Fans of this column know that I try to consume as little news as possible. If there’s one thing I hate, it’s opening a newspaper. My grandfather always said that eyes are for seducing, not for reading. If I hate anything more than reading, though, it’s work. I therefore had a mixed experience when I read the following item from David Erickson in the Missoulian. “In Missoula County, more than 40 percent of the total adjusted gross income comes from non-wage sources,” Erickson wrote in a story on rising housing prices. “That ranks in the top 10 percent nationwide.”
Forty percent! Now that’s progress. In this context, “non-wage sources” means income from interest, dividends and rent. It’s what a less polite society used to call “unearned income,” or money you get not from making things or doing things, but from owning things. The power of unearned income is on full display in Missoula, where housing prices have risen almost 30 percent since 2010, even as wages have remained relatively low. According to Bryce Ward, an economist at UM’s Bureau of Business and Economic Research whom Erickson interviewed, much of this growth has been driven by buyers who don’t rely on the local economy for income.
That’s the dream, isn’t it? Since the first American colonies were founded, the United States has sought to construct an economy where everyone owns things, and no one has to work. Unfortunately, this utopian society has long eluded us. Ejected from Europe and its advanced system of landed aristocracy, the colonists who settled New England were often forced to till the earth and harvest crops just to eat. If they wanted a house, they had to go to the edge of town and build it themselves. It was virtually impossible to get another house by charging people to live in the one you already owned, because they would just go out to the woods and build cabins. It was a nightmare.
Like the hapless pilgrims, the pioneers who settled the West were also forced to tend their own livestock, thatch their own roofs and even make their own clothes. This is why generations of schoolchildren have remembered them as stupid jerks ever since. Some progress was made with the advent of the mining industry, in which a person who had enough money to purchase mineral rights could pay menial laborers — known as “Irishmen” — to dig valuable materials out of the ground, leaving mine owners free to operate the government. Eventually, though, the mines were exhausted, and people were forced to work for money once again.
The problem with all these systems was that there just weren’t enough people. In a theoretical community of only six or seven people, which economists call a “Gilligan’s Island scenario,” everyone has to work. If one person refused to make things or do things — insisting instead that others make and do things for him, on the grounds that he owned the island and they needed to pay him to live there — they would rebel. Eventually, social pressure would force the owner of the island to harvest coconuts like everyone else.
The trick to avoiding this scenario is to get enough people together that no one knows the guy who owns the island. Then he can hire an island management company to collect the coconuts every month, and eventually people are so busy climbing trees and trying to scrape together extra coconuts to pay for the time they fell out that they don’t think to ask.
You don’t have to use coconuts, of course; that’s just an example. The point is that for much of history, a shortage of rich people forced many families into a gray area between the two natural classes of people: those who own things but don’t work, and those who work but don’t own things. This “middle class” has confused America for centuries, preventing us from achieving the founders’ dream of a society neatly divided into two types.
Fortunately, four decades of rising productivity and flatline wages have put the United States on the path to a more sensible system, and Missoula leads the way. By importing a steady stream of rich strangers, we can raise housing prices high enough that no one who works will have to distract themselves with home ownership. Working people can simply put their rent checks in the mail and focus on what really matters: finding second jobs so they can mail their checks again next month.
Will the system ever be perfect? Probably not. A small number of working people will always slip through the cracks and find ways to buy houses of their own. But if we just keep our heads down, we can move ever closer to the dream society in which working people keep paying rent with no end in sight, and owning people keep going to yoga or whatever. That’s a dream hardworking Montanans can believe in, and a dream hard-owning Montanans can help us achieve.
Dan Brooks is on Twitter@DangerBrooks.