My terminology to describe the phase of capitalism that started circa 1970 has been tweaked over time. I started by referring to ‘financial capitalism’, which was certainly ok, then ‘financialised capitalism’, which is perhaps marginally better, and now I’m tempted by ‘rentier capitalism’, following the likes of Andrew Sayer (whose work I much admire). This last shift has now been consolidated by my reading of Brett Christophers’ new book Rentier Capitalism: Who Owns the Economy and Who Pays for It?, which incidentally I highly recommend. I’m not an economist, hence the liberal use of quotations – but I’m finding Christophers’ analysis very convincing.
In this blog, curtailed by choice (I prefer blogs which are no longer than approx. 1,000 words, though I occasionally meander on), I set out what might be termed a Weberian ideal type of rentier capitalism, which I’ve extracted from the early part of Christophers’ book. I should add that his focus is very much on the UK.
Rent, Christophers suggests at the outlet, ‘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. The ‘something’, whatever it happens to be, is referred to generically as an ‘asset’: an ‘item of value owned’ … that is valuable precisely in view of the fact that control over it endows the owner with the capacity to generate future income.’ Rentier assets are hugely variable. ‘Some – housing, telecommunications infrastructure, digital platforms – are physically constructed, in virtual if not real space; others – intellectual property rights, outsourcing contracts – are purely legal rather than physical constructs; and others still – land, natural resources – are not constructed at all, but simply exist spontaneously.’ ‘Rent is income to which control of a valuable asset is in some sense fundamental, and a rentier is the recipient of such income. No asset, no rent, no rentier.’
Chrisophers’ focus in his book is on the system of production and reproduction in which incomes are dominated by rentiers; and he calls such a system ‘rentier capitalism’.
Rentier capitalism is a kind of ‘balance-sheet capitalism’. Alongside the income statement and statement of cash flows, the balance sheet is one of three main types of financial statements used to document the financial activities and position of a business. In rentier capitalism – a system based on ‘having’, not ‘doing’ – the balance sheet is the be-all and end-all.
Christophers refers first to a ‘heterodox’ understanding of rentier capitalism. For the likes of Smith and Ricardo, rent was essentially ‘land’ rent; both focused on the landowner’s monopoly power over his/her asset. Marx did not demur: for him, land rent was the form in which the monopoly that is landed property is economically valorised under capitalism. This ‘classical’ understanding of rent has been considerably broadened since. Rent remains payment for monopoly control of an asset, but the asset need not be land. There now exist ‘asset markets of all sorts’ (Harvey). Financial assets are very much part of this expanded definition of rent.
Christophers contrasts this heterodox understanding with what he calls the ‘orthodox’ view in mainstream economics. ‘Within mainstream (‘orthodox’) economics, rent is defined not on the basis of the type of asset in relation to which it represents a payment – land, rents, financial rents, and so forth – but instead by the quantum of market power enabling its derivation: it is profit attainable specifically due to a dearth of market competition. Thus, if ‘normal’ levels of profit are those that can be realised in a competitive situation, rents are the ‘excess’ returns afforded by any departure from that idealised scenario – the abnormal profits occasioned by the capitalist power to monopolise a market.’ Rents this defined may derive from control of an asset, but, crucially, they need not; they can arise in the context of all types of market production and exchange (eg Epstein & Montecino: ‘in the case of bankers, the rent is the amount of their income that they are able to command over and above what would be required to get them to perform their activities’).
Christophers grounds his concept of rent in heterodox thinking, with its emphasis on assets, but tempers this by incorporating an attention to market conditions that is central to orthodox economics. ‘An asset – a new, patented production technology, say, or a mineral fuel resource – can be scarce and in principle valuable; but the proprietor’s commercialisation of it can nonetheless encounter competition of a degree that precludes rents from being earned. Other technologies might be available to produce better, cheaper substitute products; government intervention might serve to ‘strand’ mineral assets of one kind (such as fossil fuels) and to subsidise the production and marketisation of alternative fuel sources (such as renewables). Rent-bearing assets, in short, are those characterised by monopoly power not just in ownership or control – the heterodox emphasis – but also in terms of their commercialisation on the market.’
So Christopher opts for the following definition: rent is income derived from the ownership, possession or control of scarce assets under conditions of limited or no competition.
Rentier capitalism has been accelerated in the 21st century by a series of policy reforms typically captured under the concept of ‘neoliberalism’. Christopher goes on to argue that rentier dominance stifles innovation, depresses the dynamism of capitalist economies and is a major mechanism for producing inequality.
I conclude this blog briefly introducing Christophers’ critique of rentier capitalism by noting his seven core asset types (which he goes on to discuss later in his text). These are (with their principal income streams in parentheses): (1) financial (interest, dividends, capital gains); (2) natural resource reserves (product sales); (3) intellectual property (product sales, royalties); (4) digital platforms (commissions, advertising fees); (5) service contracts (service fees); (6) infrastructure (service fees, licensing fees); and (7) land (ground rent).
Christophers writes: ‘naturally, the configuration and weighting of asset portfolios and sectoral rentier forces will vary between countries … finance and natural resources play a disproportionately significant role in the UK economy. Moreover it is hard to imagine that any national government competes with the UK’s in the extent to which it has advanced down the road of enabling contract rentiers and infrastructure rentiers through outsourcing and privatisation, respectively. On the other hand, it is also hard to think of any major capitalist economy in which all of the forms of rentierism explored in this book do not represent significant phenomena – with the possible exception of natural-resource rentierism.’