Does "capitalism" cause homelessness?
Fact checking a common and misleading myth
The received wisdom, at least in some political circles, is the claim that capitalism causes or exacerbates homelessness. One can easily find examples of this widespread claim with a search engine, there are plenty of articles and there is scholarly literature on the topic.
A closely related topic is the claim that capitalism causes or exacerbates poverty. But poverty in the absolute sense of lack of the bare necessities for survival, rather than in the relative sense, is natural. Like all other species of life we come into this world with nothing, but we are exceptional in that we can create or acquire wealth and thus comfortably avoid the daily struggle for survival. This condition is rather recent in our natural history and only really characterises life for a small proportion of people who experienced the proceeds of industrial revolution. The industrial revolution was the result of developments of technology, and the development of technology is inexorably linked to capitalism and higher intelligence.
Any discussion of “capitalism” needs to start by defining the terms. Here we shall use the term as given in dictionaries and as understood by economists:
“capitalism, also called free market economy or free enterprise economy, economic system, dominant in the Western world since the breakup of feudalism, in which most means of production are privately owned and production is guided and income distributed largely through the operation of markets.” - Britannica
Historically, capitalism was a movement driven by the trading classes to liberalise trade by favouring private property rights, instead of a state monopoly on trade or serfdom.
Capitalism may also be contrasted with a state planned economy:
“The production of goods and services under capitalism is based on supply and demand in the general market—known as a market economy—rather than through central planning—known as a planned economy or command economy.” - Investopedia
Of course there are other definitions and understandings of capitalism, but here we shall use the above.
With the above kinds of definitions it is also possible to define a kind of capitalism index to quantify how capitalistic an economy is, and this has been attempted and is called the Index of Economic Freedom (Heritage Foundation). Unfortunately this index is far from objective or entirely reflective of capitalism, as has been pointed out by its critics:
“To get to this problem, a need arises for an economic freedom index. But the problem remains: what items should be included and how much weight should be given to each item? Ideally, all forms of government intervention should be included and the weight given to each item should be in relation to just how much it restricts people's freedom to perform economic activities either in the form of taking away their money, regulating and restricting the ways in which they can use the money they get to keep as well as how these restrictions affect their behavior.” - Stefan Karlsson
Karlsson’s critique goes into some details which bring doubt on the utility of the Economic Freedom Index. The CATO Institute also publish an annual Economic Freedom of the World report that contains economic freedom rankings aka EFW rating (Fraser Institute). This has its critics as well, and can also be argued to not well represent economic freedoms according to the concept of free market capitalism favoured herein.
“…we believe that economic freedom is a concept in its own right, and as a result it cannot be conceptualised by simply adding various “good” things. Such a list can never be a theoretical concept. … efficiency and economic freedom, are confused in the majority of cases in the literature on economic freedom” - Kapás & Czeglédi, 2008
Although critics of economic freedom rankings suggest numerous improvements, so far there seems to be no published rankings, adjusted as suggested by their critics. A further problem is that neither economic freedom index deals specifically with the economic freedom of the property and housing markets. We would like to know how easy is it to obtain land and develop a property upon it, without the restrictions of state regulation, and when this alone is taken into consideration, what is the effect on homelessness—unfortunately there is no such readily available data to present.
Let’s set aside the above limitations for now, and look at the reports as they are, given they are still indicative of generally capitalist economics. The 2022 EFW report is based upon 2020 data, and reports that Hong Kong and Singapore (very closely) hold first and second place:
“Hong Kong remains in the top position, though its rating fell an additional 0.28 points. Singapore, once again, comes in second.” - Economic Freedom of the World, 2022
The Heritage Foundation place Singapore first and Switzerland second according to their 2022 report. Therefore there is alignment on Singapore being the most economically free country according to the methods of both economic freedom indexes, and of course not withstanding the above criticisms. Singapore ranks highly for per capita billionaires, according to data from Forbes on Wikipedia, Singapore ranks in 6th position. It is therefore reasonable to conclude that Singapore should be regarded as being a more highly capitalistic country.
Now we need to know where Singapore lies on the scale of homelessness, do they rank well or poorly? Do the supposed effects of capitalism in Singapore ferment a significant homelessness problem?
According to a report by Prof. Ng Kok Hoe and team, there were 1,115 homeless people in Singapore in 2019. The population of Singapore in 2019 was 5,866,405 according to Macrotrends based on U.N. data. Thus the homeless rate in Singapore in 2019 was 1.9 persons per 10,000 population, or 0.019% of the Singapore population.
The figure of 0.019% homeless put Singapore’s rate at the bottom of the scale in terms of homelessness compared to similar OECD data; range 0% (Japan) - 1.66% (Wales), median 0.18, standard deviation 0.39. Unfortunately there is no uniform measure of homelessness as categories and methods vary by country. Even so, Singapore is only bested by Japan and Croatia, and the real homeless figure for Japan is higher than 0%.
While reviewing the OECD data, it can be noted that the U.K. comes out worst in terms of homelessness. The estimates given for 2020 are in descending order, worst first:
Wales 1.66%*
England 1.25%
Scotland 1.14%
Northern Ireland 1.1%
*Note that Wales has had a continuous Labour lead administration for 25 years and with recent annual budgets around £27 billion, yet somehow they have the worst homelessness levels in the world.
Does the U.K. have a laissez-faire property market, or one characterised by regulation and central planning? Of course the answer is very much the latter. The U.K. property market is subject to a strict regime of; central planning, zoning, building and construction regulation, use regulation, tenancy rights, property taxation and money market manipulation—every aspect of the market is subject to rigorously enforced state regulation or manipulation.
The states regulatory activities of the U.K. property market limit the supply of available land and houses and drive up prices. Although it is contrary to values of capitalism, some will argue that this situation is the epitome of capitalism (i.e. cronyism). But then what would such critics say of Singapore or of the liberal history behind the movement towards free-market economics and away from state hegemony on behalf of crony interests?
Let’s return to the critical issue highlighted above, neither economic freedom index deals specifically with the economic freedom of the property and housing markets. These economic indexes may reflect the degree of capitalistic economics in general, but miss the specific market of interest.
The housing market in Singapore is very much centrally planned, but rather than the planning restricting the supply of housing, as in the UK, Singapore has a housing program to supply housing to those who need it. This model is similar to the council housing programs that used to exist in the UK.
The UK is a nation of 67 million people while Singapore is a city state of 5 and a half million people. Lichtenstein, like Singapore is also very much a capitalistic economy, yet it bests Singapore and is reported to have no homelessness (Landesverwaltung Fürstentum Liechtenstein, p. 42, 2004), because Liechtenstein has an effective housing subsidy program. The population of Liechtenstein is under 40 thousand people. What do Lichtenstein and Singapore share in common other than being very much capitalistic economies? Both have small populations, socially they are deeply conservative, Lichtenstein being mostly Catholics and Singapore being mostly Asians. Both these populations share values of family, work and personal and social responsibility.
A population can embrace economic liberalism as well as support those in need of obtaining affordable housing, but this approach doesn’t seem to scale well. As the size of a democratic state increases, the state tends to increasingly regulate the property market and skew it in favour of supply restriction. This makes perfect sense in a representative democracy where there is substantial property ownership, particularly with the political elites, because property owners form a voting block that have to be appeased. Therefore the political class is highly motivated to infringe upon private property and free market forces that would adjust to demands.
Homelessness and inflated property prices are primarily a feature of large scale democratic nation states where social cohesion has fractured due to the breakdown of family life and many other factors. This is a condition that governments typically cannot address substantially and instead only offers empty rhetoric, along with protecting vested interests threatened by property market liberalisation. Capitalism is not the problem, more of it would seem to be a good idea.