Friedrich Engels, Market Urbanist

A blog about business and economics.
May 3 2012 3:08 PM

Friedrich Engels, Market Urbanist

Here's an interesting historical artifact: Friedrich Engels "On The Housing Question." He's criticizing a proposal by the French non-Marxist socialist Pierre-Joseph Proudhon which seems to be some kind of scheme for encouraging and subsidizing widespread working class homeownership. Specifically, "Proudhon proposed that the tenants should be converted into purchasers by installments, so that the rent paid annually would be reckoned as an installment on the payment of the value of the dwelling, and, after a certain time, the tenant would become the owner of the dwelling." What we got in the real world was substantial government intervention into the mortgage finance market which has had the effect of creating the 30 year fixed rate self-amortizing mortgage, something that functions similarly to Proudhon's proposal.

Engels denounces this as utterly impractical in a modern world that demands multi-family dwellings:

And now imagine the fine state of things if each worker, petty bourgeois and bourgeois were compelled by paying annual installments to become first part owner and then full owner of his dwelling! In the industrial districts in England, where there is large-scale industry but small workers’ houses and each married worker occupies a little house of his own, there might possibly be some sense in it. But the small-scale industry in Paris and in most of the big towns on the continent is accompanied by large houses in each of which ten, twenty or thirty families live together. On the day of the world-delivering decree, when the redemption of rent dwellings is proclaimed, Peter is working in an engineering works in Berlin. A year later he is owner of, if you like, the fifteenth part of his dwelling consisting of a little room on the fifth floor of a house somewhere in the neighborhood of Hamburger Tor. He then loses his work and soon finds himself in a similar dwelling on the third floor of a house in the Pothof in Hanover with a wonderful view on to the courtyard. After five months’ stay there he has just acquired 1/36 of this property when a strike sends him to Munich and compels him by a stay of eleven months to take on himself ownership in exactly 11/180 of a rather gloomy property on the street level behind the Ober-Angergasse. Further removals such as nowadays so often occur to workers saddle him further with 7/360 of a no less desirable residence in St. Gallen, 23/180 of another one in Leeds, and 347/56223, to reckon it out exactly in order that “eternal justice” may have nothing to complain about, of a third dwelling in Seraing. And now what is the use for our Peter of all these shares in dwellings? Who is to give him the real value of these shares? Where is he to find the owner or owners of the remaining shares in his various one-time dwellings? And what exactly are the property relations of any big house whose floors hold, let us say, twenty dwellings and which, when the redemption period has elapsed and rented dwellings are abolished, belongs perhaps to three hundred part owners who are scattered in all quarters of the globe.
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And:

The whole conception that the worker should buy his dwelling rests in its turn on the reactionary basic outlook of Proudhonism, already emphasized, according to which the conditions created by modern large-scale industry are diseased excrescences, and that society must be led violently, i.e., against the trend which it has been following for a hundred years, to a condition in which the old stable handicraft of the individual is the rule, which as a whole is nothing but the idealized restoration of small-scale enterprise, which has been ruined and is still being ruined. If the workers are only flung back into these stable conditions, if the “social whirlpool” has been happily abolished, then the worker naturally could also again make use of property in “hearth and home,” and the above redemption theory appears less ridiculous. Proudhon only forgets that in order to accomplish all this he must first of all put back the clock of world history by a hundred years, and that thereby he would make the present-day workers into just such narrow-minded, crawling, sneaking slaves as their great-grandfathers were.

Historically, Proudhon got the last laugh on this one. But Engels is raising some good points. Owner-occupied housing isn't nearly as incompatible with labor mobility or multi-family structures as he seems to think, but it is true that the owner-occupied housing model works better in the context of long-duration single-family structures. And Engels is also correct to note that a dynamic capitalist economy would benefit from more labor mobilty and more high-density multi-family structures. And we did see during the late financial crisis that pushing further and further on the "homeownership for everyone" lever as a solution to the social need for abundant and affordable housing doesn't really work. So "How is the housing question to be solved then?" Well: "just as any other social question is solved: by the gradual economic adjustment of supply and demand." In other words, we need to allow for denser construction on the most valuable land.

Now to be sure, Engels thinks that ultimately this is "a solution which ever reproduces the question itself anew and therefore is no solution" and in the long run only the abolition of capitalism will work. But for the foreseeable future we're stuck with supply and demand as the keys to housing policy.

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