I’m going to start boasting now. So if you’re the type that turns off the computer when someone posts a Facebook picture of their dinner or their cat or both – look away now. I got an O’Grade in something when I was younger. Yeh, hard to believe, but it was in economics. I found it quite simple. If something wasn’t a problem of supply then it was a problem of demand. Multiple choice A or B. Fifty-fifty chance of being one or the other. I might have been thick but I wasn’t daft.
Take the plunging oil price. A problem of oversupply. Saudi Arabia, Russia and the US, the big three are swilling in the stuff, and the latter has frackers ready to scale up production when the global price of energy increases. Iran is scaling up oil production. The UK with less than one percent of oil production isn’t a global player, but for Scotland mooted tax revenues would provide around ten to fifteen percent of total revenues it hurts, but let’s be crude, Saudia Arabia without oil is a worthless piece of sand. Demand for oil has dropped, mainly because China has cut back on its frenetic building programmes. Oil traders and investors talk about a pain threshold –which will force the price up.
Forcing the price up is seen as a good thing for countries like Saudi Arabia, but I want to look at something closer to home. Housing.
Housing is a barometer of the British economy. Since the great British giveaway of council housing in the nineteen eighties property prices have just kept going up and up and up. That’s seen as a good thing. Our wealth increasing in windfall profits. Investors, such as the Russians and Chinese know a sure thing when they see it. And the property market has boomed. Even the 2008 crash hardly made a dent on property prices, particular in the capital, London. Win-win. Britain is a good place to live, if you’re rich. And you don’t even have to live here, you can still make money.
Demand for housing has been increasing. An estimated 200 000 houses need to be built every year just to stand still. This pushes prices up even higher. And the market rate for housing drags up the price the council householders have to pay. The recent furore of ‘rich’ council house tenants having to move out to make room for the poor is a good example of supply not meeting demand. But let’s look at it another way –as an opportunity.
The Organisation for Economic Co-operation and Development (OECD) issued a statement saying something quite radical last week (well radical for them) it advised its members, 34 wealth countries, to ease spending cuts and spend more on infrastructure. I’ll interpret this for you. Interest rates hovering above or below zero (negative interest rates in Japan) and quantitative easing both of which directly and indirectly give money to the rich by propping up stock markets and lifting housing prices out of the reach of the poor is not working (wealthiest 10% raised their financial stake in the UK economy from 56% in 2008 to 65% in 2014). The OECD advised member states to turn off the taps of quantitative easing and invest in tangible assets. Some would call this socialism. It’s certainly Keynesian. And a return to common sense. It exposes the big lie that austerity works.
I look forward to the day when I read that due to overcapacity house prices plunge. Traders are selling because no one is buying. The link between rising house prices and windfall profits is cut and the supply of housing meets the demands for homes and not as a tool for parking wealth and watching it grow. I look forward to the day when poor people can afford to live in London. I look forward to the time when the Scottish government, borrows money at zero interest starts training youngster in the skills needed to construct housing and builds houses for the future. I don’t think that it’s too much to ask to stop giving money to the rich and build housing for the poor. Invest in the green sector and invest in housing and a better future. Then again I wasn’t that good at economics. There seems to be an oversupply of rich people wanting something for nothing and getting it. Britain is a good place to live if you’re rich. Let’s make it a good place to live if you’re poor. Build homes for the future, but build them now.