Address the problem: the global housing blunder

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Hello and welcome to the intelligence on Economist Radio. I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. China's President Xi Jinping has been clamping down on the country's religions and oppression of the devout abounds. Yet certain faiths are actually encouraged. Our correspondent meets the followers of the sea goddess Mazu. And it's precisely a century since the start of prohibition in America. These days, drinking is in decline for cultural rather than legal reasons. And the drinks industry is racing to catch up with abstemious attitudes. We have proof. First up, though, housing in the Western world has become enormously expensive. Politicians tend to like it when house prices go up. They think people feel richer, borrow and spend more and that it gives the economy a nice boost. But costly housing is bad for both those who want to buy and those who want to rent. It has much more profound economic implications.

Housing across much, much of the rich world is very, very expensive. And it hasn't always been this expensive. It's a relatively recent phenomenon.

Colin Williams is our senior economics writer.

And the problem with that is it has both massive economic consequences and massive social and political consequences. So it causes financial crisis after financial crisis for various reasons. It means that the kind of way in which economies work, even when there isn't a financial crisis is much less efficient. Economic growth is generally slower. But then on the political side, there's more and more evidence which suggests that when something that many people see as a kind of right that everyone should have is that expensive, it creates lots of dissatisfaction with the status quo. And it's one of the main reasons why there's been a surge in recent years towards more populist parties across the rich world.

The housing market wasn't always this way. The original sin seems to be encouraging the belief that home ownership was both an economic and a personal virtue. An idea that was not lost on Margaret Thatcher's Conservative government.

If you've been a council tenant for at least three years, you'll have the right by law to buy your house, and that's that.

But it's 40 years since that policy was put into practice. Ideas are changing.

There is a received wisdom about home ownership in, but definitely in the west, in the rich west rich, which is that it's a good thing. It's a self evidently good thing. It's better than renting. And in fact, it's not just better than renting. Renting is kind of a bad form of tenure. Some people would even see it as a slightly embarrassing form of tenure and that, you know, in order to succeed and be a good person and good citizen, you need to own your home. And this is something which has sort of structured Western society for, you know, a good sort of 60 or 70 years.

How. How do you mean? How has that perception become so ingrained?

I think that perception has become ingrained for a few reasons. I think the two main ones are they feed off each other, but it's sort of government policy and economic incentives. So what you had after Second World War was you had all these people coming back from having fought in the war and governments sort of thought we have to reward people and show them our gratitude. And almost simultaneously from like 1945, you get lots of countries who decide to push home ownership as a good idea through various tax incentives, through various government departments that are set up in order to promote it so you could get mortgages much more cheaply and that kind of thing. And the second reason why it's become ingrained is because of the economics of it. What's happened over time is that governments have given, in some cases more and more subsidies, in effect, to home ownership, have given it significant tax preferences, for instance. And that's one reason why homeownership has become such a good investment.

And is there any truth in that belief Homeownership good, renting bad.

It's not true, as many people assume that homeowners are kind of better people than renters or more responsible citizens. And, you know, there are countries where being a renter is actually a perfectly normal thing. And you can be by any standards a kind of well off, respectable family with children in somewhere like Switzerland, for instance, or in Germany, which have very low home ownership. And that's basically because for various reasons, the rental sector is basically not bad and the quality is high. Landlords are kind of responsible, they don't try and skew you on the rent when the tenancy ends and all that kind of stuff. So we shouldn't assume that homeownership is always good.

And does the economic thinking that got this idea of home ownership so ingrained in the economic systems of the rich west, does that hold up the problem.

With the push for home ownership? It rests on two sort of problems, I suppose. The first is that when you kind of do the sums, it turns out that actually often owning your own home actually isn't a better idea than renting an equivalent home. So the most obvious problem is that, you know, as happened in the financial crisis, for literally millions of people, they fell into negative equity. It was a hugely bad investment for those people. So, you know, homeowning is not always a good thing. And even when there isn't a financial crisis, once you add up all the kind of costs of homeownership that people don't really consider that much. So, for instance, the fact that homeowners have to, you know, repair their home, often in most countries you have to pay quite significant taxes when you actually buy the home. The relative affordability of renting and owning an equivalent property over the life of that property are quite similar. Then there are all these unintended consequences of the push for homeownership. And in a sense, that's the real public policy problem and explains fundamentally why housing today is such a mess and causes so many economic and social and political problems, because it's basically too expensive. And the unintended consequence of pushing for home ownership was that you created a class of people who had a strong economic interest to resist housing development. So if you own a home, you have a strong economic incentive to go down to your local town planning meeting when you hear about the news that they're going to try and build a block of flats next to your house, because you don't want that to happen, because the value of your house will go down. And you can see this in lots of different countries, again, pretty much all at the same time, is a simultaneous rise in home ownership and an increase in the kind of regulations that govern the building of new homes. And what that means is that over time, over the second half of the 20th century, the rate of housing construction across the rich world has been in sort of fairly continuous decline. And we build way fewer houses today than we did in the 60s or the 70s.

And so the way all of this argument has come unstuck is very much on the supply side. There are simply not enough homes.

Yeah. So there's this kind of growing debate in economics about whether it is to do with the supply side or to do with the fact that interest rates across the rich world have fallen very substantially, which means that you can basically borrow more money, which allows people to bid up the prices of houses and all that kind of thing. So, I mean, I think there's lots of reasons why housing is expensive. I think the fundamental reason why housing is a lot more expensive today than it was 70, 60 years ago, that is to do with the fact that it has become more difficult to build.

But if one of the root causes, or indeed root effects here is that housing is too expensive, how to make it less expensive?

So if you're trying to make housing less expensive, and that means what you're trying to do is trying to get house prices down and also trying to get rents down, or at least not grow as fast as they've been growing, I think the primary kind of tool that governments have is to try and allow building to become easier. And this is something that economists often talk about in quite sort of airy terms. But there are countries that have actually changed their planning law, such as Japan, for instance, which is the example that people like to talk about. What they've been able to do in somewhere like Japan, particularly in Tokyo, is change various really boring rules about what can go where and how much the roofs can slope and all this sort of stuff. But it adds up to something quite significant. And Tokyo's housing rate of housing construction has gone up a lot in recent years. They build lots and lots of homes, way more than you might think. And, you know, it's quite a kind of higgledy piggledy city. There's lots of weird kind of built. You know, some older buildings are next to new ones, and different architectural styles are kind of all mashed up together. So it's not like being in London where you have one road that's Georgian and one road that's modern or whatever. But it means that housing in Tokyo is actually pretty affordable. House prices are a lot cheaper in Tokyo now than they were 20 years ago, which is kind of incredible. Compare that to what's going on in London. They are really, really significantly more expensive. So if governments have the political will, they can make this work.

Callum, thank you very much for joining us.

Thank you.

China's ruling Communist Party is officially atheist, and it's not always been willing to tolerate its citizens expressing their religious beliefs. During Mao Zedong's Cultural Revolution, religions were brutally suppressed, monasteries were destroyed, and monks harried to their deaths. It wasn't until six years after Mao's death that formal tolerance of five major religions was Buddhism, Taoism, Islam, Protestantism, and Catholicism. But now President Xi Jinping is tightening some of the rules. He's called for the sinicization of religions, bringing them under Chinese influence. That has led to crosses being removed from churches and at its most extreme, the internment of hundreds of thousands of Uighurs, a Muslim minority. Yet certain forms of faith are encouraged, especially those with roots in China and with big followings among overseas Chinese. One of those is a folk religion involving a goddess called Mazu.

Mazu is technically the Chinese goddess of the sea. She was a maiden who lived in a fishing family in the 10th century, and she miraculously saved, some people say her brothers, some people say her father from a shipwreck and has been worshipped ever since by coastal Chinese.

David Rennie is our Beijing bureau chief.

Mao Zi's traditional followers are originally sailors and fishermen, and certainly they would still go to a temple and make offerings before going out to sea to pray for safety and also to get full holds of fish. But she's also very big among overseas Chinese. So the island of Taiwan in Hong Kong, and also in Southeast Asia, overseas Chinese communities, a lot of mazu temples, sometimes called Tien Hou, even in places like Melbourne and in Canada.

And there are also mazu festivals, right? And you went to one.

That's right. And these are slightly oddly kind of state endorsed festivals. This one I went to was for the opening of the fishing season after several months where fishermen were not allowed out, basically for environmental reasons. They've had a lot of overfishing. One of the largest fishing ports on the coast of China is. Is in Zhejiang Province, port of Sherpu, hundreds of boats. And at the beginning of the official beginning of the fishing season, they have a festival the night before full of communist officials who obviously must themselves be atheists and sort of various bigwigs from the government and from the Fishing ministry. So the night before the fishing boats actually went to go out to sea, they had an open air fisherman's banquet on the quayside. And that was quite something. You had a of lot, lot of fish and seafood being consumed and a lot of wine and hard liquor. And then we had some fishing boats lit up with brilliant kind of illuminations, sailing out to the harbor with statues of the goddess Madzu and also her sister Ruyi. And they circled in the water. And that was really quite something because that's actually quite an ancient ceremony, apart from the neon light. And then the next day we had a very noisy launch of the fishing season with fireworks and firecrackers and cymbals and drums. And it's an amazing kind of sight, almost like a kind of naval armada. Hundreds and hundreds of fishing boats with flags flying, tearing out to sea for the first time in several months. So at the fisherman's banquet the night before the opening of the fishing season, I was talking to various fishermen from the area about Mazu and I met a 48 year old who, who owns his own big fishing boat. So he's a skipper, quite a big guy. So I asked him when this festival got so big and he said that before China got really sort of rich and powerful, the last kind of decade and a half of economic growth, it was a much smaller deal.

But what about further back in history, the generation before you were skipper? What was life like as a mazu believer?

For instance, under Mao, it was pretty bad. And particularly during the last 10 years of chairman Mao's reign, it was really very dangerous to be involved in religion. Even folk religion was attacked as feudal superstition. You had a lot of temples destroyed, you had monks attacked, in some cases killed. So I spoke to a volunteer temple guardian who was alive during the Cultural Revolution, those dark days of the Mao era. She's actually linked to two temples in this fishing port. There's one which was built quite recently on a hilltop overlooking the fishing harbour and that is dedicated to Ruyi, who is the sister to the goddess Mazu. Then there's a much older, really rather lovely temple right in the middle of the old fishing village, dates back to the Ming Dynasty, that is dedicated to Mazu. And that is your kind of classic, beautiful sort of faded temple. So if you imagine kind of a grey stone steps and sun faded red paintwork, a gray curving roof with the very sort of distinctive upturned eaves that you see in South China. So we were standing in these temples and she told me that that ancient temple managed to survive even when others were being torn down. And the reason was that it was turned into a primary school and the local villagers actually fought off and stood down zealots, Red Guards, who came to try and attack the temple.

But you said one of these two temples had been recently built on the hilltop. Is that to say that mazu worship is thriving now?

So it's not only thriving, but it also has official approval. And I think one reason is, what's really interesting is if you go to that modern, slightly gaudy temple overlooking the harbour, which was built in 2010, a lot of the money came from the island of Taiwan, which is not very far away across the horizon. In fact, a lot of the money came from the family of a film stuntman who is most famous for jumping a car over the Yellow River. But you can see that the fact that Taiwanese money was allowed in is a big deal for the Chinese government. And remember, the Chinese government in Beijing claims the whole island of Taiwan as Chinese territory as part of China. And so the fact that mazu is very popular on the island of Taiwan and on this coast, the of mainland China, means that it's actually a political win for the government to encourage mazu worship. And you see, even the local Chinese county government in Sherpu gave some money to help build a road up to the temple.

So in a sense, the party is almost exploiting this as a soft power tool.

Oh, I mean explicitly. So China's top leader, Xi Jinping, just before he rose to the top job, he actually said in a speech that officials should make full use of mazu to woo the people of Taiwan, the island that China wants to reunify with the mainland. It helps that mazu is worshipped in coastal provinces that are the source of most emigration around the world. So when you look at Chinatowns around the world, a lot of those people are from Fujian and Zhejiang. So there are mazu temples not just in Taiwan, but also in Hong Kong and Macau. Down in Southeast Asia, she's often called Tianhou. Even in Australia and Canada, there are these temples. So it's very much part of the Chinese Communist Party's attempts to weave together the Chinese overseas diaspora.

But that doesn't square with this idea of sinicization, the oppression, for example, of the Uyghurs in Xinjiang. Why should this religion be any different?

So you're right that under Xi Jinping, they have had this policy of sinicization, where religions that are seen as foreign, like Islam and Christianity in particular, have had to prove that they can be loyal to China. And they've been under very strict controls. Religions that are seen as more indigenous, like Taoism, somewhat Buddhism, and certainly Mazu worship, they're under less strict controls. And they've done a sneaky thing, which is that worship of Madzu has been declared a folk religion as opposed to a religion and so like a kind of cultural tradition. So the atheist Communist party is perfectly happy to encourage Mazu worship.

So everything that's not seen as a threat can become a tool.

That's how communists work.

David, thank you very much for your time.

Thank you.

I'm John Prideaux, the Economist's US editor, and we're launching a podcast about the 2020 elections and the road to power in America. We'll take you through the ideas and the social changes that are shaping politics in what promises to be an exceptional election year. That's checks and balance for the global view on democracy in America. Subscribe on Apple Podcasts, Acast or your podcast app.

A hundred years ago today, Prohibition came into force in America. The ban on alcohol was driven by Protestant activists, but wider public support for the law was weak and enforcement feeble.

They say, we want beer, my friends. If you bring back beer, you bring back the bar.

That gave rise to low lit speakeasies and mafia gangs who made fortunes from bootlegging. One estimate puts the number of illegal bars during that time at 20,000 in New York City alone. Prohibition wasn't repealed until 1933.

We advocate the repeal of the 18th Amendment.

These days, alcohol use is in decline for another reason. From dry January to the new craze for mindful drinking, social norms are changing.

Millennials who are now in their 20s and 30s are drinking a lot less than previous generations.

Sloveiya Chankova is our healthcare correspondent.

For them, moderation is really part of a healthier lifestyle. The pursuit of that is starting to look like a trend rather than a passing fad now. And we can see that in things like dry January here in England, like mindful drinking, whereby millennials are very cautious about how much they drink what they drink. Thinking about, do I really want this particular drink right now? So it's definitely a trend, which is also borne out by industry figures.

And what about the generation even after them?

Today's teens, they're drinking even less. So they're starting to drink later than they used to. They've been drinking less. And these patterns suggest that when they grow up as a generation, they will be light drinkers. And there are several explanations of why this is happening. One is that they socialize a lot online and, you know, drinking is a social thing. The other is that there's probably better parenting involved as well.

And that must in turn be a worry for the drinks industry.

Absolutely. They can see the writing on the keg, if you will. They are preparing. So they're expanding their offerings of low alcohol and alcohol free beers, wines, spirits. There is tons of innovation going on in that some of these drinks are starting to taste more and more like the real thing, so people are buying them. If we take Heineken, for example, nearly 50 of their brands come in a no alcohol version. At the same time, the alcohol industry is trying to keep up their business by following in the footsteps of the tobacco industry going to developing countries. If you look at the data, the top 10 fastest growing markets for alcohol are all in emerging economies, mostly in Africa and Asia. China is not among them. Actually, alcohol sales there have begun to decline.

And so do you think that following in the footsteps of tobacco will happen also on the government side of things, that governments will start to treat alcohol like the dangerous thing that tobacco is now known to be.

So on one hand, public health wonks are pushing obviously for such measures. One thing is that alcohol is carcinogenic, even in small amounts. But most people do not know that. So there is a push in public health quarters for tobacco style warnings on alcohol labels. For now, only South Korea has such warnings and Ireland has passed a law, but hasn't introduced them yet. But there is a good chance that we may see them introduced. At the same time, there are supply side policies which are proven to curb drinking, such as hefty taxes, restrictions on where and when alcohol can be sold. Those will face an uphill battle in legislatures and courtrooms around the world, just like we saw with tobacco. Because the alcohol industry is quite powerful and anti alcohol groups are really no match for it when it comes to lobbying.

So for the moment, we unrepentant drinkers needn't worry about some sort of repeat of prohibition, I guess.

I don't think so, really. I think we're quite far from that. I mean, if you look at history, Prohibition was a whole different story. It came along just because the Anti Saloon League, which pushed for it, was one of America's most powerful lobby groups ever. It was backed by many of the richest people at the time, including John Rockefeller, Henry Ford, Andrew Carnegie. Today it's a very different story. I mean, philanthropists are not very keen on supporting alcohol restrictions because alcohol is really ingrained in their lives. So, you know, if you're a rich person and you go for that cause. Would you restrict alcohol at your parties, at your company? It's a very, very tricky cause. And, well, Jason, I, I mean, I have to ask you, are you participating in Dry January? I'm quite curious because you are our resident cocktails expert.

I would like to say that I am, but in, in truth, I'm not. I tell you what, I will do a dry January 17th, and we'll leave it at that. Slovea, thank you very much for your time.

Thank you, J.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple Podcasts and you can subscribe to the economist@examiner.com radiooffer 12 issues for $12 or 12 pounds. See you back here on.