This piece was co-written by Lisa Adkins, Head of the School of Social and Political Sciences, University of Sydney, and Martijn Konings, Professor of Political Economy and Social Theory, University of Sydney.
This article is part of a series in which OECD experts and thought leaders – from around the world and all parts of society – address the COVID-19 crisis, discussing and developing solutions now and for the future. It aims to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge. Opinions expressed do not necessarily represent the views of the OECD.
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Anglo-capitalist societies are dominated by the dynamics of the asset economy, especially the dynamics of asset appreciation and depreciation. Characterised by increasing inequalities of wealth, the asset economy has been built on decades of wage stagnation and asset inflation. This has fundamentally reworked the social structure such that class positions and life chances are now defined less by occupational positions than by relationships to wealth generating assets, and especially to housing. This means that even where people have the same jobs or earn the same wages, deep inequalities exist between those who own assets and those who do not.
Fuelled by political programmes democratising asset ownership and capital gains, as well as by the liberalisation of credit markets, the double dynamic of asset appreciation and wage stagnation initially saw house values soar and rates of credit-driven homeownership expand. The outcome was the transformation of the home into an asset that appreciated at a much faster rate than wages and inflation. There was an apparent democratisation of the “wealth effect” of asset ownership, with property-owning households seeing major gains in their household wealth portfolios.
But the very logic of credit-driven home purchases pushed prices up to heights where it became increasingly difficult to enter the market. In the United States as well as in other Anglo-capitalist countries – including the United Kingdom, Canada and Australia – homeownership rates show a particular pattern from 1980 to 2020: increases followed by decreases. Price inflation over time has meant that in many large cities it is now virtually impossible to enter the property market just on the basis of an average wage. As a consequence, private rental markets have expanded, rental prices have risen dramatically, and new modes of occupancy have emerged, including multigenerational and shared living. What is more, renters are not simply locked out of home ownership but also out of the wealth that it generates. A chasm has therefore opened out between those with and without housing assets, one that not only marks a differentiation in wealth accumulation, but also in life chances.
This differentiation is very often understood to be operating along generational lines, with the effects of property inflation and lock-out from property ownership most acutely felt by millennials. It is true that, within the millennial age cohort, the fault lines produced by four decades of sustained property inflation have become highly visible. But within this cohort the children of those owning housing assets are distinctively advantaged through intergenerational wealth transfers that offer them access to home ownership, and with it, participation in property-based asset inflation and capital gains.
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Meanwhile, those living on wages alone without the prospect of such asset-based transfers have little hope of making the leap into home ownership. This, however, does not mean their lives are any less asset-based. Their rental payments constitute income streams for landlords to service mortgages on multiple investment properties; their increasing rents are the outcome of asset price inflation; and their inadequate wages are the consequence of a sustained and embedded political strategy to deflate wages and inflate asset prices.
It is against this backdrop of asset-based class divisions that the current COVID-19 pandemic is being played out. Much attention has been focused on the differential positioning of young people in the crisis, especially on how they are more likely to experience job losses. Attention has also been focused on low-paid essential workerswho have been instrumentalised to work in the service of wealthier sections of populations. But just like their older and non-essential worker counterparts, young people and essential workers are participants in the asset economy. They are likely to have invested in their human capital by borrowing funds for education or training that they are now paying down, to be paying rents that keep on escalating, or to be using their wages to pay down a mortgage in the hope of future capital gains. Indeed, the states of emergency declared by many governments have not wiped away the political economy of asset-based lives. Instead, people are living the pandemic in the time of the asset economy.
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This is expressed most clearly in how relationships to assets – especially residential property – are central in shaping how COVID-19 lives are being lived. The lockdown, social distancing, “stay-at-home” and “shelter-in-place” mandates of governments assume access to private, residential property, marking a divide between those with secure housing and those without. Moves by some Anglo-capitalist governments (notably the United Kingdom, Australia and Canada) to implement wage subsidies are ensuring that mortgages can still be paid and that owner-occupiers can remain safe in their homes despite lay-offs and furloughs. For mortgaged home owners who have lost jobs and are without wage subsidies, mortgage payment holidays and payment pauses ensure those households stay both safe and afloat.
At the other end of the scale are the non-asset holding classes, especially renters. While governments such as Australia’s have put in place eviction moratoria, no parallel protections have been put in place for residential rental payments, despite rental relief being offered to cover commercial properties. Where local measures allow for rent holidays, tenants will need to pay back arrears and will likely accrue personal debt as a consequence of the pandemic. Indeed, while residential property owners may well see the value of their properties continue to increase after the pandemic and have the option of drawing down equity to keep themselves afloat, the only option for many renters will be to take on non-leverageable forms of personal debt.
COVID-19 life has thrown asset-based inequities into stark relief and made explicit how the asset economy has itself yielded its own politics of life. Those at the very top (the super-rich) with diverse asset portfolios have been able to retreat from the world in places far away from COVID-19 hotspots to wait the crisis out. Indeed, while the very wealthy live off income flows from assets and stay luxuriously safe, and non-asset holders (renters and the homeless) are unprotected and cast adrift, an increasingly anxious home-owning or mortgaged-home-owning middle-class sit in relative safety. COVID-19 lives, are in other words, being actively refracted through the logics of the asset economy.
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