The Asset Economy

by Lisa Adkins, Melinda Cooper, Martijn Konings

Rising inequality is the defining feature of our age. With the lion's share of wealth growth going to the top, for a growing percentage of society a middle-class existence is out of reach. What exactly are the economic shifts that have driven the social transformations taking place in Anglo-capitalist societies?

In this timely book, Lisa Adkins, Melinda Cooper and Martijn Konings argue that the rise of the asset economy has produced a new logic of inequality. Several decades of property inflation have seen asset ownership overshadow employment as a determinant of class position. Exploring the impact of generational dynamics in this new class landscape, the book advances an original perspective on a range of phenomena that are widely debated but poorly understood - including the growth of wealth inequalities and precarity, the dynamics of urban property inflation, changes in fiscal and monetary policy and the predicament of the "millennial" generation. Despite widespread awareness of the harmful effects of Quantitative Easing and similar asset-supporting measures, we appear to have entered an era of policy "lock-in" that is responsible for a growing disconnect between popular expectations and institutional priorities. The resulting polarization underlies many of the volatile dynamics and rapidly shifting alliances that dominate today's headlines.

Genres: Economics, Nonfiction, Politics, Sociology, Money, Finance

176 pages, ebook

Published October 7, 2020

Reviews

[Sirish · Rating 5 out of 5]

One of the most common suggestions I received growing up in a middle-class household was, "Invest in property, you'll never go wrong." While the frequency of that advice increased over the years, it's only after I started working and migrated to Sydney, Australia, that the advice reached a desperate crescendo. Everyone and his cousin told me to get into the property market before it was too late, to not repeat the mistakes they'd done by delaying, to find the 10% for a deposit somehow and a bank would be more than happy to cover the 90% as a loan. And while I've never had any notable economic sense, signing up for a million dollar loan to pay over a thirty year period (irrespective of the notional value of the underlying 'asset') seemed like wilful serfdom. To give credit where it's due, the 2008 GFC deeply shaped my impression of the financial industry and I've always been skeptical of any corporation that wants to give money.

So in my search to both understand the phenomenon and gain ammunition to argue against other unsolicited advisors, I discovered this book. What Venkatesh's Rao The Gervais Principle did to the employee in me, Mark Fisher's Capitalist Realism did to the consumer in me, The Asset Economy, I believe, will do to the investor in me. In three passionately argued essays, the authors set the scene, explain how it came to be and project the path for the future.

Ch 1 - Asset Logics - The seemingly commonsencial dictum, "House prices always rise", is less than a hundred years old. The assumptions of permanent middle-class upward mobility, job security, home ownership and the like, which my parents' generation assumes instinctively has been true for two, at best, three generations. I particularly liked the dichotomy of the Keynesian Household vs the Minskyian Household, and how speculative logic has been embedded into even middle-class families that created the mindset of looking at a house not as a dwelling but as a node in the financial marketplace.

Ch 2 - The Making of the Asset Economy - How does a democratic government prevent political unrest when wages become stagnant for long durations? By encouraging workers to reimagine themselves as capitalists by offering cheap credit ('invest in asset price appreciation, via a democratisation of stock ownership, home ownership or simply ownership of your own skills, our human capital'). Apparently this was known as The Third Way and it is in many ways responsible for the GFC

Ch 3 - New Class Realities - This chapted paints a bleak picture of the future, elaborating on how new class divisions are becoming entrenched and causing a larger and larger population of young people to become disillusioned. This frustration, when combined with the affects of climate change and technological disturbances, portend a radically differenct landscape than what we've come to expect from liberal democracies. The quote, '[Kids these days] will either become fascists or revolutionaries', by Malcolm Harris perfectly illustrates their prediction.

I highly recommend The Asset Economy to anyone interested in how we seem to live in a society that's pathologically obsessed with money and investing. The list of references is gobsmackingly good, and I hope to read a lot of those books in the near future.

[Reid tries to read · Rating 5 out of 5]

The thesis here is that the key element today in shaping inequality is the ability to purchase assets (such as houses) that appreciate faster than wage growth and inflation. One’s relation to assets, rather than the relation of wage-laborer to employer, is the key element of one’s class position. Today, making money through wages is important mainly in its ability to help one purchase assets; income from work still is essential for many to buy their means of subsistence, but it is no longer enough to afford what has historically been thought of as a ‘middle class lifestyle’. Often what is more important than wages is one’s ability to use intergenerational wealth from their parents to purchase assets or live off their parent’s own assets. For example: Between 1981 and 2016 the typical age at which a first home was purchased increased by nine years from age 24 to age 33; estimates approximate that parents are involved in more than 25% of all first-time home purchases and that up to 60% of first-time buyers expect to need financial assistance from family members; and from 2007 to 2011 the share of young adults (age 18–34) living in the parental home rose by 11% in the UK and in the US by 4% to reach an all-time high of 36%. This argument is so striking, so simply laid out, and so quickly elucidated (this book is under 100 pages) that I was completely blown away reading it.

An asset is a property title that cannot easily be traded and must constantly be revalued, requires an upfront investment (often on borrowed funds), and is intended to appreciate over time to generate returns for the holder of the asset. Houses are now assets, rather than a means of subsistence or consumption; historically this is a recent development. The previous “Keynesian household” in the postwar era was not subject to large fluctuations in value and was readily available to be purchased through wages (at least for white men). Today’s household is seen as an investment, where the buyer seeks not just to pay a mortgage but also make capital gains. All households today participate in the housing market as either renters or owners. It is extremely difficult to transition from a renter to an owner; only the highest of wage earners can afford the downpayment on a house through wages. If a renter isn’t paid outlier wages, and if they don’t have access to intergenerational wealth, their financial flows are siphoned off into paying rents, which are then used by others to further their own accumulation of assets.

Real estate values are speculative, since they are based on what people think others will be willing to pay for real estate in the future rather than being based on genuine innovation taking place within the property industry. Buyers’ willingness to buy houses aren’t dictated by beliefs in the genuine underlying value of the house, but rather on beliefs about what other people will be willing to pay for that same house in the future. This speculative aspect is blatant and obvious, yet shocks and crashes have not been able to completely collapse the prices of houses, which seem to eternally rise. This implies that, through policy, the inflation of property prices has been built into the market. How did this happen?

During the 1970s a polar opposite dynamic was at play: asset prices were stagnant while wages and consumer prices were rising. Because of the strength and scale of mass unionization, most workers and their unions were able to inflate their wages to a greater degree than employers could push up consumer prices. Employers also could not easily threaten layoffs to break demanding unions because unemployment benefits were generous enough to live on and welfare benefits were often indexed to inflation. This pattern of inflation generally benefited the working and ‘middle’ classes, and even renters were not hurt by it since their wages tended to keep up with rent rises. Those who benefited most from inflation were the middle-income homeowners who had borrowed to buy a house. With fixed mortgage repayments and interest rates, indebted homeowners saw their mortgage burdens depreciate in value. Really the only ones this inflation hurt were the rich, whose wealth was invested in financial assets such as stocks, bonds, or Treasury bills and whose income derived primarily from interests, dividends, rents and capital gains (real value of stock had been decreasing since the 1960s, and bonds had very low interest rates).

The neoliberal takeover is what reversed this trend of wage inflation and asset stagnation. Since the 1980s, wages have struggled to keep pace with low levels of consumer price inflation while the asset holdings of the richest households rapidly grew in value. Justified by adherents to Milton Friedman’s ‘monetarism’, a new policy was put into place in the 1990s that ensured wage and consumer price inflation were defeated while asset inflation would be ignored or even encouraged. The pillars of this neoliberal policy implemented by governments and the banking system were: regressive taxes, ‘balanced budgets’ to ensure low levels of public spending, permanent vigilance with regard to wage and price inflation, and a strategy of benign neglect for asset price inflation. Cheap imported goods were key for keeping price inflation low, while offshoring was instrumental to breaking the labor movement’s back. Governments then encouraged people to participate in the asset economy to compensate for their losses of wage income with investment income. Crucial to this was cheap and omnipresent access to credit, allowing people that could normally not afford houses to receive subprime mortgages; this at the cost of mountains of debt, meaning only unprecedented levels of household debt do the wage-poor have any chance of earning income from assets. On top of this, to pursue higher education or a compulsory unpaid internship now very often requires financial or other kinds of support from family in the form of rental assistance, rent-free shared housing, or parents acting as loan guarantors or taking on student debt; not only does housing wealth lead to more housing wealth, progressively shrinking the number of people who can enter the housing market, it also is a key in determining future educational opportunities and therefore one’s future potential earnings.

There is now obviously a gap between people who make the same wages, maybe even work the same exact job, if one owns a house and the other does not. The authors map out a new class reality as they see it (this is where the book is definitely controversial and could be wrong idk I’m not smart enough to say): there are those that own housing assets and the churners that do not. For the housing owners, the top of the pyramid are investors (which can further be subdivided into investors who also work for wages and those who solely make income from assets), followed by outright homeowners (which can be subdivided the same as investors, and then further subdivided into whether they own investment properties or not), and then followed by homeowners with mortgages (same subdivisions as the outright homeowners). Below the homeowners are the ‘churners’: those who rent and those who are homeless.

[David · Rating 4 out of 5]

At only 93 pages, you get a lot of very concentrated bang for your buck. The Asset Economy's claims are straightforward:
- since the 70s, central banks have shifted from supporting full employment and hence the option of incremental wage growth (or wage inflation), to managing monetary stability in the service of incremental asset price inflation (API).
- governments around the anglosphere (Australia, the US and the UK are the only economies that get an in-depth look here) have pursued policies advantageous to those receiving income from (inherited) capital, to the detriment of those tied to just income from their labour.
- this intersection creates a new ecosystem of asset-based class positions, where one's relation to assets is more important in explaining social mobility (or lack thereof) than one's position in the labour market. The authors regard this as an important corrective to the narrative promoted by (for instance) Michael Hudson and Piketty (don't see those two grouped together often), where the neoliberal era is characterized by a shift towards indebtedness. Adkins, Cooper and Konings emphasize that debt and credit themselves are governed by access to collateral (i.e., assets). As one cannot individually "create" assets on a meaningful scale (wheraes one can through self-employment scrape together enough income from labour to eke out an existence), climbing up the ranks is conditioned on inheritance, leveraging future value of currently-held assets, etc. Debt is what happens, but it doesn't create itself. I would've liked to see all this quantified more in the book.
- assets have been democratized enough to give rise to a broad electoral bloc (66% of US houses are occupied by its owners) who stake their fortunes on future asset inflation and low inheritance taxes, but not enough to ever allow the majority of those owners to ascend. These unstable petty owners have a tendency of voting for populist authoritarians, while the younger generations, who only arrived on the scene after public goods had been dismantled to a large degree, have a tendency of looking to the left to unblock their future once more.
- there's no simple policy prescription available to swing back this asset-based system. Since the Clinton days, left liberals have attempted to stabilize the asset economy with public investment, understanding the necessity to reverse asset class polarization and its political fallout. But public investment couldn't lead to wage growth, which would threaten the continued appreciation of asset prices. This is said to undergird much of policy deadlock around the neoliberalized globe. Sadly, this last point is asserted but not explained -- I'm too much of an economic amateur to see clearly the relation between wage growth, easy money and API.

The authors admit to shying away from macronarratives based on either structural necessity or political agency, emphasizing the middle-of-the-road metabolism between all citizens and their national economy. This is refreshing, and I won't fault the authors for not digging further into either roadbank. In the final sentence, the authors declare their hopes to lie with millenial socialism, though this isn't fleshed out. More homework for the reader, then. I'd be interested in reading about how the determinants of global economic competition prejudice policymakers towards API. It's toxic for a country's long-term health, and neither does it appear to allocate capital to productive sectors. Did the shifts of the 70s (which wage inflation was the polar opposite of today's API) scare policymakers into seeding the soil for the 'deflationary bloc' (meaning pro wage deflation, and pro asset price inflation), after which this bloc took over the reins, now holding the world economy hostage to its dead-end pipe dreams? What should a socialism look like to win over the mass of petty owners, into whose ranks the traditional working class has to a degree dispersed? Much homework for the reader. Kudos to the authors for this no-frills, high-speed gauntlet.

[Swarthout · Rating 4 out of 5]

this book finds problems with the heterodox economic critique of neoliberalism because it puts heavy emphasis on assumptions about commodities, consumer demand.

the authors want to move toward an understanding based on the weight of asset price appreciation and its heavy reliance on institutional designs.

they see neoliberalism's unique nature found in "the way fiscal and monetary policies have produced distinctive logics of asset appreciation and depreciation"

the "distinctive logic" might be the government's inability or lack of desire to ameliorate rising homelessness through public spending for instance.

or lowering taxes at the same time governments run into budget problems.

or the slashing of public assistance during a recession.
etc.

i thought they had an interesting observation about housing, even though there is no great new innovation in property design for instance, housing costs eternally keep rising. it does seem to be a constant, besides a few instances of bubbles popping.

this gives potential and real home owners a psychological expectation of eternally rising assets.

this is where they find the class designation in heterodox and mainstream economic analysis incomplete.
the designation that they find worth understanding is those with ability to access appreciating assets and those without.

[Amber V.2.0 · Rating 4 out of 5]

A thought provoking book. It’s points out some uncomfortable truths about Australia’s economy and society.

Whilst we like to think of ourselves as egalitarian, the truth is that our society is now divided into people who own assets and people who don’t.

This creates a cycle whereby children of asset owners have access to deposits for first homes, free accommodation whilst at university and later inheritance. Children of people without assets don’t have access to these advantages & are further locked out of the asset economy.

The thesis explains why in times of recession, designer goods stay in high demand and blue chip suburbs don’t lose value - the asset owners have income from investments other than wages.

A good book to show grandparents who believe that too much avocado toast is to blame for the difficulty to buy a house.

[Mick Harvey · Rating 5 out of 5]

Quite convincing intervention into debates about the changing nature of class composition and the role that assets and relationship to asset ownership plays within that. Untangles the contradictions in contemporary 'generational' discourses very effectively. Glosses over some of the empirical detail and causal mechanisms, and overly focused on Anglosphere economies slightly but these are very minor points, esp in a book this short.

[Natalie Li · Rating 5 out of 5]

Banger phrases describing the asset frenzy: 'frenetic inactivity'; 'non-stop inertia'; 'suffering agency'; 'slow death'; and, most nauseatingly, 'abortion of the future'

Banger sentence summarizing banger phrases: "The idea here is that life becomes a series of moments of bare survival, forced participation in a game of which the outcome has been pre-empted by the existence of a debt to the past that can never be discharged.”

There's no call to action to this one. And, depressingly, I kind of have to agree. Like the authors say, our asset-based, speculative socioeconomic shitstorm is way beyond reversibility via even the most progressive, redistributive policies. Anything that tries to simply attenuate the effects of asset appreciation in the now will backfire doubly in the long run. In the face of a whole polity of home and asset owners with outsized influence, democracy and politics under neoliberalism appear fruitless. If there were any actionable message at all here, it would have to be: revolution or nothing.

[JJ Weber · Rating 4 out of 5]

Written with academic debates in mind, but highly relevant and legible to a general audience I think. Advances a clear and plainly true thesis: our society is increasingly stratified by asset ownership and its speculative logic. This includes not just the explicitly capitalist class able to create wealth from asset ownership only, but also the middle class increasingly reliant on family wealth and home ownership. The authors analyze the growing importance of assets not in terms of immutable economic laws, but as the result of politics and policy.

[Ishmael · Rating 3 out of 5]

Not what I would describe as a "fun" read, since it's written for an academic audience and basically just hammers home how intractable inequality has become. But it makes a compelling argument that our prevailing definitions of class are obsolete if they don't take asset ownership into account. Housing is a particular focus, including how the logic of the asset economy creates a vicious cycle of policies that inflate home prices so as to support upward mobility in lieu of wage growth, which then has the effect of further putting home ownership out of reach for new entrants into the market.

[Matthew Sun · Rating 5 out of 5]

this book is excellent and very short (almost like an extended essay). It's written in accessible (enough) language, offers a careful critique of orthodox economic thinking on the left (particularly regarding claims of a "new plutocracy" driven by the ultra-rich 1%), and posits a new understanding of class that is driven not just by employment and income, but by asset ownership. Also contains a boatload of references to other books that I want to read now!

[Sohum · Rating 4 out of 5]

wonderfully smart and lucid book, I only wish it were longer.

[David]

Pretty interesting book. I find the argumentation relatively convincing, but the ultimate thesis -- that asset ownership is increasingly a more significant class signifier than wage labor -- clashes with my preconceived notions. I'm not sure if I believe it. In any case, I've been drawn more and more to questions of financialization vs commodification. Seems like a useful lens for understanding our economy.

[Rafa · Rating 4 out of 5]

A solid, succinct primer on why our economic system is f***ed and how housing is central to that.

[Logan Kedzie · Rating 4 out of 5]

It's Capital in the Twenty First Century but make it fashion.

The Asset Economy is a brief and intentionally incomplete book. The thesis is that a variety of factors in the anglosphere have made it so that assets, and of them real estate in specific, central to economic living, so much that it makes more sense to think of class not in terms of heritage, wealth, or occupation but in terms of how much and what sort of assets that you own, particularly in that how inter-generational transfers, either outright or proxy, are becoming central to securing assets (again, primarily real estate).

The text is somewhere between academic treatise and open ended polemic. I think that I agree with the authors' central idea of the over-assetization of economic life, and some of the sort of second order effects in light of thinks like school loans or quantitative easing. But turning it into a class system seems drastic, and even if I think that a rethink around class and what it means is understandable, this is also a more fragile state of affairs than all that. And the book is short on solutions or even full causation, intentionally so, I think, for people like me. And what I see as the real problem here is that this is something that you do ideally need a certain degree of popular buy-in, rather than policy changes alone. That is a hard row to hoe.

So what we have is an important idea that I hope more people come to at least consider. And it is brief and readable, if still meant to be viable for an academic audience as well.

[Robert · Rating 5 out of 5]

This is one of the most important and best books written about the modern economy in the last 10 years. By centering the logic of asset price inflation rather than financialization or credit/debt or the 1% it's able to explain all of those phenomena while also providing a convincing reason for the durability of our economic system even as it causes more and more problems. Plus it's super readable and relatively short. Highly recommended.

[Sofía · Rating 4 out of 5]

Un ensaio moi conciso sobre unha das grandes loitas sociais dos nosos tempos; o prólogo da edición en castelán explica a situación no Estado español, pero en realidade a análise xeral é moi transferible ás nosas realidades diarias. Se a terra é para quen a traballa, a vivenda digna tamén. Afilieu-vos al Sindicat de Llogateres ✊♥️

[P J M · Rating 4 out of 5]

Just clearly true.

[Cian Pearce · Rating 4 out of 5]

A very important and topical book to read

[Jacob Chak · Rating 5 out of 5]

Being a Millennial, and not a homeowner, this book is terrifying.

[Zachary · Rating 4 out of 5]

What a surprise, yet another Melinda Cooper dub
For those unacquainted it Gary Stevenson's channel about similar issues, I highly recommend: https://www.youtube.com/watch?v=MSdhi...

[Canyon Ryan · Rating 3 out of 5]

Dense but easy to read. As a non-econ oriented reader, and not someone who would not identify as a or with sociologists, terms had completely different meanings than I would prescribe to them (most importantly, "class" in this book seems to mean income bracket - or asset bracket, as opposed to a classical Marxist interpretation of relation to the means of production - which may be reductionist, but less so than the asset-reductionist trend by the authors). Also incredibly very little consideration of the landlord - which I would qualify as a distinct social class, as opposed to the mortgage homeowner and outright homeowner being sub-classified into investment property holders. IDK, some weird stuff going on here. But the content otherwise was pretty sound, some good sections, some meh sections.

[Shawn · Rating 4 out of 5]

4.5 stars. Really clear, persuasive and (to me) resonant points on neoliberalism and inequality in Anglo-capitalist societies.

[Ewan · Rating 4 out of 5]

Yes very good asset ownership