The real “takers” in America are not poor
people dependent on welfare, but the unproductive, rent-extracting rich
By Michael Lind
http://www.salon.com/2013/03/21/private_sector_parasites/
Businessman and real
estate developer Donald Trump (L) greets Mitt Romney after endorsing his
candidacy for president at the Trump Hotel in Las Vegas, Nevada
February 2, 2012. (Credit: Reuters/Steve Marcus)
You
don’t have to be a Tea Party conservative to believe that the economy is
threatened when there are too many “takers” and not enough “makers.”
The “takers” who threaten the dynamism and fairness of industrial
capitalism the most in the 21st century are not the welfare-dependent
poor — the villains of Tea Party propaganda — but the rent-extracting,
unproductive rich.
The term “rent” in this context refers to more than payments to your landlords. As Mike Konczal and many others have argued,
profits should be distinguished from rents. “Profits”
from the sale of goods or services in a free market are different from
“rents” extracted from the public by monopolists in various kinds.
Unlike profits, rents tend to be based on recurrent fees rather than
sales to ever-changing consumers. While productive capitalists —
“industrialists,” to use the old-fashioned term — need to be active and
entrepreneurial in order to keep ahead of the competition, “rentiers”
(the term for people whose income comes from rents, rather than profits)
can enjoy a perpetual stream of income even if they are completely
passive.
Rents come in as many kinds as there are rentier
interests. Land or apartment or rental-house rents flow to landlords.
Royalty payments for energy or mineral extraction flow to landowners.
Interest payments on loans flow to bankers and other lenders. Royalty
payments on patents and copyrights flow to inventors. Professions and
guilds and unions can also extract rents from the rest of society, by
creating artificial labor cartels to raise wages or professional fees.
Tolls are rents paid to the owners of necessary transportation and
communications infrastructure. Last but not least, taxes are rents paid
to territorial governments for essential public services, including
military and police protection.
All
of these goods or services are necessary to make or distribute the
goods and services generated by productive industry (which can be
government-owned or nonprofit, as well as for-profit). If one or more of
the sectors providing inputs or infrastructure to productive industry
charges excessive rents, then industry can be strangled. Industry
cannot flourish if too much rent is paid to landlords, if credit is too
expensive, if excessive copyright protections stifle the diffusion of
technology. Even progressives must concede that guilds or unions or
professions can use the power of labor monopolies to demand excessive
incomes for their members and that at some point high taxes really do
strangle the economy. (The evidence of successful high-tax-big
government countries like those of Scandinavia suggests that you can go
safely up to about 40-50 percent of GDP going to government, assuming
the taxes are well spent and raised largely by less-distortionary taxes
including consumption, property and wealth taxes).
All of this
suggests that, if we want a technology-driven, highly productive
economy, we should encourage profit-making productive enterprises while
cracking down on rent-extracting monopolies, whether they are natural
products of geography and geology (real estate and energy and energy and
mineral deposits) or artificial (chartered banks, professional
licensing associations, labor unions, patents and copyrights). This is a
valid distinction between “makers” and “takers.”
Unfortunately,
with the exception of some leftist and liberal economic thinkers
who distinguish “rentier capitalism” or “financial capitalism” from
“industrial capitalism,” conventional political discourse doesn’t
distinguish among profit-earning “makers” and rent-extracting “takers.”
Many progressives and populists indiscriminately denounce “big business”
and “the corporations” as though a productive consumer electronics
manufacturer were no different than a company that monopolizes the tolls
from a privatized municipal parking meter system. At the same time,
the center-left, whose upscale supporters tend to be credentialed
upper-middle-class professionals, tend to ignore the antisocial aspects
of the rent-extracting schemes of the professional guilds — medicine,
law and the professoriate — as well as of their elite accomplices, the
credential-granting universities.
On the right, the greatest
triumph of the rentier interests has been to redefine “capitalist” to
mean, not productive entrepreneur or successful industrial company
executive, but “anybody who makes money” — a category that includes not
only investors in productive enterprises but also rentiers and a third
category of speculators in unproductive assets (Picasso paintings and
Persian rugs, as opposed to machine tool factories). In today’s
rentier-friendly conservative ideology, somebody who makes payday loans
at usurious interest rates, gouges businesses with high insurance rates,
or gets paid tolls from a privatized toll road is as much a “maker” and
an “entrepreneur” and a “capitalist” as someone who puts together a
team of inventors, engineers, workers and investors to apply 3-D
printing to printing replacement body parts. All money-making
enterprises are supposed to be equally productive and socially useful,
for no other reason than they make somebody rich.
A case can be
made that the greatest threat to the future of industrial capitalism
comes, not from excessive statism, but from the excessive share of the
economy going to the “private taxation” of productive business by
unproductive, parasitic private rentier interests. In the U.S., the
rentier sector is sometimes described as the FIRE (finance, insurance,
real estate) sector. The FIRE sector accounts for most of the
rent-seeking in the U.S., although it does not include energy/mineral
rentier interests or professional associations.
Without invoking a
conspiracy, we can identify a Rentier Agenda that is harmful both to
productive business and ordinary wage earners but promotes the policy
goals of many of America’s large and influential rentier interests,
particularly those in finance. The Rentier Agenda has three broad
components: low taxes on rentiers, privatization of natural monopolies,
and a macroeconomic policy driven by fear of inflation.
This is the first in a three-part series.
Friday, Mar 22, 2013 07:45 AM EDT
The 3-point plan of wealthy landlords,
lenders and insurance providers -- the true "takers" threatening the
nation
By Michael Lind
http://www.salon.com/2013/03/22/how_rich_moochers_ruin_america/
In a previous
column detailing
the true “makers” and “takers” in America, I argued that the greatest
threat to American capitalism today comes not from public taxation
supporting public programs, but from “private taxation” in the form of
excessive private “rents” that subsidize private sector parasites or
“rentiers” (like landlords, lenders and providers of health insurance
and healthcare). These excessive private taxes or rents are costs on
productive enterprise that can be as crippling as excessive public
taxation.
In American politics as in the American economy, power
and wealth have shifted from the industrial capitalists of old to the
“rent lords” of the early 21st century, based in the overgrown FIRE
(finance, insurance, real estate) sector. The agenda of the new rentier
oligarchy in the U.S. is quite different from that of traditional
productive businesses. The Rentier Agenda consists of low taxes on
rentiers, the privatization of infrastructure and social insurance, and a
macroeconomic policy that favors creditors rather than debtors,
including debtor businesses and debtor governments.
Low taxes on rentiers.
In the late 20th century, the U.S. and a number of other capitalist
countries made tax rates on capital gains lower than tax rates on wage
income. This was supposed to encourage investment in productive
enterprises, but in fact it merely provided the super-rich with windfall
fortunes that have often been used for stock market and real estate
speculation. Thanks to privileged tax treatment of capital gains, Warren
Buffett complains that he pays lower taxes than his secretary, and Mitt
Romney — the poster boy of rentier financial capitalism —
paid 13.9 percent in taxes in 2010, lower
than the combined employee and employer payroll taxes paid by
low-income workers who pay no federal income tax (and not counting the
state and local taxes that they pay). America’s rentier plutocracy has
deployed campaign contributions to intimidate Congress into keeping
taxes extremely low on those who make most of their income from
investments, whether the investments enhance the American economy’s
productive capacity or not.
Privatizing natural monopolies.
The classic productive capitalist wants to found a company to provide a
new, socially useful good or service and make money by sales. In
contrast, the classic parasitic rentier wants to bribe the state
legislature into privatizing and selling state roads so that he or she
can make money without effort or innovation every time somebody drives
and pays a toll. Not only progressives but mainstream conservatives used
to agree that natural monopolies, such as many infrastructure
services—water, electricity, transportation — should be either publicly
owned or publicly regulated utilities. Today, however, some plutocrats,
seeking guaranteed, recurrent streams of money for little or no effort,
fund politicians and ideologues who favor privatizing or deregulating
infrastructure and public utilities and cutting or voucherizing Social
Security and Medicare, to force the elderly to buy financial products
and costly health insurance from the rentier sector.
Anti-inflationary macroeconomic policy.
The rentier class overlaps largely with the creditor class, much of
whose wealth is in the form of debts that must be repaid by governments,
businesses and individuals. In all times and places, the creditor elite
has lived in fear that its wealth may be reduced by inflation, which
permits the debtors to repay their debts in currency, which is nominally
the same but in reality of ever-dwindling value.
Moderate
inflation is the friend of governments with high debt loads, allowing
them to pay down debts more easily without hurting the economy by
raising taxes too much or cutting spending too much. Most businesses can
live with moderate inflation, as long as they pass on price increases
in inputs to their customers. Nor is moderate inflation a threat to the
working-class majorities in the U.S. and similar industrial
democracies, as long as wages and social insurance, like Social
Security, are adjusted for inflation. (Only an affluent minority of
Americans have substantial private retirement savings that could be
harmed by inflation.)
This means that the rentiers are much more
willing to have central bankers and other government policymakers slam
the brakes on the economy, at the slightest sign of inflation, than are
productive businesses (if they are rational), governments or wage
earners. Indeed, because rising wages in tight labor markets can
sometimes contribute to economy-wide inflation, the creditor class can
tolerate or even approve of high levels of sustained unemployment that
devastates much of a nation’s population while depriving productive
businesses of great numbers of consumers.
That’s the Rentier
Agenda, then — low tax rates on unearned income flowing to passive
investors, replacing public utilities with private toll-charging
monopolies, and pursuing policies that deter inflation, even at the risk
of prolonged, mass unemployment and idle factories. It is no
exaggeration to say that the private sector rentiers are not only the
real “moochers” and the real “takers” but also are the greatest threat
to productive industrial capitalism, in the United States and the world.
What
we need is an Anti-Rentier alliance. Such a coalition would scramble
the usual patterns of politics. Progressives and conservatives alike
would have to distinguish between productive businesses, which we should
encourage, and rent-extracting parasites that need to be dealt with.
Pro-manufacturing liberals and Main Street conservative populists should
unite against what the progressive economist Michael Hudson calls
“the tollbooth economy” in alliance with what James K. Galbraith calls
“the predator state.”
This is the second in a three-part series.
Taming wealthy, unproductive "moochers" will
require a populist campaign to stop them. Here's how we can do it
By Michael Lind
http://www.salon.com/2013/03/25/defeating_useless_rich_people/
In two
previous columns,
I argued that left and right alike are confused by a failure to
distinguish productive businesses that sell innovative goods and
services from “rentier” interests — landlords, lenders, copyright
holders and others — which use their natural or artificial monopoly
power to extract excessive tolls, fees and other recurrent payments from
the rest of society, including productive businesses. The fees or rents
extracted by these interests constitute a kind of “private taxation”
which — rather than public taxation — is the greatest threat facing
America’s productive economy.
Today America’s powerful rentier
interests, particularly those in the FIRE (finance, insurance and real
estate) sector, are mobilizing campaign contributions and paid
propaganda to promote what I called the Rentier Agenda: low taxes on
those whose income is derived from capital gains; the privatization of
public infrastructure and the deregulation of regulated private
utilities, to generate windfall profits for investors in privatized or
deregulated agencies; and a macroeconomic policy that serves the
interests of creditors, at the expense of slow growth and mass
unemployment, rather than productive businesses and workers. Similar
observations have been made by many on the left and some mavericks on
the right.
To counter the domination of America’s rentier
oligarchs, we need an Anti-Rentier campaign that would unite unlikely
groups: owners of productive businesses as well as workers, populist
conservatives and liberal reformers. An Anti-Rentier movement would
distinguish businesses that make profits by providing worthwhile goods
or services in innovative ways from rentier interests that passively
extract exorbitant tolls and fees from the economy without adding any
value.
An Anti-Rentier movement would oppose unproductive,
ill-begotten wealth, not the rich in general. Wealthy individuals who
get richer by investing in start-up companies or funding long-lived,
creative blue-chip firms provide a valuable benefit to society, even as
they risk losing their own money. Such risk-taking investors are the
opposites of financial sector rentiers who seek to bribe policymakers
into letting them privatize their gains while socializing their losses.
But
government can and should minimize passive rent extraction and
unproductive speculation or gambling. The methods for minimizing
excessive rents are as various as kinds of rentier interests. Windfall
real estate profits should be taxed away by property taxes or “land
value” taxes. Severance taxes or superprofits taxes should be levied on
energy and other resource windfalls determined by geography rather than
human effort. Banks should be low-profit, publicly-regulated utilities
and laws against usurious interest rates, struck down in the U.S. in the
late twentieth century, should be restored. Infrastructure assets—water
systems, electricity, roads, airports and airlines, rail, inland
waterways—may be privately-owned utilities, but their prices need to be
regulated in the public interest. While there are legitimate roles for
both professional associations and labor unions, they should not be
allowed to act as predatory labor cartels at the expensive of the
economy.
The Anti-Rentier tax agenda would seek to raise capital
gains taxes on rentiers while lowering the tax burden on American
workers and the profits of productive businesses. The Anti-Rentier
policy reform agenda would involve increasing public ownership or
utility regulation of infrastructure. Instead of cutting Social Security
and Medicare to force the elderly to buy more products from parasitic
private-sector monopolies and oligopolies, the Anti-Rentier coalition
would favor expanding Social Security and other public social insurance,
while phasing out tax subsidies for private health insurance and
private retirement products. When it comes to economic management, an
Anti-Rentier movement would tolerate a modest amount of inflation, in
the interest of productive business and solvent government, at the
expense if necessary of the creditor elite. An Anti-Rentier movement
would consider using methods used by other governments, such as postal
savings banks, public investment banks, and “financial repression”
(which isn’t as scary as it sounds) to raise adequate money for
government while minimizing blackmail, in the form of high interest
rates, imposed by domestic creditors and foreign creditors.
If
these Anti-Rentier reforms were undertaken, then genuinely productive
American businesses would be freed from many costs imposed on them by
the “private parasites” who are far greater threat to its future than
America’s public sector. Cutting off excess rents would not only shrink
the rentier elite’s share of the U.S. economy, it would also alter the
membership of the exclusive club of rich Americans, which would have a
much greater percentage of “makers” who got rich by selling new goods
and services and a much smaller proportion of “takers” from finance and
real estate. The typical rich American should be an innovative
industrialist or technologist, not a Wall Street financier or a guy with
a parking-meter monopoly. Super-rich bankers would be as rare as
super-rich public utility executives.
Americans have tamed rentier
industries before. In the early twentieth century, exploitative private
power companies were domesticated as regulated public utilities. The
Enron scandal, associated with late-twentieth century deregulation,
proved the wisdom of the utility regime. And even conservative states
like Texas have always levied severance taxes on natural resource
monopolies. The challenge of our time is to extend utility-style
regulation or public ownership to today’s out-of-control, predatory
rentiers in higher education, health care, and — most of all — finance.
Productive Americans of center, left and right, unite! You have nothing to lose but your rents.
...
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