Move over neoliberalism; rentier capitalism is now king
Because the average person’s prosperity is shrinking, they can’t buy so much stuff. Companies are instead generating profits by getting hold of assets to rent out, such as housing and roads. This financial capitalism has huge political ramifications for progressives, but they are not listening. A recent article by Dr Guy Standing, who is a Fellow of the UK Academy of Social Sciences, offers some important ideas for the analysis of capitalism, class, and thinking about revolutionary strategy. It is especially valuable in showing how wrong-headed most mainstream Labor-left thinking is.
The somewhat long article begins with brief notes on the history of mistaken Left theory and practice over recent decades. Standing then focuses on the distinction between Neoliberalism, which he says is over, and the new quite different form of capitalism, rentier or financial capitalism. Neoliberalism was the triumphant sweeping away of impediments to capital’s freedom to do whatever would maximise global profits. It involved deregulating, getting rid of rules keeping it out of various sectors or protecting workers or industries.
But Standing points out that now the economy is in fact highly regulated .. in the interests of capital. Wages are set, strikes curtailed or banned, working conditions such as safety provisions are set, massive subsidies are granted to business by the state, and big juicy contracts and licences are decided by states not by free markets. Whether or not millions live in severe poverty is determined by where the state decides to set “benefits” such as the Jobseeker income level. Trump enabled vast increases in the incomes of the 1% by lowering their tax rates.
Standing focuses on the emergence of rentier or finance capitalism, stressing that we are now in a very different era from that of only a few decades ago. As the amount of capital constantly accumulates and inequality worsens, people have diminishing capacity to buy the stuff that could be produced.
As Brian Davey says in the Nottingham Economy Recovery and Renewal Plan, “the average person’s prosperity is shrinking and this has massive implications for their ability to go shopping”.
Thus the scope for making increasing profits by investing in the production of stuff is declining.
So what to do? The answer is get hold of assets that you can rent out, such as housing, or that you can put rents on. When reserve bankers cut interest rates to zero and allocate vast amounts of QE to entice investors to “get the econ- omy going” the banks don’t lend to set up more factories; their loans go into buying up rent-yielding opportunities.
That is, the corporations borrow to get hold of or get into activities which can be “hired out” for a fee.
Roads yielding toll income are a good option, which state governments are typically eager to sell or contract out to private corporations. Once upon a time tertiary education was free, but now students must take on massive loans, yielding nice income streams to those who made the loans. This determination to secure rent-yielding assets is a major factor causing the now very high cost of housing. In one recent year this shifting- money-around industry made 40% of US corporate profits.
Financial capitalism’s advent marks a turning point in capitalism’s inevitable path to self-destruction. It aligns with the view that the economic system has entered a “catabolic” or “cannibalistic” phase. There is an increasing resort to activities that do not produce and sell anything useful but tap into and siphon wealth out of existing supply chains.
The Mafia does this but a lot of normal/ legal financial activity is much the same – with short selling and asset stripping.
A major cause of the GFC was the lending of large sums to home buyers incapable of meeting the repayments, because investors could not find less risky outlets. When the borrowers could not pay their interest instalments their houses were repossessed cheaply by the banks and sold off or re-mortgaged. This is one way rent yielding assets are acquired. The current very high levels of household debt are due in part to the need many people have to borrow to be able to purchase.
An economy in which these things are increasingly happening is on the skids. It’s as if the only way a hardware shop can keep making satisfactory profits is by starting to sell its own roofing iron. The owners of capital are increasingly having to look for ways of parasitising already created wealth to get good returns. These mechanisms drain off some of the wealth and purchasing power of the little people at the bottom of the system who are increasingly obliged to pay rents and fees, thereby reducing their capacity to purchase, which feeds back to further undermine the “health” of the system.
The basic underlying causal factors would seem to be (a) the now massive amount of wealth and productive capacity that has accumulated at the top, and (b) vast levels of inequality, reducing the disposable income of the majority and thus their capacity to consume. It seems to me Marx got this right; capital- ism will eventually and inevitably generate the immiseration that will lead to system replacement. (He got his timing wrong, though.) The elite do not seem to have the wit to see that their greed is strangling the goose; at least Henry Ford realised that if he paid his workers higher wages they could buy his cars.
But Standing is most valuable on the issue of class. He points out that it can be a mistake to focus on the 1%; it’s the top 30% for whom the system works well, including the professionals and managers with the outrageous fees they get servicing the rich. Thus the economy is attending to a diminishing proportion of people. The middle class is shrinking and the “lumpenproletariat” at the very bottom is excluded, irrelevant and ignored.
He argues that the most important class now is the precariat, but it is complex. For instance it includes different sectors, and many people in the “middle class”. The precariat is “being gradually habituated … to put up with a norm of unstable task-driven bits-and-pieces existence”.
“They must try to survive solely on low, volatile and uncertain money wages, with few if any non-wage benefits … while being subject to onerous exploitation by rental mechanisms, living constantly on the edge of unsustainable debt … (and)…. losing … the rights and entitlements of citizens.” The precariat “… enjoys almost none of the benefits won by organised labour during the last century.” It is growing, and Standing expects that before long most of us are likely to be part of it.
There are three subcategories within the Precariat. The first has a strong sense of grievance over feelings of a lost Past, “… the secure Yesterday they had”. This group “listens to the sirens of neo-fascism, or populists … promising to bring back ‘greatness’”.
The second group are the “Nostalgics”, especially minorities, who are simply lost and discontented but with no ideological home anywhere.
Hope lies only with the third group, the “Progressive Precariat”. This group was “promised by politicians, teachers and parents that they would have a Future. They emerge without one, except an insecure one burdened by debt stretching into the future and suffering from a precariatised mind”. They certainly will not support fascism or populism, but they do not long for the Yesterday of the tired left either. “They will only be mobilised by a progressive vision of a Future…” If we are to be saved, this is the group that will do it.
This sets the context in which Standing sees the stubborn irrelevance of the tired old left with its focus on the long- term security for, and dignity of, labour within a firm. He has tried to get the UK Labour Party to attend to these themes but says mainstream progressives have not even attempted to understand the Precariat let alone consider its significance. They can’t go beyond pining for more good jobs and purchasing power for workers, and “promising to restore Yesterday”. Australian progressives seem to be just as stuck on that quest. They do not realise that rentier capital- ism has ruled it out.
Standing makes no reference to the savage ecological and resource limits that are the major causal factors underlying the “bumpy road down” we are on. These factors will greatly accelerate the difficulties and costs cutting into the opportunities to invest all that capital, they will grow the precariat, and drive the system more rapidly to a chaotic future.
This article is reproduced with the permission of the author. It appeared previously on 17 Feb 2021 in John Menadue’s site Pearls and Irritations.
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