The era of feudalism began to flourish in the years after the downfall of the Western Roman Empire, and reached their zenith during the medieval era. Far from being a natural outgrowth of societal development, feudalism was a reaction to overbearing policies enacted by corrupt centralized governments. And while feudalism disappeared from the Western world centuries ago, current government policies are creating a new era of neo-feudalism that has profoundly negative implications for the future.
Tax historian Charles Adams is well known for his explanation of how repressive taxation during the late Roman Empire helped spur the development of the feudal system. Taxation became so heavy that many landowners could no longer afford to pay the taxes on their land. So they sold their land to larger, richer landowners, under the condition that they be allowed to remain on the land and use it, while the larger landowner paid the taxes. Thus began the relationship between landowners and land users that eventually developed into the feudal system of lords and vassals.
Today we’re experiencing much the same development, although increasingly it is monetary policy, not tax policy, that is responsible for that change. Thanks to decades of loose monetary policy undertaken by the Federal Reserve System, real estate prices have become excessively high. In many areas of the country, prices of land and housing have grown far faster than the official measures of inflation.
More and more households are finding it impossible to afford those exorbitantly high prices, which in many areas of the country are accompanied by incredibly high property tax rates too. The choices are either to take on massive levels of debt in order to purchase an overpriced house that you won’t pay off for 30 years, or to rent from someone else. An increasing number of people are choosing the latter.
Part of the problem is that an increasing number of houses, townhouses, condos, and apartments are owned by large institutions such as hedge funds, real estate investment trusts, or other corporations. Those institutions benefited from the Fed’s quantitative easing programs by being able to borrow money at low interest rates, snap up distressed properties at bargain basement prices, and are now putting those properties to use generating income. And once those properties become corporate assets, there’s very little likelihood of them ever reverting to individual ownership anytime soon.
As the nation slowly becomes a nation of renters, it is becoming more and more like feudal Europe. Property ownership is becoming increasingly concentrated in the hands of fewer and fewer individuals and corporations. Those who can no longer afford the costs of ownership, thanks to the Fed’s policies driving up housing prices, are forced to rent from those who own. The owners will continue to enrich themselves while the renters will continually have their wealth siphoned away. And with the Fed showing no signs of ending its expansionary monetary policy anytime soon, that trend towards a bifurcated society of haves and have-nots will continue unabated.