Freemarket Think Tank Defends Stalinist Housing Targets

IEA

Housing targets have come under fire again. During the Conservative Party’s leadership election, one candidate described them as “Stalinist”, while another complained about “socialist housing”. A third one described them as “an idea that has been tested to destruction over many years, and it’s time to face the fact that they’ve been a failure everywhere” (which, to me at least, sounds a lot like socialism again).

But it is not just conservatives who are hostile to housing targets. If you are, broadly speaking, of a pro-market persuasion, the word “target” will probably make you wince. The candidates have been widely mocked for their use of the terms “Stalinist” and “socialist”, but it is true that quantitative output targets set by the government are usually a feature of socialist economies, not market economies. And while not every target is automatically “Stalinist”, “Soviet” or “socialist”, target-driven approaches are prone to multiple failures. For a start, government targets reflect political priorities, not consumer demand. They distort production, because meeting a target becomes an end in itself: producers comply with the letter, but not the spirit, of a target-led plan. Targets are authoritarian, because they override the autonomy of local actors, and conflict with local priorities. Perhaps most importantly, even in the best case, targets are usually just arbitrary fantasy numbers. We cannot know what consumers truly want and need, until we can observe the choices they make in an open, competitive market.

This is why, even if you are not especially keen on free markets, you probably would not want an equivalent of housing targets in other sectors. Unless you are a full-on socialist, you probably would not want the government to set “beer targets” for the brewing industry.

Nonetheless, in the current housing policy context, I believe that “Stalinist” housing targets are perfectly defensible as a lesser evil, including – or perhaps especially! – from a free-market perspective. Government output targets, whether for housing of anything else, are obviously very far away from a free-market solution. And yet, our current planning system is so uniquely awful that “Stalinism” represents a relative “liberalisation”. Yes, I mean it. Completely unironically.

In fact, if we organised brewing in the same way we organise housing, I would support “beer targets” too.

Let’s imagine that, as a result of some strange historical accident, we had a system in which, every time a brewery wanted to increase its beer production or broaden its product range, it had to obtain “brewing permission” from a local or regional citizens’ committee. Imagine those committees could, for example, refuse brewing permission for a modern-style IPA if they believe that it would not be in keeping with the character of their region. Or they could block an increase in beer output, on the grounds that this would lead to more lorry traffic, and thereby inconvenience residents.

Let’s also assume that the members of those brewing committees are a heavily self-selected group, consisting almost exclusively of people who are insulated from any adverse effects of curtailed beer production. Say, some of them hate beer and beer drinkers anyway, and actively want to reduce supply. Others are traditionalists, who want to preserve the bitters and milds of the 1970s, and believe the best way to do this is by restricting access to alternatives. Others are homebrewing enthusiasts, who are not affected by what goes on on the beer market.

Whatever the motivation – let’s suppose that the committees constantly get in the way of the brewing business. As a result, per capita beer output is much lower than in comparable countries, and beer becomes a luxury good. Most people are deeply unsatisfied with this situation – there is constant talk of a “beer crisis” – but they are not aware of the causes. The political Left blames greedy brewers, the political Right blames excess demand from beer-loving immigrants. The government tries to mitigate the effects through various demand-side measures, such as the low-interest loan programme “Help To Drink” and pint vouchers for key workers. But nobody wants to take on the brewing committees.

As long as it is deemed politically impossible to abolish the brewing committees, anything which at least constrains their power would be a step in the right direction. Beer targets, which force the brewing committees to accept a higher volume of brewing than they otherwise would, could be one (clumsy) way to achieve this.

We could call such targets “Stalinist”. Stalin, after all, believed in state-imposed production targets, and this would be a state-imposed production target. But the analogy does not really work. The whole point of Stalin’s production targets was to force Soviet citizens to produce and consume things they would not voluntarily have chosen to produce and consume. In our example, we have a very different situation: we have plenty of brewers who want to sell beer, and plenty of beer drinkers who want to buy it from them. Thus, we have a huge potential for mutually beneficial transactions. But those potential gains are not being realised, because a bunch of troublemakers get in the way.

In such a situation, the liberal solution is not to give those troublemakers free rein to tyrannise everyone else. If you want to call centrally imposed targets “Stalinist”, you have to acknowledge that our starting position already represents a Stalinism of sorts: the tyranny of a thousand petty-minded local mini-Stalins. If a more benevolent, growth-focused Stalin limits the power of the Luddite, anti-growth Stalins – good! Glory to Comrade Stalin!

I know that the analogy is not perfect, but there can be no doubt that our planning system gives far too much power to NIMBY obstructionists, who use that power to paralyse the country. As a result, housebuilding numbers in the UK are much lower than in neighbouring countries, and housing costs far higher.

Needless to say, in my ideal system, there would be no housing targets. If I had my way, NIMBY obstructionists would be stripped of their power, and housebuilding levels would be primarily determined by consumer demand. In such a market-driven system, housing targets would not just be unnecessary – they would be a completely alien element.

But in the current system, abolishing housing targets would only strengthen the stranglehold of the NIMBYocracy.