Systemic Solutions to Housing Should Be Calibrated to Reverse the Wealth Divide
Presenting the worker in resident housing zone
Contemporary Capitalism Serves and Limits the Ownership Class
A report from PItchbook The Transient Era of Billion Dollar Funds tells of the sudden boom and equally sudden collapse of unicorn investment funds (billion-dollar funds), during 2021-2022.
The article is written in investment culture lingo using initials in place of words for all the key concepts. When it is written that “From 2006-2022, 62 unique GPs, five of which were corporate ventcapital (CVC) arms, raised 139 billion-dollar funds with commitments totaling $277.9 billion. Most of the capital raised occurred in 2021 and 2022, which saw 42 unique GPs close 60 billion-dollar funds with commitments totaling $147.9 billion.”, I make a guess that GP means global partners. Global corporations (GPs) raise capital from limited partnerships (LPs). That’s central management of the economy through established networks.
The rapidly accelerating venture capital growth occurred in late-stage investments at the top of the investment pyramid fueled by larger sized LPs, limited partnerships that include pensions funds and university endowments.
The code gets even more cryptic when it is written” Now, nearly half of the record $300.0 billion in dry powder is held within these vehicles by a small group of investors, consolidating a lot of power into a few hands.”
What is dry powder?
For venture capital (VC)and private equity (PE) firms, dry powder refers to the amount of committed, but unallocated capital a firm has on hand. In other words, it’s an unspent cash reserve that's waiting to be invested. As a highly liquid asset, investors and corporations use dry powder strategically to gain financial success or ease financial stress. Pitchbook
Dry powder means cash reserve. Why couldn’t it just say so in the first place?The psychology of secrecy using language derived from a battlefield can’t be so easily obscured by a code which has a burgeoning potential to generate a goldmine of AI disinformation. Imagine how AI might misinterpret “powder”.
Investment in the largest sized funds kept getting larger and the time frame in which they grew into unicorns became shorter, but the return on the investment failed to meet expectations. The return on investments is largely determined by the small group that controls the way that the cash reserve is invested.
According to PitchBook, as of June 30, 2020, private debt funds had about $273 billion of dry powder available. Around $66 billion of that capital was held by managers focused on distressed debt, a class of riskier investments in troubled companies with the potential to offer bigger returns. That is an investment goal which cannot succeed if it is not also incorporated into production goals but the investor mentality fueling business development is removed from the productive work process at the core of enterprise, painting a portrait of an ecosystem irredeemably bifurcated into the ownership- contributor divide. It is not clear if shortening the time frame for raising capital also shorted the time frame for realizing the return on investment, which is where the split personality of the ecosystem encounters its other side since company profits are a result of productivity which has its own time frame, separate from the accelerated time frame in which investments multiply.
The VC system was top heavy causing it to malfunction. Now investment funds are downsizing but the philosophy remains the same. In the capitalist world, the purpose of growing a business is to raise a billion dollars in investment capital and then sell the business. But in fact, wealth is not created by capital. Wealth is created by productivity. Capital enables productivity. When capitalization is implemented only to further greater capitalization, it misses the point.
The dispersion of investments into smaller funds will impact the larger economy but anything that disperses power concentrated in the hands of the few can’t be all bad. Doors close and doors open.
What happens to the unicorn, after it is sold? Most large corporations become publicly subsidized under the rubric of job creation and states and municipalities make deals for X number of “quality jobs” branded as such by virtue of negotiated higher-than-average wages and benefits regardless of how the worker who invests their time, skills and talent might feel about their job, the job culture, and the people within it. The worker experience does not compute in the rhetoric of central management, which measures the quality of a job sheerly by the amount of income it adds measurably and manageably to the state’s personal income tax revenue stream
When most growth is at the very top of the pyramid, power and wealth is concentrated in the hands of the few. This is nothing new. It’s been going on since the beginning of history, but it is only half the story. In today’s economy growth is accelerated and spurred on more than ever before by innovation that happens within the working process, through the agency of individual workers whereas the investor-ownership class is removed from the work process and concerned only about profit growth.
Capitalism vs The Free Enterprise System
Responding to the high pressure for companies to be at the forefront of innovation, academia working hand in hand with industrial interests has advanced the concept of psychological ownership as a magic spell that will motivate the workforces to innovate. In this model the worker is encouraged to identify as an owner of the enterprise but since the owners of the large enterprise are not engaged in the work process, the illusion of ownership that the magic spell aims to manifest is that of a small enterprise wherein the owners participate in the work process. The teams within large corporate structures serve to emulate the type of business that makes up the free enterprise sector of the economy, too small to qualify for public subsidies but not too small to subsidize large corporations.
In another paper, Modeling the Roles of Craft Production in Ancient Political Economies by Edward M. Schortman and Patricia A. Urban1, the discussion delves into specialized craft production and its relationship to historical political power structures. Though today's technological innovation may seem far removed from the hand-crafted production of ancient history, social organization remains the same and technology builds on what precedes it, continually developing new forms. The innovative workers of today interact with the same political powers as they ever did. The cultural constructs are still centralization and decentralization, growth from the top or growth from the roots? The Pitchbook Report concludes: "We have spoken often that a robust IPO market is the key to a return to more active dealmaking, and that sentiment holds true for billion-dollar fundraising as well. Without IPOs as a viable path to liquidity, the top end of the VC market, where the largest funds operate, will be much riskier than we have seen in the past.”
Initial Public Offerings are at the root of the VC system.
It’s still the same
The significance of craft production in the genesis and functioning of ancient sociopolitical structures has been one of the most hotly debated topics in archaeology over the last two decades. Issues of power, agency, resistance to domination, and the cultural significance of daily practice that are so pervasive in the archaeological literature all converge in discussions of specialized manufacture. (Emphasis by author)
In general, Childe argued that concentration of wealth and power in the hands of Bronze Age Sumerian magnates thwarted the development of a broad market for craft goods. This, combined with the estrangement of artisans from their products, the latter controlled exclusively by rulers and their agents, retarded economic expansion and technological innovation. Modeling the Roles of Craft Production in Ancient Political Economies by Edward M. Schortman and Patricia A. Urban
Yes folks, crafts-making is political!
My own world view is formed and informed by being raised in a home, attached to an independent craft production that meets the definition of production in ancient political economies. Concerning the arguments over whether or not itinerate Bronze Age craftsmen were freemen, I cannot say but I can say that my parents established a business that did not pursue the prestige objects market, which I believe was an intentional decision informed by an innate understanding of that as expressed in the paper by Shortman and Urban. On occasion my father would tell of a community of designer craftsmen in New Jersey, sponsored by a wealthy benefactor. They were invited to join but their instincts said no, later justified when its members sued the benefactor.
Instead, my parents sold their Levittown style home in Ohio to set up their own ceramic production company in Maine with a mission to “design a handmade product affordable to the middle classes” This is the type of artisan freedom and independence that archeologist debate about. Is it possible that craft productions existed independent of elite power structures during the Bronze Ages? Were there craftsmen who were not subservient to kings and extended hierarchal power structures? I say, most probably, but that is due to my own experience not archeology. The question seems to be would there have been artisans motivated by an artistic pursuit, not merely serving a functional need. Speaking from the work process perspective, which I submit is eternal, the answer is, yes, of course! It is natural to the work process to engage artistic expression, and it is not an interest limited to the elite. Even the functional forms line with which Andersen Design was established was not purely functonal it was an expressive artistic pursuit, based in the midcentury movement that brought good design into the everyday home following the philosophy of Lewis Mumford and the Arts and Crafts movement that emerged in reaction to the Industrial Revolution.
Creating Power Through Dependency
The use of craft production as an economic resource employed in elite domination strategies is most systematically expressed in “prestige goods theory”
These economic processes are closely wedded to both political centralization and inequality. Prestige goods given to followers transform independent agents into dependent clients whose labor and its products are now owed, in part, to their “benefactors.” Unable to secure on their own those items that make social life possible, subordinates must turn to the monopolists for these necessities and “pay their price.” Loathe to alienate their patrons, the majority surrender at least some of their autonomy and acquiesce to the demands of their leaders. Debt is the key to dependence, which, in turn, is the foundation of power and the infrastructure of hierarchy. Modeling the Roles of Craft Production in Ancient Political Economies by Edward M. Schortman and Patricia A. Urban
Debt is the key to dependence
Today elite domination strategies are systematically expressed in “workforce housing theory”. Housing has become a scarcity so that the working classes must turn to public-private corporate hegemonies to obtain housing. The financing of non-profits using Model L fiscal sponsorship via for profit subsidaries is configured to give investors the advantage of debt free capital raised through non-profit means. The nonprofit creates its own for-profit subsidiary LLC as its fiscally sponsored project. Non-profit debt-free funds are merged with private for-profit investment capital so that debt-free capital benefits the investor over the client that the non-profit purportedly exists to serve. Government created programs provide the clients with benefits, such as low-interest loans, while the debt-free funds benefit the private investor.
Overcrowded housing developments are advanced by those with an interest in seeing that the ownership class has the availability of workers to serve its own interests. By squeezing the working classes into smaller and smaller spaces the hegemony encourages innovation to take place in facilities owned by the hegemony, which claims ownership of intellectual property rights based on ownership of facilities. With negotiations made in conditional giving agreements, now used by non-profits in lieu of tax-exempt giving, and with the high degree of secrecy with which most development projects on the peninsula are proceeding, it is conceivable that negotiations will be made with donors to reserve housing in the concentration zones for specific corporate workers. This is the type of rigidly controlled social organization we are welcoming into the future with the current high-profile projects that are being advanced on the peninsula and dominating the narrative.
But the development of the peninsula need not go according to that plan.
The new breed of developers on the Boothbay Peninsula like to believe that all that they need do is to say “affordable workforce housing” to be awarded with public funding for projects that exploit government housing benefits, which upon close examination are designed to keep those whose incomes are at the or below median in their economic stations, like a twenty-first century American caste system. America is no longer ”the land of Opportunity”.
The developers deliver public presentations sparce on informative details. The Boothbay Region Housing Trust tells us that it is ready to start building seven houses that will be sold to individual owners. The Boothbay Regional Development Corporation is also planning seven houses that will be sold to individual owners but the corporation tells us that it will retain ownership of the land. The Boothbay Region Housing Trust does not tell us how much land it has or the planned housing density or even provide visuals of the housing it is planning, but it does have a website and identifies the board members. The BRDC does not tell us who the board members are and does not have a website but it does tell us that it is planning 162 units on 36 acres at 3.5 the density of the surrounding area. The Housing Trust does not mention who will own the land where the houses being sold sit. The BRDC tells us it will have equity investors but does not say wherein lies the subsidiary relationship that makes that possible. The Housing Trust doesn’t mention equity investors, but not telling is just not saying.
Neither developer gives enough information to be trustworthy. Their success in raising funds and extending the TIF zone rests on keeping the narrative thin, preferable limited to the words” affordable workforce housing” with no examination of the social political structure that is attempted to be implemented on the Peninsula, designed by the public-private state and based in a static class structure that limits opportunities for economic development in the median and below sectors of the economy. In example the owners of houses in the affordable workforce housing development zones are prohibited from renting, not only prohibited from renting as a short-term rental, but prohibited from renting at all, forcing the owners to either occupy the property they own, sell it, or leave it empty if they should have a reason to be away for a length of time, as well as depriving the affordable home owner the opportunity to use short term rentals as a means to afford their mortgages, awarded to homeowners outside of the affordable housing zone, the primary justification for not regulating short term rentals as a general law applicable to all. Unit occupancy is tied to income level so if the occupant increases their income, they must move. The rational used to retain the availability of affordable housing is used to keep those in affordable housing within that economic class discouraging upward mobility.
The term “workforce” designates that sector of the economy that is employed by the ownership class, which the ownership class needs and so advocates for housing for that sector of the economy but in such a way as to limit the opportunities for those below the median to rise above their income status. The BRDC is open about retaining all land ownership in its own hands but not so open about revealing the identities of ownership. It tells us that it will fund 60% of the ownership of the land and houses with equity capital but it keeps secret the corporate subsidiary relationship that makes equity investor capitalization of a non-profit organization possible. It is to the advantage of the BRDC to keep the narrative narrowly focused in the present with no long-term view either into the past or the future, but such a large dominant project is setting up the future of Boothbay as a feudalistic society.
Redirect the system beneficiaries
Observing the system in action poses the question of why the non-profit funding cannot directly benefit the individual client of the non-profit organization, bypassing the investor class. That puts the individual in charge of raising their own funding through tax-exempt fundraisers. That is not an easy task, so the non-profit organization could develop resources and a support system that would help the individual to raise funds. In this variation, a non-profit formed to solve affordable housing, fiscally sponsors the individual who needs an affordable home, giving that individual an opportunity to raise funds through debt-free funding. Thus, looking forward, that puts ownership back into the hands of the working classes as opposed to creating a future world of corporate owned housing monopolies and a working class that is progressively excluded from the ownership opportunities.
That is the idea behind a 501 C3 Museum of American Designer Craftsmen which targets the working studio. Speculatively the museum could partner with another fiscal sponsor of individual home ownership. Adding a working space to a home increases opportunity for upward mobility. In a free society there are open and fluid channels for upward mobility at all levels.
Back in the sixties I used to ride a bike through downtown Manhattan. Tribecca was a deserted area filled with old warehouses. Then Tribecca was made an artist in residence zone and by the 1980’s Tribecca had more art galleries per square foot than anywhere in the world. Eventally the stock market which was feeding the art market crashed so that was that. Gentrification then drove the art community to other areas.
Independent working communities are vibrant and creative, attractive to the young demographic that Maine needs. Imagine a zone that retains the historical New England community with buildings that have private lawns zoned for workers in residence, an expanded variant of artist in residence. As it stands, to achieve such a zone would require a calculated workaround of the draconian HP 1489 enacted last year which allows but does not mandate unhealthy overcrowded density for affordable housing zones and prohibits Maine municipalities from regulating housing density anywhere. We can thank the BRDCs VP and spokesperson Erin Cooperrider for that act in which she performed a highly influential role. There is a valid argument to be made that workers in residence are a class discriminated against in Maine law, as is clearly the case with HP 1489.
The issue to resolve is how do we have affordable community housing that also allows for economic growth and development? I don’t have all the answers but I know that suppressing economic development among people living in affordable housing becomes a trap that eventually leads to social unrest.
The Habitat for Humanity Shelter Venture Fund is a small size Venture Fund that targets innovative entrepreneurs and small businesses and low-income clients. It is a roots level investment fund, as is the equity fund that I am hoping to work with- a work in progress. A small peninsula can work effectively with small size funds but are we being led in another direction by current leadership.
Imagine such a community with houses that have spaces attached for work activity. Imagine for example a creative slip casting studio. Andersen Design has the productivity assets to make setting up such a studio a viable economic reality. Such a studio network would need to be working with a master mold maker and a photographer and a marketing company. All these businesses might be located in the zone, or anywhere, each one independent but complementary. Instead of one big hierarchal corporation with teams, and overlords casting spells to make the team members feel like small independent owners, is a community of small independently owned enterprises.
Lewis Mumford talks about the New England way, that when a community verged on becoming over-crowded it broke off and started a new community a short distance away. It is possible to think of the housing zones this way. HP 1489 allows overcrowding but it does not require it so one can create a housing zone at .5 the density of the surrounding area by carefully selecting who is involved using individual fiscal sponsorship, and working with individual builders rather than mass developers.
The BRDC is planning at 3.5 the density of the surrounding area that would increase the population of Boothbay by about 22% but the BRDC does not explain why we need to artificially expand the population of Boothbay in a small over crowded area that much. A more humanistic planned community zoned for workers in residence would definitely be attractive to a younger demographic (or any age) that wants to break free of the corporate grid, whose promise of the American dream has been disspelled. There is a large movement that wants a different lifestyle with an emphasis on work-life balance. Boothbay is a small peninsula, with a challenged water supply, so a smaller sized target with spacious density could just be better for Boothbay than overcrowded housing zones.
In addition to honoring Paul Coulombe, Governor Janet Mills presented the 2023 Maine Tourism Awards to four recipients for their contributions to the industry. Other award recipients included: Maine Crafts Association –Maine Craft Weekend (Collaboration Award), the Schoodic National Scenic Byway Committee (Innovation & Creativity Award), and Husson University College of Business, School of Hospitality, Sport and Tourism Management (Leadership & Growth Award). source
Crafts is recognized as an industry that attracts tourists. By extension, crafts include technology of all sorts. It makes more sense for a peninsula so invested in the tourism industry to develop a working and teaching community of small entrepreneurs than to develop a corporate culture which is arguably the aim of the 100-million-dollar school system and the concentrated “workforce” housing zones. The school system is likely targeting becoming a demonstration research school invented in last year’s LD 1845 an Act To Amend the Maine Education Statutes, which was enacted alongside of LD 1489. Such a school should be located central to a larger region, not on an isolated peninsula.
Tourists do not want to see more of the same corporate culture that they see every day, they want something different. The world needs alternate cultures and peninsulas are ideally suited to be different from the rest of the world.
Whether visitors stay in former residential homes or hotels, motels, and bed and breakfasters. Imagine a workers in residence community of houses with barns or other spaces where a creative business community thrives as a unique alternative attraction to today’s corporate world for visitors and settlers alike.
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Schortman, E.M., Urban, P.A. Modeling the Roles of Craft Production in Ancient Political Economies. Journal of Archaeological Research 12, 185–226 (2004). https://doi.org/10.1023/B:JARE.0000023712.34302.49