London crisis – or: from post-communism to pure capitalism!

Some months ago, the US-economist Jeremy Rifkin published his newest book, in which he predicts the end of capitalism as an outdated form loosing power to the “Sharing Economy”. This model, as opposed to capitalist system of reducing marginal costs as far as possible for competition means, is based on zero marginal costs in society in many different aspects. I have not yet read the book (for more details click here) but have heard of similar models.

As nice as they sound (although of course every model bears their own problems), they are hard to believe in if you are currently living in Europe’s most capitalist city: LONDON!

IMG_2142IMG_2123[1]

Hey what? I don’t want to be unfair. London is beautiful. It is not only the city of Sherlock Holmes and somewhat of Harry Potter. It also has really nice phone booths and is therefore not purely efficient, since really – noone needs these anymore nowadays and they must be some kind of nostalgic gimmek.
So, to all London-lovers out there: I don’t want to offend anyone. I can understand how people can love this city. I am sure once I get to know the city, all the nice spots and affordable cafés I will fall in love too. But from my current perspective, albeit it’s obvious beauty and tremendous amount of cultural, artsy and historic sites and opportunities it is preliminary one thing to me: EXPENSIVE.

This is the story of how I came to London: Fairy tale

Once upon a time, a little girl left Bishkek and all her friends in this dry, dusty and beautiful country behind and got on a plane to London. In London, they say, you have all the opportunities, you can do anything you want, there is everything that we don’t have in Bishkek, things that you don’t even have in Berlin.

She gets off the plane and: it doesn’t rain, the people are friendly, the streets are clean but not too clean, everyone speaks English although everyone is from different backgrounds. The girl thinks: they were right. Here is everything that you want. But the girl has no shelter. She is not worried. If there is room in a city like Bishkek, or Berlin, there has got to be some place in the big city London where she can stay and be happy. It does not have to be big, it does not have to be nice, bright and new. The girl is not even concerned about the people she would move in with as she already knows: Londoneers are friendly. Everything is going to be alright.

The girl walks up and down the streets and asks for shelter. If anyone knows anyone. But there is noone. She does not know where to turn to and in every corner there are witches, mumbling prices for finding fees, administration fees, deposits and 6months rent in advance. They offer her horrible places, and the girl wants to take them but then they cost as much as five months living in Bishkek and a week costs as much as a month in Berlin. The girl covers her ears and runs away, but they are everywhere. There is no place!

And the prices rise with every day because people are flooding the city. Everyone wants to be here. In the city where you can do everything and have all the opportunities. But the girl is afraid to buy a sandwich because maybe she won’t be able to pay the rising rent.

This desperate feeling that property in London is inaffordble is not only my perspective as a spoiled student from Berlin where the prices are admittedly as low as barely elsewhere in Europe, but also the one of some real Londoners: Stuart Heritage just published an article yesterday in the Guardian and found a solution for the fact that London’s rents are too high for everyone with a family and a “normal wage” (which probably equals my situation without family but with no wage). His solution:

So here’s what I suggest – dissatisfied Londoners, come with me. We can set up our own little miniature London in the middle of nowhere, and gentrify the crap out of it. We can all refuse to wear socks and sell each other overpriced cocktails in jam jars. We can put on grand retrospectives of obscure artists in the village hall, and upcycle the bejesus out of everything. Everyone will want to live here. House prices will go through the roof. And then, maybe, if all goes well, I can sell up and move back to a beautiful, freshly-deserted London. See? Everyone’s happy.

Okay okay, enough with the fairy tales and the utopias, and back to real life. I’m exaggerating, others are too, but it’s true to some extend and it definitely feels that way if you are looking for appartments here.

So what is fact and what is feeling:

England is by and large a very rich country with a GDP per capita of $37.000 in 2013 (comparison: Kyrgyzstan: $2.500). However, as the Guardian says: “The only portion of the population surveyed whose lives weren’t made difficult by rising rent and property prices were those earning over £70,000”. For those among us, who, like me, struggle with the conversion: 70.000 Pounds are almost 90.000 Euros and a bit more than $113000. The average rent in August was £758 all over England and Wales.

Average weekly rents in both the social and the private rented sectors increased between 2008-09 and 2012-13. In the social rented sector,average rent increased from £71 in 2008-09 to £89 per week in 2012-13 while average private rents increased from £153 to £163 over the same period. (English Housing Survey – Headline Report)

In London this is nothing. In my experience you will definitely not get an appartment for that much (at least not anywhere near the centre) but a humble student’s room. Also in addition to this rent most agencies charge high agency fees all over the place. I for example pay a contract signing fee of 150 Pounds before I’ve even signed a contract and some ask for 6 months rent in advance if you don’t have a UK guarantor with a ridiculously high income.

Some 8% of rents were paid late or not at all in August, which is the highest level of people struggling with their budgets seen since last Christmas (Guardian).

Additional to that, what you get for your money is incredible. I cannot speak for the London market as a whole, since I’ve only been in it some weeks, but the appartments I saw where far from nice:

  • old – as it’s an old city
    more than 8million of 22 million dwellings in England are pre-1945, as the Housing Survey states.
  • damp – as it’s a rainy city
    in 2012 22% of the homes failed to receive the so-called “decent-home” standard which was already a decline to the state of 2006, however prices keep rising
  • overcrowded – as it’s a big city
    the National Housing survey found that 3% of households were overcrowded. I know that symptom from Russia where it’s called “kommunalka” and I am living right now in one (we were 7 people in a three-room apartment – now we’re down to five though)
  • and small – as… well, it’s a big city
    70% are under 90qm but this is only the entire property. Given that it IS often overcrowded you find a ton of stories of where people actually TRY to live – among others:

    @Judoon_Platoon: Room in shared flat: £350pcm. Was a bed mounted on a platform above the washing machine and tumble drier in a utility room. @MegFitz: Viewed a “studio flat” in Chelsea. Agent warned me it was a bit small. It was a converted broom closet in the hall. @C_A_R_O_caro: 2-bedroom flat in Finsbury Park with no windows – £220 a week “but it’s ok, there’s a ventilation system in the rooms” (from Londonist.com)

How can it come that far?

IMG_2128

Piccadilly circus billboard

Welcome to the new age of landlordism, in which the property-owner has all the power and the renter hardly any choice. (Chakrabortty, Guardian)

And this is where the nice alltime-favorite from the beginning comes in: capitalism. In my opinion it could only come that far because the market is deregulated. Since 1919 England has a social housing policy called council housing. However, in the last years the number of private housing (as in owned by agencies) has outstripped the council houses. Chakrabortty writes: “Report after report shows that homes in the private rental sector are far worse than either council housing or those under owner-occupation”. Under Thatcher in the era of wildest deregulation dreams the council housing declined and the Conservatives introduced a “Right to Buy” law that allowed owners to buy up their house from the market. Also, the last governments refused to build more public housing and David Cameron introduced a “Localism Act” that gave more responsibility to the local governments (yes they have an ayil ökmötü here too :)).  However, some local governments  could not afford to keep the council housing and sold it all to private companies which led to a further rise of private agency-run housing quite recently.

So much for the history. The presence is this: the market is largely without government regulation AND there is a lot of demand, given the general urbanisation trend everywhere in Europe and the high fluctuation of us – the globalized millenials – who are moving around quite a bit allowing a rise in rent whenever we leave a property for the next person.

It’s the dream of every businessperson. And it fosters power inequality:

“a market characterised by this much demand doesn’t really reward good landlords or penalise bad ones. Because the laws give the landlord the power. Because anyone can set up as a letting agent, without qualifications or licensing – and to be one is to own a printing press of made-up fees. Because even if tenants complain, they could face a retaliatory eviction” (Chakrabortty).

Conclusion:

While it is true that there is a new trend for sharing goods, trading goods without money and trading services in our generation, this is far from being an overall trend. If this is really our spirit, then maybe we will change the system, like Rifkin says, once we get in the higher positions (to be honest, I doubt that this will be the case with our generation given that it is only small circles of people and where it affects wider circles it is only on the internet and does not relate to offline life yet). Right now, capitalism is still at its peak – at least where I am now.

Capitalism has different faces, different perspectives, different forms. In theory we are long over the plain-invisible-hand-markets-regulate-themselves-ideology but it has not quite gotten to real politics yet. Just coming back from a post-communist society that had just a 25 year long history of capitalism and free market economy and moving THE state in which capitalism has started to rule the world (through industrialisation), I can tell you: this is not the goal! It’s shiny on the outside like the shops around Oxford CircusIMG_2125[1] but it’s not quite as shiny anymore once you (as a priviledged, white, middle-class citizen) have to think about if food is affordable. And I am speaking from a very priviledged perspective here. I finally got a place not far from the centre, I will have everything that I need, I get support from my state and my family, in a year I will have a good education with which I might be able to pay back my debts but I know this is not normal and I don’t think there should be places that are only for priviledged people. As the richest continent on earth (GDP-wise – we’re only third when it comes to GDP per capita) we have the possibility to create access to goods, we even have the obligation to provide access for our citizens if we want to continue to pretend that we believe in the virtues of democracy (which at least we continue to spread among other people who have suffered from our colonial adventures and whose states are not shiny anymore because of this).

Germany is going to introduce rent-rise caps for their cities next year. One Tory MP answered a proposal of the Labour party to do the same, saying that this would be a “huge error”.   I am not a policy maker and my speciality is definitely not in social policy, so I cannot judge on advantages and disadvantages of such a policy. The only thing I would say is that there has to be done something. London has been in a terrible housing situation before: around 1848 when Karl Marx (who was in London exile from 1849) wrote with Friedrich Engels in the Communist Manifesto:

Capitalism has subjected the country to the rule of the towns. It has created enormous cities. Capitalism has agglomerated population, centralised means of production, and has concentrated property in a few hands.

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5 thoughts on “London crisis – or: from post-communism to pure capitalism!

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