The Strength of Ordoliberalism (1)

This is the first of a series of posts on ordoliberalism, the original focus of the perspective that informed much of my work. It was in 1972 that I first saw how ordoliberalism worked in Sweden, when Kerstin and I moved there in 1972, after a year at Minnesota University. I came to love Sweden and have never looked back. There are several portals to begin at, but my starting point was housing and urban form. In a way this is the story of my working life as it has happened.
This text is taken verbatim from my IBF Home Page which leads off with the text below, followed by a complete CV. http://www2.ibf.uu.se/PERSON/jim/backgr.html©- 2012 Institute for Housing and Urban Research, Box 785, 801 29 Gävle | webmasterOriginal version published in 1996, and since then periodically updated.

A Personal Background to my Research Focus

I became interested in housing research quite late. After taking a first degree and masters degree in sociology and then teaching for several years in British universities I took my doctorate at Gothenburg University in the early 1970s. While there I was struck by how easy it was to get an attractive rental flat at a reasonable rent: Kerstin, my Swedish wife got us an old two-room flat in a wooden house in Artillerigatan with a shared closed yard, without hot water, with a shared toilet on the landing and an oil-heated tiled stove. We never ever met the landlord or even the landlord’s agent, but paid our rent of 106 kronor a month into a giro account. I remember how we watched our Jugoslav neighbours moving out, delighted to have obtained a flat in the new million programme development at the end of the tram line in Bergsjön.

I remember wondering why renting was so attractive in Sweden compared to Britain where I grew up or the USA, where we had lived for a year as a student, or Australia where we later lived for 5 years. How come when you apply for rental housing landlords don’t give you the third degree and want to know all the details of your private life as they do in English-speaking countries? And why don’t landlords come poking their noses into the flat to check what I am up to? How is it possible to walk off the street into a Housing Exchange and get a permanent rental contract on an unfurnished flat without having to queue for years to obtain a flat in a stigmatised public housing estate? Why were rents so low?
It was several years before I found the answer to these questions and meanwhile I had my doctoral thesis to write. In the Sociology Department I had another surprise. Several of the Faculty who had families were renting as a permanent proposition! This was even in those days unheard of in English-speaking countries. I decided that when I got my doctorate I would do some reading in the sociology of housing to find the answers to these questions.

From Gothenburg I was appointed in 1975 to a lecturing post at Adelaide University in Australia. Again I was struck by how uncomfortable it was to rent. The same suspicious and meddling landlords; rental contracts – for mostly furnished housing – of at most two years, often much less; sky-high rents. The insecurity of tenure and the lack of privacy was in stark contrast to my Swedish experience. No wonder owner occupation was called the Great Australian Dream if renting was so unattractive: it’s all relative!

I began to read the international comparative housing literature to find the answers to my questions, and did so with growing disbelief and mounting astonishment. There was nothing in the literature that gave even a clue as to why Swedish housing was so fundamentally different! So I decided to research it myself and perhaps write a paper on it. Little did I know that this would turn into a lifetime task, leading to several books and numerous articles and that twenty years later I would still not have completed my task. I think if I had known this I would never have begun it!

One of the first things I learned – not from the English-language literature I must stress, but from a book written in Swedish by K. Boberg et al., Housing and capital: a study of Swedish housing policy published in 1974 – was that averaging rents between older housing, often with low debt-servicing charges, and newer housing had a major impact on keeping rents low. This not only explained to me why Swedish rents were low but gave me an insight into why public rents were low in English-speaking countries.

The other early discovery I made – again not from the literature – was that Swedish housing policy was explicitly tenure-neutral. Indeed, it also strove for neutrality within the rental tenure between private profit-landlordism and non-profit housing provision. Both should be able to compete on the rental market for households on as equal terms as possible. This was true not just in terms of subsidies but in terms of the practice of landlordism. One implication of this is that landlords should not discriminate between households. This has not prevented profit landlords from cherry-picking but policy makers have tried – until recently – with mixed success to create rules to minimise this.

The 1970s were an exciting time in housing research. A new infusion of theories had come from both Marxian and Weberian influences in sociology, geography and other social sciences, and the field was undergoing rapid development. My early work in particular was influenced by this.

My first major study of Swedish housing (The Myth of Home Ownership Routledge, 1981) was a comparison with Australia, where there is an extreme emphasis on owner occupation and with Britain, which at that time was something of an in-between case (Britain has subsequently moved sharply towards the Australian model).

During the 1980s there was a reaction against the theoretical development of housing research and a reversion to very detailed empirical policy studies that addressed the party political agendas of governments. Housing research sank into something of an intellectual torpor, though some important developments continued to be made, particularly in comparative housing research, notably the founding of the three existing European housing journals and the establishment of the European Network for Housing Research.

Housing and Social Theory (Routledge, 1992) was an attempt to argue for a return to theory and for more rigorous disciplinary connections to be made by housing researchers. As part of this endeavour I first developed the divergence perspective in comparative housing that had implicitly informed my earlier work.
The Myth of Home Ownership (Routledge, 1981) implicitly argued that some societies had developed in divergent directions in terms of housing policy. As such it ran counter to most (though certainly not all) comparative housing research which was primarily concerned with emphasising similarities and common trends while acknowledging that each country is unique. All of this has been implicit and untheorised, however. Housing and Social Theory made a first attempt to explicate this aspect of my work.

Since the early 1990s there has been a resurgence of interest in theory among housing researchers. Partly as a response to my own urgings for a more theorised approach in housing research, I returned to my earlier work to see if I could develop ‘the distinctiveness of Sweden’ thesis from a one-country phenomenon to locating the Swedish experience in a broader divergence of a number of societies away from the ‘Anglo-saxon’ model of developing owner occupation and restricting access to non-profit renting.

For many years I had been puzzled and somewhat frustrated by the lack of interest being shown in Sweden’s distinctive housing tenure system by comparative housing researchers. But it occurred to me that perhaps one country, however unique and interesting, could be dismissed as a one-off freak, a unique cultural phenomena of one country. It seemed to me that if I could identify a whole group of countries that had similar housing systems to Sweden it would put Sweden’s distinctiveness in a new light and be seen as more relevant.

The breakthrough came when by chance I found an article on the German concept of the social market in economics. There in a broader economic context were set out the principles that governed the social market approach, some of which clearly applied to the Swedish rental market: especially the integration of profit and non-profit forms of ownership in one market and the public management of markets in a market-sensitive manner. The history of the development of the ideas – deriving from the 1930s – also suggested links to Sweden, as at that time in Sweden German – not English – was the second language and the founders of the Swedish welfare state were almost certainly influenced in some ways by German ideas as much as by British.

Gunnar Myrdal led the Commission of Enquiry into housing in the 1930s, the recommendations of which led to the formation of the Swedish social rental market. His huge collection of correspondence, comprising some 100,000 items, can be studied at The Labour Movement Archives and Library in Stockholm http://www.arbark.se/en/collections-and-resources. One day, perhaps, someone who has a fluent command of both Swedish and German will study these and write a dissertation or book on the material showing how German thinking especially among ordoliberals and other proponents of The Third Way influenced the foundation of the Swedish housing system.

I began to collect data on German housing and to see if I could find elements of a social market approach and also looked to a number of other countries: particularly those with large rental sectors. I succeeded in identifying a group of countries with social rental markets, which, although different from one another in important ways, never the less had markets developed on social market principles. Besides Germany and Sweden these included the Netherlands, Denmark, Austria and Switzerland. I was struck by how these are all have close cultural ties to Germany, including similar formal structures such as the judicial system and the education system (the gymnasium school system, the docent university system). I was also struck by the geo-political pattern: the countries I could identify as having social rental markets are all small western countries bordering on Germany.

The result of this was a book that placed Sweden in the wider context of the social market. From Public Housing to the Social Market was published by Routledge in 1995, and argued that there is a distinctive type of housing system shared by a number of European countries that is organised along social market lines. In such countries an integrated social rental market has been created in which non-profit housing organisations compete on comparable terms to profit housing organisations, rather than being segregated off into a residualised and stigmatised public rental sector.

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