By Christine Berry, a freelance researcher and writer and was previously Director of Policy and Government for the New Economics Foundation. She has also worked at ShareAction and in the House of Commons. Originally published at Open Democracy.
As the COVID-19 crisis grinds on, it’s increasingly clear that the UK’s broken economy – an economy based on the extraction of rent – is deepening the pain. In August, people were prematurely cajoled back to the office, amid rising panic at the ‘hollowing out’ of city-centres built on inflated commercial property values. In September, students were herded back into overcrowded university accommodation, which duly became the epicentre of the second wave. Many suspected that this predictable disaster was allowed to unfold at least partly because of the dependence of universities and private landlords on rental income from student halls.
Meanwhile, the divide between private renters and homeowners yawns ever wider. While buy-to-let landlords have been able to access mortgage holidays, their tenants struggle with escalating rent debt. Social movements are gearing up to resist evictions after the temporary ban was lifted. While the government’s stamp duty holiday has helped house prices to bounce back, there is no sign whatsoever that jobs and living standards will do the same.
Housing itself is just the most egregious tip of a very large iceberg. Everywhere you look, COVID-19 is widening the gulf between those who own assets and those who owe debts. Buoyed by central bank interventions, capital markets have seen the promised ‘V-shaped recovery’ – but for everyone else, this is now a distant fantasy. Our economy and our politics seem increasingly oriented around the interests of asset owners, and increasingly uncaring about the fates of everyone else.
Vast sums are siphoned off to failing private providers – including £12 billion for our disastrous test-and-trace system – while government quibbles over the relatively tiny amounts needed to ward off outright destitution (£65 million for Greater Manchester to weather its local lockdown, £21 million a week to feed hungry children). Rishi Sunak might be trying to revive the old chestnut that “there is no money left”. Yet increasingly, people are beginning to suspect that the problem isn’t the amount of money available, but where that money goes. This is intimately bound up with the question of where power lies.
Two very different new books aim to help build our understanding of this landscape, and how we can navigate it to build a new economy. ‘Rentier Capitalism’ by geographer Brett Christophers (out on 17 November from Verso Books) is a serious and detailed study of how the UK economy became dominated by rent extraction. What does this mean? Christophers combines the orthodox economic understanding of ‘rent’ – essentially, excess profits beyond what would be achieved in a competitive marketplace – with the heterodox understanding, which focuses on ownership and control of assets.
Accordingly, he defines rent as “income derived from the ownership, possession or control of scarce assets under conditions of limited or no competition”. It’s debatable how much is really added by the orthodox emphasis on competition – or whether it’s entirely coherent to mash up heterodox and orthodox analytical frameworks in this way. But, leaving these theoretical debates aside, the real heart of Christophers’ argument – and what makes this book so important – is the emphasis on ownership.
Christophers meticulously documents how the ‘commanding heights’ of the UK economy – its most successful sectors, from finance and property development to pharmaceuticals and utilities – are all riddled with rentierism. Most intriguing is a chapter on ‘contract rents’, in which he argues that the entire outsourcing industry is a textbook example of rentier capitalism. The likes of Serco, he argues, are not experts in actually doing anything. They are experts in winning government contracts – essentially, monopolies on the delivery of public goods, which provide guaranteed flows of income (rent) for years or even decades. These contracts are the assets on which their shareholder value is based.
One might be tempted to respond that a contract to deliver a service feels somehow different from, say, a piece of land or an energy resource: the former is, at least in theory, a reward for work, while the latter is simply a gift from nature, allowing the lucky owners to profit with no work whatsoever. This is a much more clear-cut case of unearned rent. Yet recent events have given Christophers’ argument a new relevance. Watching Serco’s profits soar as its calamitous test-and-trace system crumbles around our ears, the extractive nature of its business model has been laid bare for all to see.
Christophers’ dual emphasis on asset ownership and low competition also illuminates how we got into this mess, and the nature of the system we need to change. He argues that neoliberalism was never really about free markets, as is often assumed: it was about private ownership. In this respect, the rhetoric of neoliberalism never matched the reality. Markets for the control of assets were massively expanded by neoliberalism, through processes such as privatisation. But this was never accompanied by any serious efforts to promote competition in those markets. Instead, successive governments allowed ownership and control of assets to concentrate in the hands of a small number of big players.
One partial exception to this was housing, where the Right to Buy ‘bought in’ large swathes of the middle classes to this economic model. This helps to explain why it has endured politically for as long as it has. As Keir Milburn argues in ‘Generation Rent’, it also helps to explain why that political consensus is now fracturing along age-related lines, as young people are locked out of the housing wealth accumulated by their forebears. Or, as Christophers puts it: “Nothing today bespeaks exclusion from the ‘common wealth’ more than being locked out of home ownership – and nothing bespeaks the likelihood of remaining excluded more than paying half of one’s income in rent.” Without fundamental change to the UK’s economic model, these divisions will surely only continue to grow.
‘Rentier Capitalism’ does not have much to say about what this change should look like – although it does end with a few pointers. But then, this is not really a book about solutions. It is a careful and compelling argument about the nature of the problem, an important and urgent contribution to our understanding of modern capitalism. Yet its analysis raises the question: if our entire economy is structured to concentrate wealth and power in the hands of an ever-shrinking ownership class, how can we hope to challenge this power effectively? It is this question that concerns the authors of ‘Unions Renewed’, Alice Martin and Annie Quick (out now from Polity Press).
This is a much shorter, more accessible affair – but it packs an impressive breadth and depth of thinking into its 140 pages. It argues that the changing nature of capitalism – specifically, the rise of financialisation and rentierism – poses major challenges for traditional trade union organising models. But at its heart is a bold claim: unions can reinvent themselves and build the social power to truly challenge financialised capital. Indeed, they are the only actors in the economy who can.
Like Christophers, Martin and Quick point the finger at rentier power as a cause of low pay, high inequality and declining worker power. But their reasoning for this is in some ways more innovative and interesting. Christopher focuses mainly on the outsize market power of corporations to squeeze labour and dictate terms. He also points out the growing divide between a small minority of highly-paid professionals tasked with protecting assets (think lawyers, accountants and executives) and a huge precariat who do the actual work. But Martin and Quick argue that rentierism disempowers workers by its very nature. If companies can make money by sweating assets, including through various forms of financial engineering and landlordism that do not rely directly on the labour of their own workers, the power of levers like strike action is drastically reduced.
This, of course, poses much deeper questions: if profit under capitalism is no longer only about the labour relation (and it’s worth noting that this is a claim some Marxists would dispute), how far are models of the economy built on the factories and mines of the nineteenth century still relevant? Do we need to reorient our compasses beyond the world of work altogether? As both books argue, rentier capitalism feeds off multiple kinds of exploitation – of customers by suppliers of energy and water; of borrowers by lenders; of tenants by landlords. What these all have in common is the exploitation of those who don’t own capital or resources by those who do.
In response, Martin and Quick argue that we need a more expansive concept of trade unionism – one rooted in solidarity with the whole working class, “expanding the bargaining unit” out beyond the workplace to the communities and citizens who are also being exploited by finance capital. Care workers should make common cause with those they care for and their families; railway workers should organise with passengers; energy workers should ally with energy consumers and local residents. They cite inspiring examples of unions and social movements organising around rent and debt – from the Chicago teachers demanding affordable housing to the El Barzón movement, campaigning for debtors in Mexico.
Both books highlight economic democracy as the ultimate answer to rentier power. Martin and Quick define this as “moving power for economic decision-making from those who own capital to a much broader group – the workers, renters and carers, from whom capital owners profit.” But – as they do later acknowledge – it’s also about democratising the ownership of capital itself. As Christophers notes, transforming ownership of assets would mean that “society’s economic resources would be subject to much more dispersed and democratic control than they are under capitalism.”
There is much more to be unpacked on what democratising ownership really means. Martin and Quick – understandably, given their focus on trade unions – talk primarily in terms of worker ownership. But, if we accept that the labour relation may not always be the primary site of exploitation under rentier capitalism, are there sectors where worker power just isn’t the answer? If the socialist argument is fundamentally that ownership and control should be in the hands of those who truly create value, has modern capitalism morphed to such an extent that this no longer necessarily means wage-labourers in a given industry?
Perhaps the most obvious example is big tech. Companies like Facebook and Google tend to rely on a relatively small number of highly-paid knowledge workers, while their business model rests on extracting value from the data of millions of users – accruing massive unaccountable power in the process. Worker ownership of these companies might not get us very far towards a more just economy. Co-operative ownership by the platform’s users just might – or, perhaps, public ‘data trusts’, turning this asset into a shared resource rather than a private commodity. Likewise, the best examples of democratic banking tend not to be worker-owned: they are either public banks, or community and consumer-led co-operatives.
Of course, there are plenty of sectors where labour is still the source of value and the key site of exploitation – with care being an obvious example. Even in the tech sector, beneath the shiny apps and platforms, companies like Uber and Amazon still rely to a substantial extent on exploiting the labour of drivers and warehouse workers. Here, worker empowerment is still the right response to the injustice at play.
An understanding of rentier power also raises the question of exactly what we need to democratise. Martin and Quick deploy the traditional socialist language of “the means of production”, while Christophers hints at the need to go beyond this. Many successful rentiers are essentially gatekeepers to the resources we need to live a good life and participate in society – housing, energy, water, broadband access. The fact that they are essential is both what makes them such a reliable source of profit, and what makes this profiteering so morally unacceptable. Accordingly, much new thinking on the left – from energy democracy to universal basic services – is really about democratising the means of subsistence, or perhaps the means of wellbeing.
Arguably, these resources should be taken out of the market altogether, treated as basic universal rights rather than commodities. Democratic ownership should be less about socialising the rents these assets generate, and more about eliminating the potential for rent extraction altogether. Ultimately, it should be about reorienting our economy towards meeting human needs. The language of production and productivity isn’t always particularly helpful in this context – indeed, for activities like care, it is almost irrelevant.
These are interesting conceptual questions, but the authors of ‘Unions Renewed’ would rightly respond ‘so what?’ Their focus – relentless and refreshing – is on what, practically, we can do when faced with seemingly unchallengeable rentier power. The challenge they pose is: if not unions, who?
In today’s somewhat bleak political landscape, we need to get serious about building strong counterweights to the power of extractive rentier capital. We need to be smarter about finding sources of leverage and using them to create change – and we need to start somewhere. It’s a formidable challenge; but, as both of these books powerfully demonstrate, it is one of the defining challenges of our age.
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Mark Blyth has an interesting interview with the author mentioned, Brett Christopher, in his podcast just out today.
https://www.youtube.com/watch?v=4fh5UvV8hfU
Start by energizing the labor union sector. Then expand the underlying dynamic out into the population at large. We are the Union.
The problem is in any attempt, as Open Democracy perennially try to do, to link whatever the crisis (or crises) de jour is (or are) to some apparently benign social reform or social justice outcomes, these might not necessarily be the result.
Especially if the counterpoint to a rentier capitalism society which is proffered starts to look more like some awful authoritarian-progressive technocratic mash-up (and by eschewing classical socialistic solutions, as Open Democracy did in the above piece, through their repudiation of the workers owning the means of production*, they look from some angles like that’s what they’re heading for). Because, if that’s one alternative that’s on the table from the so-called left, people may flip 180-degrees in disgust and embrace libertarianism instead.
* to quote:
Personally, I would like to see that worker owned biz more readily available. I am currently on a rural type collective ownership Electric system. When I bought my first car, I used a Farmer’s collective group Auto Insurance Plan. If given more choice, rather than the few largest monopolies for basic services, I would do it again—cost permitting.
And the vultures in PE and the other parasites will be going full bore toward making that “cost” be “prohibitive.”
There’s a lesson to be found in Capra’s “It’s a Wonderful Life.” But I would bet that if one visited Bedford Falls 10 or 12 years later, George would have been at best a minor Vice President in Potter Bank, and the town would have still been renamed Potterville… That house George and Mary bought was a real money pit, and the bucks to fix it up and maintain it would not likely have come from Bailey Brothers Building and Loan.
I don’t get why Potter was ever selected to be on the Board of Bailey Brothers in he first place, or why he was not kicked off after pulling the scam with the money that Uncle Billy inadvertently handed him. Maybe in upstate New York, board members don’t owe any duty of fealty to the company.
Maybe starting with unions will work in the UK, but when unions were still strong in the US, the rank-and-file voted for Reagan.
In the US, back in the ’70s and ’80s, when I was trying to interest my techie peers in unionization, many of them were not at all attracted because they saw unions as just another layer of state bureaucracy, in other words, a kind of parastical rentier institution. Their perceptions were often based on the experience of their (often working-class) relatives and neighbors; it was not just a creation of propaganda. Indeed, in order to subsist in a capitalist polity, unions must usually adapt to capitalist principles, formations, relations, and culture, which means that the principle of rent will always emerge and eventually dominate.
Worth remembering: It was the “saintly” Jimmy Carter who deregulated trucking and airlines–both unionized at the time–showing the way for Reagan to do even more. This threw union agreements under the bus. The Teamsters endorsed Reagan in the next election.
Democrats! Gotta love ’em!
We have to have Union leaders that want that, and are willing to put those wishes above their own agenda.
One very difficult problem faced by all political organisations (political parties, elected representatives to public office, unions, etc.) is that as the number of people being represented becomes larger and larger the leaders are increasingly distanced from the rank and file. Then these leaders may wind up with a different agenda from the base, and also run the risk of being co-opted, or even corrupted. The bigger the stakes, the more this happens. An active and vigilant rank and file is the only remedy. But the rank and file have their lives to live. So it’s easy to say, difficult to do.
Well said! We just think it is hard. There are many trail blazers out there working on independent internet, video sharing, alternative media, and yes 3 rd. parties. Chris Hedges does give you an idea for peaceful resistance.
The by-laws of the United Electrical Workers union (UE), one of the most militant rank-and-file- oriented unions, prohibit union officers from earning more than the highest paid member.
That’s a good place to start.
That’s wonderful!
I believe Unions had them. I believe “McCarthyism” was about removing all those Union leaders from Union office.
Was the Mafiazation of those Unions which were Mafiafied the result of a Federal Government Conspiracy to Mafiafy those Unions?
I’d start by terminating forrever the Fed’s QE and ZIRP policies, as these provides trillions to the wealthy and corporations. This one act, would reduce wealth inequality more than any other action I can think of.
How about a transaction tax on stock and bond deals? Especially high-speed trading. Even just a few pennies per trade would strip a lot of the power that is money from the looter capitalists. Low hanging fruit, https://www.brookings.edu/opinions/congress-wants-to-tax-stock-trades-investors-shouldnt-fret/ and some Dems already think it’s a good idea.
Then make the bought-and-paid-for legislature move on to a Jubilee. As pointed out earlier, Biden could for starters, by executive order, direct the federal student loan lender to just stop collecting.
All these stories about people crying tears of joy that “Biden won.” I did a little weeping too, but it was tears of bitter experience knowing that the Dems ‘led” by Biden will do none of the above, nothing for the common good. Obama 1.666.
Christophers was just interviewed by Mark Blythe for those that want to follow this article in a bit more depth: https://watson.brown.edu/rhodes/podcasts
Thanks for the heads up, and the link.
That was a good link, good explanation of how neoliberal financialization is woven throughout the economy in a specific effort to siphon money to the top – to the alpha person(s) of interest – which begs the question still of how we effectively change this system. I’d say the most effective method would be to create a new “top beneficiary” – that would be the people, the commons. That’s only one more layer on the entire structure which really ought to be put to work for the environment and civilization – rather than choking it off or incentivizing competition to out-compete it (to be more ruthless and exploitative) or making meaningless little demands for higher wages as asset values skyrocket, etc. Let’s go straight to the top – we can do that pretty easily with sovereign taxing authority. And make that money accountable and dedicated to social well being and environmental restoration. We are just sitting around looking at a fat piggy bank and not even considering a shakedown. I like to think that corporations are lean and mean machines – which could also mean they have a smaller carbon footprint for one thing. I don’t know – but it’s logical that lots of little, hyper competitive capitalist enterprises would be dirtier and messier and harder to manage. And we really don’t have time for that kind of nostalgia.
Biden will be even worse than Trump (in reality Jared Kushner) on reining in Big Tech.
buckle up
and biden will be worse than trump on wall street too.
can’t tackle rentierism without addressing big tech and “big money”—-the accumulation of Wall St power thanks to the Fed and lax Wall St overaight
Biden is 77 years old. He’ll be 78 on the 20th. Is he likely to run for re-election at 82? Has there been a president who only intended to serve one term? Do presidents who do not intend to run for re-election, have different priorities than those who would seek a second term?
I don’t know the answers to these questions.
Yeah enriching themselves or setting up to in 4 years instead of 8.
I guess we’ll have to wait and see where he places on this list:
https://en.wikipedia.org/wiki/List_of_presidents_of_the_United_States_by_net_worth
Forbes places his current net worth at $9 million.
Our most consequential unheralded president promised to serve a single term, wherein he ginned up war on Mexico, swallowed Texas, took California and the Southwest, and negotiated ownership of the Northwest with Britain. He did all this in Jacksonian style so racist and dishonorable that his extraordinary achievements really can’t be celebrated–just too ugly. Polk did it all in a single term.
But we like the land and the lifestyle, don’t we? I know I do. I know I won’t support returning Conquered Mexico back to the Mexican Republic.
Will 78 year-old dottering Biden have his own priorities any more than our Congressmen or Senators write or even read their own bills? Now that Biden has won the question I would ask is who will be actually running the Biden government? What is their agenda and how does it differ from the agenda the Trump government fostered?
we had to elect him to find out what he would do (h/t Nancy P)
If a BidenAdmin chooses to rebuild some degraded Administrative State governance functionality, that would differ from the Trump agenda, in a good way.
If a BidenAdmin decides to resume the Powers-Slaughter-Clinton devotion to resume supporting the Global Axis of Jihad and the Cannibal Liver Eating Jihadis against Syria and resume support for the genuine Bandera Nazi regime in West Ukraine against East Ukraine, that would differ from the Trump agenda, in a bad way.
And let us assume that a BidenAdmin will seek to bring America back into the TPP because the BidenAdmin will support Clintonite Free Trade Treason economics.
So there are three areas of probable difference, right there.
Polk promised only to serve one term and did so–after having achieved everything he promised.
He’s one of the more astonishingly “effective” presidents, though the Mexican War–and the territory it brought into the union–ultimately gave rise to the Civil War.
My sentiment as well.
“Strong Counterweights” Absolutely. Maybe that can be the first, “Push him Left” issue. Every 8 to 10 years when the Banksters have ran themselves off of golden paved roads, we bail them out. As soon as that happens, the populace becomes poorer, and the Bankster class richer with the ability to buy up everything not nailed down. We then get to hear ad nauseum how Privatization will save us, and how all of us Dumb Ass Americans need to go back to school for intentional training on jobs for the “NEW ECONOMY”. Chris Hedges has spoken about the Rentier problem for years. He has done in-depth studies on it, and how we as Americans might fight back. With this election just scrambling for a halt, with the slap in the head to the Left with a nicely wrapped gift of Cheney, and far right cabinet placements; how do we get our feet back under us? I do agree that Unions would logically be the first go to, but at this point in history I feel it will take a whole lot more, and from a varied directional assault. “Push him Left” practically left me speechless. Who, and When, and what exactly was the plan for that?
+++++++++
We are already in the Gulag.
This table needs flipping!
Public service worker unions should be eliminated. Why should you and I pay a third person to fight the three of us for more tax dollars to pay that third person? (Along with paying for union administrators). Union pension clauses, many with guaranteed escalation clauses that pay retired workers more than they ever made working is unsustainable. (Illinois teachers for example – let alone the uneducated masses that are moved through the system) Social Security’s annual adjustment is eroded buy increases in insurance… If tax dollars are the source of compensation, the open market should determine job demand not public service worker unions.
> the open market
The labor market is “open”? Really?
Public service worker compensation and pensions (bargained-for and basically deferred compensation) are a bigger problem than the not-tax-paying and trillions-hogging rentiers? Kiss up kick down is the true face of Civility. Collective bargaining is fighting but business is just business. Recognize the accounting and characterization at play.
So you kick fellow workers and support the race to the bottom rather than demanding better protection of Social Security. Oh, and Social Security, like all Federal spending, does not depend on taxes for funding. The Federal government’s spending is limited by inflation and politics.
I’m not sure you can get rid of rentiership per se, as there will be always some looking for easy gains.
The missing indgredient for me is responsibility. A lot of the talkign heads talk about how the poor are “irresponsible” in one way or another, w/o really understanding them. Few, if any, talk about the irresponsibilities of the other side of the spectrum. Since Enron, how many top managers (or even white-collar managers) were jailed? How many of them were made to feel the externalities they created/misused?
I think it is useless to write articles like this. It assumes that all of those who decide what does and doesn’t happen, the 1%, the .1%, are just not clear no how to make things better for the 99%. As we have seen numerous times, too many to count here, if anyone who just might implement and of these ideas gets even close to gaining any power, whether domestic or abroad, they are thoroughly destroyed in every way.
We don’t lack for ideas. We lack a process to rid ourselves of the parasitic elite who are fine killing us all (or having us all kill each other) and killing the planet too. Maybe if we just voted a little harder. Ha!
Sorry but the system itself is corrupting and like a cancer that has wrapped itself around, if not through, vital organs it must be removed carefully lest the host is destroyed.
That said, the system can be reformed with little pain for anyone but not if the victims insist on retaining the bits of corruption that benefit them*.
*Such as positive interest/yields on inherently risk-free sovereign debt; i.e. welfare proportional to account balance.
I’ve learned to save time when reading Open Democracy‘s pieces to simply begin by looking for the — inevitable — grouping or actor who is being lined up to intermediate power on our behalf. In this particular example it’s the nicely ambiguous and nebulous “strong counterweights” and “sources of leverage”. Regardless of being coy about who it’s going to be, there’s always one, lurking in there, somewhere.
And it’s never one — you can count on this — that’s going to be any class or agency that we’re going to be allowed to be a member of.
Ah, I mis-spoke there, just now. Actually, it’s more likely than not that the intermediary is going to be one where my class (the Professional / Managerial Class) is going to right there, in the thick of it. Who, believe me, are the last powerbase you want to have put in charge of your affairs, if you can help it.
Do not disagree you’d not want to put them in charge (mostly), but the problem is that they are the only ones who actively _seek_ to be in charge (of at least something) – as opposed to the 0.1% who are in charge and know it.
There’s a number of reasons why the others aren’t in charge (for example, because they are too busy just trying to survive, or if you ask PMC, because they are too stoopid, irresponsible or whatever to be there.. ), but unless either they do want to, or you find someone who gets them to engage (by the sound of it AZ/GA in the US were good examples this elections), it’s not going to change.
I actually like the citizen assemblies for it, as if they are to be representative, the majority on them won’t be PMC, and in the non-PMC class it builds the self-confidence that they _can_ make decisions (which often, with too much listening to the PMC, they do not even believe, except when they are presented with too easy solutions.).
I have to respectfully disagree. It is VERY useful. Yes, we may have ideas, but were you going to implement your ideas all on your own? There is a coming together. We may all differ somewhat in our ideas, but there may just appear a way to go forward with many minds sharing. Heck, what if you were serving on a Board of Directors for some entity—you would have to collaborate to steer the ship. In any case, thank you for your opinion, and I hope my kind disagreement is just as welcome.
Boom! Not as to the usefulness of this piece but to your other points
Rentierism and over-financialization go hand in hand. With regards to the UK, they’ve had the City of London for centuries – guiding the off-shoring of wealth from the first ships.
And, in a nicely circulatory way considering the problem of Big Tech and Big Data (plus the surveillance society), the nearly two-centuries long history of City financial extraction was one of the main instigators of the rapid development and introduction of the telegraph and, later, telephony. Even today much of Northern hemisphere’s data is routed through London, retracing cable paths that date back to the turn of the 19th century and early 1900’s.
Financialisation and rent extraction through monopolies on communication and data have gone hand-in-hand since the days of the Empire.
As often with economists, a little bit more history wouldn’t come amiss.
For most of human history, extracting rent was the main way to get rich, or even to earn a decent living. Apart from craftsmen and a few wealthy merchants, everybody who wanted to make some money had to find a passive income stream and attach themselves to it. This usually meant persuading the Monarch, or another powerful individual, to let you have the rights to the income from land (the original “rent”), the monopoly of some function or import, or a position at Court with a salary attached. This made sense in an era when economic growth was limited to non-existent, and the amount of wealth in the world was assumed to be constant. It was the growth of trade and the development of technology that finally changed this, as it became possible to make fortunes from capital investment rather than rent. When Marx was writing, this was becoming the norm, and he assumed it would continue to be so. He was wrong.
In the end, it’s always easier to take than to make. What this article describes is pretty much the conclusion of a struggle that has been going on in England since the seventeenth century, between productive and extractive forces, and, contrary to what we supposed in my youth, the extractive forces have finally won. The destruction of British industry from the 1980s, followed by the enormous expansion of the extractive financial sector, was the final stage. It is futile to talk about tackling rent-seeking, when investment in production is no longer really possible. In the end, rent-seeking is just so much easier. If you had a choice, what would you rather do: open a factory to make protective masks, or borrow the money to buy millions of them from China, and sell them at a huge mark-up on the Internet?
One point I disagree with is the criticism of rented property. Anyone who has ever bought and sold a house knows how laborious that is, and how many rent-seeking mouths have to be stuffed with money along the way. House ownership drastically reduces mobility and personal freedom, not least because few people actually “own” their houses. I was born in a rented local authority house, with a very reasonable rent, which we could leave at a few weeks’ notice to move anywhere in the country where there was a similar house vacant.
… or borrow the money to buy millions of them from China, and sell them at a huge mark-up on the Internet? Dave
Except banks don’t really lend money; they create new deposits for the benefit of the so-called “credit worthy.”‘ So there’s a root cause of our problems: government-privileged private-credit-for-usury cartels.
Another is no limits to land ownership.
Both are contrary to the Old Testament, btw, and that’s relevant since Christians are bound to take the Bible seriously and there’s still many of those, one might hope.
Banks may not lend money strictly speaking, as MMT has demonstrated, but you and I certainly have to borrow it, and that is a major factor in the rentier economy. We can’t refuse to repay a loan on the basis that the money was just a creation of the banks.
And the biblical injunction against usury was only applicable to “brothers” (ie the Jews) not to “strangers” (everyone else). There was a brisk debate in the Church about whether this should be read as all Christians or not, but that didn’t stop banks from flourishing in the Middle Ages, nor the Papacy having its own financial management cell.
And the biblical injunction against usury was only applicable to “brothers” (ie the Jews) not to “strangers” (everyone else). David
True (Deuteronomy 23:19-20), but even the broadest definition of “foreigner” does not allow government privileges for private credit creation whereby fellow citizens are cheated and/or driven into debt; i.e. God is a just God even when it comes to non-believing fellow citizens.
There was a brisk debate in the Church about whether this should be read as all Christians or not, but that didn’t stop banks from flourishing in the Middle Ages, nor the Papacy having its own financial management cell. ibid
And that’s due to an inexcusable misunderstanding of the nature of fiat given “Render to Caesar what is Caesar’s” (Matthew 22:21) and Romans 13:1-7 in favor of treating gold and silver as more than just anti-counterfeiting measures but as money themselves. Imo, that constitutes idolatry, i.e. worshiping creation rather than the Creator and what He desires (justice, etc.)
Totally agree with you on limits to land ownership, and on the credit too – if I could wrap my head around it properly.
Particularly on land, there are solutions like in Singapore.
I always found it interesting how renting was preferred in Germany
I was perfectly happy renting in NYC and in Australia. Renting is a fine option when tenants have good legal protections. And that does not mean by contract but by statute. Germany wants to encourage rentals (so as to keep labor costs down!) and so has very strong tenant rights.
Re house ownership. A friend of mine described it well. A house is a living thing, not an item. Unless you take care of it (which involves spending time and money on it), it eventually dies.
True for all machines, Including humans and other animals.
Thank you so much, for this comment, and your comments in general.
Your first paragraph distills brilliantly tomes of political economy over centuries of modern history. This is the kind of understanding I strive for and you are one of the commenters here who demonstrate it most completely.
Marx had it right. Capitalists begin with “a period of primitive accumulation”, meaning they take their meager incomes and save some of it. Living in the first years on a low standard of living is no fun and takes discipline. But millions of recent immigrants to the U.S. do it ; they drive old cars, work long hours, save pennies, shop for bargains and in short order (2-3 years) have the down-payment for a house in a lousy neighborhood, which they buy and fix up with their own hands. Then they rent out part to generate cash flow. I know immigrants who have gone from dishwasher to millionaire in 15 years, In 1968-9 I lived in one small room while teaching school in RI. I earned $5,900 that year,saved $2,000 and purchased a house. i lived in the basement while going to grad school. I’m not among the super-rich but in my 70s I’m that rentier capitalist you talk about. And I have not held a 40 hour/week job in 35 years.
Schools (and parents) don’t talk about this. Buy a car and furniture on time; maximize your short-term standard of living; buy a $4 latte each morning at Starbucks and always be in debt. Those are the decisions of short-term thinkers. I could talk about the reasons (pop culture, the easy availability of “low doc” loans via credit cards, in-store financing, the celebration of consumption and financial illiteracy caused by bad schools, weak laws, the sales oriented media and sadly incompetent parents) but the reasons doesn’t matter. Marx and most Chinese workers have it right. Save don’t spend. Prosper.
Being a villain should not be the only alternative to being a net victim.
Besides that, there’s the “paradox of thrift” to consider.
+
Eviction’s a rill b*atch
cheaper than avocado toast, though
if you haven’t been a wage earner since 1985 (35 yrs) then you have been on the upper half of this chart
https://www.epi.org/productivity-pay-gap/
are you a landlord to college students?
” …In 1968-9 I lived in one small room while teaching school in RI. I earned $5,900 that year,saved $2,000 and purchased a house. i lived in the basement while going to grad school. I’m not among the super-rich but in my 70s I’m that rentier capitalist you talk about. And I have not held a 40 hour/week job in 35 years….”
Bully for you. Nobody can do that today. Isn’t that obvious? Education alone puts you in debt you did not face in 1960’s when you became a teacher. Plenty of disciplined young folk have a mountain to climb that under the most optimum circumstances is dauntingly depressive. And then there’s covid and the job situation today. A latte from a drivein Starbucks might be the equivalent of having fun at a restaurant as you and I used to do with our families, good memories there. A latte is all that’s left; don’t knock it.
There isn’t going to be any labor union renaissance. Nice idea. The Spook agencies and NGO apparat co-opt and control anything that might pose some threat to the hermetic system of control. You can’t reform an empire. The best thing to do is help push it over into collapse then build something useful from the wreckage.
Unions voted for Prop 22 in California. Enough said.
Yikes
That is worse than I thought
I have trouble relating to this post. I live in the US and I suspect there are many subtle and not so subtle differences between the situation in the United Kingdom and the US.
The post discusses a book concerned with asset consolidation and how the “entire economy is structured to concentrate wealth and power in the hands of an ever-shrinking ownership class.” That book — judging from this post — makes a familiar sounding if not a quaint analysis of this issue. But I’ll continue reading Matt Stoller and the very occasional useful offerings from Barry Lynn. Barry Lynn’s two books from over a decade ago, “End of the Line” and “Cornered” provide a clear and detailed taxonomy and description of the workings of the new kinds of monopoly and monopsony joining the older categories of rentier exploitation. I also need to read the offerings at Institute for Local Self-Reliance [ILSR] much more often. The second book this post discusses — bandies about on worker power, trade unionism, solidarity with the whole working class, means of production, and other shopworn terms. Both books propose “economic democracy” as a remedy but as this post points out: “There is much more to be unpacked on what democratising ownership really means.”
The post notes how both books ask: “what, practically, we can do when faced with seemingly unchallengeable rentier power?” The concluding challenge “if not unions, who?” — falls flat. The most cogent question asked by this post:
“if profit under capitalism is no longer only about the labour relation (and it’s worth noting that this is a claim some Marxists would dispute), how far are models of the economy built on the factories and mines of the nineteenth century still relevant?”
hangs unanswered.
Is it “ILSR.com”? Does the ILSR propose a breakdown of best practices – like (just trying to imagine here) local business for food production and housing; State for education and (now) medical; Federal for the greater commons and redistribution; and maybe International to restrict “trade” done merely to profiteer and exploit. And all of them in an alliance to repair the environment?
ilsr.org — I remember it as a site Matt Stoller referenced for a study on Walmart and another on Amazon. I believe it also had a study of the impacts of the consolidation of US pharmacies and the value of local pharmacies. It’s areas of concern are fairly broad.
thanks
Another useful article from this outstanding site. That said:
The problem is not rentier capitalism.
The problem is not unregulated capitalism.
The problem is not predatory capitalism.
The problem is not crony capitalism.
The problem is not disaster capitalism.
The problem is not neoliberal capitalism.
The problem is capitalism.
We are out of time, diddling with this ecocidal system. Really.
The problem is Humans .. and their rapacious need to extract and waste more earthly stuff, regardless of the ‘ism’ used.
Whether they be of Secular or Religious stand matters not .. the grinding churn of billions guarantee these actions we’ve witnessed for what? – 60-80 years … and, ‘Now fortified with Hypergreed!’ … by the Grand Ghoulish Globullizers who drive/fly/or yacht around us, over us, indeed right through us! .. who wish to keep us all in our safe and separate ‘spaces’ … for our health and vitality, of course.
Can’t wait to see what new-n-‘improved’ bubble logic the reddened blu ishmonkeys (covered in a saccharine shell of sticky idpol gooeyness .. like ice cream gone bad) will have in the offing, should they get THEIR craycray chance to sit on the lead-throned dias ..
Get ready to be commonly Cored like there’s no yesterday!
The problem (humans) will sort itself out shortly without any help from said humans.
If anyone is looking for solutions, they might investigate current practices in Singapore. Large savings for retirement are compulsory but can be tapped for home (apartment) ownership. They seem to have solved the race problem too, as most housing is government-owned tall buildings with race distribution matching the national distribution of races.
Singapore? Based on very little evidence and never having visited Singapore I have the impression of a highly regimented State with harsh punishments for infractions like littering — not that I favor littering. This post considered the problems of a rentier economy. How do retirement savings and the race problem tie in? I can see government housing as a possible answer. It seemed to work for the Soviet Union but didn’t fair so well in the US urban renewal programs.
Should your comment be interpreted as veiled sarcasm suggesting the tension between personal freedom and libertarian concepts of private ownership which anti-monopoly anti-monopsony anti-property rentier legislation or direct action might engender?
“neoliberalism was never really about free markets, as is often assumed: it was about private ownership. In this respect, the rhetoric of neoliberalism never matched the reality.”
Indeed. If we the sheeple would learn to watch what our government and business Powers That Be DO, instead of listening to what they SAY, we would have caught on to this a lot sooner.
When I was old enough to know better, I listened to Obama’s “Hope and Change” promises, skeptically voted for him, and then watched what he did during his year in office. No Democrat has won my vote for president since then.
BTW, what the author of this post says about Serco also applies to a plethora of US companies of course. A few I can think of: McKinsey, Deloitte, — and here’s a doozy: The Riverside Company. Named “M&A Mid-Market Awards Private Equity Seller of the Year” in 2018, Riverside especially loves companies that have made a bundle privatizing municipal services such as building inspections (SafeBuilt) and “public safety policy and training solutions for law enforcement, fire and rescue, and corrections” (Lexipol).
“Riverside takes pride in its role as an advocate for the good it says private equity delivers to the economy, companies, customers and their employees. The firm takes part in visits to Capitol Hill, delivers columns, editorials and speeches touting the effectiveness of private equity, and has many team members serving in advocacy roles at industry organizations.”
https://www.themiddlemarket.com/list/private-equity-seller-of-the-year-the-riverside-co
I had just had lunch and even copying and pasting this sh*t makes me nauseated.
Jaw dropping. Time for a serious Correction.
We want economic success
Step one – Identify where wealth creation occurs in the economy.
Houston, we have a problem.
Economists do identify where real wealth creation in the economy occurs, but this is a most inconvenient truth as it reveals many at the top don’t actually create any wealth.
This is the problem.
Much of their money comes from wealth extraction rather than wealth creation, and they need to get everyone thoroughly confused so we don’t realise what they are really up to.
The Classical Economists had a quick look around and noticed the aristocracy were maintained in luxury and leisure by the hard work of everyone else.
They haven’t done anything economically productive for centuries, they couldn’t miss it.
The Classical economist, Adam Smith:
“The labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money.”
There was no benefits system in those days, and if those at the bottom didn’t work they died.
They had to earn money to live.
Ricardo was an expert on the small state, unregulated capitalism he observed in the world around him. He was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
“The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist.
They soon identified the constructive “earned” income and the parasitic “unearned” income.
This disappeared in neoclassical economics.
GDP was invented after they used neoclassical economics last time.
In the 1920s, the economy roared, the stock market soared and nearly everyone had been making lots of money.
In the 1930s, they were wondering what the hell had just happened as everything had appeared to be going so well in the 1920s and then it all just fell apart.
They needed a better measure to see what was really going on in the economy and came up with GDP.
In the 1930s, they pondered over where all that wealth had gone to in 1929 and realised inflating asset prices doesn’t create real wealth, they came up with the GDP measure to track real wealth creation in the economy.
The transfer of existing assets, like stocks and real estate, doesn’t create real wealth and therefore does not add to GDP. The real wealth creation in the economy is measured by GDP.
Real wealth creation involves real work producing new goods and services in the economy.
So all that transferring existing financial assets around doesn’t create wealth?
No it doesn’t, and now you are ready to start thinking about what is really going on there.
How different is Classical Economics?
Ricardo was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
“The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist
What does our man on free trade, Ricardo, mean?
Disposable income = wages – (taxes + the cost of living)
Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
Employees get less disposable income after the landlords rent has gone.
Employers have to cover the landlord’s rents in wages reducing profit.
Ricardo is just talking about housing costs, employees all rented in those days.
Low housing costs work best for employers and employees.
In Ricardo’s world there were three classes.
He was in the capitalist class.
The more he paid in labour costs (wages) the lower his profits would be.
He was paying the cost of living for his workers through wages, and the higher that was, the higher labour costs would be.
There was no benefits system in those days and those at the bottom needed to earn money to cover the cost of living otherwise they would die. They had to earn their money through wages.
The more he paid in rents to the old landowning class, the less there would be for him to keep for himself.
From Ricardo:
The labourers had before 25
The landlords 25
And the capitalists 50
……….. 100
He looked at how the pie got divided between the three groups.
The capitalist system actually contains a welfare state to maintain an old money, idle rich in luxury and leisure. In the UK we still have an aristocracy, so it is hard to forget.
The Classical economist, Adam Smith:
“The labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money.”
There were three groups in the capitalist system in Ricardo’s world (and there still are).
Workers / Employees
Capitalists / Employers
Rentiers / Landowners / Landlords / other skimmers, who are just skimming out of the system, not contributing to its success
The unproductive group exists at the top of society, not the bottom.
Later on we did bolt on a benefit system to help others that were struggling lower down the scale.
This is why they differentiated between “earned” and “unearned” income.
In today’s world, the rentier capitalist is DEAD WEIGHT.
Thus endeth the lesson.
Even I felt relief yesterday, a grand bargain to eliminate government pensions is less likely with a very divided government. But a Kamala Harris Presidency makes the solution to the fall of the Western Empire by restoring a national New Deal extremely unlikely. She is the ultimate Globalist after all; come Pandemic Depression or not; a coronavirus vaccine or not.
A prime example of nothing happening, nada, is the Biden Pandemic Plan to be announced tomorrow. With the Obama Crew and Dr. Anthony Fauci at the helm it will be more of the same; lots of confusion plus a lockdown in North Dakota. The virus is so widespread and the rulers so dependent on pharmaceutical rent extraction, the USA will be a sick quarantined nation for the foreseeable future.
The only way out is universal antigen testing for everyone before they go out in public to see if they are infective or not. Paid isolation and free treatment if test positive. This requires lots of money, school and work bubbles, and a functional national public health system. All completely verboten by the American ruling class.
Its hard to bite the hand that beats you when it is tightly wrapped around your own throat.
There will probably be a thousand approaches offered to undermine Rentier capitalism. I will offer way number one thousand and one. Wherever you are, whoever you are; earnestly consider every single thing you pay for, whether a good or a service or something else. If any of it comes from a toll-charging monopoly tollgate-keeper, see if you can do that thing or obtain that thing by personal subsistence work or production or barter. With-holding just that much revenue from the tollgate-keepers’ revenue stream attrits their revenue stream by just that much. And it will get you thinking in this way more and more.
What prompted me to get on here and write this? An “ask me anything” reddit I just saw. And here it is.
https://www.reddit.com/r/IAmA/comments/jqgr6j/i_desperately_wish_to_infect_a_million_brains/
And the very first sentence reads like this.
“I desperately wish to infect a million brains with ideas about how to cut our personal carbon footprint. AMA!”
It is by Paul Wheaton. Who is Paul Wheaton? Here is a link to a wiki about him offering all kinds of provenance and bona fides and links to readable stuff he has written and listenable stuff he has recorded.
https://en.wikipedia.org/wiki/Paul_Wheaton
I am also going to place a briefer version of this comment with the Paul Wheaton material on the most recent ( top of its page) entry under the Permaculture category. So that people can find it later if they wish.
How bad is it?
No one knows what real wealth creation is.
Where does it always go wrong?
“The Fate Of Empires and Search For Survival” Sir John Glubb
http://www.rexresearch.com/glubb/glubb-empire.pdf
The pivot point where the decline begins.
“There does not appear to be any doubt that money is the agent which causes the decline of this strong, brave and self-confident people. The decline in courage, enterprise and a sense of duty is, however, gradual.
………..
All these periods reveal the same characteristics. The immense wealth accumulated in the nation dazzles the onlookers. Enough of the ancient virtues of courage, energy and patriotism survive to enable the state successfully to defend its frontiers. But, beneath the surface, greed for money is gradually replacing duty and public service. Indeed the change might be summarised as being from service to selfishness.”
“But, beneath the surface, greed for money is gradually replacing duty and public service. Indeed the change might be summarised as being from service to selfishness.”
That sounds like the ideology we call “neoliberalism”.
Why is this so dangerous?
You have lost sight of where wealth creation actually occurs it is the beginning of the end.
The Americans hoped an entrepreneur would develop 5G in their garden shed, but it didn’t happen.
5G sounds a bit hard; there are loads of easy ways to make money.
Making money doing nothing.
What are the options?
Well, there are quite a few options available; we’ve got rent, dividends and interest and there is the globalisation favourite, capital gains on property.
You can make money without creating wealth and this is the easiest way to make money.
In 1984, for the first time in American history, “unearned” income exceeded “earned” income.
The American have lost sight of what real wealth creation is, and are just focussed on making money.
You might as well do that in the easiest way possible.
One economics, one ideology.
Global groupthink.
The US and UK are worse than most other places as they are the most ardent supporters of neoliberalism.
Imagine your Social Security deduction was more like 20% and another 20% from your employer, but then after a specified balance accrued, you could get a loan to purchase an apartment. A nation of home owners! That’s the Singapore system.