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Nothin’ but the Rent

Modern economies are dominated by the rentier

Rentier Capitalism: Who Owns the Economy and Who Pays for It? by Brett Christophers, Verso. 512 pages.

Like so many of us, Karl Marx spent a summer after college trying to figure out why anyone has to pay rent. He wrote down two quotes in his 1844 notebooks as guidance to the problem. One was from Adam Smith: “The landlords, like all other men, love to reap where they never sowed, and demand a rent even for the natural produce of the earth.” The other was from the French economist Jean-Baptiste Say, and was more direct: “Landlords’ right has its origin in robbery.” Marx and Smith and Say and all of their classical contemporaries agreed: rent was unearned, inefficient, and extractive, and for those reasons it was a relic of a pre-capitalist past. So why does it dominate the richest economies of twenty-first century capitalism?

Since the 2014 publication of Thomas Piketty’s Capital in the Twenty-First Century, the figure of the rentier has emerged in critiques of contemporary capitalism that come from different points on the political spectrum. Piketty showed that inequality has overwhelmingly been driven by the capital incomes of the top one percent (or tenth or hundredth of one percent), which led even Bill Gates to agree that “excess wealth concentration can have a snowball effect if left unchecked.”  Liberals like Paul Krugman and Joseph Stiglitz bemoaned abnormal or excess profits received above competitive market rates. Work from left-wing academic critics like Andrew Sayer, Guy Standing, and Mariana Mazzucato sharpened the point further: rents are unearned incomes extracted by people who own things rather than do things or make things.

The story of the rise of the rentier is a new version of what had become a stale narrative about the rise of neoliberalism. Following Piketty’s chronology, the story goes like this: there was an earlier era of rentier dominance in the unfettered capitalism of the nineteenth century Gilded Age. That world came crashing down in the destruction of physical and financial capital between 1914 and 1945, leading to about thirty good years when organized labor was strong, taxes were high, governments were interventionist, and median incomes were rising. All of that changed in the long crisis of the 1970s and the policy responses of the 1980s. Inequality began to rise again, finance was deregulated, and neoliberal governments came to power, promptly breaking labor strikes with police violence and privatizing everything they could lay hands on. After thirty years of crisis from 1914 to 1945 and thirty years of suppression from the 1940s to the 1970s, the rentier returned to political and economic dominance from the 1980s onward.

The preponderance of rentier wealth and the attendant distortions to national economies, democratic politics, and international institutions has contributed to a parallel conversation about whether financialization, automation, information, or capital overaccumulation have led us into a new phase of capitalism, or indeed out of capitalism and into something worse.

In his detailed and stimulating book, Rentier Capitalism (first published in late 2020 and due out as a paperback in June), the political economist and economic geographer Brett Christophers offers a unifying interpretation of how rentierism works, providing a synthetic analysis of the contemporary British economy as a case study. The UK’s economy is currently dominated by finance, fossil fuel extraction, intellectual property, digital platforms, and the recipients of privatization, especially in real estate. Christophers aims to show how each of these sectors is a symptom of the same underlying malady, the rentier model, as well as how, collectively, the dominance of the cross-sector rentier alliance has produced the sclerotic economy, gaping inequality, and virulent politics that characterize global capitalism today.

Rentier Capitalism draws on research Christophers has been doing for at least half a decade. In The Great Leveler (2016), he showed how intellectual property law worked to undercut anti-monopoly laws. In The New Enclosure (2018), he followed the privatization of public land that constituted some 10 percent of the area of Britain, with its attendant social and political consequences. Each of those subjects returns here in its own chapter. More important, he is now offering a unified interpretive framework, developed across 112 pages of Preface, Introduction, and Coda, with seven intensely detailed substantive chapters in between, each discussing the rentier structure of a different sector of the British economy.

What is rent, then? “In essence,” Christophers writes, “rent, at least as understood in this book, is payment to an economic actor (the rentier) who receives that rent—and this is the key factor—purely by virtue of controlling something valuable.” He goes on to clarify further: rent is “income derived from the ownership, possession or control of scarce assets under conditions of limited or no competition.” Both elements matter: control, and limited competition. He contends that these are the fundamental characteristics of neoliberal capitalism in general, and the British economy in particular, spanning sectors, borders, and scales. Thus: “Rentier capitalism is an economic system not just dominated by rents and rentiers, but, in a much more profound sense, substantially scaffolded by and organized around the assets that generate those rents and sustain those rentiers.”

The central chapters are compelling reading. Christophers has delved deep into company reports and annual financial statements, and he is interested in how everything works, from tax loopholes to cloud computing to the abyssal dread of Special Purpose Vehicle contracts. He will show you that Subway is one of the most prolific rentiers in modern capitalism (because they do not actually operate any restaurants, their entire business is licensing their brand, images, and recipes), he will teach you how privatization auctions work, and he will explain why the University of Oxford is right behind British American Tobacco in filing patent applications. The core of the book is an essential synthesis of who makes money in Britain, and how. The picture is grim.

Take Arqiva, a private telecommunicates company owned by a consortium of international investment institutions, which controls most of the infrastructure of TV, radio, and cell phones in Britain. “Arqiva doesn’t primarily extract or make or provide,” Christophers writes. “In fact, the crux of its business model is not doing (extracting/making/providing) at all; rather, it is having.” Arqiva’s website disagrees. It claims that Arqiva “provides critical data, network and communications services.” The book stands or falls on whether the reader is more persuaded by Arqiva or by Christophers. The participants and defenders of the many, many rentiers Christophers discusses would all make the same plea: they provide services to customers who want them. Barclays provides financial services, Amazon Web Services provides a range of remote computing services, and your landlord provides the “service” of letting you live inside an apartment. Christophers says as much, acknowledging that platforms “make” markets, that Google and Facebook do “provide tangible services,” and that intermediaries exist because their customers want them to. Many of these services are ridiculous or pernicious, but they are not nothing.

The problem is most acute in the chapters on intellectual property and outsourcing. Each of those are structured around profound injustices, but companies that received outsourced contracts definitely do extract/make/provide, and holders of intellectual property rights did at some point make something, whether a vaccine or a book about capitalism. So why don’t all of these players deserve their rewards?

The answer clarifies why Christophers’s definition of rent is a mix of the classical version (rent is unearned) with the modern economist version (rent is surplus profit above competitive rates). Barclays, Arqiva, and Amazon are either outright monopolies or close enough to function just like monopolies. Thus, “rent-bearing assets,” Christophers writes, “are those characterized by monopoly power not just in ownership or control—the heterodox emphasis—but also in terms of their commercialization on the market.”

The standard economics understanding of monopolies is that they are bad because they provide too little of a thing at too high a price. Anyone who has ever attempted to do anything in Britain will see the immediate applicability of this definition. By expanding from that narrow conception to take in things like intellectual property, private housing, and digital platforms, Christophers makes a persuasive case that rentierism is coterminous with capitalism itself. The point can, and should, go further. The thing that monopolists control is access. They can charge the high prices they do because people have to pay them, or the monopolist can exclude those people from access to whatever the monopolist controls.

This critique is common across the political spectrum. What gives it a radical content is the recognition that private property is itself, in all of its forms, inherently a kind of exclusive monopoly. What gives property its value is the ability to call on the coercive power of the state to violently exclude all other humans from some part of the world. Contrary to the claims of its ideologues, the essence of capitalism is exclusion. Market exchange is predicated on excluding anyone who cannot pay; profits are predicated on excluding anyone who is not an owner; investment is predicated on excluding non-investors from returns. Part of the deep capitalist animosity toward taxation and redistribution, let alone collective ownership, is exactly because those policies do not exclude people from benefits they haven’t “earned.”

So what is new here? We have had theories of monopoly capitalism before: Paul Baran and Paul Sweezy’s book on the subject in 1966; Rudolf Hilferding’s Finance Capital in 1910. Has the return of the rentier ushered in a new phase of capitalism? Is it a reaction to a long crisis of capitalism, yet another way of “buying time”? As a concept, “rentier capitalism” has a breadth that “financialization” lacks, and a clarity that is sorely missing from “neoliberalism.” It also speaks to deep continuities in the history of capitalism, suggesting not a transcendence into new relations of production, but a destructive reassertion of an old pattern.    

Monopolies and rents are not only the basis of private property, they are also the basic form of capitalist institutions. Joint-stock companies were the first form of permanent capital, lasting longer than a single partnership for a single venture, or even the lives of individual investors. They also held government charters that gave them monopoly rights to things like colonial exploitation in the East Indies, tax farming in Old Regime France, or the Atlantic slave trade. Likewise, an earlier version of the English word “rent” was the French rente (it rhymes with “want”), which were loan contracts under the Old Regime. People would loan the Crown (or one of its bewildering clients) a lump sum and receive back some percentage in a semi-annual payment for as long as some individual stipulated in the contract remained alive. The rente contract in turn could be bought or sold: it was a right to a stream of future income. The specified lives were often public figures (so everyone would know when they died and the rente expired), but eventually a consortium of financiers realized that Genevan girls who had survived smallpox were likely to live the longest, so they created rentes on bundles of their lifespans. The first rentiers were people who lived on the income from these various rentes.

Joint-stock charters and rentes have something in common with each other, and with the rentiers in Christophers’s story: they are each a way of transforming an instant of wealth inequality into a future of structural dominance. In each case, the monopoly power was initially purchased with a lump sum. That lump sum was converted into a future stream of exclusive income, exclusive market share, or exclusive profits. Debt is an even clearer version of this relationship: an initial imbalance is converted into a future of repayment service. This temporal dimension of monopoly power is all over Rentier Capitalism. The monopolies have already been built, so they can use their power to block upstart rivals and protect themselves from their own shoddy business practices. The privatization has already happened, the no-bid contracts have already been awarded, and the digital platforms are already online. The critical moment has already passed; we live now in the future of control and exclusion those earlier purchases have bought.

In the same passage of his 1844 notebooks, Marx went on to write:

Now, however, let us consider the rent of land as it is formed in real life. The rent of land is established as a result of the struggle between tenant and landlord. We find that the hostile antagonism of interests, the struggle, the war is recognized throughout political economy as the basis of social organization.

Read with this passage in mind, Rentier Capitalism shows what is new: not the existence of monopolies and rents alone, but the fact that their ubiquity and high prices (in all senses of the word) are the result of a struggle that was lost forty years ago and continues to be lost over and over again. Christophers concludes by pointing to four policy areas that would need to change to undo the rentierization of the economy: a return of anti-monopoly law, a restructured tax system, the return of government investment, and large-scale redistribution of property. He has no illusions about the stakes, or the challenges: “Unless the Left returns to power in the UK in relatively short order and is able to push through the transformations required to remove the rentier from her pedestal, it is entirely possible that it will require devastating socioeconomic ructions once again to impose the limits to rentierism that it does not contain within itself.” He invokes not only the apocalyptic possibilities of climate change, but also the precedent of 1914 through 1945. In doing so, he joins Piketty and other analysts of historical inequality who have found that substantial reductions to inequality tend only to happen in the wake of catastrophes.

What is new about the rentiers of today, then, is not their prevalence, their dominance, or that they face less serious opposition than in the past. What is most distinctive about our contemporary rentiers is that it has become difficult to discern whether their maneuvers represent rational strategies of elite wealth defense in conditions of declining productivity and technological change, or instead, the implacable drive of a nihilistic death cult.