The Economic Paradox of Cities like Vancouver Save for later Reblogpost

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We humans are moving to cities, moving around the planet, especially to places like Vancouver. Now there is starting to be some push-back, on this. People are starting to question the wisdom of so much immigration, starting to re-think how cities work. The usual dumb answer to why some people are opposed to immigration into large North American cities, is the liberal/progressive mantra: White people are racist!….White people are racist!

But is it true? I don’t think so. There are other, more sensible answers.

So, let’s start with racism…..when it comes to immigration and the cost of housing, is racism the problem? Are people upset that immigrants are coming to North America in large numbers, because white people are racist? I actually think that’s a minor problem. When the economy is doing very well, when most people can easily afford housing, and have good jobs, then people open their hearts to immigrants.

Things are changing now. Anti-immigrant sentiment is definitely growing. But why? Let’s look back in time. True story from my life: In Vancouver where I lived and went to university back in the 1970s, I had an older friend named Larry, who raised a family in West Point Grey, a very nice neighborhood, just up from the beach, during the 1940s and 1950s. Larry had a Grade 12 education, and back then Vancouver was very uncrowded, so prices were cheap, and so even on a salary of a man with a Grade 12 education, Larry  was able to buy a house in a nice area of the city, raise a family, and his wife didn’t have to work unless she wanted to.

….those days are long gone

Today if Larry was around, it would take 2 income earners, both with university degrees, to be able to buy a house in the same neighborhood. I know this because my dentist is a Chinese-Canadian woman from Vancouver….the same neighborhood. Kate told me “I moved from Vancouver because most of my friends were married professional couples. Both needed to work, just to buy a house. And some of them were teaming up with other married couples, to buy a house together. And many of them are not having children, as they must both work, to pay the mortgage, and pay the bills.”

So Canada and specifically Vancouver has gone in a few decades, from a society where a man with a high school education could raise 3 kids, buy a house, and the wife didn’t even have to work, to a society where even the top income earners are having trouble buying a house, and can only do so, if both the man and woman works. What happened?

What is behind this shift? Immigration, to a large degree, is one of the main drivers of price increases. It’s pretty simple supply and demand, and it doesn’t really matter, the skin color of the immigrants. The immigrants could be all from Germany or England and the economic effect would still be the same: Generally speaking, the more immigrants you let in, the higher the house prices. Immigrants create demand for housing, and unless the supply increases sufficiently, the price increases. And that is what has happened for decades. Now, after decades of too much immigration, house ownership in Vancouver is unaffordable.

The most unaffordable cities in the world are Hong Kong, then Vancouver, then San Francisco, Sydney, San Jose….all very nice places for the most part, that people want to live in. Their very attractiveness drives immigration to these cities, ramping up prices, making them unaffordable over time, for most people.

It’s interesting that, for decades the working class and middle class in Vancouver, mostly white, took a pounding over house prices and no one cared. Now that the sons and daughters of the elite are having trouble with house prices, it’s suddenly important.

Now, Vancouver is the 2nd Most unaffordable city in the world. It now takes more than twice as much money, just to keep the mortgage going, as is recommended by financial people:

https://globalnews.ca/news/1098143/vancouvers-housing-prices-2nd-most-affordable-in-the-world/

Something has gone very very wrong, in Vancouver.

Another factor pushing up house prices in Vancouver, believe it or now, was feminism: …..2nd Wave Feminism came around, in the 1970s and this eventually impacted house prices, pushing them upwards. Here’s how that works:  The smarter, or at least more academically inclined women started to go to university, then get married, almost always to men at university, who also graduated then pursued very lucrative professional careers. Charles Murray wrote about this in “Coming Apart”…Thus the yuppie professional couple appeared on the scene….and we are socially isolated into economic classes, much more than ever before. The different economic classes no longer understand each other’s concerns. With two professional incomes, these people ended up with most of the money. And for reasons I don’t fully understand, there has been a shifting of economic rewards over the past few decades in capitalism, with more and more of the increases in wealth, going to professional people….and less and less to ordinary folk. So yuppies, the top 20%, they have all the money. And when women get money, their expectations rise. The size of houses has increased for decades, very consistently, and as yuppie couples had lots of money, their houses got bigger, more luxurious, and higher and higher in price, because luxury is expensive. This all acted as a push on the price of all housing….further making house ownership more unaffordable for most people. In the 1960s, houses were smaller and simpler. You could buy a house much cheaper back then, but it was definitely smaller and far less luxurious. The rise of yuppies, feminism, pushed up demand for larger houses, which acted as a push on the price of all real estate….and of course most of the population could not keep up with these price and salary increases. Heavy immigration also pushes up prices, due to supply and demand. So feminism, the rise of yuppies and power couples, the concentration of wealth as a trend, all have enormously benefited the elite….no wonder the elite, who run society, they strongly support immigration. Why not? It helps their class get even richer.

When you were born, has a lot to do with it. If you are born today in Vancouver, God help you if you don’t have rich parents. If you were born in Vancouver in the 1940s, came into adulthood when houses were cheap, you didn’t need God’s help.

Make no mistake: for a lot of people, immigration is very good. If you owned property in Vancouver and bought it, when house prices were cheap, as many of my friends of my generation did, then as mass immigration pushed up prices to astronomical levels, you benefited tremendously.

So, it’s not all bad. In fact, for the top 20% of income earners, who lived in Vancouver decades ago, mass immigration was a very good thing. They bought houses cheap, and now those houses are worth a fortune. And they did very little to earn that money, other than be born at the right time, buy a house or some houses, breathe in and out, go to work, perhaps vote liberal and then wait.

However, the grandchildren of this generation, many of them cannot afford a home, so the Canadian Dream has died for them, and that troubles me. The older generation has shafted the younger generation. I’m not saying it was deliberate. It was mostly just based on not understanding, what was really going on. The older generation, many of them liberal, would tell you that you are “racist” if you don’t support mass immigration. After all, mass immigration worked for them, it made them rich, they figure….so why would it not continue to work?

So for anyone who bought a house cheap in Vancouver, long ago, then made a ton of money, I say: Great, you made a lot of money….but does it worry you that your grandchildren may not be able to have the same affordability that you enjoyed? And if you supported mass immigration, time to ask yourself: is it still a good idea? Will it continue to work well?

Well, it won’t…..explanation to follow

So, mass immigration in Canada has been very, very good……..for the elites, and for people who already owned a home, and were able to watch it’s value rise and rise and rise.

I once knew a Greek-Canadian lady in Vancouver with a Grade 5 education, who came to Canada at the right time. during the 1950s.  Helen cleaned tables in a restaurant, and she and her laborer husband Gus were able to buy a home quite inexpensively. That home is currently worth between 1-2 million….However, time has moved on, and Helen’s college educated grandchildren can’t even buy a home. Think about that….this is progress? I thought capitalism always progressed, made things cheaper?

So, high real estate prices are a problem for most people. It is largely about mass immigration, in a place like Vancouver, but there are other problems as well. The economy is working better than ever, but generally speaking, over the past few decades, as the economy got more and more productive, most of the economic gains have gone to the top 20% of people. That is, in part, what the Trump phenomena is about: people realize capitalism itself is broken. Not for the well off, but for most people in North America, “capitalism” just doesn’t work. I started noticing decades ago, that economists started reporting that gains from productivity were not flowing to the middle and working class….and for reasons I don’t fully understand, all the gains in the economy are going to the top 30% of Canadians and Americans….and most of those gains are going to the top 1% of Canadians and Americans. It has something to do with The Pareto Distribution, but there is more to it than that. Mark Blythe is a liberal economist who has a theory about why this is happening, which I will post in another future blog….it has to do with a basic failure in theory, of neo-liberalism, which globalized labor…which royally screwed over, most people, while benefiting the financial elite.

So speaking specifically about Canada and Vancouver, yes immigration is good for Canada, yes immigration is good for the Canadian economy, but the dirty little secret the elite won’t let out, is that it has been only good for the top people. If you believe that immigration continues to be a good thing, here is what I want to say to you: “You’ve been had.”….conned

So, the political fight now, it’s not really about left vs. right any more. It’s about “haves” vs “have nots” I have read newspaper articles here and there for decades, saying that basically the American middle class has not had a real pay raise, since the early years of the Reagan era…..the economy doesn’t work for most people, in providing basic human needs, like affordable housing. That’s why Trump got in. It only works for the well off….and that is why there is so much anger against immigrants: letting in immigrants is a bad idea in our new world of what I call “Zero Sum Economics” (my made-up term)

ze·ro-sum/ˈˌzirō ˈsəm,ˈˌzērō ˈsəm/adjectiveadjective: zero-sum

1. (of a game or situation) in which whatever is gained by one side is lost by the other.

What does my term, “Zero Sum Economics” mean?..…just what it says. When an economic system works in such a way, that more and more is provided, more and more wealth is produced, but because the income all flows to the top, and because the price of basics like housing is so high, this all means that most people feel like they are not getting ahead. Our economy is now arranged so the top people win and everyone else loses. Most people feel they can’t get ahead. They are not deluded in that belief. They are not stupid. They are, in fact, right. Correct. They get it. Their analysis may be based on intuition and little reasoning, but in fact, they are right…..and to their discredit, CNN, CNBC, NBC, CBS, The New York Times, the elite liberal media, for the most part, they are elitists, and they don’t get it.

And that is part of the reason for the very confusing, seemingly contradictory fact that a lot of people who were Bernie supporters, ended up voting for Donald Trump…..both groups may have very different economic philosophies and answers, but both innately know the elite are royally screwing most of society, and both want to do something about it.

And the basic reason the elite don’t get it, the elite don’t understand Zero Sum Economics, is that the top 20% of income earners, have done extremely well for decades. And since the rise of feminism, most of the elite only inter-marry with other members of the elite, and most people’s perception of economic reality is based mostly on their friends and people in their neighborhoods, so for the economic elite, the top 20%….who do very well: their friends are doing well, and have done well for a long time, especially with mass immigration making them rich, so their attitude is: if you oppose mass immigration, you must be racist.

But high house prices are about more than just letting in more people. Immigration drives up demand, and supply and demand play out in economic terms, but there are more human choices and preferences at work:

My guess is the root cause of the high cost of housing in a place like Vancouver, has to do with human habits about where most people want to live, combined with blindness about the effects of immigration. By that I mean: most people want to live in cities….especially nice cities, like Toronto and Vancouver. Vancouver in particular, is one of the nicest places to live, on the planet. So this human tendency herds most immigrants to a few cities, which further drives up the price of housing in those cities, which tend to be price leaders.

And the global trend is the same: About a hundred years ago, a much smaller portion of humanity, lived in cities. But globally, the trend is very clear: Regardless of race or religion or ethnicity or income level, most humans want to live in cities. And within a few decades, it’s predicted that over 90% of humans will live in large cities. This is part of the Pareto Distribution: the tendencies of clusters of things, everything from money to people to stars, to naturally arrange themselves in groupings, with most things belonging to the biggest group. We see this in the distribution of symphonies, the distribution of talent in general, where people live in Hawaii…there is lots of land, but 9/10th of the population live in 1 city, on a smaller island, the economic contribution of people within a company, how stars cluster in galaxies, who has the best selling novels like the Harry Potter series, and makes all the money……and who lives in large cities, given a choice.

And all this is leading to, what I call the “City Economic Paradox”  (my term, I made up the concept)

Let me explain what I mean:

All cities have an City Economic Paradox (CEP) built right into the nature of a city: The worldwide trend is, most people want to live in cities, and most humans will in fact, live in cities, within a few decades. And humans do this, for very good reasons: Cities have better services than rural areas. Cities have more jobs than rural areas….That’s because humans are economically much more productive, if they cluster in groups. That’s why corporations have most of the wealth, when people organize work and money in large groups, they create more wealth than individuals could hope to come up with, and that’s why most wealth is created, in cities…..people clustering together in economic cooperation creates wealth. But the trouble is, cities squish a lot of humans into a small area, so even though cities are the economic engines of most countries, because everyone wants to live there, wants to work there….but because there is limited land there…..this all  rolls out, in economic laws of supply and demand, which massively ramp up the cost of housing, in cities….and the social outcomes of this will be very bad….we see that in full display, in Vancouver.

So, that’s the economic paradox: cities really are the economic engines of the economy, but this attracts people to want to live there, which raises house prices so high, this eventually destroys the very reasons for humans moving there, in the first place. And unchecked immigration, with zero understanding of this economic paradox, eventually destroys life in a city, by driving up prices higher than capitalism can cope with….and that’s what is happening all over the world….particularly Vancouver right now, and is part of the reason for the rise of the anti-immigration sentiment that led to the rise of Trump……people rightfully feel threatened by the immigrants. So, I don’t believe the “white people are racist, people are opposed to immigration because they are racist”….that sounds like bullshit, to me. People are not wrong, that with the current immigration trends, most people in North America are taking a royal economic screwing over that. They are….and it has to do with a lot of things, including the City Economic Paradox…..Until we recognize and learn to deal with this basic economic paradox, and come up with solutions that allow everyone to own a home, within a city, we will have trouble.

….and since the global trend is the same everywhere, this is going to be a problem, all over the world….Vancouver is just experiencing it, early. And of course, as Black Pigeon states so well in the video, corrupt Chinese government money is distorting the real estate market, and young Justin wishes to cater to Chinese money.

Having lived in Vancouver for over a decade during the 1970s  and 80s, it was pretty obvious to me, that immigrants were taking over from the middle class and lower middle class white people…who are being squeezed out, by high prices, forced up by large scale immigration. My Oriental-Canadian Vancouver friends agreed with me on that….and said that to me, they knew that was happening…..they said so, flat out. They were good people, who realized how lucky they were. Many were Chinese-Canadians who came over with rich parents, and bought homes in Vancouver. They were nice people, but unusually honest since they knew I was not a hothead, I was not a racist, I was a pro-immigrant white friend of theirs, who would not take offense, but would think rationally about it.

So, you have been lied to. You have been told: you are racist, if you oppose mass immigration. That’s a lie. Don’t believe it. There are rational reasons for you to oppose mass immigration….including not wanting to participate, in your own economic screwing.

Lee Kwan Yew:

I lived in Vancouver, but eventually left,  but before I left, I told a friend:

“There is not enough land here, and they are not building enough housing. I have immigrant friends of different races, but too many are coming here, and it will eventually push the local white middle class out of existence and might start a race war. The white elite doesn’t care, because they are making money off of it. The only solution to a multi-racial city like Vancouver, is what Singapore did, under the leadership of Lee Kwan Yew….a man I tremendously respected. He recognized that this would happen, because Singapore has a variety of racial groups inhabiting the same space, with different ethnic groups in Singapore comes different economic outcomes, and Mr. Kwan knew that the land base of Singapore was too small and was leading to high prices, meaning many people could NOT afford housing……..just like Vancouver has a small land base and too many people…..and this was a tinderbox waiting for someone with a match. Mr. Kwan wisely wanted to avoid this. So Mr. Kwan used the power of government to ensure that all people of Singapore had access to affordable housing, not just the well off. This avoided a race war. Canada is too foolish, too naive, to follow Mr. Kwan’s sensible lead.”

I got a lot of worried nods of agreement, when I said that….

The road to hell, is paved with good intentions. I’m sure the liberal/progressive types, many of them are sincere in their belief that endless immigration is the answer to a better future. They are simply wrong. Just because something has worked for a long time, does not mean it will continue to work. San Francisco is becoming a shit-hole of a city, Paul Joseph Watson has a video on that, and on Paris, which is quickly turning into a sewer.

A few decades after I gave my dire warning to my Chinese Vancouver friends, Canada has a young, rich, spoiled, clueless and guilt-ridden fool of a Prime Minister.

A big social concern now, is “income inequality”. People say that’s a big deal. I don’t quite believe that. I’m quite happy, there are billionaires around. More power to them. What I’m not happy about, is we have created a society where, one of the basic social needs, affordable house ownership….is unaffordable for most people.

A large percentage of people want to follow the same basic social script: Go to school, perhaps to to college or learn a trade, get married, buy a house, have a couple of kids and a nice life. Well, that Canadian and American Dream, it used to be affordable.

Sadly, for more and more people, that is no longer an affordable dream. For most people under 30, you are serfs of corporations, as Steve Bannon has pointed out. You, I call “Generation Screwed…Gen S“….We have made some really bad mistakes, on how we run our economy. A country where a large percentage of people can’t afford to own a home, can’t afford to start a family when they are young, is a  country where the elite have too much control, and people have much reason, to be pissed.

Humans as a species are much concerned about our place in the social hierarchy. It’s not so much how much we have, that is our concern, it’s about how much we have, compared to other people. Conservative economists like to point out that in many ways we are richer than ever….we have more stuff, like smart phones. Well, firstly in housing, that’s not true. Secondly, that’s missing the point. We humans are happy, not by getting more stuff, but we are happy if we maintain our status on the social hierarchy….or increase it. And all the trends in this have been for a decrease in social status for the white middle and lower classes….the very people on whose backs, this economy was built….they are being lowered in status….thanks to the stupidity of the white elites. So I’ve never blamed immigrants for this mess. I think it’s the white elite that are to blame. Justin Trudeau epitomizes this. How do we fix this? I mean, after throwing him, out of office? I’d say leveling out access to home ownership, for all, is a social goal that helps ensure social harmony and fights the possibility of increases in racism and eventually violence.

And if we DON’T do that? Well then as Jordan Peterson correctly pointed out, when it comes to human inequality, in human history, till now only war, revolution, and epidemics have flattened inequality, in the past.

The patience of the white middle and lower classes in Canada amazes me. Their government is replacing them in the population, with people from overseas, who are taking their place in the social and economic hierarchy. Past generations could afford home ownership. Generations of white people built Vancouver, and now many of their descendants are squeezed out by immigration and other changes….yet these people have not taken to the street, have not rioted and there is no violence.

Amazing.

In general, capitalism does a good job of lowering cost for things, and raising efficiency….think of the way quality of electronics has increased in your lifetime, while the cost for electronics, computers and TVs plummet…..this is capitalism at it’s best…But one exception to that rule, is obviously housing. Because everyone wants to live in cities, and because there is limited land in cities, this places unending pressure on the price of housing. That’s why houses cost too much in Vancouver: everyone wants to live there….capitalism has failed us, for housing….It doesn’t solve housing cost….total failure…..

As Mark Twain shrewdly put it, “Buy land, they are not making any more of it”

Like in the song, “Telegraph Road”, which talks in story and song, about the long term economic life of a place, which changes over time, we must take the long view, in figuring out, what is going very wrong, with the Canadian Dream. Old answers don’t work any more. The world has changed. Let’s stop kidding ourselves on that. Globalism has failed. High house prices in Vancouver, UN-affordability, are a sign of the failure of globalism and endless immigration. We need answers based on the needs of local populations, not catering to multinational corporations, not catering to some pie in the sky vision of racial harmony and population replacement. Our current immigration paradigm, while well-intention-ed, seems a recipe for long term racial conflict. We change this, or it will eventually end in disaster.