Reason I’m asking is because I have an aunt that owns like maybe 3 - 5 (not sure the exact amount) small townhouses around the city (well, when I say “city” think of like the areas around a city where theres no tall buildings, but only small 2-3 stories single family homes in the neighborhood) and have these houses up for rent, and honestly, my aunt and her husband doesn’t seem like a terrible people. They still work a normal job, and have to pay taxes like everyone else have to. They still have their own debts to pay. I’m not sure exactly how, but my parents say they did a combination of saving up money and taking loans from banks to be able to buy these properties, fix them, then put them up for rent. They don’t overcharge, and usually charge slightly below the market to retain tenants, and fix things (or hire people to fix things) when their tenants request them.
I mean, they are just trying to survive in this capitalistic world. They wanna save up for retirement, and fund their kids to college, and leave something for their kids, so they have less of stress in life. I don’t see them as bad people. I mean, its not like they own multiple apartment buildings, or doing excessive wealth hoarding.
Do leftists mean people like my aunt too? Or are they an exception to the “landlords are bad” sentinment?
This is a genuine question: what’s the difference do you think between investments in general and real estate investments? I mean, technically investing of any kind is hoarding. It may not have such direct impact on basic needs, but it surely does overall.
When landlords “invest” in the housing market, they are not making the system of providing housing for people better or more efficient. They are buying up a limited supply of properties that exist in desirable areas and then charging people for the right to use them plus a nice profit for themselves. This reduces the supply for a necessary good and drives up prices, making it profitable for landlords, and a massive, efficiency draining, example of rent-seeking for the system as a whole since the landlord’s basically don’t work and instead take a cut of what everyone else makes doing useful work.
If you invest in some predatory companies you might be investing in companies that do that, or might do some other predatory practice, but you can also just be putting money into a business so that it has more money to grow its operations, or invest in some new efficiency that makes them run better, and that then both returns a profit back to both of you and helps improve the system as a whole.
Think about it this way, when you retire, you are going to need money to sustain you for a long time after you stop being able to work, so while you’re working, you need to save that money up. That money can just sit in your bank account doing nothing for anyone, or you can invest it in a business that lets them use those resources now and lets you get your retirement money back 30 years from now when you need it (though in reality that’s spread across hundreds of companies to reduce risk). That’s how investment can be a net benefit to society and make for a better use of resources, characteristics not present with landlords and housing investments.
Note that I am playing devil’s advocate here in order to tease out some of the nuances in people’s thinking because I believe it’s important for us all to understand the details and I’m not convinced many have thought it through. Hence the knee-jerk reaction to downvote
This describes any financial transaction in a capitalist system.
And how is this different from buying a product like a house and renting it out? Would any such distinction apply to, say, renting out a car or renting out your services? And “renting” a product isn’t really different from services or a cycle of buying low and selling high for anything other than the terms of the contract.
So like investing in real estate. For years that was considered kind of the gold standard of “safe” investments and generally providing a net annual return of about 5%.
I’m not convinced any investment can be a “net benefit” to society in a capitalist system. But proponents of renting out property argue it provides a “net benefit” by providing a needed service (housing) to those that aren’t themselves in a position to buy. It is inherently usurious, just like everything capitalist.
So for me, bottom-line, the only valid argument to support making a distinction between real estate “investment” and other kinds of “investment” is to say that housing is a basic human right. And if you are going to go there, why not make other things human rights like happiness, a life free from financial stress, a life of fulfillment. From my perspective that leads to the inescapable conclusion that capitalism is inherently inhumane and thus any kind of investing is immoral.
No it does not. If I pay you to build a water desalinating machine then suddenly we’ll have an abundance of fresh water. We’ve increased the available supply of drinking water overall.
Similarly building more housing is not as morally bankrupt as buying up existing housing and renting it back out at a profit. If you actually build more housing, you are providing a service; if you only get paid for the hours you work, you only make a reasonable amount of money, and you do a good job, you might actually be net benefit to society as a whole, as you are increasing the available supply of housing for people.
On the other hand when you live in a city where there is a limited supply of housing and you buy that up and rent it back to people at a profit so that you don’t have to work, you are simply draining the system of resources.
There is a reason that economists literally use the term ‘rent-seeking’ to describe behaviour that is personally profitable while draining the efficiency of the system as a whole, and not all types of businesses (and thus investment in them) are considered to be rent-seeking.
Oh yes it does.
And then you charge up the wazoo for a basic human right.
Ah. It would appear you believe that somehow buying a property and renting it out does not require financial risk and effort like any other product or service. Renting out housing, despite frequent appearances, requires maintenance and expenses in order to reap a profit. What you are describing would more accurately describe investments in stocks or bonds which do not require anything but capital on your part.
" economists literally use the term ‘rent-seeking’ to describe behaviour"
Except those same economists argue that renting out housing is productive. And that’s not in fact the origin of the term. The classic example, according to the wikipedia is charging money for boats to pass a section of river. The term does not refer to housing, which requires a reciprocal exchange - you build or buy the house and maintain it and in exchange you are paid for it’s use.
To repeat because I have to: I’m not arguing this is good. I’m arguing that a distinction between types of capital investment cannot be made. You can say landlords are universally bad but other types of capitalists are good, universally or otherwise. It’s the same damned thing.
Edit: I sometimes wonder if people think houses are like rivers because they haven’t owned one. They are a huge pain in the ass and require a lot of expense and effort.
No, not all investment is the same. look up the difference between rent and profit.
Ok, so do you have a 401k? Any kind of retirement savings? A bank account that earns interest?
If so, how is that different, or at least acceptable for you than any investment?
You might think I’m trying to be sneaky here or trap you in some way. I’m genuinely not - just trying to understand your perspective and thinking about how folks such as yourself might choose to function given our inability to effect wholesale change in our capitalist system.
Edit: For you downvoting sheep out there, see my comment above for context on why I ask these questions.
I don’t think a bunch of people pitching in to fund a company is in and of itself a bad thing, but there are several considerations that are extensions of that that stray into unethical territory. foremost is the matter of fiduciary responsibility. When a company is publicly traded they have a legal responsibility to put money in the investor’s pockets, and that shapes the behavior of that company in ways that can be very harmful. Intent shapes action, and the imperative to provide profits to investors changes whatever intention that company may have had when it was founded. It means if the company has a choice between fulfilling that imperative or doing something to reduce harm to the world around them they will always make the decision that fulfills the intention. Where if your intention is just to be the best at something, or to provide a service, you would make a different set of decisions. The biggest example that’s particularly central in public consciousness right now is the health industry. Health insurance companies have the ability to ensure that their customers are well taken care of and that healthcare is accessible, but providing healthcare isn’t the point. Providing profit to their shareholders is the point, so in every situation where the profit, and the doing the right thing, conflict they will always choose the former because that’s the whole reason they’re doing it in the first place. Even if the CEO wanted to lead the company in a more ethical direction they couldn’t do so without courting legal action, if the investors believe their decisions aren’t maximizing profits. Multiply this by time and companies gradually become worse, even if they started out great. Enshitification isn’t just for the internet. Often this leads to unethical ends, as in the health insurance example where it causes thousands of deaths each year. A lot of it depends on whether the demand for something is fixed or elastic. Say you wanted to purchase a lot of something as an investment, if that thing is FunCo Pop figurines and you’re hoarding them banking that they’ll increase in value due to scarcity could be sold later at a markup. People can take or leave FunCo Pops, They can choose not to spend their money on your marked up collectibles. Hoarding them would be a dick move, but not necessarily unethical. If the thing you’re buying up is water the landscape changes. People need water, every single person needs water. That demand is not elastic, people have to have it or they literally die. If you hoarded that resource so that you could sell it at a higher price, and that prices some people out of being able to access water, it’s more than unethical. It’s straight up wicked. Your intention isn’t to provide water. It’s to maximise your profits, and thus your decisions will always be guided by those priorities. It’s nuanced. But not very difficult to understand. The world could change for the better, but the profit margins are too slim to make it a worthwhile goal for a savvy capitalist.
So tl;dr investment can be for good or can be for ill. I’d argue any investment ends up prioritizing profit over any ethical concerns no matter what they say. As you say, in essence: Profit motive does that. Venture capital demands it.
A society is only good as it’s incentives. Because there will always be a segment of the population that will only act when incentivized. How they act is determined by what is incentivized and what is not. We’re a society with a long list of really bad incentives. I agree with you that investment always prioritizes profit over ethical concern because we live under capitalism and that is what is expected and incentivized. The sad thing about capitalists is that they often argue against social programs because they think that people will always game the system, and it’s true. But there is a name for those people, and that name is capitalist. When they say things like “capitalism is just human nature” and that it’s natural to compete and try to gain the upper hand in all situations, they tell on themselves. It’s not human nature, it’s their nature, and they project themselves onto everyone else. I don’t think that capitalists will ever truly go away, that’s why we can’t seem to have nice things. Any society we create will have some capitalists in it. Some people are just competitive. And capitalism is a way of keeping score. It’s not true of all people, but it’s true of some. Enough to cause trouble. Any advanced society we may one day have will need a sort of pressure valve for capitalists that will allow them to feel like they’re gaining the upper hand over their fellow man. Without a way to indulge those impulses they will always undermine any collectivist society they find themselves in. They’re just something that needs to be managed. Investment can be innocuous, or it can be evil, it is almost never good. In the rare case that good does come from investment it is short lived because capitalism is corrosive. The intent to win at capitalism will always determine the decisions capitalists make, so over time everything good they create will ultimately turn to shit.
I’d argue that this is true of all the population but with the stipulation that “incentives” do not need to be monetary. I completely agree that capitalism is not human nature and feel that we’ve essentially brain-washed people to believe that money and material possessions are the reward when in fact it’s all the other things in life that actually matter. I believe that this thinking, which had lots of good reasons for existing during times of scarcity and paucity of resources, can be undone eventually. I think in a post-scarcity world (I’d argue we’re there) where it is normal for people to live fulfilled lives in significant comfort free from financial and work stress those few people who can’t shake the need to competitively accumulate will be rare indeed.
Until then we have a huge problem: we have too much highly efficient prosperity for capitalist models to make any sense at all.
Yes, I’m thinking of fully automated luxury communism.
And thank you for your thoughtful comment. I enjoyed reading and thinking about your perspective.