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The system is great. It's just those damn phenomenons

Started by Richard Mellor, April 21, 2007, 11:04:15 am

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Richard Mellor

During the cold war when the failings of  Stalinism were reported in the capitalist press in the west, the culprit was always the failure of "communism".  The bureaucracy was never spoken of favorably of course but it was always drummed in to our heads that the real cause was the system; communism.

It served the capitalist class well to link the totalitarian dictatorship to communism.  If that was communism, what worker in the industrial democracies would want it?   It was obvious by the end of the 20th century that Soviet workers had had enough. The fact that Stalin eliminated practically the entire Marxist leadership of the party that led the first successful socialist revolution in history is not an issue of concern to the bourgeois historian. The  fact that Stalin and the social forces behind him were far from communist and that the Soviet dictatorship was equally as far from being a communistic society is not part of their history:  "Communism has failed",  is the rallying cry.

Yet when capitalism fails, and it fails on a monstrous level, the system is not the culprit, at least in the same way.

In the article below it's interesting that the author does allude to this, as he reports on the housing collapse in the US.  "There is no single villain" he writes.  "There is no one company or person to point to."  "..this was a  market phenomenon.." he concludes.

He is correct, there is no individual or lone company.  For socialists, the issue is not this or that individual either, it is the system itself, the system of production we call capitalism or the free market, where one class of people, a minority, own the means of production and they purchase the labor power of others to produce the necessities of life. It is this that socialists aim to eliminate and replace with a form of social organization that is collective, rational, and not driven by the anarchy of the so-called fee market.  The capitalist class however is the force that will defend the old way and it is the force that will ensure that this change is not without pain and physical confrontation.

The author cannot admit that it is the system itself as they did with the collapsed Stalinist regime.  When the capitalist economy wreaks havoc and mayhem on human beings it is merely a "market phenomenon."

The destruction of the rain forests is simply a "market phenomenon."  Starvation in Africa is a "market phenomenon" as is pollution, high infant mortality, and the wasteful  and market driven building of homes without any serious concern for the environment.  Homes that will now stand empty, owned by moneylenders in mansions in Westchester and Beverly Hills or London while the folks who went to work to pay the interest on the loan are thrown out on to the street.

The trafficking in women, mostly young girls is at unprecedented levels.  Disease and death in the former colonial world are rampant. Attacks on living standards in the industrial world are increasing.

In the colonial era, males of the occupying forces had their way with women of those countries they occupied, the same with slavery.  Increasingly,  men from Europe and the US, working class men, flock to Vietnam, Latin America, Thailand and Cambodia in search of brides who, because of poverty, will welcome anything that will get them to the wealthier countries and offer some sort of life and future other than the one that exists where they are. Some of these men are racists but their racism doesn't apply when it comes to sexual gratification and their ownerhsip of women.

Under this "legal" deal the young bride, often much younger than her new husband,  will remain passive, subservient, stuck in a new land with a new language and the threat of returning to what they once had.  Is it a better life?  In many ways it is, you might not be hungry every day,  you might be able to send money to your father and mother or siblings, but that doesn't mean it is a free and decent existence. It is superexploitive. Any nondescript little man, bullied by his boss, afraid to open his mouth,  can have power under this deal.

As long as I have lived on this earth, starvation has existed, poverty, wars over natural resources, Vietnam, Iraq etc.  It is even worse today.

Websters defines a phenomenon as "A rare fact of occurrence"  and "An extremely outstanding or unusual person or thing." Unusual is a key word here.

There's some phenomenon's about alright.

Financial Times
Subprime assault on southern California

By Matthew Garrahan

Published: April 20 2007 22:52 | Last updated: April 20 2007 22:52

Far away from the sun-kissed beaches and palm trees that make up southern California's idyllic coastline, trouble is brewing in the Inland Empire.

Two years ago the sprawling arid region that lies to the east of Los Angeles was one of California's property hot spots.

House buyers priced out of expensive Orange County and the more affluent neighbourhoods of Los Angeles poured into towns such as Riverside, Moreno Valley and Perris. Limited housing stock and a relatively benign regulatory environment attracted developers, who built scores of new homes.

For a while, the Inland Empire rode the coat-tails of the California housing bubble as buyers, many of whom had limited financial means, took out subprime mortgages with low "teaser" rates.

But with the subprime sector collapsing, the area is facing a looming crisis, with an increasing number of homeowners delinquent, or failing to make payments on their loans. Delinquency often leads to mortgage foreclosure, or the repossession of the house by the lender.

"It used to be that we would get one call a month from someone needing help [about mortgage foreclosure]," says Vilma Mercado, home ownership centres manager with the Neighbourhood Housing Service of the Inland Empire, which promotes home ownership. "Now we're getting close to 50."

It is easy to see why towns in the region appeal to property buyers. In Moreno Valley, in the heart of Riverside County, residential streets are laid out in a grid system of predominantly low-rise homes, well maintained with large gardens and quiet, safe streets.

Riverside County appears to have been most badly hit by the subprime collapse, with mortgage defaults in the first three months of the year up 168 per cent on the same period of 2006, according to DataQuick.

Several factors have contributed to the region's problems. "There's a lot of predatory lending going on," says Gary Aguilar, vice-president of counselling services at Springboard, a national service for people struggling with debt, which is based in Riverside. "I heard of one homeowner going through a divorce who ended up with a $115,000 [£57,410] mortgage on a $45,000 home."

When property prices were rising, buyers did not want to miss out, he says. "Everyone was jumping on board to buy a home. The majority of people did whatever they could do to have the American Dream and purchased homes they just couldn't afford."

Ms Mercado says many buyers were not adequately prepared. "A lot of people moved into these areas thinking they were more affordable, but didn't understand what they were getting into." The increase in foreclosures in the region, she adds, is "absolutely overwhelming".

Almost two years ago Sonya Mcphearson and her husband moved from Los Angeles to San Bernadino, where they bought a six-bedroom house for $480,000. Ms Mcphearson works in a hospital in Los Angeles 70 miles away. She commutes by train but stays with her sister during the week to save money. Her husband is a truck driver.

Ms Mcphearson says that the couple were unaware they had taken out an adjustable rate mortgage. "Our payments went up and we couldn't afford to pay. Now we're three months behind and we've been told we have to leave. I don't know what we're going to do."

Refinancing the mortgage is not an option. The Inland Empire was one of the last parts of California to experience dramatic house price inflation, with the price of property in some towns doubling in five years.

But last year the number of newly built houses coming on to the market reached its highest level in two decades. Prices fell and many of the buyers who had taken out subprime mortgages found themselves trapped. They could no longer rely on the equity in their homes to refinance their loans.

"Anything can turn that has doubled in five years," says Dr Christopher Cagan, director of research and analytics at First American Real Estate Solutions, which tracks real estate sales. Meanwhile, the Inland Empire "ran out of new buyers" which exacerbated the problem.

"What we have [in the Inland Empire] is an explosion of building and an explosion of generous lending. There was no single villain: this was a market phenomenon characterised by 30 years of [house price] growth with very few defaults. There is no one person or company to point to," he adds.

This has not stopped the California Department of Justice from pressing on with an investigation into predatory lending. It is unlikely that action will be taken imminently, though, as the state has been examining the issue for almost five years.

Further, the US Supreme Court appears to have curtailed California's ambitions with a ruling this week that limits the power of individual states to regulate lending practices.

However, any action that California or the federal government takes to resolve the subprime collapse is likely to come too late for the people currently facing foreclosure in the Inland Empire.

The increase in foreclosures has "come on strongly and quickly and none of us anticipated it", says Ms Mercado. "And it is nowhere near ending."

Copyright The Financial Times Limited 2007

Tony Budak

  Thank you for an informative piece of writing.

There are options for people.
One is to remove land and housing stock from speculation or market forces. An excellent  step in this direction is the work being done at Institute for Community Economics (ICE) http://www.iceclt.org/clt/index.html with the use of Community Land Trusts

In the 1960s, ICE's founders developed the Community Land Trust (CLT) concept as a way to encourage affordable resident ownership of housing and local control of land and other resources. For more than three decades, ICE has promoted public understanding and acceptance of this approach to ownership; has helped local groups establish CLTs in a variety of urban and rural communities; and has provided technical assistance and financing to the growing number of CLTs around the country.

 Of course when one is a member of a community trust, you forgo the option of a windfall  profit should you decide to sell, however in return your living expenses are reduced and home security increased.
With Respect and Cheers,
Tony Budak, Site Owner and Webmaster

Please do not email or PM me for CLNews technical  support. Instead Post Questions and Concerns Here

Dr Shann Turnbull

Hi Tony

The "Father" of Community Land Trusts (CLTs) was Bob Swann, my co-author of Building Sustainable Communities: Tools and concepts for self-reliant economic change.   However, Bob agreed that my concept of Community or Cooperative Land Banks (CLBs) provided many additional advantages over CLTs as they introduced a fundamental change in the capitalist system by changing the nature of ownership.

All the major UK political parties now include CLTs in their policy documents.  However, CLTs depend upon private gifts or public grants of land to eliminate the cost of land.  This makes CLTs not widely reproducible.  CLBs are self-financing and so widely reproducible provided there is political will.  

CLBs can halve the price of housing from the windfall gains created by public expenditure in infrastructure as described in my article at http://www.henrythornton.com/article.asp?article_id=4254

Kind regards


Tony Budak

Quote from: Dr Shann Turnbull;358CLBs can halve the price of housing from the windfall gains created by public expenditure in infrastructure as described in my article at http://www.henrythornton.com/article.asp?article_id=4254

Kind regards

Hi Shann,

Wow, Thanks for the web link, Shann, I finally got to read you paper, "Halving the cost housing".  In one of your closing statements, you say, "It provides greater incentive to investors while reducing their ability to get overpaid and avoids public investments creating private profits for the few."  It is not that I doubt you when I ask, but, I wonder if anyone here in the U.S.A. or for that matter, where and how are the CLBs doing outside of Australia? This idea is right on the Community Labor News theme and if I may ask, please tell us more.
With Respect and Cheers,
Tony Budak, Site Owner and Webmaster

Please do not email or PM me for CLNews technical  support. Instead Post Questions and Concerns Here