Bernard Hickey in Who is to Blame for the Housing Crisis puts the options open to a capitalist government in Aotearoa/NZ which would shift investment from speculation in property to productive sectors. He prefers a 0.5% land tax to a wealth tax or Capital Gains Tax. But the Labour Government with a majority of seats has written all such taxes off as unpopular with the interests of the property-owning middle class. But for Marxists, such fiddling with capitalist monetary and fiscal policy does not exhaust solutions to the housing question!
The housing crisis is the legacy of white settler colonisation
Finance Minister Robertson’s timid suggestion to the Reserve Bank to dampen down the rapid rise in housing prices shows that Labour is committed to the neo-liberal dogma that the Reserve Bank must maintain its independence from politics. These proposals exclude anything more radical, such as the policies of the Labour movement in the early 20th century which proposed to socialise the Reserve Bank in the name of the working class.
More recent developments such as Keynesianism and Modern Monetary Theory (MMT) argue that politicians can employ state deficit spending to stimulate the productive economy to compensate for the reluctance of the market to invest in production. But as we saw during COVIT 19 the economy is stuck on “business as usual” while homelessness continues and housing prices run away from first home buyers.
For more radical or left-wing Fabian Socialists, post-Keynesians and MMT advocates, there is much impatience with the Labour Government for sticking to the neoliberal shibboleth of Reserve Bank independence from the state. It should act on the instructions of a majority Government of workers and print money and steer economic policy to reduce inequality by creating jobs, lifting living wages boosting benefits, taxing property speculators, and saving us from climate change. On the Housing Crisis they hark back to William Pember Reeves and Micky Savage for inspiration.
Pember Reeves, one of the founding Fabians was all for taxing land to recover the ‘unearned increment’. That is, the capital gain that attaches to monopoly or absolute rent which is therefore ‘unearned’ by land owners. But a land tax or capital gains tax became political suicide by the 1920s when workers who got on the land seized on the ‘unearned increment’ to help pay their mortgages. In the 1930s, Savage and his Finance Minister Walter Nash, was allowed by the Bank of England to run up the national debt to build state houses in exchange for a guarantee of many lifetimes of monopoly rent in the pockets of British financiers. Today, the posts on Bomber Bradbury’s The Daily Blog are full of righteous anger at the betrayal by Jacinda of this ‘radical’ past with her Blairite brand of nauseating corporatist niceness.
For serious down to earth Marxists such games are not even amusing. The policy of the Reserve Bank is to facilitate capitalist production and regulate the market in which exchange value is realised. Therefore, the state is a bourgeois state that represents the common interests of the capitalist ruling class. It follows that debates between neo-liberals, Keynesians and Fabians merely discuss the arrangement of the deckchairs while the ship of state goes down. The important thing is that the ship must sink and be replaced by a single state bank acting on the democratic decisions of a workers’ government. Let’s see what a Marxist critique makes of these various positions on the independence of the state, putting them to the test of history, and their ability to solve the housing question.
Marx and Engels on the Housing Question
For Marx and Engels, the ‘housing crisis’ is a necessary, permanent crisis based on unrestrained rent seeking where the monopoly of land allows its owners to speculate on its rising value making home ownership for workers difficult if not impossible. That is why the current debates about the need for a Capital Gains Tax, Wealth Tax or Land Tax, and over the role of the Reserve Bank in steering new investment into production rather than land speculation, needs to be grounded on an understanding of the importance of landownership in NZ history.
The story begins with NZs colonial settlement in the mid-1800s. British settlers came to NZ to escape the land trap at home. Land in Britain was still largely owned by the gentry who, in converting to capitalist agriculture for industry, evicted their surplus agricultural workers off the land into the factories and the poorhouses. Britain had thrown most of its peasantry off the land into the cities where they had no means of support other than selling their labour. Engels documented life in the slums in his The Conditions of the Working Class in England. And poorhouses functioned to provide a bed in exchange for work.
These conditions created a growing surplus of the landless and a reason to emigrate to the colonies in the hope of becoming landowners. The infamous Wakefield scheme was set up to relieve Britain of the surplus population by planning the export of cross-section of British class society to the new settler colonies including NZ. This included small tenant farmers whose profits were being expropriated by landowners. Both tenant farmers and landless labourers were sold a dream of becoming independent capitalist farmers with their own plot of land.
Later academics slapped the label “property owning democracies” on the settler colonies because property ownership was held to be the precondition for democracy. From start to finish the settlers sought to escape wage labour and rack renters to become their “own men”. The immediate goal was ownership of their own means of production and hence the value produced by their labour. But this was not part of the plan of the prominent political economist Edward Gibbon Wakefield.
Wakefield versus Marx on “Systematic Colonisation”
E.G. Wakefield was familiar with the theory of rent held by John Stuart Mill, Adam Smith and David Ricardo. This school of political economy argued that agricultural production, necessary to provide cheap inputs for industry, was limited by its scarcity and location, but most critically by the declining fertility of the soils, which depressed profits and rents deducted from profits. Hence new lands had to be found to provide cheap inputs necessary to restore profits and allow industry to grow. Marx, also part of that school, agreed that the decline in fertility caused a “metabolic rift” as capitalist agriculture depleted soil fertility which could not be replaced by industrial chemicals. Marx clearly anticipates capitalism developing at the expense of nature.
Wakefield’s scheme proposed that the three ‘factors’ of production land, labour and capital, necessary for capitalist production, could be reassembled on ‘vacant’ lands in planned settler colonies. Land would be transferred to the ownership of settlers with capital by conquest or other nefarious means such as theft. Capital in the form of machines and tools, accompanied by landless labourers, shipped free of charge to the colonies in steerage, would be employed by the paying deck passengers as the new landowning gentry.
Marx in his critique of this “Modern Theory of Colonisation” exposed its real purpose and also its fundamental weakness – the necessity to separate the workers from the land and their own means of production. Marx used the case of Mr. Peel to reveal the “secret” of capitalist production. Mr. Peel took his money, machines and 3000 labourers to the Swan River in Western Australia, and ‘acquired’ some land. But his business plan failed when he couldn’t stop his workers absconding and squatting on their ‘own’ land to provide for themselves. They didn’t need Mr. Peel’s wages, and since Mr. Peel couldn’t singlehandedly operate his machines, his productive venture failed and he ended up as a land agent, speculating in stolen Aboriginal land.
The ‘secret’ of capitalist social relations suppressed in the home country, but revealed in the colonies, was that labourers had to be separated from the land to force them to sell their labour-power. Here was the living proof that stolen land and imported capital cannot produce wealth by itself. Machines rust and money capital devalues unless it can be exchanged for labour producing value. Mr. Peel’s capital evaporated with his decamping workers.
Wakefield’s settlements therefore failed in their objective of recreating a capitalist colony, where workers were able to acquire their own land. But this ability to decamp depended on the availability of land to squat on. Such was not the case where the indigenous owners were able to retain their land and adapt capitalist technology to their collective form of production for exchange in the expanding colonial market. Therefore, the success of the settlements was founded on the dispossession of both indigenous people and workers.
Development of Capitalism in NZ
What was ‘systematic’ about capitalist settlement was the authorisation of the NZ Company or the colonial government to get a monopoly of cultivable land, notwithstanding the Treaty of Waitangi, forcing the indigenous peoples onto marginal tribal lands, and landless labourers into wage labour to earn enough to pay the ‘sufficient’ price to buy land. This systematic dispossession of land, and setting of a price high enough to force workers to sell their labour power, were necessary conditions for NZ’s capitalist development.
The most important consequences of both were first, the struggle for Maori land rights which led from the King Movement and Te Whiti’s resistance to private property, to the Treaty Settlements from the 1970s that allowed modern Maori ‘incorporations’ to use the Settlements to convert reparations into the equivalent of private property and capital ready for the application of wage labour. The second, was the long struggle of landless labourers to get “on the land”. This latter can be seen as the theme song of the ‘wrong white crowd’ – the struggle to escape the working class into family farming.
Both of these struggles were intertwined. The escape onto the land by settlers was always at the expense of Maori land. Land confiscated as a result of the land wars and forced land sales did not meet the needs of landless settlers by the 1880s depression. This caused a growing demand from unemployed workers to get on the land, to break up the large estates, and hold down land prices with a Land Tax on the speculative ‘unearned increment’ component of land value. The Liberal Government (1891-1914) responded by incentivizing squatters to subdivide, and expropriating millions more acres of Maori land.
By the end of the Liberal Government, NZ’s class structure was set in place reflecting the separation of land, labour and capital. Those on the least fertile land remained heavily mortgaged to the banks and were often forced to walk off the land. Families on more fertile land would be able to pay off their mortgages assuming the soil, the weather and prices held. Those who got the best land like the Waikato confiscations or the large runs on the Canterbury Plains, could reap good profits, survive price fluctuations and become a new gentry who were often also business owners and lawyers in the towns and cities. This reflected the fact that development of the economy created wealth in the form of rent that circulated from primary production on the land to secondary and tertiary sectors of the economy that serviced production on the land. Everyone was a rent seeker.
Who earns the rent and who gets the rent?
Rent as we understand it today originated in class societies, namely tributary modes of production where dominant lineages extracted tribute from subordinate lineages. The specific form in Europe was the feudal mode of production where the commons were expropriated by landowners who extracted rent from tenant farmers in return for the use of the land. By privatizing part of nature, with its soil, forest, water, and so on, as their private property, the landlords demanded rent as a share of what was produced on the land; first as part of annual output, then as a market formed, money rent. Thus, in the typical feudal society the peasant produced surplus-labour which the landlord appropriated as rent. As with the tributary mode in general, the class struggle between tenant and landlord over the amount of the ‘surplus’ caused many peasant uprisings.
Capitalist agriculture brought about big changes. Feudal social relations enabled landlords to get wealthy living off rent and appropriating the value of improvement leaving tenant farmers with little incentive to increase labour productivity by investing in new methods and machines. This meant that prices did not fall and imposed high costs for industry looking for cheap inputs. As landlords realised that they could increase their market share and their rent by raising productivity, they became agricultural capitalists essentially no different from industrial capitalists. Instead of landlord and tenants we now had capitalist farmers and agricultural labourers. The division of labour value was now that of wages (necessary labour-time) and rent as profit (surplus labour time).
Capitalist production on the land is different to that in industry only insofar as land enables monopoly rent or profits which enable landowners to benefit from surplus profits or monopoly rent redistributing profits from other branches of industry. With the rise of state monopoly capital in the early 20th century, global capitalism becomes characterized by forms of monopoly across all sectors of the economy. Marx treated mining the same as agriculture, and where monopolies arose in the production of food and fuel, they all benefitted from surplus profits, or for Marx – absolute rent. Therefore, we can see why industrial capitalists seek to eliminate landlords and buy commercial property to take advantage of monopoly rent in land, minerals, water etc.
Landlords who remain as a distinct class deduct their rents from capitalists’ monopoly profits. Workers who rent houses from landlords or borrow from banks to buy them, pay rent/interest which is deducted from the value of their wages. The question of absolute rent as deducted from profits and wages is therefore critical, especially when capitalism is facing a crisis of falling profits as a result of the LTRPF. And as a component of the real wage, rent is critical for workers who produce the surplus in the first place as capital must reduce wages to enable the counter-tendencies to the LTPRF to restore the rate of profit. This brings us to the nub of the problem of rising land values which not only contribute to the cost of production, but which act as a drain on profits insofar as rent gets more than its share of value created, that is, absolute rent.
What determines the value of rent?
Ground Rent equals the value of the productivity of labour on the land. Where workers labour time and capital advanced are equal, the productivity of labour differs according to the fertility and location of land. Marx calls this differential rent. The productivity of labour on the worst land (infertile or distant) equals the average rate of profit. As a rule, below that average profit rate, investment in land stops. unless there are conditions where small farmers work for less than the average rate of profit. Land which is more fertile and nearer the market reaps a differential rent that is above average and therefor a super profit. This theory explains why colonisation resulted from stagnation in investment in land in Britain that was not sable to return average profits (despite political favours such as tax avoidance etc) creating surplus capital looking for new lands in the colonies where the benefits of differential rent, such as natural fertility, climate etc compensates for distance.
We can then understand why British settler colonisation to new lands where the indigenous peoples were displaced and dispossessed of their land was critical to overcoming the stagnation of capitalist agriculture in Britain and with it the LRRPF in industry. And it follows that the ‘founders’ rent of new land combined with capital and labour extended the division of labour of the British Empire be creating the potential for a new source of cheap agricultural commodities entering into industrial production and consumption in Britain. Ironically for the new settlers they were faced with the competition from Maori who rapidly adapted new techniques to their traditional mode of production to produce, transport and trade commodities to Australia and even North America. The land wars put an end to that as we have seen.
It follows that not only was the ‘secret’ of capitalist social relations revealed in the settler colony, as invasive, deceptive and destructive, Maori society as a classless lineage mode of production at the time of European contact, demonstrated its ability, as a collective society with a cooperative labour process, combined with communal resources in land and ‘capital’, to compete successfully with the rudimentary capitalist mode in its formation, and was destroyed not by any pricing mechanism, but by the armed forces of the imperial and colonial state.
As we have seen privately owned land under capitalism contributes to the production of labour value. But in the epoch of monopoly capital as the counter-tendencies can no longer delay the LTRPF, private land ownership becomes a barrier sucking capital out of productive investment into speculation. Overvalued land becomes a cost on profits at a time when they are stagnant or crashing and a cost on workers’ wages, their lives and livelihoods. Thus. private land ownership sets a limit to the growth of capitalism and signals the total war on nature. As we shall see, the struggle over the land such as Ihumatao reveals that capitalism cannot solve the housing question because it cannot abandon private ownership of land, and must inevitably fail to meet the basic needs of workers for decent housing.
Socialising Land, Labour and Capital
The struggle for land rights at Ihumātao reveals the ‘secret’ of capitalist society in Aotearoa much more dramatically than the case of Mr Peel on the Swan River in Western Australia. Māori land was privatized by confiscation, collective labour privatized as wage-labour, and the value produced on the land expropriated as absolute rent for many generations. The recent ‘settlement’ at Ihumātao ignores this history, nationalizes the land from the private owners, yet expects the mana whenua to jointly manage a public reserve with some provision for housing. Private landowners are claiming Government has set a precedent to nationalise their property. Racists object to Maori breaking ‘one law for all’ to get any land rights. Meanwhile Māori self-determination (Tino rangatiratanga) is patronized.
It is clear that the state did a deal with the Kīngitanga to prevent the land being returned under the control of mana whenua who might revive the tradition of the original King movement and Te Whiti at Parihaka. Communal land, collective labour and sharing of production would be a major challenge to capitalist private property. That is why revolutionaries demand that Māori land rights be restored in full to mana whenua whose lands were confiscated or swindled by rapacious settler governments. What must be done to undo this violent history of colonisation if not the socialisation of land, labour and capital? We need a transformational program designed to support those land rights by uniting all workers in a revolutionary movement for socialism.
Socialising the Land
It is not enough to nationalise land since the state represents the capitalist owners rather than the working people as we see at Ihumātao. The colonial capitalist state invaded, confiscated, gave private title and kept some land in ‘public’ ownership of use-value to the capitalists as regulated by the state. It defends private property and serves the expropriation of value as rent. The Labour Government buys the land back from the private capitalists at a value that includes an accumulation of 160 years of capital gain, but continues to control the land in a partnership of interests governing its use as a public reserve. In doing a deal with Government, the Kīngitanga has adapted to the capitalist system and renounced full land ownership rights of the mana whenua over the use of the land including compensation for the absolute rent expropriated since its confiscation.
As we wrote last year, “Any settlement that falls short of the full return of the land to the Iwi will be a compromise that props up private property rights at the expense of the Iwi right to communally owned land…the fight for the return of communal land is more than a matter of historical justice for dispossessed Māori, but critical in re-uniting the people with the land and to bring an end to colonialism and the threat of human extinction.”
Socialisation, by contrast, is the collective ownership by society, meaning those who work to produce value to reproduce that society. Socialising land ownership means individuals no longer own land and forego unearned capital gain. They can use the land; work it and benefit from the fruits of their labour including improved value. Homeowners would no long own their private section, nor would the private banks or finance companies, but would continue to own their homes and any improvements they make. The expropriation of absolute rent or capital gain from the ‘unearned increment’ of society, would mean that land values would revert to their actual value – the labour value produced on the land, or in the case of housing – the value of the social labour required to build houses. It’s not difficult to see the housing question would be resolved in one stroke. But of course, there is much more to it than that.
The standard socialist demand for land ownership is: land to those who work it. Socialists need a program for those who work on the land and have a common interest to unite with workers to fight the rent seekers. This includes all those who work to live off the land, rather than live off wage workers. In Aotearoa that means all working farmers, often ‘disguised’ wage slaves who work to pay off mortgages and debt (the absolute rent deduction) and take a ‘wage’ from what is left. The labour of the family/whānau creates the value which is divided between subsistence and the absolute rent. The expropriation of the big banks and finance houses would leave working farmers debt free. They would be better off as leaseholders as part of a socialist plan that allows them to benefit from their work and improve their farms with state research & development and interest-free loans for development. They would also be compensated for the cost of changes necessary to meet carbon zero by 2030 to avoid burning up the planet.
Socialisation of land means socialising labour and capital
In this way labour value as rent would be retained by the collective owner – society. Socialised land that eliminates private property in land, would at the same time require the socialisation of labour value, and capital as accumulated surplus value. The expropriation of capitalist enterprises under workers control within an economic plan would at once socialise labour, amass a surplus fund for planning the economy, and restore the balance between society and nature. Surplus value as rent and profit would no longer exist nor would capital as the accumulation of surplus value.
Labour value would cease to be expressed as value, or price, since no market would exist to respond to price signals. Work would be measured by labour-time. Society would decide what labour-time was necessary to reproduce workers, and what surplus labour-time was needed for investment in production. Under socialism, this would be according to the maxim: from each according to their ability, to each according to their work. That is, all must work and all must receive an equal reward for equal work. Capitalist inequality would become the stuff of pre-history.
It is obvious that none of this would happen without the end of capitalism and the birth of socialism. So, the immediate and urgent task is to build an independent workers movement; an independent workers’ labour party; elected workers’, and working farmers’, councils/rūnanga in every neighbourhood, town or city, to coordinate decisions taken at local and regional level with a central workers’ and working farmers’ government/kāwanatanga. These are the essential workers organisations that are necessary to make the transition from capitalism to socialism.
A Transitional Program for Socialist Revolution
Decolonisation means cutting off the flow of surplus-labour from producers to the parasites by socialising land, labour and capital. For this to happen the producers have to be united as a force for change, reversing the stock and flow of rent and profits stolen by parasites back to producers. Our strategy must be to reverse this downloading of oppression and attack the root cause – private ownership of land, labour and capital. We have to build workers’ power to take on the power of imperialism and their comprador agents who control the extraction of absolute rent. So, our strategy is to develop a workers’ revolutionary movement capable of expropriating the imperialists and the compradors – politically and economically. For that we need a transitional program which fights for socialism now, starting with the immediate problems created by private ownership of land, labour and capital, and building the struggle towards the goal, which is a revolutionary overthrow of the capitalist state and creation of a workers’ state.
Aotearoa’s semi-colonial status is worsening because its imperialist ‘partners’ are all looking to extract more absolute rent from Aotearoa impoverishing the producers of value. During and after the neoliberal deregulation of the 1980s, natural monopolies that were in state hands were privatised. State assets were turned into SOEs trimmed down for auction to imperialist and colonial vulture capitalists. In energy, transport, finance, retail, property, tourism, media etc. rent-seekers added value as more of the value chain was monopolised. Neoliberal deregulation means that imperialism grabs more absolute rent at the expense of compradors (which is not a bad thing) workers, and working farmers. The result is a low wage, a flat tax, increasingly casualised migrant labour semi-colonial economy, as the value of wages are squeezed to extract surplus profits.
What we need now!
All of this is downloaded onto the working class as a cut in value-share leaving it lacking in jobs, a living wage, housing, health, education and social welfare, which all blow up as ‘social problems’ –unemployment, homelessness, child poverty, falling education standards, health standards etc. We can no longer waste time begging capitalist governments to fix these problems as they are part of the problem. We have 10 years to prepare to take power. We start with immediate demands mobilise producers to resist the download of the destruction of the terminal crisis of capitalism by working class action, starting with strikes, occupations and going on to workers’ control, and finally workers’ power.
To reverse the download of capital’s crisis on workers, we upload our demands as direct class struggle. We attack inequality, organising militant, democratic unions to fight for jobs for all to end unemployment and the dole and unite the working class. We attack poverty demanding a living wage for all by strikes and occupations, and we peg wages to inflation based on what it costs workers to live including housing and health costs. We demand homes for all through rent strikes, occupying vacant housing, and collective action against parasitical landlords. We support the health workers on the frontline against Covid 19 and demand a return to fully funded public health and end to the private sector as a parasite on the back of workers. In all of these struggles the object is to build organisations for workers control of jobs, wages, welfare, health and housing etc.
To fight for what we need now, we have got to defend our right to do so by any means necessary. Marxists support demands for individual democratic rights within the bourgeois state only insofar as they advance the collective interests of the working class. We do not demand that the bourgeois state defend our ‘free speech’ because we know from history that the only right workers have is to be exploited. Since the 1848 revolutions, confirmed by the Paris Commune of 1871, the bourgeois state has been the open enemy of the working class. We fight for workers democracy, not bourgeois democracy. We fight for our rights to freedom of speech, to organise, to strike, to arm ourselves, defend oppressed minorities, defend national self-determination, and so on, but we know that to win and defend these rights we must organise independently against the bourgeois state. The organisation that embodies workers democracy is the workers’ commune/ohu modelled on the Paris Commune and put to good effect in the Russian October Revolution.
As the pressure to resist the capitalist crisis of falling profits and absolute rent downloaded onto the working class, compounded by the threat of Covid 19 and human extinction, calls for direct action outside the law, we must fight for the freedom to build a class-conscious resistance to the crisis. As we fight the oppression that suppress our resistance to the extraction of surplus profit and rent, further resistance will inevitably be met with the repression of state and paramilitary forces. Against fascism and reaction, we build self-defence organisations, workers’ and working farmers’ militia/taua and appeal to the rank-and-file military to mutiny and create soldiers’ militia. In the struggle for democratic rights in our interests, the workers’ movement will learn that democracy can only mean workers’ democracy in the socialist revolution and the workers’ state.
For a Socialist Aotearoa in a Socialist Pacific!
As the struggle for immediate and democratic demands brings workers up against state repression, workers need to build independent class organisations to advance their struggle for workers’ power and socialist revolution. Socialist demands are political demands to expropriate capital, both current and accumulated, by the revolutionary working class. We distinguish between nationalisation, where the bourgeois state owns assets, or takes over private assets, in the interests of the wider capitalist class, and socialisation, which means expropriation of capitalist assets without compensation. In Aotearoa, nationalisation is common, to subsidise capital by investing in infrastructure, or energy, and basic services such as health, education and housing. Such subsidies increase differential rent at the expense of workers’ labour-value. Since the 1980s neo-liberal counter-revolution much state property has been privatised to extract new sources of surplus rent.
Socialisation, however, means the expropriation of current and past capital (including nationalised assets) accumulated from generations of labour value extracted from the producers. This includes the expropriation of the assets of imperialist enterprises as well as the assets of nationally owned enterprises. The expropriation of capitalist assets will be met with an investment strike and imperialist attacks on currency, trade, and military intervention and counter-revolutionary coups. Clearly then, socialisation cannot be attempted short of a workers’ state capable of expropriating these assets, defending them against imperialist intervention, and putting them to work as part of a national economic plan. Hence, socialist demands take the logic of the transitional program to its end – workers organised into workers’ councils/rūnanga and militias/taua take power and install a democratic workers’ and working farmers’ government to administer a workers’ state and an economic plan which includes the expropriation of capital and the building of a socialist society restored to nature.
For a Socialist Republic of Aotearoa within a Socialist Federation of Pacific Socialist Republics!