The Rentier Economy

There’s a piece in the Bible (Thessalonians II) that goes, “He who does not work, neither shall he eat.” And then there are tons of people nowadays who misinterpret that, claiming it was aimed at welfare bums — as if welfare benefits even existed in the ancient Middle East. The only able-bodied people not working in the Roman Empire were the rich. And they were eating, big time.

And for those at the bottom, Christ wouldn’t have spent most of his time exhorting one and all to give generously to widows, orphans and refugees — if he thought those who were were unable to work should just go away and starve.

The story of Christ overturning the tables of the money lenders in the temple gives us a clue what he had in mind. Sure, it was because they were profaning the temple with their commercial activities. But even more than that, it was because here was a mercenary class of people making piles of money — not by doing an honest day’s labour — but by hoarding money and then rationing it back out to those from whom they took it. There’s where — “He who does not work, neither shall he eat.” — comes from.

Many centuries later, when economists began to theorize about it all, they distinguished between those who made income from work and those who made income from property. At first, David Ricardo and others complained about those who raked in cash just from owning land — without doing anything productive themselves.

Assuming the landlord is not the farmer — doesn’t farm, just owns — Ricardo defined rent precisely. Rent is excess income — income greater than the cost of making that land available. Since nature makes the land available for free, then whatever the landlord charges for it is indeed excess income — over and above the zero dollars Mother Earth charges the landlord for it. This is rent by Ricardo’s definition.

To take a modern example, a star basketball player could probably feed his family quite well with $100,000. That’s all you really need to pay him to obtain his basketball labour. So most of the $5 million he gets is economic rent.

David Ricardo in Britain, and Henry George in the U.S., said that economic rents should all be taxed away, since they perform no economic function — an illegitimate form of income.

Then Karl Marx said the culprits were not land owners but factory owners, raking in cash just from owning capital, without doing anything productive themselves. He called it Surplus Value — a variation on Economic Rent — and he treated it as income stolen from workers. But it should not be taxed away because government collaborated with capitalists — it will be confiscated by workers.

Later economists compounded the confusion (as they are wont to do) by throwing every kind of unearned income — from land, from capital, from exclusive apprenticeships, from corruption, from hoarded caches of money — into the definition of Economic Rent. And just to make things even more confusing, everybody thinks rent is something else — something related to finding a place to live. Nope, not to economists.

So now some economists speak of the Rentier Economy. That’s an economy where the most prominent incomes do not come from making anything useful or performing some useful service — but from leveraging advantages to make money without contributing anything to anyone. We are indeed living in a Rentier Economy — made worse because the really obscene incomes come from just spinning money, without even bothering to own a factory.

Unless St. Paul misread the guy, Christ never said — “He who does not work, he shall get as much as a million workers”. Christ wasn’t terribly fond of parasites.

But we need to be a little more nuanced than that, eh? Some landlords farm too — they improve the land themselves. Many capitalists (though not the really rich ones) work hard as entrepreneurs, building up a viable and valuable business. I admire them. They work harder than I do. Generally, they fall into the SME (Small and Medium Enterprises) category. They are legion and they’re the backbone of the economy. So no complaint there.

And indeed, therein does not lie the problem. Still, even those who do nothing but lever rents to siphon half the world’s wealth into their exclusive old-boy’s club — it’s not as if none of them ever do any work. There are some who get home tired at the end of the day. The pirate’s life is not an easy one.

But there’s no way you can actually call it productive work — which is supposed to mean producing something useful for the people on the ground. All they’re creating is more economic rent for themselves — even if they spend all day doing it — while they outsource the actual production and distribution work to honest SMEs and vile hucksters.

Well, let’s get a little more nuanced again. Aren’t they providing a service to the public? Some peasants need a little cash advance to feed the family before harvest time. Others need some foreign exchange to buy supplies from out of town. Moneylenders are there to give a helping hand.

Yeah, right. Anyone who has hoarded anything, especially mountains of finance capital, is in a position to overcharge customers big time for their services. That’s economic rent — unearned income. It once bordered on theft until economists declared it legitimate.

Christ wouldn’t have been bothered in the slightest if those moneylenders were humble members of the community selflessly helping out their neighbours when times are tough. (And btw — not charging interest — because that’s strictly forbidden in Scripture.)

Financiers don’t count their loot on tables any more. Nothing to overturn. Maybe Christ will get creative and toss viruses into their spreadsheets this time.

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