Financialized Capitalism

While many European countries experienced a global housing boom in the early/mid 2000s, house prices and mortgage debt in Germany stagnated. Therefore, the German housing system is considered to be operating outside financialized capitalism. Despite Germany’s apparent stability, we argue that an alternative trajectory of financialization in the German housing market can be observed. This trajectory has followed three stages or ‘waves’. The first wave started around the time of German unification and is characterized by the failed attempt of West German banks to marketise and liberalise German housing finance. The second wave started in the late 1990s and is characterized by the ‘financialized privatization’ of many public housing associations and the speculative investments of private equity firms and hedge funds. The third wave started during the global financial crisis and is characterized by booming housing prices and the market entry of listed real estate companies. 
KEY WORDS: Germany, financialization, privatization, political economy, private equity and hedge funds, listed real estate firms

In the literature one finds various explanations for the rise of financialized capitalism. In the different strands of financialization literature, housing either plays a minor role or is simply seen as one of the bearers of financialization. The relations between housing and financialization are under-researched and under-theorized. This article, first, looks at the rise of housing finance as an integral part of macro-economic policy, and second, at the role of financial globalization in the rise of housing finance. Housing is seen as an absorber of a ‘wall of money’, but the absorption of finance by housing is a very uneven process. Four trajectories of national institutional structures are suggested and it is discussed how capital flows are absorbed in each of these trajectories. Finally, it is discussed what this tells about the geographies of financialized capitalism, and its relations to debt, housing, mortgage markets and the spatial fix.

The paper "Capital, housing and inequality in 21st century" raises critical questions for housing researchers by introducing debates from economics into the field of housing studies. The authors conclude “it is time to debate housing capital in the century ahead” and stress “there is an urgent need for a renewed political economy of housing policies”. We agree that housing studies would not only benefit from a re-engagement with political economy, but also that “a wider understanding of housing systems is required to make sense of how global capitalism has developed since the 1980s.” However, whereas Duncan Maclennan and Julie Miao quickly reduce housing researchers to housing economists and political economy to political-economy-within-economics, we would like to acknowledge the fundamentally interdisciplinary nature of both housing studies and political economy. To us, the focus of Maclennan and Miao—debating the mechanics of Piketty and its relevance to housing economics—is too narrow. We argue that one should take Piketty’s Capital to the next level and present the broader range of issues and conceptual debates that need to be included in an examination of housing, capital and inequality in the 21st century. In particular, we feel that the rich tradition in geography, urban studies and political economy to study the effects of overaccumulation on real estate and the built environment needs to be included in a political economy of housing. 

If we want to contemplate about the long-term outlook of capital and housing, we need to think about the dialectics of the toxic nature of housing centred financialization. The urbanization of capital (à la Lefebvre and Harvey), or the metamorphosis of capital (à la Piketty), is simply not a stable set of social relations. While Piketty’s arithmetic underlying growing inequality may be a correct assessment of actually existing trends, the long-term durability of real estate as store-of-value is not as straightforward as suggested. Housing studies should not be reduced to housing economics, and political economy should not be reduced to a political economy approach within economics in which politics plays the second fiddle to so-called economic laws. We need to understand the role of real estate in the political economy as real world phenomenon rather than as the outcome of a universalistic deduction that exists separate from time and space. Housing as carrier of practices of capital accumulation is variegated in space, across national manifestations of capitalism and is shaped by historical trajectories, culture and institutions. The rise of housing as carrier of wealth needs to be understood as part of larger political economic developments, in which the twin phenomena of neoliberalization and financialization are key to understand the shifting power relation, the ‘regulated deregulation’ (Aalbers 2016b) of both housing and mortgage markets, and the return of the rentier class. Although ‘real world economic’ aspects of housing are introduced at the end of Maclennan and Miao’s paper, we believe they need to be at the core of how we perceive the future of capitalism and inequality. Housing is central to the variegated political economy of contemporary societies and therefore key to understanding actually existing capitalism and inequality.

In recent years, labour markets have been characterised by stagnant wages, reduced incomes and growing insecurity supplemented by the ongoing proliferation of outstanding payment obligations at almost all levels of economy and society. We draw upon current debates in social and economic theory to explore the disconnect between the deterioration of late capitalism’s distributive measures and the relative vitality of consumer cultures, suggesting that the latter relies substantially on immaterial, credit-based payment means to bridge the gap between the fundamental fantasy of ‘more and better’ and the decline of material productivity denoted by base rate of profit. We then use this disconnect as a breach-point for an in-depth interdisciplinary discussion of the substantive and ideological function of credit.