Version 3.2_September 2016
Individual Paper: Real estate speculation and rent-extraction in a degrowth economy:
the dangers and some proposed solutions
Constraints on resource use associated with degrowth are likely to reduce the scope for profitable investment in the ‘real’ economy. In such a context, those seeking to grow their wealth may increasingly turn to the purchase of existing assets, including land and housing, for the purpose of rent-extraction or speculation. Indeed, sociologists like John Bellamy Foster and Wolfgang Streeck argue that the reason we have seen such enormous flows of capital into the unproductive FIRE sector (finance, insurance and real estate) over recent decades is because of falling profit rates in productive sectors. Although these Marxist writers would blame today’s falling profit rates on a crisis of overproduction/underconsumption inherent in capitalism itself, the results could be similar in the context of self-imposed resource constraints. Firms, fund managers, and even individual households, may increasingly look for places beyond the productive economy to put their savings. This paper focuses on the impact of such behaviour in the housing and land market, where fund managers may turn towards further investment in securitised mortgage debt, and individuals with excess savings may turn to property speculation and landlordism. Such additional demand could lead to persistent and/or intensified land and house price inflation and thus a widening gap between ‘haves’ and ‘have nots’. This paper will offer some tentative proposals for intervention – including a Land Value Tax – which might help to guard against real estate speculation and rent extraction in a degrowth economy.
Start time: 14:30
Track: Exit from growth ≠ exit from capitalism?