Friday, February 21, 2014

Building profits versus building homes (Part 1)

From the Winter 1984 issue of the World Socialist


Housing is one problem of capitalism which has been a constant source of difficulty and is part and parcel of working class life. Few members of our class escape some aspect of housing trouble.Whether it is the complete crisis of homelessness, or the stress involved in keeping our homes through paying rent or repaying a loan. Most members of our class live in relative poor housing, some of which is within the bounds of adequacy, while the rest reflects the worst in living conditions.

Our quality of housing acts as good guide to the degree of suffering associated with the many other problems inherent in our class position such as bad health, poor nutrition and inadequate education. We can therefore accept that the problem of housing reflects the problems of capitalism. Accepting this, it is logical to assume that the solution to the housing problem is only attained through the solution of the problem of capitalism.

In the beginning an investigation into housing difficulties, one simple observation should help us overcome our surprise at the absurd nature of our findings: that production under capitalism, not least the production of buildings, is based on he ability to achieve a profit and not to fulfil human needs.

The first fallacy to dismiss is the belief that “housing shortage” is the beginning and end of the problem. As it so happens, there is currently in some areas of the world severe “housing shortage” and this has been the case at different times throughout history. This is not however the source of the problem, because if it were it could be logically assumed that there was some intrinsic inability of society to meet the housing needs of its populus. It has had plenty of time and resources to do so , so this is clearly not the full story.

The problem in the economically developed parts of the world is one of “allocation”. In other words, how best the housing stock is to be distributed to meet human requirements. A scant observation shows that the ability to pay is the deciding factor in gauging the standard of housing to which you are entitled. A walk around the slum areas of your city will tell you that it is the elderly, the mobile poor and the immigrants who are concentrated in the poorest housing stock. It is no coincidence that these lowest financial groups live in the poorest housing conditions; housing conditions which least meet their needs—the elderly with no care facilities, and young children in high-rise flats. It is also important to realise that this group and others such as the homeless, mental patients and ex-prisoners—those who make the poorest section of our class—have little chance of housing themselves, and must accept “being housed”. The limitation on their freedom puts them in a more degrading position than the urban poor in the shanty towns of Latin America and elsewhere who have at least built their own homes, even though living in the most incredible poverty.

Another fallacy which tends to cloud our conception of the issue is that which suggests that the housing problem has its basis in the inefficiency and lack of organisation of the building industry. It is true that this industry is not generally well organised in relation to output and the workers employed there; it is also true that at times it can operate in an inefficient manner. The fallacy is however that this is a cause of the housing problem rather than, like the housing problem itself, an effect of an inefficient and unrealisable social system. How can the construction industry possible be efficient when it is subjected to the demands of profitability in a system which produces an uneven flow of work, conflict between employers and employees, and most importantly, the fact that buildings which create the greatest profit in construction are usually the least socially useful and therefore take preference over housing?

In most of the economically developed parts of the world, the construction industry represents (if not the largest) one of the largest employers. Indeed if we include those involved in related industries such as building materials, the number of directly employed and dependent employed increases dramatically. In this current recession the economic stringency is clearly affecting the industry. With inflation of home prices coupled with the wage restraints of workers, our ability to buy property has been depleted. Of greater effect is the reduction of public spending of governments, as they are substantial clients for new buildings. In cases like American, most European countries and Britain, the government constitutes up to half of the building trade clientele. All these things have allowed for substantial unemployment in the industry: in many countries at any given time there is up to 12% unemployment, in this industry alone. This means that we have a situation where people still need housing while those who can build that housing are unemployed because of the economic recession. This is the best illustration against the argument of "house shortage" and it was shown in its most ironic form in Britain in the mid-1970s.

The National Federation of Building Trade Employers represents the largest private firms in the sector in the United Kingdom. In 1976 they initiated a campaign costing a quarter of a million pounds with the title of "Let us Build". The President of the Royal Institute of British Architects led the delegation of employers to the Prime Minister in an appeal for building work. So here was a situation where those who knew the business realised there was no shortage of workers, no shortage of materials, and no shortage in the demand for building work; there was however one thing missing—finance. Of course, these Building Trade Employers were not motivated by anything other than the threat to their profits, but their action did display the real source of the problem.

The building industries suffer the inevitable slump and peak cycle of capitalist society and therefore suffer the response of the owner of wealth to these trends. The study of building activity acts as a thermometer to the health of the capitalist economy.

Capitalists will, when profitability is high, move surplus value into fixed capital projects such as machinery, equipment and not least buildings. This opportunism of the possessors of capital is a good sign for the building industry and they have little difficulty in finding the resources, men and material, to meet the awakening demands. All is rosy in the garden. Conversely, when profitability is low for the capitalist, particularly the industrialist, in other words in times of economic depression, the first area to be abandoned is that of capital transfer into fixed capital projects. This is equally true of government activity as postponement or cancellation of construction is the easy, obvious way for a government to cut back on its spending. Furthermore, and of much more importance from a supply point of view, in a depression builders ignore housing construction to concentrate on the more profitable area of large building projects, often those of least social necessity.

The nature of the industry diminishes its ability to either prepare for or cope with the advent of slump economic conditions. The overwhelming majority of building firms are very small with 60% employing less than 8 people (taking European countries and America as studied areas), with only the top 2% each employing over 1,000 people. This reflects many features of the industry like localisation, the necessity of specialisation; and most importantly the necessary financial commitment if contractors are to take on the very large contracts. It is relatively easy to start a small building form as the initial capital outlay is low due to the low level of mechanisation and the number of hire firms for the more costly necessities such as mixers, scaffolding etc. All this means is that the small firms concentrate on small sites jobs, improvement work and similar projects. The other side of the coin is the traditionally high tendency for bankruptcy in building firms and in many countries up to a quarter of all industrial bankruptcies can be expected to come from building firms. All this reflects the fluctuation in the demand for building work and is not a general reflection on the inefficiency of these firms to do a good job. One major consequence is that this fluctuation of the building market means that most building firms hire and fire as demands dictate.

The type of unpredictable fluctuation suffered by the building industry puts it in a much more precarious position than most other areas of capitalist commodity production. It tends to attract peculiar action from an economic point of view. For example, one would expect (purely from the economic criteria of capitalism) that if there is inefficiency in an area of production increased investment would be undertaken to improve the productivity of labour. But, as this does not occur due to the accentuated fluctuation in work flow, we see a trend where, in most capitalist countries, the construction industry accounts for up to 8% of the Gross Domestic Product whilst only employing about 4% of all capital employed in production and service industries.

The conflict between profitability and human requirements is displayed in abundance in the construction sector. So what is the source of this conflict, how does it manifest itself, and most importantly, what is its effect on a basic human requirement—housing?

Although the methods employed in the building of houses are moving away from the traditional techniques to become more of an industrialised process, it has not been to a sufficient degree to tempt the big investment and concentration of resources from the large building contractors. Since the last world war, the major incentive for firms to put their profits back into fixed capital projects has been in civil engineering. Not coincidentally, this has been the area of the highest productivity in the same period; putting a nail in the coffin of the inherent inefficiency argument.

This trend has its roots firmly fixed in the evolution of capitalism. Contracts grew bigger with post-war development and the growth of motorways and high-rise buildings and the like. These contracts meant big capitalisation and therefore the big firms came into their own. These firms had the ability to invest in the heavy plant machinery necessary to take on these mammoth contracts and dig the foundations and understructures of the tall buildings. The large firms capable of such investment had a degree of monopoly in the new emerging sector where annual turnover and profits were attractive. This is the more productive sector. The only attraction left in housing for the big firms is in industrialised housing or the possibilities of land speculation in areas for home building, as the high cost of the specialised trades in traditional housing is unattractive to these firms. These large firms can also afford the expense of mobility to search for new and more profitable investment areas. The Middle East is an example of such an area, although indications are that there is currently a reduction in available projects there.

So what is left for the house building sector? The small-time builder picks up repair work and extensions and other small jobs connected with house maintenance. This is the life blood of the small one or two-man firms which might employ a couple of workers on a short-term basis as demand dictates. These types of small forms rarely get beyond this stage and few get the opportunity to become tender competitors in the speculative housing market. The larger firms are better able to meet the demands of the system-building of large housing projects, with the financial ability to buy large areas of land and to keep a large work-force of tradesmen occupied, as many have many houses at different stages of production. This type of housing is common to us all and is a feature of the large estates in the cities we live in. The result is large areas of monotonous housing similar and unimaginative. They quickly become modern slums with vandalism and miserable lives common features. The cause is commonly put down to being the disassociation of the designer to the building process, poor management practices and the inefficiency of competitive tendering, but this is just another way of saying that the job is completed in as short a time as possible as cheaply as possible, to ensure the maximum profit. 

The relationship between the housing problem, the building industry and our economic system has hopefully become clearer. The facts tell us the industry suffers many problems which have been related to one thing: the contradictions and conflicts of the system of capitalism. It is us as members of the working class who best know the problems we go through in order to acquire and keep the place we live in and the standard of accommodation we are subjected to. From this experience it is abundantly clear that the provision of housing is not related to our needs. The facts also inform us that capitalism prevents this from happening because of the economic obligation forced on those who do the building. No one decides we should live in slums.

If our slums are a product of the inability of the building industry to supply to us the type of housing we want, then this is because the building industries are clearly responding instead to the realities of capitalism. That reality is the profit motive and the cost is that human needs will not be met. This will continue for as long as this system continues and you will suffer your housing conditions and be aware of the housing conditions of the rest of our class as long as this system continues.
Brian Montague

1 comment:

Imposs1904 said...

Hat tip to Alan J. for transcribing the majority of this article.