Housing Crisis, the US General, and the New Goldman Sachs

Just how far has the Labour Party has travelled on the road to worshiping at the neoliberal altar can be seen in Minister Alan Kelly’s housing strategy. Kelly has accepted the general neoliberal law that Governments can’t provide any service, be it health, education or housing, for their citizens without enlisting the expertise, dynamism and efficiency of the Market. Thus, his housing strategy relies completely on both the private rented sector for the bulk of its provision with private speculatively built housing by developers meant to provide the rest. Local Authorities will remain underfunded, and the stock of social housing will remain marginal.

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Just how far has the Labour Party has travelled on the road to worshiping at the neoliberal altar can be seen in Minister Alan Kelly’s housing strategy. Kelly has accepted the general neoliberal law that Governments can’t provide any service, be it health, education or housing, for their citizens without enlisting the expertise, dynamism and efficiency of the Market. Thus, his housing strategy relies completely on both the private rented sector for the bulk of its provision with private speculatively built housing by developers meant to provide the rest. Local Authorities will remain underfunded, and the stock of social housing will remain marginal.

Just how bankrupt this reliance on the market is illustrated by the Governments announcement of a new fund worth €500 million that will lend to developers for private built (i.e. for profit) housing. When the market is shown incapable of providing a basic necessity like housing, the solution is obviously for the Government to… look to the market for solutions. As banks fail to lend to developers, this new fund will step in with €325 million stumped up by our old pension reserve fund (now renamed the “Ireland Strategic Investment Fund” ) and the rest provided by KKR Capital.

Who? Well KKR Capital are a private equity. The outfit started life in the US, where it specialized in what is known as “Leverage buy outs” of various companies in the 1980s and 90s. This is where KKR would swoop on a troubled firm; borrow the money to get control of it, then asset strip it to pay off the debts while savaging  jobs and wages along the way. In the Reagan and Thatcher era this provided rich pickings for various vultures like KKR. Think Gordon Gekko and “greed is good” and you get the picture.

KKR has grown it now has €100 billion in assets and shares in firms worth over €200 billion. The recession has been good to KKR; they have diversified into energy, transport and now sprawl the globe picking up firms and debts and lending to companies that can’t access money from conventional sources. One recent financial report called KKR and other private equity firms the “New Goldman Sachs”

So eager are KKR to spread their wings that they are eying up Kazakhstan for its huge energy resources. Thus they appointed the former CIA chief General Petraeus, of Iraq and Afghanistan fame, to head up their Global Institute and to “open doors” and court the country’s “political elites” according to a gushing New York Times article.

President Nursultan Nazarbayev is Kazakhstan’s virtual dictator presiding over a country with vast energy reserves  vast poverty and an appalling human rights record.. Labour activists are routinely tortured and imprisoned – the ideal location for the former General Petraeus, who presided over Iraq’s Abu Ghraib prison, to help KKR unlock the potential hot investment opportunities in the oil and gas rich state

Back in Ireland, various Government drones have been touting the idea that this fund could finance over 11,000 homes. It will of course do nothing of the sort. At best it might finance 2,000.

Nothing of course could go wrong with such a policy. Developers always pay their debts and KKR will most likely shoulder most of the risk, renowned as they are for wanting to help the homeless. The recent scandal where KKR are alleged to have overcharged their clients by some $100 million is probably just an exaggeration by those leftist reporters at the Wall Street Journal. Pretty soon the housing crisis will be ended by vulture capital outfits, retired US army generals, and Alan Kelly. Indeed.

Kelly described this new fund as hugely significant. It is, but not like he thinks. It shows the utter bankruptcy of Labour. It means relying on a giant vulture capitalist to lend to a corrupt developer class to build houses for profit. That the vulture capitalist comes dripping in blood from deals with dictators and torturers or with a recent past as a destroyer of countless workers’ livelihoods makes no difference to the defenders of the efficacy of the market .

 

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