Substitute for Money

There is a new condominium development near us, half a dozen units, each with multiple bedrooms, located near the food center, close to shopping, and on a bus line. Always being interested in other options, I checked out the complex’s website and found that each of these units was selling for north of a million dollars—which is about right for this area. But one day I saw that one of them was being sold for a little more than $300,000, with a limited time for buyers to apply and an announced date of sale several days in the future.

This was clearly a “below market rate,” or BMR, housing unit—which is generally a deal between the property developer and the permitting agency, such as the city, or the supplier of partial funding, such as the federal government, to make a portion of the development available to people of moderate to low income. This sort of blending—of people at one economic level with those of another—is apparently considered a societal good.¹

And I wondered, why? On one hand, I suppose, this is some offshoot of affirmative action and fair housing, based on the premise that minorities always make less than the average buyer in any area and so need special help to preserve a mix of neighbors. But if that’s the working premise, then it harkens back to the racism of lowered expectations: “Those poor dears … They just can’t compete in our unfair society.”²

Absent an ethnic or racial angle, however, these income-level set-asides smell of an anti-capitalist, anti-rich mindset that wants to insist that money can’t buy everything. This is a way for the government to give some of the people good things, the preferments generally granted by having money, without requiring them to earn, save, or manage their money to get the things they want. The idea is that poor folks—the “deserving poor,” those barely making it, but certainly not the undeserving and self-destructive “homeless”—should be given a hand up, so that they can live in a really nice place alongside the good people who can actually afford the market price. Bring a little bit of the lower classes into the area … for leavening, I suppose.³

But money is just a store of value: easily held, easily transported, easily converted. I work to produce something of value for you, and you pay me in coins or credits that can buy me the things I want and need. Or I can save those value-carrying objects for a time of greater need, or to tide me through a disaster. You could pay me in meals and a bunk in a dormitory, or in a share in the product I make for you, or in bags of rice, cups of coffee, or snorts of cocaine. But money is easier to exchange, and I can use it however I want.

I can also obtain money by owning something that is useful to—or can produce something useful to—the society where I live and the economy in which I participate. I can own a machine that makes shoes, or music, or electrical energy. I can own land that produces water and a crop, or grass to feed useful animals, a mine that produces valuable metal, or a well that yields up oil or natural gas. I can own a house that other people will want to live in and so pay rent money. All of these things that I can own require some attention and care on my part. Money does not grow on trees, after all—unless they are apple, olive, or almond trees, and those still need tending and harvesting.

Because money is a store of value, I can inherit it from my parents and give it to my children. In this way, the family is simply an extension of myself. If my parents have been particularly industrious or thrifty, I will have more money—a start in life with more money to my credit—than the average person.

None of this—working in a high-value profession or industry, owning the means of useful production, or having industrious parents—is any kind of theft. A person reaps what they—or their parents and family—have sown.

Because money is easily transported and exchanged, the coins, credits, and property can be stolen from me. If property, then the thief can sell it for money of his own. Or a person of unscrupulous temperament can produce and sell illicit or forbidden goods and substances. In either case, such people are subject to pursuit, conviction, and jail time.

With money, I can have nice things. With enough money, I can pay people to do nice things for me, or to say nice things about me. Or I can start a company—set up the means of production, establish connections in trade, build places where useful work can be done—and hire people to work for me. Then I can sell the goods they produce and give them money to spend as they please. This is not theft either. I am using my money to help others make their money. An economy is like an ecology: the more activity there is, the more activity there can be. Wealth follows everywhere.

So … money is not a bad thing. Still … many people would like to have the advantages of money—nice things, a nice place to live, control of property or resources, a say in the activities of others—without having to put in the actual work, such as producing something useful in the first place, to buy these advantages. Or they would like to confer the advantages of money on favored groups—usually people whom they have already convinced that money and its ownership are a form of theft.

One of the issues in a democracy—or really under any form of government—is that a person can acquire money, power, and personal advantage without actually producing something of value or owning a productive asset. A politician can create the impression of disadvantage and the desire for compensation among people who have less money or advantage than others in their society. Hence the creation of “below market rate” advantages for people whose labor or savings do not qualify them for as nice an apartment as other, wealthier people can afford in the neighborhood.

Or you can generate money and advantage by playing on the conscience of those who have the resources of productive labor and family assets so that they sympathize with those who do not. And so are born charities, causes, and “development departments” for institutions that are supposed to do good work for the poor, the sick, the disadvantaged but also provide a good living and towering structures for those who might otherwise be productively employed.

And a new substitute for money is the concern for nebulous causes that don’t actually have to be spelled out in detail or provided for in concrete terms. Such is the latest trend of investing for “environmental, social, and governance,” or ESG, factors. That is, asking people to put up money for productive purposes but favoring its use for other causes and “stakeholders,” like the planet’s long-term environment, social programs that advantage the disadvantaged, and corporate governance that attends to the needs of something other than a profitable business. This kind of investment is also linked to “sustainability,” meaning something different from a business that can remain profitable but, again, implies the health and longevity of the planet itself.

If you can sell this kind of hot air and heat mirage—social guilt, societal benefit, and environmental concern, all without putting a single piece of bread in a hungry child’s mouth or picking up a single piece of trash from the sidewalk—then you can earn a modest, and sometimes an embarrassingly immodest, living. But you’ve got to keep up the pretense and never encourage the objects or the sources of your enterprise to ask exactly what you are accomplishing. Or, as Robert A. Heinlein put it in Stranger in a Strange Land: “Anybody can clap and cheer—but applause worthwhile will be found in a pile of soft, green folding money.”

Still, I favor making money in the old-fashioned way: earning it by providing a product or service useful to someone who has an actual existence, or by saving up and acquiring an asset that provides such a product or service. That is the real formula that commands power, respect, and advantage.

1. I can understand how “below market rate” works in a rental property: the landlord contracts to keep a specific number of units available for a rental rate below what he or she could otherwise charge. But now does this work in a condominium? There, the unit—that is, the right to the living space and a share in the common area—is sold to an owner, who has the same rights as someone buying a piece of land and building a house on it. Does the BMR owner contract to eventually resell the property at a defined fraction of the market rate? What happens if property values surge or drop due to external forces? And if he or she decides to rent the owned property, do they contract to make it available at a fraction of area rents? This BMR distinction seems to fly in the face of full ownership.

2. Note that I am not against mixing up the neighborhood. I have lived 46 years in the same condominium complex. When we started here, the population was mostly Caucasian with a mix of young and old and a few minorities. Over the decades, we have picked up a variety of other races and ethnicities: largely Middle Eastern and East Asian in subsequent waves of immigration into the Bay Area, but always with some of the native Hispanic and African American population. Our town has a good school system, and that attracts first-time buyers and new renters. Anyway, I am more comfortable living with a cheerful mix than with a fiercely held and fearful majority—which suddenly breaks in flight and the neighborhood goes to another complexion. That way lies a precipitous fall in property values.

3. In our condominium complex, this kind of leavening is achieved by having housing units of different intrinsic value. That is, units on the San Francisco Bay side, with better views, have a higher asking price than those on the hill side, looking at trees. Those higher up, also with more expansive views, are worth more. And the complex has a mix of one-, two-, and three-bedroom—or penthouse—units, again reflecting different prices and affordabilities. By contrast, in the small development under discussion, which had just the one below-market-rate unit, they were all three-bedroom units with similar views and amenities.