Rentier capitalism is a term used in Marxism and sociology which refers to a type of capitalism where a large amount of profit-income generated takes the form of property income, received as interest, intellectual property rights, rents, dividends, fees or capital gains.
The beneficiaries of this income are a property-owning social class who, it is argued, play no productive role in the economy themselves but who monopolise the access to physical assets, financial assets and technologies. They make money not from producing anything new themselves, but purely from their ownership of property (which provides a claim to a revenue stream) and dealing in that property.
Often the term rentier capitalism is used with the connotation that it is a form of parasitism or a decadent form of capitalism.
In general, what happens when parasites become as big as their hosts?
Click to enlarge.
Click to enlarge.
Can't you just feel the prosperity?
Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2
If you are a stock market investor, that first chart should scare the you know what out of you.
ReplyDeleteThe "lifeblood" of the host is being sucked bone dry.
The only thing keeping the patient alive at all are the massive unsustainable transfusions from government (which over the long-term are also an extreme form of parasitic activity).
The host cannot pay for all of this. I don't know how else to put it.
As a side note, pension funds still expect 8% returns?
ReplyDeleteForehead. Desk. Whack. Whack. Whack.
In sharp contrast, I'm planning on -2% annual returns after inflation and taxes over the long-term. I'll be thankful if I get it. I certainly don't feel "entitled" to do better.
The only thing keeping the patient alive at all are the massive unsustainable transfusions from government
ReplyDeleteayup. I don't think things are bad, necessarily, just rather out of balance. We can feed ourselves still at least, though once the sub-$50 oil runs out, who knows.
Being smitten by Georgism/geolibertarianism, it is highly frustrating to see the problem, know the solution, yet see the system continue to spin out of control regardless.
I guess I have a moral duty to continue the battle for public enlightenment. I'd been kicking around an iPad-hosted economics sim game, I should get back to that I guess.
Framing the first graph as (PI-W/W) is certainly more thought-provoking than (PI-W/PI).
ReplyDeletehttp://en.wikipedia.org/wiki/File:Pyramid_of_Capitalist_System.png
Man, if the Republicans really take over next year, I need to get my mobility thing going again.
As I mentioned before, I'd like to think your corner of the country might work well on the doomstead front. I like how the PNW is sitting at a corner booth, facing the door, so to speak.
And a doom stead north of Bellingham can take this to ridiculous levels.
http://www.redfin.com/WA/Blaine/3906-H-Street-Rd-98230/home/15768935
Speaking of sim games . . .
ReplyDeletehttp://www.huffingtonpost.com/2011/10/13/herman-cain-999-sim-city_n_1008952.html
Those are some excellent and scary graphs.
ReplyDeleteThe problem with rentier capitalism is that not everyone has the capital or wherewithall to be a landlord.
I mean, there are property taxes, maintenance, insurance, security, all sorts of costs involved. Plus, all the laws these days favor the renter.
So, you put up the capital to purchase a property, maintain and insure it, then lease it out to a tenant. Then, when the lease expires, the tenant either refuses to vacate or worse trashes the property. Suddenly, you're faced with all sorts of court costs and legal fees, not to mention repair bills. Then further marketing expenses if you intend to lease out the property again.
And what are you going to do about it? Sue the delinquent tenant? He doesn't have any money!
Marx was an idiot. And frankly I'm shocked at how many people, particularly economists, give is "theories" any credibility.
A couple of years ago, I tried to help out this guy I went to high school with. He's a lawyer now, but he was desperate, in the middle of a divorce, on the verge of bankruptcy.
He had this house that he had bought long ago that he wanted to get rid of. It was on the market with another realtor, so I asked him, have you signed a listing agreement? No.
Well, if you want me to list and advertise this house, you need to come down to the office and sign a listing agreement, which he did.
When I was putting the sign in the yard, this car drove up and some guy said, "I'm renting this house." Not to my knowledge.
I called the lawyer. Did you sign a lease agreement? Did you receive a deposit for first and last month's rent? Have you done a credit check on these people? No, no, and no.
Well, then, I'm not letting these people into this house, because if I do, you're going to have a hell of a time evicting them, not to mention make it increasingly difficult to show and sell the house.
Now, I sold this house in a week. And the lawyer screwed me out of the commission, $1200, because I didn't let him rent it before it sold.
Lawyers, sheesh, some friend. So much for rentier capitalism.
Pretty good data dump here:
ReplyDeletehttp://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10
The problem with rentier capitalism is that not everyone has the capital or wherewithall to be a landlord.
ReplyDeleteNo, the problem with rentier capitalism is that landlords are getting something for nothing.
They didn't create or cause to create the site value -- ground rent -- of their property, but they profit from it.
That is a fundamental tap on the working class, and has been since workers had the right to leave the land.
you put up the capital to purchase a property
the beauty of neoclassical economics was eliding the difference between land and capital.
We pay money for land, so it must be capital, or so we assume.
But the value of land comes from its natural opportunity, and buying title to it you are dispossessing everyone else of their natural birthright to the land in usufruct with others.
Half this nation rents, and the percentage is higher in the higher-cost cities.
Land rents is *the* fundamental economic injustice in the system.
Troy,
ReplyDeleteI like how the PNW is sitting at a corner booth, facing the door, so to speak.
I grew up in Eastern Washington and headed west until I hit water. Okay, I admit it. It was not the most adventurous of journeys. ;)
GawainsGhost,
ReplyDeleteThe problem with rentier capitalism is that not everyone has the capital or wherewithall to be a landlord.
That is indeed a problem. Every landlord who took on excessive debt to participate in the "sure thing" rentier society found that out the hard way.
For the reasons you point out, I had very little interest in being a landlord. It is a lot of work.
It didn't hurt that I saw the movie Pacific Heights.
A couple works hard to renovate their dream house and become landlords to pay for it. Unfortunately one of their tenants has plans of his own.
"Pretty good data dump here:"
ReplyDeleteAnd from the comments section:
"People scream about the taxpayer money bailing out banks and totally ignore that the people who paid the most in taxes toward that bailout were the bankers themselves. Thats right, the 1% pays the most taxes."
These folks never bother to mention that when you pay 5% on $30M it's different from paying 10% on $12000.
Yes, the banker paid more $$, but at a far lower rate (after employing tax strategies) than the poor guy.
When will it end...
Troy,
ReplyDeleteLand rents is *the* fundamental economic injustice in the system.
Cars too (taxi cabs). Just wait until the rentier society creates tenderloin medallions.
Anonymous,
ReplyDeleteI too am weary of the "1% pays the most taxes" rant.
There was a finance guy on CNBC yesterday who said that he was lucky to have picked finance a few decades ago. His pay has risen much faster than that of doctors.
He then went on to say that he didn't feel that he should be asked to pay more simply because he can.
It was enough to make me want to swing the "windfall profit tax" bat at him.
I too was lucky but the difference is I don't feel entitled. Mitt Romney would love to see me pay ZERO taxes. I think it is ridiculous and outrageous.
From your Mitt Romney link:
ReplyDelete..."anyone but Bush" option.
Elections are like going to the movies and having to settle for a movie you don't want to see because the movie you went to see is sold out.
Landlords are not getting something for nothing. They put up their capital, which didn't just fall from the sky or grow on a tree. They worked for it, and now they want to invest it.
ReplyDeleteThey're also taking on considerable risk, especially if they lease a property to some know-nothing Marxist who only wants to whine and complain when the world doesn't give him everything he wants for free, because he doesn't have and doesn't know how to make money.
I've dealt with landlords and rental properties. It's a pain in the ass. If the tenant doesn't want to vacate, you're looking at six months of court costs and legal fees before the judge will sign the eviction notice. All the while the tenant gets to live there for free, and you're stuck with the property taxes. And if the tenant trashes the property before he finally leaves, you're out all that money plus repairs.
I suppose a Marxist would consider that sticking it to the man. I consider it theft.
They put up their capital, which didn't just fall from the sky or grow on a tree. They worked for it, and now they want to invest it.
ReplyDeleteThe fallacy here is the unstated assertion that anything one buys is rightful private capital.
This is falsified in the case of chattel slavery, and land ownership is not too far removed from that.
They're also taking on considerable risk
So? Bank robbers take risks too.
The economic value of an investment idea is measurable by the actual wealth created or preserved.
The land value component of real estate existed when mankind was still in the trees, "investors" purchasing this is simply buying stolen property.
"To prove a legal title to land one must trace it back to the man who stole it." -- David Lloyd George
I suppose a Marxist would consider that sticking it to the man.
Straight to the ad-homs and vague insinuations. EVERY discussion on land rights always goes here. Without fail.
This cracked me up:
ReplyDelete"Zuccotti Park, formerly called Liberty Plaza Park, is a 33,000-square-foot (3,100 m2) publicly accessible park in Lower Manhattan, New York City . . . After renovations in 2006, the park was renamed by its current owners, Brookfield Office Properties, after company chairman John Zuccotti."
BPO's CY10:
Income Before Tax 1,571.00
Income After Tax 1,577.00
Magic!
Anonymous,
ReplyDeleteElections are like going to the movies and having to settle for a movie you don't want to see because the movie you went to see is sold out.
There's another analogy that involves "politicians" and "sold out".
How our politicians sold out America
Our politicians privatized the gains but socialized the losses for their favorite campaign contributors, all while the Forbes 400 wealthiest gained $30 billion and the rest of the country crashed.
It's hard to argue with that logic.
GawainsGhost & Troy,
ReplyDeleteAlthough my house is paid off, I still feel like a renter. The property taxes see to that and at some point that property tax "rent" could exceed my ability to pay it.
None of us truly owns the land due to property taxes, and that's probably a good thing. I have no doubts that if property taxes did not exist then the wealthy would be trying to acquire as much land as humanly possible.
I'm picturing million acre parcels within gated/moated communities (complete with modern castles). So clearly there is some Marxist in me because I'd not want to see that happen.
if property taxes did not exist then the wealthy would be trying to acquire as much land as humanly possible.
ReplyDeletethere are happy mediums here -- I think after 20+ years of paying property taxes people should pay less.
The key thing is that property taxes do limit how much we bid up the price of land, so starting out they are something of a free lunch in that regard.
If we had a homestead exemption (say $300,000 of land value per person) that'd be fine too.
And if we tax non owner-occupied land value at rent-confiscatory levels our governments would have money coming out of their @ss.
http://geolib.com/essays/sullivan.dan/royallib.html
People do not understand the difference between real estate and real property.
ReplyDeleteThe estate is the land and its improvements. The property is the rights associated with the estate. You cannot own the estate without the property.
Yeah, "property" (actually estate) taxes are a bitch, but that's how municipalities and counties fund projects such as road improvement or construction, sewage, drainage and irrigation systems, power plants and electrical grids, schools, etc. Would you prefer to "own" a piece of land without any of those? It would be worthless.
The problem with these taxes is that the dictrict appraiser, or more accurately the tax accessor, routinely overvalues the estate to keep revenues high. The value that your land and/or house is taxed on is not based on fair market value, which is a reasonable estimate of what it would sell for. Rather, it's taxed on whatever arbitrary value the accessor, who never enters the house to perform an inspection, comes up with.
As long as you own the property--the right to sell or transfer, to build on or improve, to destroy, to do nothing with--then you own the estate. And you can do with it whatever you wish.
But there are expenses involved with any investment. How are the taxes you pay on your estate different than the taxes you pay on your labor and income? Other than that the latter are much higher, I mean.
GawainsGhost,
ReplyDeleteAs long as you own the property--the right to sell or transfer, to build on or improve, to destroy, to do nothing with--then you own the estate. And you can do with it whatever you wish.
I cannot do whatever I wish with my estate. Never have, never will.
Further, if the government felt that another person could do better at creating economic activity than me, then it could in theory seize my property from me against my wishes, pay me what it thinks is fair, then hand my property over to that other person.
Kelo v. City of New London
The Court held in a 5–4 decision that the general benefits a community enjoyed from economic growth qualified such redevelopment plans as a permissible "public use" under the Takings Clause of the Fifth Amendment.
The city eventually agreed to move Susette Kelo's house to a new location and to pay substantial additional compensation to other homeowners. The redeveloper was unable to obtain financing and abandoned the redevelopment project, leaving the land as an empty lot, which was eventually turned into a dump by the city.
It would seem clear that I do not own my property/estate. I merely rent it from the government.
It would seem clear that I do not own my property/estate. I merely rent it from the government.
ReplyDeleteThere are two things in conflict here.
One is a fundamental human desire (if not right) to enjoy stability and security.
The other is that land rights come from the state, they are not "God given" per se.
This is a very interesting philosophical area that I didn't discover until I was in my 30s . . . where do land titles come from?
Thomas Jefferson said they issued from the State --
"A right of property in moveable things is admitted before the establishment of government. A separate property in lands, not till after that establishment. The right to moveables is acknowledged by all the hordes of Indians surrounding us. Yet by no one of them has a separate property in lands been yielded to individuals. He who plants a field keeps possession till he has gathered the produce, after which one has as good a right as another to occupy it. Government must be established and laws provided, before lands can be separately appropriated, and their owner protected in his possession. Till then, the property is in the body of the nation, and they, or their chief as trustee, must grant them to individuals, and determine the conditions of the grant." (1812)
The classical economists saw land as a third factor of wealth creation, but the neoclassical school was essentially created to confuse the two to hide the obvious parasitical rentierism in land (and natural resource ownership) in the larger idea of capitalism.
And in this, they were fabulously successful.
Mason Gaffney's _The Corruption of Economics__ is an interesting read on that.
Troy,
ReplyDeleteThe classical economists saw land as a third factor of wealth creation, but the neoclassical school was essentially created to confuse the two to hide the obvious parasitical rentierism in land (and natural resource ownership) in the larger idea of capitalism.
And in this, they were fabulously successful.
They were fabulously successful in selling the dream right up until they weren't. ;)
Why the Real Estate Boom Will Not Bust - And How You Can Profit from It (Excerpt)
Unlike renting, ownership not only provides a roof over one's head but also generates significant long-term wealth. In fact, for most people it is the primary vehicle for wealth creation in America today.
Why the Real Estate Boom Will Not Bust - And How You Can Profit from It: How to Build Wealth in Today's Expanding Real Estate Market (Amazon.com)
Publisher: Crown Business (February 21, 2006)
“An invaluable book . . . Today’s real estate markets are booming and Lereah makes a convincing case for why the real estate expansion will continue into the next decade. This book should prove to be a truly practical guide for any household looking to create wealth in real estate.” —DEWEY DAANE, FORMER GOVERNOR OF THE FEDERAL RESERVE BOARD OF GOVERNORS
“An important book, whether you agree with the author (as I do) that housing will remain an excellent investment or are convinced that home prices are poised for a plunge, David Lereah lays out a compelling vision of housing as a continuing positive investment—and how you can profit from real estate if you already own the home you live in, are looking to move from rental housing to an owner-occupied home, or want to use real estate as an investment.” —DAVID BERSON, CHIEF ECONOMIST, FANNIE MAE
David Lereah? Dewey Daane? David Berson?
How does one pluralize doofus? The dictionary says doofuses. I think doofusi sounds more clinical though, lol.
"This book should prove to be a truly practical guide for any household looking to create wealth in real estate"
ReplyDeleteSEE, DAT'S WAT I'M SAYIN'
People "create wealth" when they BUILD the damn things, not buy them.
The entire system is predicated on confusing rent-seeking and skimming for productive enterprise.
From the comments section of your "How our politicians sold out America" link:
ReplyDelete"Actually, it’s time for a 100% turnover in congress!"
Why is it that many people think this will solve anything?
All it does is create an environment where opportunists can aquire an office that ordinarily they wouldn't be able to.
In this sense I would define opportunist as someone who, under recent political history (30 years or so), would not have been able to get any traction as a congressional/senatorial/mayorial/governing candidate but who now finds themselves with new fertile grounds from which to harvest. Namely unhappy folks who are just now starting to realize they've been lied to all along.
It does not mean that these candidates will get to Washington and impose their right and good wills on anything.
They would have to change the system in place itself to do that. And until the treasury has seen its contents completely confiscated that's not happening. It will be too late by then.
Anonymous,
ReplyDeleteWhy is it that many people think this will solve anything?
Perhaps many people are to the point where the unknown evil seems better than the known evil.
People want this change but unfortunately might get this change?
It does seem like the BS is slowly catching up with us.
ReplyDeleteBeing able to graph FRED data to my hearts' delight has been immensely educational for me, I've made dozens of graphs that shed light on stuff I've never seen in the media or even CR for that matter.
The populace was pissed in 1992, and that let Clinton win with less than 50% of the vote, even though Bush had 90% approval in the aftermath of GW1.
Somewhat recently I've been sorta trying to figure out "what happened" between 1992 and 1995 that turned things around for the middle class and "animal spirits".
There seems to have been a truce between center-left and center-right, where the "left" (the Dems) agreed to bringing in the deficits and the right (bank system) agreed to keep interest rates low to soften the deflationary shock of that.
Then I made this graph:
http://research.stlouisfed.org/fred2/graph/?g=2Oq and I had an ahah! moment.
That was a massive change in the system in the time period of interest, yet nobody seems to know about it.
Getting free stuff from China was an immense short-term boon, we could build big-box retailers and they could sell tons more product.
As long as you weren't in manufacturing, you got measurably wealthier, at the household level.
But the trade deficit with China kept expanding, and China wasn't bringing the money back into our economy, not as capital investment in paycheck-producing jobs, but as GSE bond buys and other indirect investment.
This was a systemic imbalance, but the 1990s oil glut cushioned us economically. Gas for under $1 a gallon was a helluva boon for everyone, since we all purchase 20 gallons a week.
But by 2003 there was something rotten in the state of Denmark.
http://www.georgewalkerbush.net/madeinchina.htm
Gas was pushing $2 again and the so-called recovery was jobless, just like 1992.
That's when the system was allowed to lever up.
I don't know if this was intentional or just something that happened, but man was it a massive wrong turn.
http://research.stlouisfed.org/fred2/graph/?g=2NI
Nobody in the media or economists in general are really cognizant of that move. It's really quite bizarre how we don't know how we got here.
Troy,
ReplyDeleteI don't know if this was intentional or just something that happened, but man was it a massive wrong turn.
No joke.
Nobody in the media or economists in general are really cognizant of that move. It's really quite bizarre how we don't know how we got here.
Few seem to realize what's going on right now. It won't make us more prosperous over the long-term.
Our Top 20 Fastest Growing Exports
http://www.georgewalkerbush.net/madeinchina.htm
ReplyDeleteAs much as I'd like to, there is no way I would believe that picture as framed.
Or put another way, it could be a frame.
As much as I'd like to, there is no way I would believe that picture as framed.
ReplyDeleteI posted it because I remembered it happening at the time.
They were just embarrassed by the "Made In China" stamps on the boxes, so they covered them up.
http://www.dailykos.net/archives/001183.html
Back then the President's handlers were big on him standing behind some printed up backdrop.
The USS Lincoln later in 2003 was the peak of this.
http://research.stlouisfed.org/fred2/graph/?g=2NI
ReplyDeleteNote how late into the recession it was before people began throwing in the towel!
http://www.dailykos.net/archives/001183.html
ReplyDeleteJanuary 22, 2003:
The "Bush is historically popular" storyline has run its course and is in its dying gasps. The "struggling Bush" storyline is starting to emerge...
I must have missed that memo.
Note how late into the recession it was before people began throwing in the towel!
ReplyDeletehttp://research.stlouisfed.org/fred2/graph/?g=2Ox
The spirit was willing, but the bubble was weak.