More crisis on the horizon as capitalism prepares the way.

Detroit: Motor City

by Richard Mellor

If there’s one term that sickens me it is “flipping”.  When I first saw the word in relation to housing I wondered what it meant.  It is the term that describes the buying and selling of human shelter, (houses).  A gambler enters this market with the sole purpose of taking advantage of the misfortune of others like the 5 million people that have lost their homes (shelter) in the last six years.

Detroit and its environs has a proud history in the making of this country. Generations of workers broke their backs in the factories of Detroit and Flint.  In the aftermath of the rise of the CIO and the civil rights movement more black workers came north for a better life and found themselves in the worst jobs but even that was an improvement from the impoverishment and racial violence they faced in the South, and they had a Union.

Last time I was in Detroit and Flint it reminded me of a third world city. The auto bosses have shifted production to less Union friendly areas of the US and the world.  The militant history of Detroit and Flint was not a good influence, it must be eradicated. The Great Recession also took its toll; jobs and population declined so did the communities and along with that, property values. But the speculators are back and are gobbling up homes by the hundreds.  “Detroit is the hottest thing happening” one of them tells Bloomberg Business Week as she accumulates 332 homes in two years (average price $2500).  She rents some out and sells others to fellow speculators as far away as Australia and Cambodia.

Along with individuals, there are the organized coupon clippers like the private equity thugs who have taken similar opportunities buying up thousands of foreclosed homes in order to rent them out.  These characters don’t normally like to buy single-family homes as they like their victims to be in one place like an apartment building. With single-family homes, if things go wrong, or tenants need throwing on to the street for some unfortunate reason like losing their income, owning individual rental units that are miles apart can become inconvenient and more costly.

This activity is extremely socially destructive bringing misery and uncertainty in to the lives of millions of people. It has all sorts of side affects, crime, alcoholism, the destruction of family and personal relations and with it increased domestic violence and child abuse as our humanity breaks down.   It also has a negative affect on home prices as they rise artificially, we saw that in the housing bubble just passed and we are seeing the whole process emerge from the ashes once again. Blackstone is one of the groups. The head of Blackstone, Peter Petersen is worth more than $1.2 billion and in 2011 contributed $458 million of what is laughingly called “his own money” to advocate for cuts in social security and Medicare. Petersen’s partner, Stephen Schwarzman is worth $5.2 billion according to Forbes which describes them as "self made". If they are "self made" men. so was Muammar Gaddafi and Henry V111. Like Goldman Sachs, these characters are closely linked to government service through their affiliation to one of the two Wall Street parties.  This makes it easier for them to plunder the wealth of society legally.

So the coupon clippers love Detroit, a city where 25% of the city’s housing is vacant and 36.2% of the population live below the poverty line compared to 14.3% nationally according to the Census Bureau. The insanity of the market; poverty is rife, unemployment high, jobs scarce, but the coupon clippers call this an upturn. “There’s going to be a big turn around in Detroit and I want to be part of it” one of them tells BW.  He paid $90,000 for 29 homes, will rent them out for ten years or so then sell at a profit.  Maybe he will sell at a profit, maybe he won’t.  But this is one small example of the parasitical, unplanned and irrational capitalist system.

This is not civilization. It can be avoided.

The same activity is going on in Phoenix AZ paving the way for the next and more destructive crash.  Business Week has an extensive piece on this activity and it is worth reading. Like health care, education, transportation and other social necessities in a civilized society, housing or human shelter has no rational plan to its construction as housing humans is incidental to this activity as is human health to the health industry, profit is the driver.

Crashes aren’t accidents they are built in to capitalist production.  In Phoenix during the height of the boom, human shelter speculators were building 4000 houses a month, “bulldozing one acre of land an hour” as the city’s population doubled in 20 years according to BW.  There is another side to this activity, the destruction of the environment as well as indigenous land. Real estate agents, or land pimps as some call them  “wrote contracts on the hood of their cars” business was so good. This activity is such a waste of human talent as well.  One woman, trained as a mechanical engineer got a real estate license and decided she wanted to “flip homes”.  The search for riches through unproductive labor.  “Flip homes”; I find the term disgusting and the activity parasitical.

Another “flipper” borrowed $600,000 from his father-in-law and started flipping homes to the tune of 60 a year accumulating $4 million, all on the backs of the folks who were thrown on to the street. There is some depressing news though for guys like him, foreclosures are declining so him and father in law are buying up homes in Florida to wreak some havoc there.

Nationally, private equity firms have spent $8 billion buying up homes people have lost except they’re not really lost, they have been evicted from them by the banksters.  Blackstone has spent $2.5 billion buying some 16,000 of these properties.

One final example in this tale of capitalist anarchy and that’s the oil and gas boom, what is referred to as the new “fracking economy” in states like North Dakota.  It is the gold rush reborn. North Dakota has been America’s least visited state but the place is swarming now with thousands of people looking to make some quick cash. This has aided the state’s banks as more and more money flocks in to the ND communities. The number of new businesses in the Bakken oil fields of North Dakota and Montana have risen 50% in three years and the bankers are rolling in it.  Leaving aside the pros or cons of fracking or oil production, even if there were no environmentally questionable impacts in the process itself, the environmental damage caused by the unplanned influx of human activity is significant.

Investors and speculators are rushing to build malls, apartment complexes, hotels (and brothels) to accommodate the increased population. The effect of all this activity------and we know that fracking is an extremely toxic activity when it comes to nature-----is extremely damaging socially and environmentally. And here too, indigenous people’s and their communities will suffer greatly. In a civilized society, a democratic socialist economy in which production and our needs are based on a democratic rational plan in harmony with nature not in conflict with it, this would never happen.  Like a tsunami, capitalism comes in and leaves destruction in its wake.  A few reap extreme wealth as the many find themselves drowning in an environmental morass, in poverty and despair.  The high is a brief one.

We must reject this method of social organization. While we fight it, we have to recognize that within the framework of capitalism, of a social system in which the means of producing the necessities of life is owned by private individuals and set in to motion for personal gain with no democratic plan to it, we cannot stop it, the forces are too powerful, the riches too vast. Capitalism is truly on the road to ruin and taking us all with it.

Society needs new managers.