THE RADICAL REVIVAL OF THE RENTIER
It is a lie to say we have a free market economy. It is rigged in favor of rentiers, the owners of financial, physical and intellectual property. It is institutionalized rent-seeking corruption, in which morally flaky characters can make billions. Guy Standing
[The behavior of the rentier state] embodies a break in the work-reward causation … rewards of income and wealth for the rentier do not come as the result of work but are the result of chance or situation. Douglas Yates
Landlords grow rich in their sleep without working, risking or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title. John Stuart Mill
When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it. Frederic Bastiat
Still, thinking of what’s happening as the rule of rentiers, who are getting their interests served at the expense of the real economy, helps make sense of the situation… Paul Krugman
The cause of liberty can be advanced through social reform, through a more robust welfare state, through attacks on monopolies and unearned property. J.A. Hobson
The relatively arcane term RENTIER (from the French, ränˈtyā) is cropping up in polite (and unpolite) conversations again, mostly as a source of much confusion. This situation stems from an extremely well-orchestrated ideological brain washing, and the fact that the grip of this class has dramatically evolved like everything else in the economy. Mainstream economists (who shun evolutionary thinking) would like us to believe they belong to a bi-gone era. Yet, they are more pervasive and perverse than they have ever been. This small, but extremely powerful, ruling class is not merely landlords (or those who rent other stuff, like money), but something much more ubiquitous and ominous. Wikipedia defines a rentier as:
Someone who earns income from capital without working. This is generally done through ownership of assets that generate yield (cash generated by assets), such as rental properties, shares in dividend paying companies, or bonds that pay interest.
They also maintain that Rentier Capitalism describes the economic practice of gaining large profits without contributing to society. Furthermore, Rent-seeking is the act of growing one’s existing wealth by manipulating the social or political environment without creating new wealth. Thorsten Veblen described the overwhelming influence of the rentier and their predatory motives in his classic, Theory of the Leisure Class, suggesting that they actually work very hard at preserving their status, while not laboring in the conventional sense. He and other Classical economists (like John Stuart Mill) maintained that the existence the rentier class was a huge dilemma. They described it as the accumulation of unearned wealth and extraordinary political power. When the wildly misinterpreted Adam Smith alluded to “free markets”, he was a referring to free from rent-seeking. Modern economists (labeled Neoclassical and/or Neoliberal) magically solved the problem by merely suggesting that there is NO such thing as unearned wealth, and that economics was a pure and ethereal science devoid of political power. Ergo Milton Friedman’s edict, there is no free lunch. Even Friedman’s arch nemesis (when it came to government intervention) John Maynard Keynes contended that progressive policies (fiscal, manpower, and monetary) and judicious financial regulation would eventually euthanize the rentier. Unfortunately, it is they that have euthanized the rest of us. As the old adage maintains, the devils greatest trick is in convincing us he does not exist.
As its mainstream apologists morphed from Neoclassical to Neoliberal and now Neofeudal, the rentiers and their toadies convinced the masses that the only “rent-seeking” that should concern them is undertaken by government bureaucrats. With government regulators disarmed and devastated, rentier capitalism could proceed pell-mell with its raping and pillaging as well as the inflation of existing assets, until the innovative core of the economy was destroyed. As Joseph Schumpeter (of Creative Destruction fame) predicted, the rentier class would conspire to undermine the entrepreneurial essence of the economy, killing the Golden Goose as it were. And, that is pretty much what happened. In the process they changed the fundamental nature of property, enterprise , and wealth creation. Property would become much more about global patent protections and less about real estate. Enterprise would focus on privatization, information extraction, monopolization, and militarization. Wealth leveraging, moreover, would focus on risk engineering (especially governmental backstopping) and phantom accumulation.
Revenge of the Rentier
Essentially the rentier class has evolved beyond the confines of industrial and even financial capitalism, to return to a more Medieval form of political economy. As Veblen contended economic progress/digress moves readily back and forth along an anthropological continuum. In eras like the Gilded Age, it danced along the edge between savagery and barbarism. During the brief period of shared prosperity and upward mobility following WWII, rentiers formed a truce with progressive forces, but also launched an ideological counter attack to convince the masses that they no longer mattered. Moreover, they made us believe that the tide of globalization would continue to raise all boats (as well as their mega-yachts), if the masses would just be patient and await the “trickle down”. But as Neoliberalism continued to fail, financial skullbuggery became the normal operating procedure (creating liquidity from phantom wealth). These processes also failed, hence the new rentiers began to return to more primitive rationales. Lately they seem to be invoking the devine right of the Davos Men, declaring a new era of an old idea called “Stakeholder” (actually mistakeholder) Capitalism (where the masses vill own nothing, but vill be happy). In other words, the reign of radically reconstituted rentiers will mean the implosion of capitalism, not to mention ushering in the demise of democratic governance. Our system is already little more than an overstimulated Banana Republic, with an open caldron of societal strife bubbling just beneath the surface. It has also become a new version of the oligarchic imperatives of the Middle Ages recast and reified for the Information Age.
It is worth noting that Mainstream economists’ preoccupation with fake social physics made them pretend to be ahistorical and anti-institutional (especially politics) as well as anti-evolutionary. This ersatz scientism does not excuse there pandering to pernicious plutocrats. Nor does it reduce their responsibility for actually creating the counter-culture that they were commissioned understand and ameliorate. In short, the Mainstream was always more a cult than a science. Famed, yet forgotten, American classical economists like Henry George and Thorstein Veblen sought to reintroduce the rentier as the social blight they were, but were demised as cranks and clowns in most academic circles (except for the orphaned Institutionalists).
The prime example of economics as institutionalized ignorance is how Mainstream economists treated money and banking as completely neutral and irrelevant. Meanwhile, deregulated b(w)ankers parlayed the fraud of the fractional reserve system into a galactic Debt (or Death) Star, with money literally created out of thin air as interest bearing obligations (often self-securitized) to private banks. And, of course, debts are assets to a bank and banks are the wonderland of the rentier. Household, corporate, and government debt is now somewhere north of 305 trillion or about 3 times the GDP of the planet, not including the nominal value of derivatives maintaining that the debts will not be repaid (maybe another 500 trillion). Utter debt serfdom is the lot of much of the world’s population.
Mainstream stupidity about the importance of historical context and the existence cultural evolution, not to mention geography and demography, were also monumental. In American the royal landlords of Europe were totally eclipsed by the new Robber Barons (named for the German royals who controlled major river traffic). In America they and their offspring were not just absentee landlords, but also railroad/land grab tycoons, industrialists as well as investment bankers. These pirate captains of industry endowed burgeoning economics departments at prestigious universities and think tanks to ideologically convert their vices to virtues. More importantly, they used their excess to influence legislative, judicial, and executive offices as well as the capture regulatory bodies.
Furthermore, this re-emergence of Veblen’s “predatory impulses” from the previous Gilded Age blended seamlessly with the monopolistic platforms of the new technological epoch. The information Age, also greatly expanded opportunities to expropriate the public patrimony via the Internet, big data, and Artificial Intelligence (AI). Plus, the algorithmic epoch further fueled hyper-financialization, once the New Deal financial constraints, such as Glass-Steagall (which maintained a fire-wall between commercial and investment banking) were removed. Financial engineers (called Quants) not only created mountains of phantom wealth, the Internet and social media allowed giant platform monopolies to monetize our very souls.
Changing Nature of Property and Who Gets to Own It
Using their unmitigated power over political individuals (from both parties) and associated institutions (as well as the culture at large) many rentiers systematically engineered new systems of vast wealth accumulation. A new generation of rentiers discovered that they could accumulate and inflate their assets, and engage in debt leveraging and speculation without the risks of actual industrial ventures. While privatizing gains, they could socialize much of their losses to the tax payers.
At a fundamental level, the revival and vengeance of the rentiers was mutually causal with changes in the nature of property. Moreover, for the vast majority of the world’s inhabitants these new improved forms of property became virtually unattainable. In the pre-industrial era, immobile property (land, rents, and windfall via proximity to public infrastructure and development) was paramount. The Industrial Revolution brought mobile property (commodity rents and monopoly profits). Highly mobile global finance, further fueled by insane central bank liquidity measures (e.g. zero interest rates) exploded the growth of a type of phantom property (astronomical leveraging, galactic stock valuations (manipulated via buybacks), and unbridled speculative frenzies). The Information Age, moreover, shifted property toward the collection of artificial claims (patents, trademarks, and other intellectual property protections) and the expropriation of the commons of the public knowledge, infrastructure, and scientific base. It also brought the rise of “Surveillance Capitalism” and instantly rewarded the “platform monopolies”. Information commodification also recombined with the increasing frenetic finance and it novel synthetic instruments (e.g., credit default swaps, etc.) as well as further central bank interventions (undermining market discovery and triggering more onerous government bail-outs). Exotic securities became the preferred form of property. Worse yet, as Columbia Law Professor, Katharina Pistor, details in her 2019 epic The Code of Capital: How the Law Creates Wealth and Inequality, these processes for creating fake wealth were readily encoded into the legal system. As she explains, It is legal coding that turns an asset into capital and gives it the capacity to generate wealth for its owner.
Beyond the mammoth influence over the legal apparatus, dramatic changes in the tax system and campaign finance laws, along with relaxation of financial and anti-trust regulation, have restored the rentier’s Gilded Age supremacy. Only now the rentier class includes the tech monopolists and the “Shadow Bankers” (hedge & private/pirate equity fund managers, venture/vulture capitalists, Insurance executives, as well as usurious payday and title loan sharks).
The negative repercussions of the rabid financialization of the economy are exemplified by re-commodification of housing and the Great Dispossession which accompanied the last (yet still unresolved) financial crisis. Consider how governments papered over the so-called resolution and facilitated the shady title transfers (e.g., “robo-signings”). Rather than helping the homeowners, as promised, they expedited the repossession of distressed parcels to private (pirate) equity firms and hedge funds (e.g., Blackstone). With 10 million Americans loosing their homes, the old fashioned landlords were back in spades. It is noteworthy that the shiny new overlords made land inaccessible to most (as they ain’t making anymore) and they are again extracting exorbitant rents (as inflation flattens incomes). Consider that the instant tech billionaires (Gates, Zuck, Jeff, etc.) own thousands of homes and tens of thousands of acres of farmland.
Plus, old school (pre-New Deal) style “money trusts” control many of the remaining industrial enterprises. Several previously illustrious industrial firms are merely platforms for stock manipulation and “pump and dump” finance. The only folks actually making stuff these days are primarily part of the powerful Military Industrial Complex (a government onto itself) and/or the drug cartels (both legal and illegal). Of course, Big Pharma also benefits from inordinate information monopolization and legal manipulations. A recent article in the New York Times explained how one drug company made 114 billion by gaming the patent system; not to mention exploiting our hyper-privatized public health regime.
This perpetual motion fake wealth machine also creates huge incentives for what Naomi Klein labeled “disaster capitalism”. In essence, what colonial powers and modern-day development bankers did to the 3rd World is now coming back to roost in the 1st World. Home grown rentiers are now following John Perkins, Confessions of an Economic Hitman playbook, chapter and verse. They loan, then destabilize, demand austerity, enforce privatization (plus grand fire sales of public infrastructure and resources, in lieu of unpaid debts); not to mention promoting warlords and demigods. In short, many of the rentier’s aims and devices are completely at odds with democratic traditions they so easily exploited to the detriment of their fellow citizens. Furthermore, contrary to the popular mythology, most of the members of the present-day rentier class did NOT earn their wealth in all that different a manner than the kings and princes of old (legalized piracy and inheritance). Recall how Bush the younger first acts as president were to do away with the inheritance tax and the initiate a “forever war”. Many of the rentier’s enthusiasm for fascism and neofeudalism should come as no surprise. SERFS UP!
