidence? Just follow the money. We all remember the $700 billion that was appropriated by Congress to bail out banks. That is a huge number. But it pales in comparison to the actions the Federal Reserve and Treasury Department employed to stabilize the banks. Estimates of the financial bailout begin at about $3 trillion but is more likely closer to $29 trillion (according to the Levy Economics Institute at Bard College). Of course, the real number will never be known, since much of the $29 trillion was advanced countless times to help banks meet short-term reserve and other requirements. Regardless, the number is huge and begs the question as to whether the money was targeted properly in order to best emerge from the Great Recession and put the economy back on a track towards full employment.
And while the Fed was enriching the banks at taxpayer expense, how were homeowners fairing during this time? After all, homeownership is supposedly the bedrock of our democracy, providing working and middle class families with the opportunity for wealth accumulation and fulfillment of the middle class dream that has so long been an important part of our American story. Well, while Congress was throwing relative crumbs for homeowner mortgage modifications, and the President was touting these programs on the public airwaves, banks, with the implicit and ongoing approval of the Department of Treasury, were frustrating all attempts on the ground by not-for-profits to work with distressed homeowners on mortgage modifications. For years, mortgage foreclosure counselors worked furiously with frantic homeowners, preparing exhaustive documentation, only to find after a few months that the person they were speaking with was no longer available and the bank had no record of any files. Or worse, banks would drag their feet and in six-month intervals tell homeowners that the documentation was stale and that the information already given would have to be re-submitted. Many engaged in “dual tracking,” confusing homeowners who thought they were in serious modification discussions with legal notices of foreclosure. Even after the implementation of mortgage modification rules by the Consumer Financial Protection Bureau went into effect in January 2014, complaints continued in struggling markets. In markets like New York City, where real estate has rebounded, the modification processes have improved, but now – a full six years after the start of the crisis – banks are pursuing foreclosures more aggressively.
Political actions, as much as real outcomes, are important indicators of political power. To state otherwise, would be like refusing to accept that the sun has risen on a cloudy day simply because it cannot be seen.
As the victory of finance capitalism has consolidated over time, wealth, to an ever growing degree, has been separated from land, allowing the average person to have the opportunity to own land. However, as we learned from the recent past, the acceptance of broad-based homeownership was predicated on the ability of the capital markets and its managers to make huge profits through the home buying/home selling, financing and secondary market processes. The wealth-building aspects of homeownership are now tied to how the operations of real estate markets serve the needs of finance capitalism. This has made most homeowners vulnerable to the vagaries of the market, along with the always present vulnerabilities to population shifts and elite class preferences for settlement and recreation. To help preserve some semblance of democracy and dis-incentivize the kind of destructive financing of the most recent past, there is a need for basic reform.
We are in a unique and pivotal time in our democracy. There is no stopping global development, but there is still an opportunity to strengthen and build local communities – the only form of social organization compatible with democracy, as so eloquently stated in so many ways by American philosopher John Dewey. There are many approaches to support the preservation and building of local communities. One innovative approach is being promoted currently by advocates of the so-called “New Economy.” An important part of New Economy’s agenda involves the development of Community Land Trusts as a community alternative to atomized and vulnerable residential neighborhoods.
In a Community Land Trust the use of land is regulated by community and public interest members who are dedicated to the principal that land is a commonwealth in which all of us have a stake. Those community and public interest members serve as trustees to ensure that the land is available, over the long term (some would say in perpetuity) to serve the needs of those who desire to take speculation out of the real estate market and by those who cannot afford to rent or own within the speculative real estate market. The Community Land Trust model is especially useful as a vehicle for working class people to live and prosper outside of the exploitative mechanisms of our political economy — disruptive and destructive mechanisms that have been causing the same chaos to our current system that Andrew Carnegie was causing in the 19th Century – only in a different form.
Re-defining the role and value of land through socially significant ownership mechanisms such as community land trusts is one very important start toward the kind of reform we need to save our democracy and minimize suffering from the innocent victims of predatory financing – the extreme, morally repugnant, and (likely) ultimate phase of finance capitalism.