One the best economic bubble analysts in the world, Doug Noland, describes how the development of investment manias is often interrupted along the way by well meaning people. But, when they do intervene, bubbles by their nature are already so large that their burst threatens to pull down the system around them, so every effort to prick the bubble only ends in even more resources being sucked into supporting it.
Yet I doubt very much that Mr Noland has ever seen a bubble so expansive and complete as the one that has now engulfed Australia. What began as a turn of the century property fancy in Olympic Sydney has been prompted, plumped, supported and fluffed so may times over so many cycles that it has become Australia; our society, our economy, our politics, our very culture. I once described this as the “politico-housing complex” but this is no longer sufficient. Our country has become the world’s first Propertocracy, a nation state whose full faith, credit and power exists in some large part to support one impossible outcome: interminable rises in property prices.
You think I’m mad, I know, but bear with me. Edmund Burke theorised that a state was made up of “four estates”: the clergy, the nobility, the commoners and the press. For contemporary Australia we can adapt that to mean our culture, our leadership class, the battlers and the media. And when we run through the state of each you’ll see what I mean.
In 1997 a low-budget Australian movie dominated the national box office. The Castle cost $500 000 and took nineteen days to shoot. The movie’s title was drawn from the platitude ‘each man’s home is his castle’. Its major theme was an examination of the rights and value pertaining to home ownership.
The lead character, Darryl Kerrigan, was an iconic figure of Australiana: working-class, egalitarian and down-to-earth, someone who might have been described as a ‘good bloke’. He was played by the lanky, laconic Michael Caton, whose moustachioed credulity encapsulated Australia’s most adored self-image. The film held an ironic mirror up to Australia. On display were those dimensions of the nation that did not fit with its self-image of giving everyone a ‘fair go’.
The Castle’s launch coincided with changes that curtailed the realisation of traditional, passionately held goals of home ownership. That great Australian (or American or British) dream was mutating into volatile and dynamic asset trading. There is no better symbol for this shift than the subsequent career of Michael Caton.
After the success of The Castle, he was recruited to host a major television series called Hot Property. In a case of life ignoring art, the man behind Darryl Kerrigan, the embodiment of passionate owner-occupation, became the face of asset speculation. The program offered tips on how to buy, renovate and sell property. This theme grew so strong with passing seasons that in 2000 it was renamed Hot Auctions. This was the very opposite of the quaint owner-occupier culture venerated in The Castle.
That was just the beginning. The lifestyle television revolution grew and grew through several phases of mass cultural event: first it was a DIY boom, then reality television, more recently it branched into whacky choreographed competitions using real people. These are now the biggest budget programs on television and the biggest advertising generators outside of sport as well. The travails of the contestants are reported in the broader media as news, as if they’re real, as we’re drawn further into what is an huge myth-making exercise about home ownership and its paraphernalia.
Tradies have become celebrities and celebrities have become tradies and both are the pivots around which we wrap our tastes, personal goals and identities. The Castle has morphed into a spiritual guide book with chapters on everything from property tax-avoidance to kitchen couture.
Any leadership class is made up roughly of two halves. The first is the executive, the formal institutions of power: government, regulatory bodies and law. The second is more nebulous but just as powerful in civil society. It is the normatives of the nation’s elite, those that set the agenda for others, often expressed in the intelligentsia, non-government sector and lobby groups.
The Australian Propertocracy is nearly complete in the first half. At all levels of government and regulatory enforcement, real estate rules supreme. At the Federal level it guarantees and protects too-big-to-fail banks, drives rampant population growth and shields legal loopholes for criminal property activity. Regulators are only nominally independent from this, offering further uber-generous banking supports, little or no transparency as they endorse gaming of international rules that would impinge on property rent seekers. At the state and local levels it is planning restrictions, supply side bottlenecks, developer kickbacks and demand side stimulus measures.
All are designed, in one way or another, to keep property prices high.
Australian civil society is not much better. While it agonises over global warming, asylum seekers and aboriginal fates, it gorges itself on the property ponzi, forcing its children into levels of debt servitude far beyond prudence and their parent’s experience, pushing many offshore to find careers that might pay for a small plot of land back home. The intelligentsia is polarised by party politics that has poisoned the marketplace of ideas with bizarrely simplistic platitudes about the benefit of respective economic systems, and by career paths that demand conformity to the executive point of view.
The non-government sector is paltry and ineffectual while the lobbies that drive property interests hold privileged seats at the policy table.
Australian civil society has become a dinner party pissing contest that gawks greedily at its own financial genius, generally doing nothing to reform a system that it prefers to internalise as a badge of its own investment prowess. This is new in the broader scheme of things. In the nineteen nineties it did not exist.
Australia is fortunate to not have a true “commoner” class. We are still, socially at least, relatively classless. But that does not mean that the Propertocracy is not at work shaping our blue collar caste and vice versa. Battlers are no longer workers. They have become “aspirational”; a nebulous term designed to capture a worker that no longer cares for trade unions or his industrial relations rights.
The aspirational battler votes Liberal, a lower class that gleefully endorses laissez faire economic policies designed to denude him of income. He does this because in return, so runs the message, he gets lower interest rates (and lot’s of middle class welfare to boot). That, in turn, enables our propertocratic proletariat to “get ahead”, a political dog whistle for investing in property using tax lurks freely offered by the state.
Who exactly he is getting ahead of is no bother to the aspirational battler. He may be ascending upon a tide of disaffected and disenfranchised neighbours that he is locking out of home ownership, not to mention his children and, God help them, grand children, but that is not of relevance.
What matters in the propertocractic state is that our heroic battler is rising and the unpropertied underclass he is creating are just “doomsayers” and “leaners”.
The fourth estate used to be the press. Or the news. Not any more. Those quaint notions are long gone. The media is now an ubiquitous and full blown propertocratic trivia factory running 24/7 on devices, planes, trains, automobiles, TVs, radios, buildings, public spaces, toilet walls, the sky, you name it.
In terms of ownership, business models and editorial point of view, Australian media is dominated by the duopoly of Fairfax vs Newscorp. The two fastest growing profit centers of both are Domain and realestate.com.au. Actual journalism that seeks truth has become a liability to these operations.
On the Fairfax side, journalism is nothing more than a loss leader to attract and dumb down eyeballs into property speculation. Thus a fine journalist like Michael West is no longer wanted because his “skill set” to seek truth and hold power to account upsets the endless lifestyle rituals that give meaning to the meaningless pursuit of property.
On the Newscorp side, whatever gets in the way of Murdoch profits, including governments and policy, is mowed down like chaff. The current “Duncan” spectacle is outright bullying, some poor sod who dared put his hand up and declare that he was missing out in the Propertocracy, butchered by Murdoch’s billion-dollar human harvester. At stake is a Prime Minister that Murdoch wants to see returned to protect his monopolies, as well as the perpetuation of a value system that pretends meritocracy while handing him economic rents.
Fundamentally, it is the media’s job to offer the nation an independent political and ideological centre where its myths, ideas and plans can be thrashed out. In the Propertocracy, the media’s governance of this collective fora has become a kind of electronic God perpetually regenerating the property myth in the name of its own horribly conflicted profits.
The propertocratic election
And so, when we tie these strands of our political economy together, it is no wonder that in the end we should come to that point when power in its most obvious form – a Federal election – will now be determined by property prices. Having infected all other parts of our society, real estate will now control your vote as well.
On the one hand we have a Labor Party governed by a terribly unpopular, backstabbing unionist. He is old Labor not new, espousing fairness not meritocracy, protection not productivity and tax rises not spending cuts. He has, however, one redeeming feature. One epic policy gamble that changes everything, a reform that shoves a large pin straight into the bubble heart of the Australian Propertocracy and, in so doing, transforms his entire platform, far beyond what even he himself seems to understand. Scrapping negative gearing turns Bill Shorten from a vestigial socialist into an historic economic reformer with far greater liberal quailities than the Liberal Party itself because once property prices stop rising, as they must, it means Australia will have to earn its way in the world by competing.
On the other hand, we have Mad King Malcolm, a man born to rule if there was ever one, who has the knowledge and intelligence to know full well that the propertocratic state is not the Australia it pretends to be. It is not meritocratic, egalitarian, dynamic or clever in any of the ways that it says it is. It is a bubble and he knows it, indeed has stated it openly. But in his desperation to retain power he is resisting Labor’s negative gearing reforms, standing shoulder-to-shoulders with realtors, and in the process positioning the Australian Government and the office of the Prime Minister directly behind guaranteed high property prices. This is a real estate apotheosis unique in the world.
Australians typically are rather unAmerican about their PM’s office. No matter what idiot occupies the Oval Office, the seat and seal of the President remains somehow revered. But, I put it you, even Americans would be appalled at such a degradation of their seal of power. The Office of the Prime Spruiker may reflect the Propertocratic citizen – or perhaps vendorzen might be more accurate – but anyone with a degree of national pride will recognise a base distortion of the role of the PM. The rule of a prosperous and modern nation is literally being handed to the spiv at your local shops. What’s next? Deploying the army at auctions to coerce higher bids at the point of a bayonet?
Our nation is at a crossroads. It faces an existential crisis that could not be more prosaic. We are not threatened by an overwhelming external enemy, a plague, or economic depression (yet!). We are not defending our territory, forging a visionary path, wrestling with the great challenges of our times or taking control of history. The enemy we face is a banal insurgency of self-serving salesman that are bleaching us of consequence and substance.
The Propertocracy is deeply unworthy of the former liberal democracy known as Australia.