The Dialogue between Ferreras & Ryan-Collins; A Report

As part of the Future Markets Consultation, we organize a series of online dialogues between visionary economists. This is a report by Ilse Oosterlaken on the dialogue between Isabelle Ferreras & Josh Ryan-Collings on the effects of contemporary capitalism on everyday life, which took place on 12 October.

In last week’s episode of our series of online dialogues on the future of capitalism economists Raghuram Rajan and Paul Collier made a plea for restoring and empowering local communities. This is necessary, they claim, to take away the anxiety, hopelessness and loss of control over their lives that many people feel in our contemporary globalized economy. The problem was re-emphasised by Kees van Buitendijk in his column starting off the episode of this week, in which he referred to a recent book by American economists Anne Case and Angus Deaton, called Deaths of Despair and the Future of Capitalism.

The episode dug a bit deeper in two areas that arguably play an important role in such despair: work and housing. What they have in common, moderator Natasja van den Berg explained the choice for this dual focus, is that in both areas many people nowadays experience a lack of security, even though – so it was mentioned somewhere in the episode – both are recognized as fundamental human rights. In both areas there also seems to be an increasing rift between the ‘haves’ and the ‘have nots’ (but that is the topic of next week’s episode: inequality).

Another commonality between both topics that was implicitly present in this episode, but not explicitly discussed: commodification in some sense (with houses becoming quickly tradable financial assets rather than homes, and laborers being disposable human resources rather than people), and treating things as more one-dimensional than they are in reality.

The experts invited for this fifth dialogue in the series were sociologist Isabella Ferreras (work) and economist Josh Ryan-Collins (housing). Both propose certain solution strategies for the problems that they have studied, and thus this episode got more concrete and practical than that of last week on the importance of communities – which is, I suppose, the benefit of zooming in on specific problem areas.

But although the problem addressed can be seen as a continuation of last week’s dialogue, the solutions discussed went in a different direction; communities were only mentioned in passing (for example, the possibility of community housing schemes), it was more about the role of government regulation in ensuring human rights.

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Financial assets rather than homes

Josh Ryan-Collins started out by emphasizing that insufficient supply of housing is not the cause – or at least not the main cause – of the current housing crisis. According to him, it is rather the changes in demand for housing over the past decades that are the problem. A root cause of this change are policies since the 1980s to promote the right to home ownership as a way to provide people financial security (as this would reduce their potential dependency on welfare payments). To bring home ownership within reach of more people, the financial system was liberalized. As a result, more and more houses became financial assets rather than places to make a home.

As for solutions: Ryan-Collins would like to see a more equal treatment of home owners and renters by fiscal and other policies. Furthermore, and this seems to be the key element in his solution strategy, he proposes to make a clear separation between the price of land and the price of housing. That they are currently coupled very narrowly is visible in the influence that urban developments like a new metro station – so investments in land usage – have on the prices of surrounding houses.

His books on the topic no doubt provide further details and reasons why this would help (although I have been warned by people who have browsed through or read them that they tend to get a bit technical). Hopefully they also address the question to which degree his analysis of the problem and the solutions that he proposes are specific to the UK, or valid for some or most European countries (a question that was unfortunately not raised in the episode).

A problem with a long history

Ferreras began her interview with highlighting the new appreciation that the COVID-crisis has given us for the important role of previously undervalued work, such as making deliveries, nursing and collecting garbage. We have been shown, she argued, that no economy can exist without the contributions that people in such low-paid jobs make. Her subsequent reasoning was that as people give their “person, body, psychological health and sometimes even their physical health” to the job, it is not fair that they don’t get an equal say in the management decisions that affect them, on a par with the shareholders that bring in capital.

This is, of course, a problem that has a long history of analysis and discussion. See, for example, the interview with economist Irene van Staveren from episode 1 of our dialogue series on what reading Marx had taught her on the problem of ‘labor’ always losing from ‘capital’ under capitalism. The solution for Ferreras: a democratization of large firms, by means of regulation that gives workers substantial decision power rather than the weak right to be consulted that is characteristic of most current work councils. She made a comparison with politics, where the introduction of a House of Commons meant that elites had no longer exclusive power via the House of Lords.

In addition, Ferreras made a plea for a job guarantee. This is, so she argued, a better idea than a basic income, as it does justice to what makes work important for people. And that is not just having an income, but being useful, making a contribution to society, being socially included.

A comment from economist Marcel Canoy in the accompanying zoom session, which did not reach the moderators: ask her what she thinks about the bad track record that governments have in creating jobs. But if she had been asked that question, she would certainly have been more optimistic than Canoy, as she did share something about a recent French initiative that was – according to her – quite successful in this respect.

Whether such optimism would be justified or not (for example, what is the long-term financial sustainability of this French initiative?): I think that it is only fair to then also ask what the recent track record is of markets in creating good and secure jobs for people (as opposed to the – no doubt – positive track record of markets over the past few centuries).

Markets and regulation

With respect to the role of both governments and markets in creating a better society, Ferreras made at some point a rather bold claim that as housing and decent jobs are human rights, they should thus not be left to the market. Moderator Natasja made an assumption that Ryan-Collins shared this opinion, but he explicitly rejected his work being framed in that way.

It reflects, he explained, a way of thinking that is characteristic for neo-classical economics but that we should get away from, as it wrongfully assumes that markets function completely independent from governments, as if markets and governments are different spheres. Ryan-Collins wants more and better regulation of markets, and in particular of the financial sector, but that does not make him opposed to markets.

In response, Ferreras expressed agreement with this interdependence and claimed that it has actually been the contribution of sociology to show us that “markets are man-made”, with rules that we have given ourselves, yet under heavy influence of power differences (and so not necessarily just).

However, this social view of the market does not prevent her, so it became clear, to be highly critical of how much room we should give this socially constituted market – according to her substantially less room, so it seemed, than Ryan-Collins would give it.

Since I started this report with the topic of despair, I should probably also mention the hope that was expressed by Josh Ryan-Collins in his closing remark; He noticed that the Second World War had led to the establishment of the most important institutions that are key to life in the UK today, such as its national health services. That gave him hope that the current crisis can also bring about new and better institutions.

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