Many Cubans have always lived under the Communist system, one of the few countries in the world to still operate under the defunct economic system. Recently I discussed how the country is slowly opening up, giving its people individual liberty. Now private property has become legalised which can only be good thing for the Cuban people. For years property, along with many other goods, have become rationed. Housing for everyone, but the catch is you have to share with 3 other families, just like under Joe Stalins Russian utopia days.
During my trip to the country one of the people we spoke with discussed how he still lived with his parents in law as they couldn't move out due to state oppression. The bitterness was clear, in the West we are lucky in comparison. For the past decade property rampers have said we have a shortage of property, of course its all nonsense. I moved out of my parents place since I was 18 and never once have I had an issue getting a place to stay. There's lots of properties to move into and anyone can get their own place. Prices rose in line with the expansion of the money supply, not due to so called "Shortages". Go on Rightmove, you get pages of properties available.
When you buy a place its not like you have to go on a waiting list. Properties are stuck on the market for months, even years, where's the shortage there. Shortages are where something is not available at any price. The shelves are bare. The Cuban didn't have the option of getting his own place. Our housing situation is similar to saying there's a shortage of Ferraris because everyone hasn't got one. Of course there is no shortage, it's either because people can't afford one or choose not to buy one, just like our houses. The current price of houses? Well blame Government for that one. Printing money, as the BoE are doing despite inflation running at two times the targeted level, won't help affordability either.
The comments under the video amuse me. Westerns telling the Cubans how bad they will have it as they copy our systems. Yet I never see these Westerners move to these Communist utopia's. They enjoy the free market benefits, buy what you want, live how you wish and have the freedom to express themselves. Hypocrisy, but hey that's the "do-gooders" mentality. Its so simple to fix societies ills that all we need to do is just share everything out and allow central planning to work its magic.
So long as the Cuban old guard are present they will always claim to be running a Communist regime. In all reality they look to the free market, just like all Governments, to fix the problems that they create.
there are several problems with your analysis here.
ReplyDeleteFirstly, your failure to distinguish the particular factors involved in the housing market does you no favours regarding your conclusions.
You are correct that the UK doesn't have a general problem with the number of bedrooms in the country, but we do have several specific problems with the type, form and location of them.
Primarily this is because supply is inelastic - we can't easily move thousands of empty houses from Middlesborough to the home counties, nor is it easy to change the oversupply of family properties into 1 and 2 bed executive flats to cope with the changing demographics of aging reproduction and the tendency against communal living.
Secondly, the comparison between housing supply and ferarris is a case of apples and oranges. The former is a general good, while the latter is a specific asset, which means they operate in different markets under different market rules.
It's a bit strange that you say you've never had a problem with filling your demand for housing, yet you neglect the rising level of homelessness which exists. It's easy to brush over the fact that access to markets requires money, and that confusion between different types of markets has enabled widespread transferance of equity to restrict access to markets. Obviously I can't comment on whether this is chance or wisdom on your behalf, but to extrapolate a general rule from it is disingenuous.
Nevertheless the Cuban experience plays directly into this dilemma and is a good example for discussion.
While markets are more efficient in distributing resources, this depends on active controls (education, regulation etc) to prevent the manipulation of contracts so that this efficiency isn't bypassed and made ineffectual as power imbalances take effect.
However the command economy is no answer either, since central dictatorship removes the economic efficiencies to be gained.
So, is an intermediate position the solution? If so, what are the range of options to shift the balance? And, how fast is it possible to move towards a more suitable arrangement without causing widespread social disruption?
"Primarily this is because supply is inelastic - we can't easily move thousands of empty houses from Middlesborough to the home counties, nor is it easy to change the oversupply of family properties into 1 and 2 bed executive flats to cope with the changing demographics of aging reproduction and the tendency against communal living."
ReplyDeleteThats why we have prices. You can buy a large four bedroom house in hartlepool for 80K, down south you can't buy a one bed place for that. But the point is you can buy somewhere. Everywhere there are places for sale. I used to live in Newcastle, then moved down south despite the fact that housing is far more expensive. Why? Because the jobs are better in what I do. If there was a real shortage then prices would rise more. Then people may be deterred moving down south, meaning more housing being built to try and meet rising demand. Basic economics.
"It's a bit strange that you say you've never had a problem with filling your demand for housing, yet you neglect the rising level of homelessness which exists."
Well apparently we always have rising homelessness, but then I'm never sure of statistics. As the population rises more will decide they wish to live homeless lives (its a known fact that some people opt for this lifestyle), but I've no idea of percentages compared with the population over the years. Private Charity can help people back onto their feet. Prices are inflated by governments schemes that pay peoples rents. If they didn't then prices would drop (less money chasing same amount of goods) and prices would be more affordable for everyone. Land is always a finite resource, and people always want nice places to live, therefore prices will always be relatively pricey. It was the same when my parents bought places in the 70's and 80's when interest rates were 17% it was very expensive relative to incomes.
No, the point is that you can only buy if you have the money, because traders exploit the differences in market rules to the exclusion of those at the bottom.
ReplyDeleteFor example, being able to treat housing as an asset, rather than a good makes a massive difference to your trading decisions.
For example interest rates peaked at 17% for seven months from 15 Nov 1979, having fallen to 5% on 17 Oct 1977 from 15% on 7 Oct 1976. So you're exaggerating about the affordability of mortgage debt across the period.
I disagree with your dismissal of rising homelessness - we don't always have it, rises tends to be marked during economic downturns because our housing market is mismatched to our jobs market.
You definitely can't buy if you're jobless, so if you've already got a mortgage relocation is practically impossible and this compounds the pricing effect.
And that is a serious point - we have many markets, all of which operate in different ways under different conditions, yet are inextricably interlinked. Ideological answers will therefore never provide more than half-truths.
I'm worried about your conclusions because they depend upon certain invalid assumptions. Ultimately, your economic argument taken to extreme does leave many out in the cold and could never be sustained politically in any country with a winter or a British summer - either contingencies must be allowed or charity compelled.