Left Side Thinking

I have never particularly liked the whole left-right political divide; possibly because I never  felt I fit in it.  As a gladiator cum slave, I just did not know where I fit.  It seemed to me a dated oversimplification of multiple issues and multiple values.

The whole construct dates back to a simpler yet more complex time when, during the French Revolution, those who sat to the right of the King in the National Assembly were his supporters and those who sat on the left of the King were the revolutionaries or “innovators”. History will remind us what happened, to whom, by whom and how.

The world and political thinking has evolved since the 1780s. Nowadays, it is generally considered that the left are those who believe it is the role of the state to solve community and national problems whereas the right believes that it is the role of the state to create the conditions for civil society and citizens to solve community and national problems. Central management vs local management. Standardised programs vs customised programs.  Big government vs small government.

Most political parties generally sit in the middle with governments forming on the margin to the left or right of centre. And before readers jump in on the current centre left and further left structure currently in Australia, I reiterate the generally descriptor.

At the core of left side thinking seems a belief in the ability of (wo)man to control things that probably can’t be controlled.  And attempted control is effected by a belief in the superiority of central knowledge held by technocrats and experts. It is also a belief in the superior morality of those same technocrats and experts. It is a belief that centralisation and operation by these learned experts and technocrats can solve all societal ills and lead us all to utopia.  It is the same thinking that brought us famines caused by Soviet and Chinese central planning, the wars and deaths from eugenics and the South Australian economy.

By its very nature, the management of society by experts and technocrats requires political and economic control, which is why it always leads to larger government, despotism and totalitarianism. Reference the USSR, North Korea and Venezuela, countries which have generous natural resources, yet their citizens starve(d). And every single time when the plans and policies of the central committees fail and cause mayhem, the philosophical apologists always claim that the plans and policies were not implemented correctly or purely enough, and the only way things can work is through further centralisation, further confiscation and even great government expansion.

This leads to the housing affordability discussion that keeps humming along.

Every market intervention that has been implemented intended to address this so called issue has made things worse, yet more interventions are proposed. Every proposal is foolproof, yet it is usually the case that the only fool is the proponent.

Earlier this week, in attempting to prove that prior performance is sometimes a predictor of future performance, the NSW Labor opposition stepped onto the stage pledging that:

Every residential development built on state-owned land under a NSW Labor government will have 25 per cent of its dwellings designated affordable housing.

and

For privately-owned land rezoned for development, 15 per cent of homes would be designated affordable housing.

There you go. That will fix it. No soup for you. NEXT!

Let just go through some of the detail.

With regard to the 25% affordable housing on government owned land, that program has an existing name. It’s called public housing. More interesting is that the NSW opposition leader is proposing that the government go into the property development business to rent/sell the remaining 75% of housing built on government land at market rates. Good one Luke. Any other capital intensive, high risk businesses you propose the NSW Government get into?

With regard to the 15% affordable housing on newly rezoned private land, well, where to begin. A property develop generally looks for a total return across a project not property by property. Therefore, if the developer is forced to under price 15% of properties, then the other 85% of properties will have to increase in price to generate the whole of project return necessary to cover costs, risks and return on capital. Classic government – we have to reduce prices to increase prices.

Further, because the 15% that is deemed to be “affordable”, that means that there will be excess demand consistent with pricing something below market. This will then require rationing, which in turn means that politicians and bureacrats (bigger government anyone?) gets to decide who gets access to this “affordable housing” and on what terms. Lovely conditions for corruption and misallocation.

The thing about the housing bubble is that the true culprit has not been named – and it is not the foreign buyer or the investor. The true culprit is the Reserve Bank of Australia which has lowered interest rates too much for too long. Run your own DCF and see what happens to the NPV when the discount rate is reduced.

If Government really wanted to deal with housing affordability, they should use their influence to increase interest rates.   The Secretary of the Treasury is a member of the RBA board.  Just ask him to move a motion at the next meeting.

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24 Responses to Left Side Thinking

  1. Alexi the Conservative Russian

    On this matter I agree with you. But as an owner of a few properties I like the current situation. For those who squeal about the price of houses I will remind you of the period we were paying 19% p.a. interest rates. Think about that, over 2 years you’ve paid near 40% of the cost on interest. Start small and build up, pardon the pun.

  2. Bob of Brisbane

    Re: Housing unaffordability, why not just halve the current immigration rate of 190,000 a year? That would substantially improve housing availability and also reduce unemployment. Australia was a very comfortable place to live when immigration levels were far lower – and we had far less social strife.

  3. ned

    “Why, you are neither left nor right!”
    “Left” and “right” are each descriptive of authoritarian positions.

    https://fee.org/articles/neither-left-nor-right/

  4. Gavin R Putland

    Raising interest rates would reduce house prices by reducing price/rent ratios. But in the long run it would INCREASE rents by reducing borrowing for all purposes, including construction.

    The way to improve housing affordability is to change the tax system so as to make it more attractive to build dwellings and offer them for sale or lease, and less attractive to hoard vacant land and empty dwellings.

  5. OneWorldGovernment

    where is my sit down money and my house?

  6. Terry

    “a gladiator cum slave”

    – sounds nasty.

  7. struth

    I thought the exact same thing Terry.

    Nasty occupation .
    Indeed.
    Not my taste at all.

  8. .

    Every residential development built on state-owned land under a NSW Labor government will have 25 per cent of its dwellings designated affordable housing.

    and

    For privately-owned land rezoned for development, 15 per cent of homes would be designated affordable housing.

    Absolutely woeful. Well intentioned, but utterly ruinous.

  9. Bruce of Newcastle

    Spartacus – You are behind the times very Romanesquely. The divide these days is between the Marx-Gaia religion, the Mahometan religion and everyone else.

    Being a religious divide logic doesn’t come into it. Anyone on the previously-described Left side of politics now has to believe the canonical body of doctrines of the Green-Progressive religion. If they fail on any one of them they are cast out into the real world where rivers of government cash don’t flow. Latham, Gary Johns and Lomborg are examples.

    Both the Green-Left religion and the Mahometan religion do not work in practice, and result in shitholes like Venezuela and Pakistan. But because the religious gene in humans is so strong and the Left-as-it-was-previously-known is so collective, there is nothing to stop any economy which becomes captured by those religions from falling into the same festering swamp.

    It would be impossible now to have a centre-left government like Hawke-Keating in this country. The Green-Left religion is too solidly established.

  10. Fulcrum

    With the fake “severed head” of Trump treading enough to catch the attention of Trump’ s children, the assumption that the the Democratic Party is the “caring party” has been hit for six.
    Sad to see the magnificent John Kennedy and Martin Luther King’s party stoop so low.

    As for the leftist media, they are the owners of the cesspool that we now have.

  11. Tim Neilson

    For those who squeal about the price of houses I will remind you of the period we were paying 19% p.a. interest rates. Think about that, over 2 years you’ve paid near 40% of the cost on interest.

    True dat. I think I got in at 16.5 % for my first house.

    If you look at price increases, average weekly earnings increases and interest rates, then even in the inner Melbourne and Sydney markets it’s probably not hugely less affordable now than in say the early 90’s.

    The squealing comes mainly from people who* finish school at 18, take a gap year, take 5 years to do a three year degree while swapping courses and majors around to find their niche, spend 2 years post uni “pursuing a passion”, then when that 2 years doesn’t amount to anything take a year backpacking, finally get their first serious entry level job aged 27, spend their first 5 years in the workforce renting in the inner city and enjoying the lifestyle (plus overseas holidays etc.), and then in their early thirties are aghast that they can’t afford a Victorian terrace or warehouse conversion within 4 k’s of the Melbourne or Sydney CBD.

    A young colleague confirms this to me. He said he has high income friends and low income friends, and any one of them who really wants to buy a home seems to achieve it somehow.

    (*As was pointed out on this site previously – sorry for not remembering who by.)

  12. meher baba

    Public housing was perhaps a good idea in the decade or two after WWII when there was a chronic undersupply of housing in some of the larger cities. In those days, the affordable rental housing (supplied at what was deemed to be a “cost rent”) was targeted unashamedly at lower income working people who couldn’t afford to buy or rent a private dwelling. And this was ok: we needed a lot of lower income working people to do important jobs in our cities.

    By the 1970s, private housing had become much more affordable and the public housing sector shifted away from working people and towards the chronically welfare-dependent. Eventually, the Federal Government – which footed much of the bill for State Government-provided public housing began to see investment in construction as a waste of money and shifted funding towards a system of subsidising welfare recipients in private accommodation. So, gradually, the States began to cease investing in public housing and sell off their existing stock. The new system was probably a bit more expensive than the old one, but the cost became hidden within the overall welfare budget. So that was ok too (sort of).

    But now, we are in a situation in which housing in most parts of Sydney and Melbourne has become caught up in a global investment market and is undoubtedly priced beyond the reach of most of the lower income working people who we still need in large numbers in those cities to collect the garbage, clean hotel rooms and private dwellings, serve in shops, etc, etc. It’s a problem.

    Putting up interest rates a bit is definitely part of the solution: the two cuts last year were reckless and damaging. Getting rid of negative gearing or cutting the capital gains tax discount are definitely not part of the solution: they could not help but to make things worse.

    But some sort of government intervention might also be needed. Perhaps some sort of additional tax subsidy for basic lower cost apartments?

  13. meher baba

    PS: I should have added, what we don’t need is more low cost accommodation for the chronically welfare-dependent in Sydney and Melbourne. There is already a trend for many of these people to leave the big cities and move to smaller towns, where their welfare income goes further. That’s a good trend and we shouldn’t do anything to discourage it.

  14. john constantine

    The percentage of housing in each development to be ‘affordable’ is an indicator of their lefts determination to prevent the flight of obsolete and deplorable Australians to enclaves.

    Each new development to have instant demographics of at least 15 to 25 % refugees.

    The left is conflicted however, as the millionaire socialist left have the foundations of their lives being ‘House Price Apartheid’ that keeps only nice people near them.

  15. Tim Neilson

    john constantine
    #2397192, posted on June 1, 2017 at 12:43 pm

    Shed no tears for the millionaire socialists John. The new rules apply only to “State owned land” of which there probably isn’t much in middle class pinko neighbourhoods that is remotely likely to be turned into new housing developments, and “rezoned” private land, ditto. (“Rezoned” means suburban fringe where only deplorables live.) There’s no way that the affluent comrades would approve a policy under which they would be subjected to its adverse effects.

  16. Habib

    The left are demented, dangerous, duplicitous, deranged, dunderheaded deadshit dickheads. Are rule us like peons. Clear enough for you?

  17. Habib

    And Australian real estate is so expensive because leftists at every level have consistently interfered in a market, creating artificial cost inputs and inflating prices through idiotic grants. And Australians are morons, who believe there will always be another bigger mug prepared to pay more for a depreciating asset. I can’t wait for the crash, it’ll be a bottler. I’ve got cash, and will feel no guilt in taking advantage of the idiotic.

  18. Meher;

    There is already a trend for many of these people to leave the big cities and move to smaller towns, where their welfare income goes further.

    I gather you’ve never bought groceries in a one supermarket/IGA town.

  19. Habib

    WS, I have, Oakey only has one IGA (there is a smaller Foodworks on the way out of town), and I used to do my shopping there when I was posted to Schwartz Barracks, rather than Brisbane. Cheap as chips, and excellent quality produce. Even their darbs were cheaper than bloody Brisbane. Pool chemicals from the only hardware, and dog worm pills from the stock and station were also cheaper, and better. Ammo was about 2/3 Brisbane price. Not all country towns are gougers.

  20. Tel

    let me know if you still think that Muslim are bigger problem than left

    Who said that? Which straw man are you knocking down ned?

    The “Progressives” don’t have a religion (other than their own ascent to power) and they cannot long tolerate difference of opinion. Clearly they see Muslim violence as a means to an end and nothing more (same as they see all identity politics as a means to power). At the same time I’m sure the Islamists see this temporary truce as their means to an end, both are ready to cut the other’s throat when the time comes. Same thing happened right after the revolution in Iran if you happen to be interested, and in that case the socialists got their backside firmly kicked.

    The real trouble is that the neocons also see Muslim violence as their means to a different end… those guys cannot sell arms without a decent enemy… which kind of leaves very few places to go.

  21. Tel

    Nowadays, it is generally considered that the left are those who believe it is the role of the state to solve community and national problems whereas the right believes that it is the role of the state to create the conditions for civil society and citizens to solve community and national problems. Central management vs local management. Standardised programs vs customised programs. Big government vs small government.

    Oh gosh no that’s so wrong.

    What makes corporatism so politically irresistible is that it is attractive not just to the mass electorate, but to the economic elite as well. Big business, whatever its casuists at the Wall Street Journal editorial page may pretend, likes big government, except when big government gets greedy and tries to renegotiate the division of spoils. Although big business was an historic adversary of the introduction of the corporatist state, it eventually found common ground with it. The first thing big business has in common with big government is managerialism. The technocratic manager, who deals in impersonal mass aggregates, organizes through bureaucracy, and rules through expertise without assuming personal responsibility, is common to both. The second thing big business likes about big government is that it has a competitive advantage over small business in doing business with it and negotiating favors. Big government, in turn, likes big business because it is manageable; it does what it is told. It is much easier to impose affirmative action or racial sensitivity training on AT&T than on 50,000 corner stores. This is why big business has become a key enforcer of political correctness. The final thing big business likes about big government is that, unlike small government, it is powerful enough to socialize costs in exchange for a share of the profits.

    http://archive.frontpagemag.com/readArticle.aspx?ARTID=22594

  22. Tel

    too many neocons here thinking that some man in pyjamas and turbans are our biggest enemy.

    The neocons don’t think that in the slightest.

    They may say that from time to time, but I assure you it’s not what they are thinking.

  23. Thor O. Aesir

    Is the problem with “democracy”?
    The current system of government would not be recognised as “democracy” by the ancient Greeks from whom we misappropriate the name. The original intent (if I remember correctly – happy to be corrected) was for those citizens who contributed tax to be directly involved in the expenditure decisions.
    To apply this in a modern context, only citizens who are net contributors would be able to vote. Voting would be about:
    1) regularly “co-opting” a very temporary and reluctant executive assistant (from the group of citizens) to direct the expenditure decisions via the public service and
    2) making direct decisions about the allocation of taxation to various systems and projects

    This actual democratic model may have merit in that it would:
    a) restrict the pool of “voting citizens” significantly.
    b) restrict the current conflict of interest problem (where net recipients of government funds are able to vote themselves more government money)
    c) be self controlling: groups who wanted to vote themselves more government support would find that they could no longer vote (being transferred from net taxpayer to net recipient)
    d) encourage people who wanted a say to become net taxpayers

  24. Zippy Cov me FeFe

    If You Want To Know Why Civil War Is Possible Just Look At This

    https://www.lewrockwell.com/2017/06/martin-armstrong/dont-think-civil-war-possible/

    let me know if you still think that muslim are bigger problem than let

    Martin was convicted and served time for running a ponzi scheme. I would take his prognostication with a grain of salt.

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