Move over neoliberalism; rentier capitalism is now king

Feb 17, 2021

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 the Left, but it is not listening.

Credit – Unsplash

A recent article by Dr Guy Standing, a Fellow of the UK Academy of Social Sciences, offers 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 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 economy 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 huge 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.

The advent of financial capitalism marks a turning point in capitalism’s inevitable path to self destruction. It aligns with the view that the system has entered a “catabolic” or “cannibalistic” stage. There has to be 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 is good at this but a lot of normal/legal financial activity is much the same, such as “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 vast amount of wealth and productive capacity that has accumulated at the top, and b) vast inequality, reducing the disposable income of the majority and thus their capacity to consume. It seems to me Marx got this right; capitalism 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.” It “…enjoys almost none of the benefits won by organised labour during the 20th 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”. They “were promised by parents, teachers and politicians 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 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 UK Labor to attend to these themes but says the mainstream left has not even attempted to understand the Precariat let alone consider its significance. It can’t go beyond pining for more good jobs and purchasing power for workers, and “promising to restore Yesterday”. The Australian labour-left would seem to be just as stuck on that quest. They do not realise that rentier capitalism 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.

Nor does he refer to the emerging recognition that the only way out is if some kind of Simpler Way can emerge through the coming possibly terminal time of troubles. The chances are obviously remote but working for it is your only option.

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