This time it IS different.
This ‘difference’ mantra is trotted out before every boom. It was meant to be different with the advent of radio in the Twenties that led to the Crash of ’29. It was meant to be different with the Internet in the run up to the turn of the Millenium. It was most certainly meant to be different in the run up to the recent bust.
Now that the scales have fallen from the eyes of the commentariat we are hearing an awful lot of analysis to the effect that this time it is not different and that the old rules, methods and dogmas apply. The diagnoses have been made and it is only a matter of persuading the patient to accept the treatment and swallow the bitter medicine. We will be back on track after a brief bitter spell is the implicit promise.
If the intention is to somehow get us back to exactly where we were at the end of ’06 but with slightly lower prices then I have grounds for suggesting that this time around it just might be different.
We are in the middle of a revolution, which has for the last 10 years brought us many shiny new toys that have amused and delighted us. Like many ‘overnight sensations’ it is the fruit of a much longer gestation period. Like all revolutions the second half is the more brutal and surprising part.
The revolution I refer to is the Internet. It is the public face of the Information Age launched by Claude Shannon back in 1937. What the public have seen so far has been some of the extras and add-ons that ‘utility’ information can bring. I mean ‘utility’ in the sense of water, gas and electricity – piped to the vast majority (I nearly said un-washed) for a predictable and low cost.
There is another side to this coin.
Since the start of the Industrial Revolution, we have moved the people to the work. We did this because capital was scarce and the knowledge to manage it was even scarcer.
At a time when all are agreed that we live in an age of a service economy and we are ceaselessly exhorted to move ourselves into the ‘smart’ end of the service economy, no one seems to be looking at what that might imply.
Moving the work to the people will change that. I agree with your objections – not enormously and not instantaneously and not for everyone. It hasn’t happened before for lots of reasons but it can happen now. The main driver of the change is not its feasability but its cost effectiveness. In this most vicious of recessions, survival will go to those who can keep their costs down as much as possible.
So what has this got to do with the shape of the post recovery world. Surely, this is good news that will speed up the recovery. Maybe it will. But it has a huge corrolary.
Everybody lives in about 2 and 1/2 spaces. You have a night place and a day place and some places you go to occasionally. We call the night place ‘home’. We call the day place ‘office’ or ‘school’ or ‘factory’. And we call the others ‘shops’, ‘cinemas’, ‘pubs’ or whatever. We move between these places in cars on roads.
These changes mean that we won’t need as many places. Yes, yes. I heard you the first time. Not enormously and not instantaneously and not for everyone. But the price of anything is set at the margins of supply and demand. Only a very small percentage of the property stock is changed (developed) in a ‘normal’ year and only a small percentage in traded. Beside which we have a huge overhang of property in this country.
I don’t see that we are ever going back to a time where we daily occupied 2.5 places. If supply increases, prices go down. Or is that another thing that is different this time.