The trouble with charitable billionaires

More and more wealthy CEOs are pledging to give away parts of their fortunes – often to help fix problems their companies caused. Some call this ‘philanthrocapitalism’, but is it just corporate hypocrisy? By Carl Rhodes and Peter Bloom in The Guardian


In February 2017, Facebook’s founder and CEO Mark Zuckerberg was in the headlines for his charitable activities. The Chan Zuckerberg Initiative, founded by the tech billionaire and his wife, Priscilla Chan, handed out over $3m in grants to aid the housing crisis in the Silicon Valley area. David Plouffe, the Initiative’s president of policy and advocacy, stated that the grants were intended to “support those working to help families in immediate crisis while supporting research into new ideas to find a long-term solution – a two-step strategy that will guide much of our policy and advocacy work moving forward”.

This is but one small part of Zuckerberg’s charity empire. The Initiative has committed billions of dollars to philanthropic projects designed to address social problems, with a special focus on solutions driven by science, medical research and education. This all took off in December 2015, when Zuckerberg and Chan wrote and published a letter to their new baby Max. The letter made a commitment that over the course of their lives they would donate 99% of their shares in Facebook (at the time valued at $45bn) to the “mission” of “advancing human potential and promoting equality”.

The housing intervention is of course much closer to home, dealing with issues literally at the door of Facebook’s Menlo Park head office. This is an area where median house prices almost doubled to around $2m in the five years between 2012 and 2017.

More generally, San Francisco is a city with massive income inequality, and the reputation of having the most expensive housing in the US. Chan Zuckerberg’s intervention was clearly designed to offset social and economic problems caused by rents and house prices having skyrocketed to such a level that even tech workers on six-figure salaries find it hard to get by. For those on more modest incomes, supporting themselves, let alone a family, is nigh-on impossible.

Ironically, the boom in the tech industry in this region – a boom Facebook has been at the forefront of – has been a major contributor to the crisis. As Peter Cohen from the Council of Community Housing Organizations explained it: “When you’re dealing with this total concentration of wealth and this absurd slosh of real-estate money, you’re not dealing with housing that’s serving a growing population. You’re dealing with housing as a real-estate commodity for speculation.”

Zuckerberg’s apparent generosity, it would seem, is a small contribution to a large problem that was created by the success of the industry he is involved in. In one sense, the housing grants (equivalent to the price of just one-and-a-half average Menlo Park homes) are trying to put a sticking plaster on a problem that Facebook and other Bay Area corporations aided and abetted. It would appear that Zuckerberg was redirecting a fraction of the spoils of neoliberal tech capitalism, in the name of generosity, to try to address the problems of wealth inequality created by a social and economic system that allowed those spoils to accrue in the first place.

It is easy to think of Zuckerberg as some kind of CEO hero – a once regular kid whose genius made him one of the richest men in the world, and who decided to use that wealth for the benefit of others. The image he projects is of altruism untainted by self-interest. A quick scratch of the surface reveals that the structure of Zuckerberg’s charity enterprise is informed by much more than good-hearted altruism. Even while many have applauded Zuckerberg for his generosity, the nature of this apparent charity was openly questioned from the outset.

The wording of Zuckerberg’s 2015 letter could easily have been interpreted as meaning that he was intending to donate $45bn to charity. As investigative reporter Jesse Eisinger reported at the time, the Chan Zuckerberg Initiative through which this giving was to be funnelled is not a not-for-profit charitable foundation, but a limited liability company. This legal status has significant practical implications, especially when it comes to tax. As a company, the Initiative can do much more than charitable activity: its legal status gives it rights to invest in other companies, and to make political donations. Effectively the company does not restrict Zuckerberg’s decision-making as to what he wants to do with his money; he is very much the boss. Moreover, as Eisinger described it, Zuckerberg’s bold move yielded a huge return on investment in terms of public relations for Facebook, even though it appeared that he simply “moved money from one pocket to the other” while being “likely never to pay any taxes on it”.

The creation of the Chan Zuckerberg Initiative – decidedly not a charity organisation – means that Zuckerberg can control the company’s investments as he sees fit, while accruing significant commercial, tax and political benefits. All of this is not to say that Zuckerberg’s motives do not include some expression of his own generosity or some genuine desire for humanity’s wellbeing and equality.

What it does suggest, however, is that when it comes to giving, the CEO approach is one in which there is no apparent incompatibility between being generous, seeking to retain control over what is given, and the expectation of reaping benefits in return. This reformulation of generosity – in which it is no longer considered incompatible with control and self-interest – is a hallmark of the “CEO society”: a society where the values associated with corporate leadership are applied to all dimensions of human endeavour.

Mark Zuckerberg was by no means the first contemporary CEO to promise and initiate large-scale donations of wealth to self-nominated good causes. In the CEO society it is positively a badge of honour for the world’s most wealthy businesspeople to create vehicles to give away their wealth. This has been institutionalised in what is known as The Giving Pledge, a philanthropy campaign initiated by Warren Buffett and Bill Gates in 2010. The campaign targets billionaires around the world, encouraging them to give away the majority of their wealth. There is nothing in the pledge that specifies what exactly the donations will be used for, or even whether they are to be made now or willed after death; it is just a general commitment to using private wealth for ostensibly public good. It is not legally binding either, but a moral commitment.

There is a long list of people and families who have made the pledge. Mark Zuckerberg and Priscilla Chan are there, and so are some 174 others, including household names such as Richard and Joan Branson, Michael Bloomberg, Barron Hilton and David Rockefeller. It would seem that many of the world’s richest people simply want to give their money away to good causes. This all amounts to what human geographers Iain Hay and Samantha Muller sceptically refer to as a “golden age of philanthropy”, in which, since the late 1990s, bequests to charity from the super-rich have escalated to the hundreds of billions of dollars. These new philanthropists bring to charity an “entrepreneurial disposition”, Hay and Muller wrote in a 2014 paper, yet one that they suggest has been “diverting attention and resources away from the failings of contemporary manifestations of capitalism”, and may also be serving as a substitute for public spending withdrawn by the state.

 

Warren Buffett announces a $30bn donation to the Bill and Melinda Gates Foundation, 2006. Photograph: Justin Lane/EPA

Essentially, what we are witnessing is the transfer of responsibility for public goods and services from democratic institutions to the wealthy, to be administered by an executive class. In the CEO society, the exercise of social responsibilities is no longer debated in terms of whether corporations should or shouldn’t be responsible for more than their own business interests. Instead, it is about how philanthropy can be used to reinforce a politico-economic system that enables such a small number of people to accumulate obscene amounts of wealth. Zuckerberg’s investment in solutions to the Bay Area housing crisis is an example of this broader trend.

The reliance on billionaire businesspeople’s charity to support public projects is a part of what has been called “philanthrocapitalism”. This resolves the apparent antinomy between charity (traditionally focused on giving) and capitalism (based on the pursuit of economic self-interest). As historian Mikkel Thorup explains, philanthrocapitalism rests on the claim that “capitalist mechanisms are superior to all others (especially the state) when it comes to not only creating economic but also human progress, and that the market and market actors are or should be made the prime creators of the good society”.

The golden age of philanthropy is not just about benefits that accrue to individual givers. More broadly, philanthropy serves to legitimise capitalism, as well as to extend it further and further into all domains of social, cultural and political activity.

Philanthrocapitalism is about much more than the simple act of generosity it pretends to be, instead involving the inculcation of neoliberal values personified by the billionaire CEOs who have led its charge. Philanthropy is recast in the same terms in which a CEO would consider a business venture. Charitable giving is translated into a business model that employs market-based solutions characterised by efficiency and quantified costs and benefits.

Philanthrocapitalism takes the application of management discourses and practices from business corporations and adapts them to charitable work. The focus is on entrepreneurship, market-based approaches and performance metrics. The process is funded by super-rich businesspeople and managed by those experienced in business. The result, at a practical level, is that philanthropy is undertaken by CEOs in a manner similar to how they would run businesses.

As part of this, charitable foundations have changed in recent years. As explained in a paper by Garry Jenkins, a professor of law at the University of Minnesota, this involves becoming “increasingly directive, controlling, metric-focused and business-oriented with respect to their interactions with grantee public charities, in an attempt to demonstrate that the work of the foundation is ‘strategic’ and ‘accountable’”.

This is far from the benign shift to a different and better way of doing things that it claims to be – a CEO style to “save the world through business thinking and market methods”, as Jenkins puts it. Instead, the risk of philanthrocapitalism is a takeover of charity by business interests, such that generosity to others is appropriated into the overarching dominance of the CEO model of society and its corporate institutions.

The modern CEO is very much at the forefront of the political and media stage. While this often leads to CEOs becoming vaunted celebrities, it also leaves them open to being identified as scapegoats for economic injustice. The increasingly public role taken by CEOs is related to a renewed corporate focus on their wider social responsibility. Firms must now balance, at least rhetorically, a dual commitment to profit and social outcomes. This has been reflected in the promotion of the “triple bottom line”, which combines social, financial and environmental priorities in corporate reporting.

This turn toward social responsibility represents a distinct problem for CEOs. While firms may be willing to sacrifice some short-term profit for the sake of preserving their public reputation, this same bargain is rarely on offer to CEOs themselves, who are judged on their quarterly reports and how well they are serving the fiscal interests of their shareholders. Thus, whereas social responsibility strategies may win public kudos, in the confines of the boardroom it is often a different story, especially when the budget is being scrutinised.

There is a further economic incentive for CEOs to avoid making fundamental changes to their operations in the name of social justice, in that a large portion of CEO remuneration often consists of company stock and options. Accepting fair trade policies and closing sweatshops may be good for the world, but is potentially disastrous for a firm’s immediate financial success. What is ethically valuable to the voting and buying public is not necessarily of concrete value to corporations, nor personally beneficial to their top executives.

Many firms have sought to resolve this contradiction through high-profile philanthropy. Exploitative labour practices or corporate malpractice are swept under the carpet as companies publicise tax-efficient contributions to good causes. Such contributions may be a relatively small price to pay compared with changing fundamental operational practices. Likewise, giving to charity is a prime opportunity for CEOs to be seen to be doing good without having to sacrifice their commitment to making profit at any social cost. Charitable activity permits CEOs to be philanthropic rather than economically progressive or politically democratic.

There is an even more straightforward financial consideration at play in some cases. Charity can be an absolute boon to capital accumulation: corporate philanthropy has been shown to have a positive effect on perceptions by stock market analysts. At the personal level, CEOs can take advantage of promoting their individual charity to distract from other, less savoury activities; as an executive, they can cash in on the capital gains that can be made from introducing high-profile charity strategies.

The very notion of corporate social responsibility, or CSR, has been criticised for providing companies with a moral cover to act in quite exploitative and socially damaging ways. But in the current era, social responsibility, when portrayed as an individual character trait of chief executives, has allowed corporations to be run as irresponsibly as ever. CEOs’ very public engagement in philanthrocapitalism can be understood as a key component of this reputation management. It is part of the marketing of the firm itself, as the good deeds of its leaders come to signify the overall goodness of the corporation.

Ironically, philanthrocapitalism also grants corporations the moral right, at least within the public consciousness, to be socially irresponsible. The trumpeting of the CEOs’ personal generosity can grant an implicit right for their corporations to act ruthlessly and with little consideration for the broader social effects of their activities. This reflects a productive tension at the heart of modern CSR: the more moral a CEO, the more immoral their company can in theory seek to be.

The hypocrisy revealed by CEOs claiming to be dedicated to social responsibility and charity also exposes a deeper authoritarian morality that prevails in the CEO society. Philanthrocapitalism is commonly presented as the social justice component of an otherwise amoral global free market. At best, corporate charity is a type of voluntary tax paid by the 1% for their role in creating such an economically deprived and unequal world. Yet this “giving” culture also helps support and spread a distinctly authoritarian form of economic development that mirrors the autocratic leadership style of the executives who predominantly fund it.

The marketisation of global charity and empowerment has dangerous implications that transcend economics. It also has a troubling emerging political legacy, one in which democracy is sacrificed on that altar of executive-style empowerment. Politically, the free market is posited as a fundamental requirement for liberal democracy. However, recent analysis reveals the deeper connection between processes of marketisation and authoritarianism. In particular, a strong government is required to implement these often unpopular market changes. The image of the powerful autocrat is, to this effect, transformed into a potentially positive figure, a forward-thinking political leader who can guide their country on the correct market path in the face of “irrational” opposition. Charity becomes a conduit for CEOs to fund these “good” authoritarians.

A protester outside the Nasdaq headquarters in New York marks Facebook’s IPO, 2012. Photograph: Alamy Stock Photo

The recent development of philanthrocapitalism also marks the increasing encroachment of business into the provision of public goods and services. This encroachment is not limited to the activities of individual billionaires; it is also becoming a part of the activities of large corporations under the rubric of CSR. This is especially the case for large multinational corporations whose global reach, wealth and power give them significant political clout. This relationship has been referred to as “political CSR”. Business ethics professors Andreas Scherer and Guido Palazzo note that, for large corporations, “CSR is increasingly displayed in corporate involvement in the political process of solving societal problems, often on a global scale”. Such political CSR initiatives see organisations cooperating and collaborating with governments, civic bodies and international institutions, so that historical separations between the purposes of the state and the corporations are increasingly eroded.

Global corporations have long been involved in quasi-governmental activities such as the setting of standards and codes, and today are increasingly engaging in other activities that have traditionally been the domain of government, such as public health provision, education, the protection of human rights, addressing social problems such as Aids and malnutrition, protection of the natural environment and the promotion of peace and social stability.

Today, large organisations can amass significant economic and political power, on a global scale. This means that their actions – and the way those actions are regulated – have far-reaching social consequences. The balanced tipped in 2000, when the Institute for Policy Studies in the US reported, after comparing corporate revenues with gross domestic product (GDP), that 51 of the largest economies in the world were corporations, and 49 were national economies. The biggest corporations were General Motors, Walmart and Ford, each of which was larger economically than Poland, Norway and South Africa. As the heads of these corporations, CEOs are now quasi-politicians. One only has to think of the increasing power of the World Economic Forum, whose annual meeting in Davos in Switzerland sees corporate CEOs and senior politicians getting together with the ostensible goal of “improving the world”, a now time-honoured ritual that symbolises the global power and agency of CEOs.

The development of CSR is not the result of self-directed corporate initiatives for doing good deeds, but a response to widespread CSR activism from NGOs, pressure groups and trade unions. Often this has been in response to the failure of governments to regulate large corporations. High-profile industrial accidents and scandals have also put pressure on organisations for heightened self-regulation.

An explosion at a Union Carbide chemical plant in Bhopal, India in 1984 led to the deaths of an estimated 25,000 people. James Post, a professor of management at Boston University, explains that, after the disaster, “the global chemical industry recognised that it was nearly impossible to secure a licence to operate without public confidence in industry safety standards. The Chemical Manufacturers Association (CMA) adopted a code of conduct, including new standards of product stewardship, disclosure and community engagement.”

The impetus for this was corporate self-interest, rather than generosity, as industries and corporations globally “began to recognise the increasing importance of reputation and image”. Similar moves were enacted after other major industrial accidents, such as the Exxon Valdez oil tanker spilling hundreds of thousands of barrels of oil in Alaska in 1989, and BP’s Deepwater Horizon oil rig exploding in the Gulf of Mexico in 2010.

 

The Deepwater Horizon oil rig ablaze in the Gulf of Mexico, April 2010.
Photograph: Handout/Getty Images

Another important case was the involvement of the clothing companies Gap and Nike in a child labour scandal after the broadcast of a BBC Panorama documentary in October 2000. Factories in Cambodia making Gap and Nike clothing were shown to operate with terrible working conditions, involving children as young as 12 working seven days a week, being forced to do overtime, and enduring physical and emotional abuse from management. The public outcry that ensued demanded that Gap and Nike, and other organisations like them, take more responsibility for the negative human social impacts of their business practices.

CSR was introduced in order to reduce the ill effects of corporate self-interest. But over time it has turned into a means for further enhancing that self-interest while ostensibly claiming to be addressing the interests of others. When facing the threat of corporate scandal, CSR is seen as the vehicle through which corporate reputation can be boosted, and the threat of government regulation can be mitigated. Again, here we see how corporations engage in seemingly responsible practices in order to increase their own political power, and to diminish the power of nation states over their own operations.

The idea that organisations adopt CSR for the purposes of developing or defending a corporate reputation has put the ethics of CSR under scrutiny. The contention has arisen that, rather than using CSR as a means of “being good”, corporations adopt it merely as a means of “looking good”, while not in any way questioning their basic ethical or political stance. Even Enron, before its legendary fraud scandal and eventual demise in 2001, was well known for its advocacy of social responsibility.

CEO generosity is epic in proportions – or at least that is how it is portrayed. Indeed, on an individual level it is hard to find fault with those rich people who have given away vast swaths of their wealth to charitable causes, or those corporations that champion socially responsible programmes. But what CSR and philanthrocapitalism achieve more broadly is the social justification of extreme wealth inequality, rather than any kind of antidote to it. We need to note here that, despite the apparent proliferation of giving promised by philanthrocapitalism, the so-called golden age of philanthropy is also an age of expanding inequality.

This is clearly spelled out a 2017 report by Oxfam called An Economy for the 99%. It highlights the injustice and unsustainability of a world suffering from widening levels of inequality: since the early 1990s, the top 1% of the world’s wealthy people have gained more income than the entire bottom 50%. Why so? Oxfam’s report places the blame firmly with corporations and the global market economies in which they operate. The statistics are alarming, with the world’s 10 biggest corporations having revenues that exceed the total combined revenues of the 180 least wealthy nations. Corporate social responsibility is not making any real difference. The report states: “When corporations increasingly work for the rich, the benefits of economic growth are denied to those who need them most. In pursuit of delivering high returns to those at the top, corporations are driven to squeeze their workers and producers ever harder – and to avoid paying taxes which would benefit everyone, and the poorest people in particular.”

Neither the philanthropy of the super-rich nor socially directed corporate programmes have any real effect on combating this trend, in the same way that Zuckerberg’s handout of $3m will have a negligible effect on the San Francisco housing crisis. Instead, vast fortunes in the hands of the few, whether earned through inheritance, commerce or crime, continue to grow at the expense of the poor.

In the end, it is capitalism that is at the heart of philanthrocapitalism, and the corporation that is at the heart of corporate social responsibility, with even well-meaning endeavours serving to justify a system that is rigged in favour of the rich.

What is particular about this new approach is not that rich people are supporting charitable endeavours, but that it involves, as sociologist Linsey McGoey explains, “an openness that deliberately collapses the distinction between public and private interests, in order to justify increasingly concentrated levels of private gain”. 

In the CEO society, corporate logic such as this rules supreme, and ensures that any activities thought of as generous and socially responsible ultimately have a payoff in terms of self-interest. If there was ever a debate between the ethics of genuine hospitality, reciprocity and self-interest, it is not to be found here. It is in accordance with this CEO logic that the mechanisms for redressing the inequality created through wealth generation are placed in the hands of the wealthy, and in a way that ultimately benefits them. The worst excesses of neoliberal capitalism are morally justified by the actions of the very people who benefit from those excesses. Wealth redistribution is placed in the hands of the wealthy, and social responsibility in the hands of those who have exploited society for personal gain.

Meanwhile, inequality is growing, and both corporations and the wealthy find ways to avoid the taxes that the rest of us pay. In the name of generosity, we find a new form of corporate rule, refashioning another dimension of human endeavour in its own interests. Such is a society where CEOs are no longer content to do business; they must control public goods as well. In the end, while the Giving Pledge’s website may feature more and more smiling faces of smug-looking CEOs, the real story is of a world characterised by gross inequality that is getting worse year by year.

China accuses George Soros of 'declaring war' on yuan

Billionaire investor ‘trying to create panic for profit’, says scathing editorial, after he predicted the Chinese economy is headed for a hard landing

 

George Soros said China had left it to late to move from an export to a consumer-led economy. Photograph: Pascal Lauener/Reuters


Agence France-Presse in Beijing

Wednesday 27 January 2016 06.04 GMT

Chinese state media has stepped up a salvo of biting commentaries against George Soros and other currency traders as the yuan comes under pressure, with the billionaire investor accused of “declaring war” on the unit.

At the annual World Economic Forum in Davos last week, Soros told Bloomberg TV that the world’s second-largest economy – where growth has already slowed to a 25-year low according to official figures – was heading for more troubles.

“A hard landing is practically unavoidable,” he said.

Global markets turmoil echoes 2008 financial crisis, warns George Soros



Soros – whose enormous trades are still blamed in some countries for contributing to the Asian financial crisis of 1997 – pointed to deflation and excessive debt as reasons for China’s slowdown.

The normally stable yuan, whose value is closely controlled by Beijing, has come under pressure in recent weeks and months in overseas markets and from capital outflows. Authorities have spent hundreds of billions of dollars to defend it.

China’s official Xinhua news agency on Wednesday said that Soros had predicted economic troubles for China “several times in the past”.

“Either the short-sellers haven’t done their homework or … they are intentionally trying to create panic to snap profits,” it said.

An English-language op-ed in the nationalistic Global Times newspaper blamed “westerners” for not “accepting responsibility for the mess” in the world economy.

The comments came after the overseas edition of the People’s Daily, the official mouthpiece of the Communist party, published a front-page article Tuesday titled “Declaring war on China’s currency? Ha ha” that was widely shared on Chinese social media.

Soros “publicly ‘declared war’ on China”, the paper said, citing the 85-year-old as saying that he had taken positions against Asian currencies.

But some readers questioned whether the official rhetoric could fuel Chinese investors’ fears.

“They say a lot of loud slogans, but do official media even know that Chinese investors are in hell?” said one poster on social media network Weibo.

“I’m afraid that Chinese investors will die in a stampede before Soros even shows his hand.”

In the 1990s Soros led speculators in bets against the Bank of England, which unsuccessfully sought to defend the pound’s exchange rate peg.

“The Chinese left it too long” to change their growth model from dependence on exports to a consumer-led one, Soros said, even though Beijing had “greater latitude” than others to manage such a transition because of its currency reserves, which stand at over US$3tn.

Margaret Thatcher began Britain's obsession with property. It's time to end it

Right to buy helped to turn the UK into a nation that saw houses as something to make money from, not to live in. Now we are at crisis point – and the government must step in 

• 
• • Rowan Moore
  • The Observer, Sunday 6 April 2014

Margaret Thatcher takes tea with former GLC council house tenants in Balham in 1978. Photograph: Kenneth Saunders for the Guardian

In 1975, in her first speech as leader to the Conservative party conference, Margaret Thatcher declared her belief in a "property-owning democracy". She didn't invent the phrase – the 1920s Tory MP Noel Skelton should take the credit for that, and the American liberal philosopher John Rawls picked it up before she did – but it became the most distinctive of all her many distinctive ideas, the one that most succinctly describes the Britain she wanted to create.

Through thrift and hard work, went the theory, ordinary families should be able to buy their own homes. It would give them security, dignity and freedom and liberate them from the nannying of local council landlords. It would make them better citizens, with their own stake in the economic wellbeing of the country, they would have an incentive to contribute to national prosperity. It exemplified her belief that capitalism was good not only for the rich, but for people on modest incomes. As the then environment secretary, Michael Heseltine, put it later: "Home ownership stimulates the attitudes of independence and self-reliance that are the bedrock of a free society."

So Thatcher allowed council tenants to buy their own homes at reduced prices, and sincethe right to buy was introduced, about 1.5m have been bought. She presided over an economy in which house buying became a national obsession and home ownership went up from 9.7m to 12.8m. Fundamental to her idea was that government, which had built between a third and a half of all homes for the previous three decades, should step back. Councils could no longer build council housing. The market would provide. Houses would be built by housebuilders, to use the standard term for the companies that buy land, win planning permission and then (sometimes) put homes on it.

Thatcher's idea is now at a point of crisis. Housebuilders are not building enough houses, and the proportion of people owning their own homes has been falling since 2007. People have long ago found that it does not always make you free to be shackled to a mortgage, still less if you cannot cross the increasingly high threshold into ownership. In London and the south-east, businesses lament the effects on them of expensive housing caused by the lack of mobility of potential workers.

Debt and speculation have been encouraged more than thrift and people who only wanted a home were forced to be gamblers in a turbulent market. The property-owning democracy is not turning out to be democratic, excluding as it does the large minority who don't own homes. In a sick practical joke, people have been encouraged to take on long-term mortgages at the same time that secure lifetime employment, which might pay for them, is disappearing. As for public spirit, with rising house prices goes rising nimbyism, as owners seek to protect their investment from all possible threats, above all the threat of more homes being built nearby that other people might live in.

Over three decades, a culture has been created in which the price of homes colours almost every aspect of life. It affects people's decisions about whether and when to live together, stay together and have children. An economy has been created in which inflation, otherwise frowned upon, is desirable in house prices, even essential. Property values are used as the principal tool of urban regeneration and, when those values fail to materialise, so does the regeneration. The infamous bedroom tax regards a few square metres of spare space as such a great asset that it must be wrenched from the grasp of the undeserving poor. "Values", indeed, is a telling word – we use it more to describe property than anything to do with ethical or social ideals.

It is amazing, beyond satire, that the two biggest stories in housing are on the one hand the bedroom tax and on the other the streets and squares of empty houses in Belgravia and Kensington, bought as investments by owners who rarely visit. At the same time that, when it comes to poor people, vacant rooms are deemed an offence to be expunged, they grow unchecked in the most desirable parts of London.

At almost every level, the market isn't working, from ex-industrial towns in northern England, where the values are too low to justify repairs to existing houses, to the under-supply and high prices in London, where an average home now costs £458,000, or 13 times the median full-time income. Hidden favelas are growing up in suburbs such as Newham and Southall, with unauthorised developments in back gardens and flats occupied at many times the levels for which they were designed.

 Newham, London: favela-style housing is on the increase in suburbs such as Newham and Southall, with severe overcrowding and unauthorised developments in back gardens and yards. Photograph: Newham Council/Archant

A system has been created with a few winners, for sure, but not the people excluded from the market, nor those barely able to pay for their homes, some of whom will drown when interest rates start going up. Even those who bought early enough to have a profit on their home find it to be largely nominal, impossible to realise without removing themselves or their children from the all-important property ladder.

Not even housebuilders are entirely happy, although recent government policies such as Help to Buy and the encouragement of easy credit have helped their share prices rise. They grumble that planning restrictions and regulations make their work unreasonably difficult and that the margins in their business are low. "It is a fantastically hard business," says one of those involved, because of its booms and busts. The most obvious winners were people such as Judith and Fergus Wilson, the Kent-based buy-to-let magnates said to be worth £180m. But here too there are losers – the people who got their fingers burned when this particular market crashed.

As Danny Dorling, in his recent book All That is Solid: The Great Housing Disaster has pointed out, the home is now seen as a commodity, as a unit of investment to be traded up or down. Attachment to a place, or the interconnectedness of units to make a community, is given little value. The pursuit of ideals, the idea of social or architectural betterment in the provision of housing, has all but disappeared.

Early in the last century, when Arts and Crafts architecture was flourishing and the first garden cities were being planned, the German architect Hermann Muthesius publishedThe English House, which was based on the premise that this country was particularly good at domestic architecture and that countries such as Germany should look and learn. It is unlikely anyone would want to do this now, as new British homes have, as well as the highest prices, the meanest dimensions to be found anywhere in Europe. What we have instead are a series of distinctive if largely inadvertent types, created by a warped market, which might be summarised thus:

Rural eyesore

An attempt to squeeze housing units into places where people want to live (the countryside in southern England), but the people there already don't want any more. Compromise ensues, in which new houses take on a huddled, crowded air and are given a traditional style to mitigate their intrusion. Making a new place with positive and exceptional qualities is out of the question, as all the developers' creative energies have gone into wrestling with the planning system to get their permission.

Investment silo

In London and some other big cities, dense apartment blocks are built with the primary purpose of creating vehicles for investment. Sometimes they are towers. In the previous decade, these developments were primarily aimed at British-based buy-to-let investors; currently the main target are overseas buyers. These projects typically have just enough decking, white paint and glass balustrades to allow good-looking young couples to be photographed inside them holding glasses of white wine, such that the adjectival nouns "luxury lifestyle" can be attached. They also have enough odd angles, or multicoloured cladding, to claim the adjective "iconic".

Affordable silo

Similar to an investment silo, to the extent that housing associations are now the main providers of affordable housing, and are also pressured to behave more and more like property developers. Their products therefore look increasingly like those of developers, although with some reductions in the luxury lifestyle and "iconic" elements. On the other hand, they tend to be built with better standards of space, as housing associations have to follow stricter rules than private developers.

Student silo

Exploiting loopholes in the planning and regulatory systems, which make fewer demands on student housing than other types, property companies have in recent years rushed into this market. Among the attractions of students to developers is that they can be put into even smaller spaces than anyone else. The typology is similar to other types of silo, but with still less in the luxury lifestyle department.

Northern disaster zone

 Parts of Liverpool and Gateshead have been demolished by the government, the old streets replaced with smaller numbers of new homes. The result? The uprooting of people who wanted to stay put and zones of demolished and empty buildings. Photograph: Nigel R. Barklie/REX

Parts of Liverpool or Gateshead, for example: places afflicted by the last government's Housing Market Renewal Pathfinder project, where about £2bn of public money was spent buying up streets in areas of low value, demolishing them, and replacing them with smaller numbers of new homes. The theory was that, under the laws of supply and demand, reduced supply would raise values. The reality was the breaking up ofcommunities, the uprooting of people who wanted to stay put and devastated zones of demolished and empty buildings.

Overcrowded London

Flats and backyards adapted to house as many people as possible.

Empty Belgravia

Extraordinarily expensive houses owned by people with properties in several other countries, such that they are usually unoccupied. Often also iceberg houses, with multifloor basements expensively created underneath, to create further quantities of void.

Nonexistent new town

Successive governments are lured to the attractive idea of the new town, as it enables large numbers of homes to be built while annoying fewer residents than if they have been spread over a wider area. It appeals to politicians' love of a visible gesture. The same governments then fail to provide the infrastructure and planning to make these towns happen. The last administration promised both a new city in the Thames Gateway, to the east of London, and a series of "ecotowns". Very little of either appeared.

It is not in fact so difficult to create good modern housing. There are well-known examples in continental Europe, often cited in discussions of the subject, such asHammarby Sjöstad in Stockholm, Vauban in Freiburg, and Borneo Sporenburg in Amsterdam. Peter Hall, the planning expert whose recent book, Good Cities, Better Lives, explores the best European examples, says that there is an "extraordinary similarity" between these schemes: they have good public transport, from which all homes are within easy walking distance, and "a good disposition of semi-public spaces", such as playgrounds and shared gardens.

 St Andrews in East London: housebuilder Barratt, not always a byword for design quality, is responsible for this project with its emphasis on robust detailing, balconies and shared space.

Nor is Britain incapable of decent developments. Barratt, a housebuilder not always associated with design quality, has built the St Andrews and Barrier Park projects in east London, albeit only after prodding from the London Development Agency, the public body that sold it the land. Richard Lavington, one of the architects of these developments, says that the aims were "to put a balcony on every unit, and to create a positive interface between private and public", by which he means placing family homes close to shared open spaces and streets in such a way that they might readily use them. He also sought "clear, robust detailing" that would be "straightforward to build".

Again, this is not complicated stuff and the developments live up to these claims. Cognoscenti of new housing will also know of fine, small-scale projects by the developers Crispin Kelly of Baylight and Roger Zogolovitch of Solidspace. Kelly says: "Big windows and high ceilings are a start, and lack of fussiness – having the confidence to do things simply." Inside, he likes bonus spaces – on a stair landing for example – where a child might do homework, and outside something as basic as a bench that encourages neighbours to meet. Like Kelly, Zogolovitch likes undesignated spots "where you might set up a cello or an easel or write a novel". He uses design to make small spaces feel larger and give them personality.

 Kevin McCloud at The Triangle housing project in Swindon. Photograph: Professional Images

In Swindon there is The Triangle, created with the help of Kevin McCloud's company Hab, which also stresses the importance of shared space and simple design. And, when you ask for examples of good new housing, you keep being referred back to Cambridge. Here is Accordia, which won the Stirling prize in 2008, and the university-backed £1bn plan to create 3,000 homes, half of them for key workers, on 150 hectares in the north-west of the city. Also in Cambridge are developments such as the "Scandinavian-style"Seven Acres, by the multinational construction company Skanska, which again is based on the virtues of simplicity and shared space.

But these bright spots are too rare and require favourable conditions, such as having a TV personality or an ancient university to back them. They tend to be in places such as London or Cambridge, where prices rise faster than elsewhere. This helps to pay for more quality, but by definition makes it harder to achieve.

The housing crisis is one of both quantity and quality. Some 250,000 new homes a year are said to be needed, but after 2008 the number fell below 100,000, mostly built by private housebuilders but also by housing associations. In the postwar peak in the late 60s, more than 400,000 were created a year, many of them by the councils later banned from building by Margaret Thatcher. Meanwhile, the private sector built at a reasonably steady rate from the late 1950s on, between 150,000 and 250,000 a year. Until the 2008 crash, that is, when output plummeted to a level not seen for half a century.

Blame for this lack of supply is usually placed on the planning system. There is nowhere in southern England for new housing to go or, rather, nowhere where voters and therefore politicians want it to go. Suggestions of building anything on the green belt bring accusations of desecration of a national treasure and similarly with rural locations further from big cities. The theory that brownfields, that is ex-industrial sites, could answer all housing need has proved challenging in practice. Such sites are not always where people want to live.

Suggestions for fixing the problem include, as always, the new town or, as George Osborne likes to call it, the "garden city". He used the term when repackaging existing proposals for Ebbsfleet in Kent, and presenting them as his invention, but his duplicity should not obscure the possibility that it might be a good idea. Peter Hall passionately believes that the principal hope for housing is building new towns and town-size extensions to existing cities. The new towns created in the 1960s, of which Milton Keynes is the biggest and best known, may have become the butt of patronising jokes, but, says Hall, "were really rather successful". They did their job of relieving pressure and "all the evidence shows that people like living there".

Another idea is to fit more homes into London, which is several times less densely populated than, for example, Paris. Another is to encourage people to build their own houses, which currently accounts for a minute proportion of the total. Another, popular with the current government, is the "neighbourhood plan". Here, local communities (usually rural) put together their own proposals for development so that some of the proceeds go to shared benefits and growth is no longer an aggressive intervention by outsiders. It might also help if we moved away from the preoccupation of home ownership with the help of decent properties for private rent. Michael Heseltine once said that "there is in this country a deeply ingrained desire for home ownership", but in 1900 90% of homes, at almost every level of price, were rented.

All these suggestions have merit and the answer is almost certainly to embrace all of them and more. We have to go from our current culture, where new housing is treated as pollution, and something to be squeezed through the planning system with the greatest difficulty, to one where it is seen as a positive asset. There is a vicious circle – new development is poor because it takes so much effort to overcome objections and people object to it because it is poor.

But none of these ideas will happen without the thing the coalition has been least willing to employ, which is active and forward-looking public intervention. It is hard to build a new town, or a well considered rural expansion, without things such as compulsorily buying land, paying professionals to plan it or providing transport. As Dickon Robinson, formerly of housing association the Peabody Trust puts it: "The market has failed. It's time to put some controversial ideas out there."

The compulsory purchase by government from private landowners sounds communist, but it was used (for example) in the "renewal" of northern cities. It is just that politicians are more reluctant to wield it in Kent than in Gateshead. If we are sceptical about the power of planners to achieve their objectives, we only need to look at the Netherlands. There, they had a similar scale of housing shortage, in proportion to the country's size, to the one that has been diagnosed in Britain for the past 15 years. Unlike Britain, they fixed it, by building nearly half a million new homes.

Planning apart, there is a deep flaw with the idea that the market alone will meet all the country's housing needs. The problem is not only to do with the numbers supplied, but with how much each home costs and housebuilders cannot be expected to lead a process that results in the value of their product going down. They would rather sit on their land until such time as its price goes up, which means that some other agency has to do what they won't, which means, in effect, that the government has to intervene more actively in promoting building – by acquiring land, producing considered plans for its development, and then promoting such development.

Given that in much of Britain the price of homes is high, a slow deflation might be desirable; the ideal could be that prices stay the same, so that they gently fall in real terms. But the coalition's big idea is the opposite. With Help to Buy, changing pension rules and other measures, they have stimulated demand without a corresponding increase in supply, such that prices go up further. As the Financial Times has said, this is economically illiterate. It would be a useful first step to reverse these policies.

We are now at a moment similar to the 1970s, when ideas about housing that had lasted a generation stopped working. Then it was the legacy of Clement Attlee's postwar government, which believed in massive state provision of housing, but which ended up restricting freedoms and too often creating homes people didn't like. Thatcher's policies were a necessary corrective, and had real benefits, but now they too are failing. It is time for something new.

It's not easy to champion planning, as it tends to summon images of faceless bureaucrats and grandiose visions gone wrong. But, as Hermann Muthesius recognised in the early 1900s, and as Peter Hall argues about 1960s new towns, it is not un-British to plan and design new communities well. The national dependency on high house prices has, in its effects, become an economic, social and cultural disaster. Active intervention is needed. As someone once said, there is no alternative.

Let's have some sympathy for the jury

My verdict on our justice system

Let's have some sympathy for the Vicky Pryce jury. Sitting in judgment is a tough job

• 
• • Victoria Coren
  • The Observer, Sunday 24 February 2013

12 Angry Men: the jury system as it ought to work. Photograph: Ronald Grant Archive

The jury in the Vicky Pryce case were, no doubt, just being conscientious.

After sitting through days of evidence in the Mysterious Case of Mrs Huhne and the Speeding Points, they came back to the judge with 10 questions to help them reach a verdict.

Mr Justice Sweeney was so horrified by the questions that, when they said they were unlikely to find agreement, he abandoned the trial and sent them all home on the grounds that they didn't understand what they were doing. The prosecutor, Andrew Edis QC, said the jurors had shown an "unparalleled" failure to understand "very basic concepts of jury trials".

No doubt they meant well. It is good when jurors take their job seriously. Unfortunately, their earnestness simply makes the questions even more hilarious. I think my favourite is question five: "Can a juror come to a verdict based on a reason that was not presented in court and has no facts or evidence to support it, either from the prosecution or defence?"

I am disappointed that the judge sent them home without asking: "You have a reason based on no facts and no evidence? What in God's name is it?"

Nevertheless, he deserves credit for amusing the nation with his response to question four ("Can you define what is reasonable doubt?"), to which the judge replied: "A reasonable doubt is a doubt which is reasonable. These are ordinary English words that the law doesn't allow me to help you with."

It is cruel that all this has been made public. My guess is that these questions were submitted by perfectly intelligent people, who were being driven slightly mad by the warped logic and limited understanding of some fellow jurors.

I've done jury service; trust me, that's likely. I imagine an exhausted schoolteacher sighing: "No, we can't accept your theory that 'marital coercion' involved Huhne tickling her until she screamed. If you don't believe me, let's ask the judge."

The questions do look preposterous on the page. Many barristers will, I'm sure, have jabbed their fingers at the newspaper and shouted at their spouses: "You see what I have to deal with? These are the people I'm talking to, day after day, week after week, year after year! Their blank, uncomprehending eyes! Their open, drooling mouths! Their constant scratching! And then you think I want to spend my Sunday at Ikea!"

Based on my experience, I would say that 90% of jurors struggle with the distinction between inference and speculation. They really have amazing trouble getting it. But I would also say that, somehow, justice is usually done. It's like a messy goal: there is fumbling, shoving, confusion and mud, but the ball fumbles its way to the back of the net. The jury system is a precious and wonderful thing.

I would bet that this case was discussed by a majority of good, bright people and scuppered by a couple of idiots. Then again, by the law of statistics, there must occasionally be 12 idiots on a jury. Last week, a conversation about a different case somewhere else in the country might have unfolded like this…

Juror One I reckon he's guilty. Can't wait to find out! They tell us the answer before we go home, right?

Juror Two No, no, you have to write in for the answers. [Writes on paper: "Dear judge, who did it?"]

Juror Three I reckon he was drunk. Drunk driving. As well as speeding.

Juror Four Speeding? This is a murder trial. He was on foot.

Juror Three No, I reckon he was driving. And I'd have a drink if I'd just murdered someone, wouldn't you? It's all a cover-up. [Writes: "Dear Judge, are we allowed to find him guilty of a crime he's not currently accused of?"]

Juror Two Speaking of drinking, who's for a lemonade?

Juror Five How is this supposed to work?

Juror Two I think you pour it in the glass and then you just sort of have it.

Juror Five [doubtfully] Should we ask the judge?

Juror Three Am I the judge?

Juror Seven No, you're the foreman.

Juror Three I forgot that [drinks lemonade miserably]. So I have to work out how long he goes to prison, and then I stand up and say it?

Juror Eight Yes, or you can choose to do the non-religious one instead.

Juror Three I've got hiccups.

Juror Nine He's not guilty, anyway. I saw him in the cafe at lunchtime.

Juror Two So?

Juror Nine So how could he have been drunk? He was only having a piece of toast.

Juror Two But he's allowed to be drunk. There's no law says you can't be drunk when you do a murder.

Juror Five I don't think the crime was today anyway. It was, like, a week ago.

Juror 10 But I was on holiday a week ago! How am I supposed to know what happened then? [Writes: "Dear Judge, I love skiing. Do you?"]

Juror Three I've just googled him on my iPhone.

Juror 10 That's not allowed! They specifically said, no research!

Juror Three This isn't research, it's inference. It helps me infer he's guilty. Look, here he is burgling a house.

Juror 10 That's not him, that's Ronnie Barker.

Juror Four I thought he was fatter.

Juror 10 It's an old picture. [Writes: "Dear Judge, can we have a DVD of Open All Hours?"]

Juror 12 [Waking up suddenly] Right! I think we've covered everything.

Juror 10 You're right. We've cracked it. Let's go back in, ask the questions and find out who won.

They ring for the court usher.

A Telling Silence

The issues politicians do not discuss are as telling and decisive as those they do. And the loudest silence surrounds the issue of property taxes.

GEORGE MONBIOT

You can learn as much about a country from its silences as you can from its obsessions. The issues politicians do not discuss are as telling and decisive as those they do. While the government’s cuts beggar the vulnerable and gut public services, it’s time to talk about the turns not taken, the opportunities foregone: the taxes which could have spared us every turn of the screw.

The extent of the forgetting is extraordinary. Take, for example, capital gains tax. Before the election, the Liberal Democrats promised to raise it from 18% to “the same rates as income” (in other words a top rate of 50%), to ensure that private equity bosses were no longer paying lower rates of tax than their office cleaners (1). It made sense, as it would have removed the bosses’ incentive to collect their earnings as capital. Despite a powerful economic case, the government refused to raise the top rate above 28%. The Lib Dems protested for a day or two (2), and have remained silent ever since. In the parliamentary debate about cuts to social security, this missed opportunity wasn’t mentioned once (3).

But at least that tax has risen. In just two and half years, the government has cut corporation tax three times. It will fall from 28% in 2010 to 21% in 2014 (4,5). George Osborne, the chancellor, boasted last month that this “is the lowest rate of any major western economy”(6): he is consciously setting up a destructive competition with other nations, creating new excuses further to reduce the UK rate.

Labour’s near-silence on this issue is easily explained. Under Tony Blair and Gordon Brown, who were often as keen as the Conservatives to appease corporate power, the rate was reduced from 33% to 28%. Prefiguring Osborne’s boast, in 1999 Brown bragged that the rate he had set was “the lowest rate of any major industrialised country anywhere, including Japan and the United States.” (7) What a legacy for a Labour government.

As for a Robin Hood tax on financial transactions, after an initial flutter of interest you are now more likely to hear the call of the jubjub bird in the House of Commons. According to the Institute for Public Policy Research, a tax rate of just 0.01% would raise £25bn a year, rendering many of the chamber’s earnest debates about the devastating cuts void (8). Silence also surrounds the notion of a windfall tax on extreme wealth. And to say that Professor Greg Philo’s arresting idea of transferring the national debt to those who possess assets worth £1m or more has failed to ignite the flame of passion in parliament would not overstate the case(9).

But the loudest silence surrounds the issue of property taxes. The most expensive flat in that favourite haunt of the international super-rich, One Hyde Park, cost £135m. The owner pays £1,369 in council tax, or 0.001% of its value(10). Last year the Independent revealed that the Sultan of Brunei pays only £32 a month more for his pleasure dome in Kensington Palace Gardens than some of the poorest people in the same borough (11). A mansion tax – slapped down by David Cameron in October (12) – is only the beginning of what the owners of such places should pay. For the simplest, fairest and least avoidable levy is one which the major parties simply will not contemplate. It’s called land value tax.

The term is a misnomer. It’s not really a tax. It’s a return to the public of the benefits we have donated to the landlords. When land rises in value, the government and the people deliver a great unearned gift to those who happen to own it.

In 1909 a dangerous subversive explained the issue thus. “Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived. … the unearned increment on the land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done.” (13)

Who was this firebrand? Winston Churchill. As Churchill, Adam Smith (14) and many others have pointed out, those who own the land skim wealth from everyone else, without exertion or enterprise. They “levy a toll upon all other forms of wealth and every form of industry.”(15) Land value tax recoups this toll.

It has a number of other benefits (16). It stops the speculative land hoarding that prevents homes from being built. It ensures that the most valuable real estate – in city centres – is developed first, discouraging urban sprawl. It prevents speculative property bubbles, of the kind that have recently trashed the economies of Ireland, Spain and other nations and which make rents and first homes so hard to afford. Because it does not affect the supply of land (they stopped making it some time ago), it cannot cause the rents that people must pay to the landlords to be raised. It is easy to calculate and hard to avoid: you can’t hide your land in London in a secret account in the Cayman Islands. And it could probably discharge the entire deficit.

It is altogether remarkable, in these straitened and inequitable times, that land value tax is not at the heart of the current political debate. Perhaps it is a sign of how powerful the rent-seeking class in Britain has become. While the silence surrounding this obvious solution exposes Labour’s limitations, it also exposes the contradiction at heart of the Conservative Party. The Conservatives claim, in David Cameron’s words, to be “the party of enterprise”(17). But those who benefit most from its policies are those who are rich already. It is, in reality, the party of rent.

This is where the debate about workers and shirkers, strivers and skivers should have led. The skivers and shirkers sucking the money out of your pockets are not the recipients of social security demonised by the Daily Mail and the Conservative Party, the overwhelming majority of whom are honest claimants. We are being parasitised from above, not below, and the tax system should reflect this.