The first part of Gene Balk's story, "Chinese millionaires pick Seattle as No. 2 place in the world to live, survey shows," concerns a yearly survey conducted by Shanghai-based Hurun Research. What the survey tries to determine are places or cities that are seen as desirable by Chinese citizens with an "average net worth of about $3 million." The latest survey found that Seattle surpassed San Francisco for the first time ever to become the second most-desirable city for this class of millionaires. Number one is Los Angeles. But Seattle beat even Sydney, Australia and Vancouver BC, cities whose real estate markets have been heated by surplus Chinese capital.
Now here is the thing: China is a surplus country because for the past 20 or so years it has enjoyed growth rates that are unusually high. Advanced capitalist economies can expect a yearly growth of 1 to 2 percent. China is still nearly at 7 percent, and for many years grew at nearly 10 percent. The US, during it's moment in the sun (1947 to 1972), enjoyed growth rates between 4 and 5 percent, but that was an anomaly, and it will never grow like that again because, simply, it accumulated a massive amount of fixed capital (buildings, roads, airports, military bases). And so, it is a saturated economy. And saturated economies must do one of two things to keep going: export their surpluses to poor countries (for example, Germany to Greece between 2001 and 2010), or become a deficit country whose consumption is sustained by debt that's in demand (the US can afford to be a deficit country because its dollar is a world currency and its debt sells like hotcakes on the world market).
The next thing you need to know is this: though you are broke or in debt, there is actually too much cash in the world with nothing to do. The former Chairman of the Federal Reserve called this a savings glut, but, as economics journalist Martin Wolf said, it can also be called an investment dearth. That sort of money looks all over the world for safe investment opportunities. This capital may originate from Angola—an economy which, before oil prices crashed in 2009, grew as much as 20 percent a year—and end up in an apartment building in Dumbo. (By the way, black Africa is big buyer of American debt—it holds about $150 billion worth of reserves; this means cheap black African labor is, in the 21st century, supporting a lot of cheap white American debt and consumption.)
So, China is a surplus country, and its millionaires want places that are safe to live (tolerant/cosmopolitan) and also safe for investments. Seattle has these attributes. But the problem is this: foreign wealth of this kind is rarely productive but frequently disruptive. It breaks all of the already thin links between those at the bottom of the city with those at its top. And because we live in a market-centered economy, the city responds to this significant price distortion by exacerbating it with a positive feedback loop from hell. Prices that were already going up, go up even faster. This is what happened in Vancouver, which has become too expensive for a standard millionaire. That city is now for the players at the very top parts of the global investment class. The question is: How can a city be cosmopolitan and prevent these dangerous price distortions and class de-linking? Enter Cary Moon and Dan Bertolet.
The second part of Balk's post concerns two positions on this issue. On one side, you have Cary Moon, an urban planner who is running for mayor. She believes something must be done to keep the market in the realm of reality. She recognizes that Seattle is as vulnerable as any other popular city that is open to the flows of national and global capital. Miami's housing market has been, for example, flooded with surplus cash from South America. New York City is flooded from surplus capital from almost every corner of the world, even my poor Zimbabwe. Something has to be done to make a city's globalization as local as possible.
Dan Bertolet, a senior researcher at the Seattle think tank Sightline, believes foreign buyers and capital are not a significant enough problem to demand serious policy action or even consideration. He even thinks that foreign investment for local developments is good thing. But Bertolet is missing Cary's point. We live in a financialized world. How is it possible that Seattle's housing market is immune to the financial forces that are shaping every city you can imagine? (From the opening of the second episode, "Sexual Real Estate," of the webseries An African City, which is an African Sex in the City: "The cost of any nice home in Accra [the capital of Ghana] is about the same cost of any nice home in Paris, London, and New York...")
When you look at our housing crisis, you must factor in the local market and its land-use policies, the metropolitan and regional economy, and national and global finance and capital surpluses. This is how Moon sees it, and she is right to see it this dynamic way.