From housing to farmland the speculation game moves on

Bubble's part 2

I opened my Wall Street Journal yesterday morning and never got passed an article on land prices.  The piece lays bare the insanity of the free market and the for-profit system of production we call capitalism.  The way this mouthpiece of finance capital describes the processes taking place in society that determine whether we eat or starve, have shelter or not or live or die is the best argument for eliminating the profit system and instituting instead a democratic socialist system of production and the social structures necessary to maintain it.

Since the collapse of the housing market land prices have fallen drastically.  Leading up to the burst of this bubble the Wall Street Journal writes, “….real estate speculators in California, Arizona, Florida and other states paid top dollar to buy land from farmers and convert it from citrus groves and cotton fields to potential subdivisions.”

The result of this speculation and adventurism was that a 760-acre alfalfa farm that was bought in 2005 for $40.8 million by “housing speculators” as the WSJ accurately describes them, fell in to foreclosure and has just been repurchased by a farmer for $8 million.  The farmers want to plant hay but with commodity prices rising around the world, land once purchased by speculators and other wasters to build crappy homes that led to the bubble is now being snapped up: “Farmers and investors are buying land that had been slated for development and using it for agriculture.”

Home production, more accurately the construction of human shelter, results in a real use for the people that live in them and land when worked by human Labor provides us with food to eat.  The average human being that borrows money from bankers to purchase shelter don’t generally do it as a speculative adventure.

I can’t stand this term, “flipped” when they describe the activity of land or housing speculators. But that’s how an investor looks at it damn the consequences.   The WSJ describes how one farming family in Arizona purchased 430 acres of cotton fields for $731, 000 in 2004 then “flipped” it to a Milwaukee based apartment developer for $8.6 million in 2009.  The farm was foreclosed on in the housing bubble and bought back by the same family this year for $1.75 million.

The real estate boom in the exburbs, suburbs surrounding suburbs, the WSJ adds led to builders “Pouring hundreds of millions of dollars” purchasing land “where they built quick and easy tract homes.” .  You can see these homes 50 or 60 miles beyond the San Francisco Bay Area, hastily constructed ugly structures.  But for the investor/developer, it’s much like the hog or chicken farmer, the object is to get the commodity on to the market as quickly as possible, pig or home, in order to realize the profit from the sale.

And here the WSJ describes what it claims is the driving force behind this activity, that first time buyers are “willing to commute long distances to employment centers”. The key word here is willing. They use this term to justify why women in Bangladeshi factories or workers in hog farms in the US or mines in Bolivia receive such low pay---they are “willing” to work for less.  Yet we all know that commuting is hell.  It took some of my co-workers two hours to get home after work and they lived where they did because homes were too expensive near the city.

Between 2000 and 2007 land used for farming fell by two to four million acres a year as the debt driven housing market attracted capital for quick profits. Now the reverse seems to be occurring as millions of homes remain empty and half built projects appear to have no chance of being completed for years if ever. I visited a friend living in one of these tract communities about 60 miles from Oakland California and at one point his family was the only family there.  His house was one of a circle of homes around a man made lake and he said that at night people came through in boats and rafts to pilfer fittings and fixtures.  Even built in microwaves and dishwashers went missing he told me.

So in the market driven economy, capital no longer flows in to home construction because it is glutted, people don’t have the money and/or banks are reluctant to lend as the situation is unstable and unpredictable.  Instead, as agricultural commodity prices rise (not to mention gas which kills commuters in a state like California with a dismal public transit system) investors are shifting to farmland and the whole process can be repeated in a different sector of the economy. Cotton, prices, while in decline recently reached a 140-year high last year.

They used to say about farmers that they had a special relationship with the land. It wasn’t about money for them, in fact, many of them lived a hard but extremely rewarding life producing the food we eat. Today, only .7% of the US Labor force works on the land according to the CIA statistics.  Agriculture is overwhelmingly a big business operation.

The CIA Factbook also describes the US economy aa a “market-oriented economy, private individuals and business firms make most of the decisions.”

Well we can see where the decisions of private individuals, or groups of private individuals and their political representatives get us.  What we call capitalism can no longer advance human society.  What happened in the financial sector is no being repeated in agricultural production.  This is not the end of civilization as Francis Fukiyama claimed and it is certainly not the beginning.  The production of food, shelter, and other needs integral to human health and welfare cannot be left to speculators and gamblers in the marketplace.  For the Warren Buffets and Kirk Kerkorian’s of this world, humanity is just one big monopoly game.

Land, production, science, all human life must be liberated from capital and returned to the rational and eco friendly hands of the collective.