Sunday, April 22, 2012

Michael Hudson Explains the Rise of the Rentier Class

Here's the best explanation of the background to the late uproar that I've seen anywhere: Michael Hudson on rentiers.  I hesitate to call it "Marxist" (which it isn't, really) or "leftist" or "radical,"--which would drive away too many readers.    And indeed its tone is perhaps best described as a kind of modernized and sophisticated midwestern populism (it is an accident that Hudson and his ilk work out of Kansas City).     Anyway, here (again) is the link and here is the teaser:
Suppose you were alive back in 1945 and were told about all the new technology that would be invented between then and now: the computers and internet, mobile phones and other consumer electronics, faster and cheaper air travel, super trains and even outer space exploration, higher gas mileage on the ground, plastics, medical breakthroughs and science in general. You would have imagined what nearly all futurists expected: that we would be living in a life of leisure society by this time. Rising productivity would raise wages and living standards, enabling people to work shorter hours under more relaxed and less pressured workplace conditions.
Why hasn’t this occurred in recent years? In light of the enormous productivity gains since the end of World War II – and especially since 1980 – why isn’t everyone rich and enjoying the leisure economy that was promised? If the 99% is not getting the fruits of higher productivity, who is? Where has it gone?
Under Stalinism the surplus went to the state, which used it to increase tangible capital investment – in factories, power production, transportation and other basic industry and infrastructure. But where is it going under today’s finance capitalism? Much of it has gone into industry, construction and infrastructure, as it would in any kind of political economy. And much also is consumed in military overhead, in luxury production for the wealthy, and invested abroad. But most of the gains have gone to the financial sector – higher loans for real estate, and purchases of stocks and bonds.
Is he onto something?  You bet.  But I suspect the best way to mount a challenge to Hudson would begin with the melancholy diktats of market globalism: the cruel truth that world wide, there simply are more bodies chasing gainful employment than there are jobs to satisfy them.  Or under another name, the global capital glut: the truth that we've simply got way more money chasing deals than deals chasing money.

How does this connect with Hudson?  To answer that question, you have to understand the prelapsarian Golden Age back before, as the song says "the banks have all the money."   I speak from a confused sort of experience here: I lived through the 40s-50s-60s.  In many ways, I hated them: I thought they were stuffy, boring, parochial, and don't even talk to me about Red-baiting paranoia.  But they were a kind of Golden Age: they were the last time a guy as, ahem, unskilled as Homer Simpson could support a wife and three kids with the earnings from a job that required him to nap and scarf donuts (I haven't any doubt that for the producers of The Simpsons, the anachronism is conscious and part of the joke).

It was, correspondingly, the age when we lived behind what Warren Buffet would call a moat with alligators.  We'd won the great war, at no more than modest cost to ourselves (You doubt me on cost?  Ask the Russians).  Every other industrial economy was a basket case.  If we did feel any threat, we could protect ourselves behind trade barriers.  The result was that we could build a self-serving behemoth. And more important, that guys like Charlie Wilson really could split the pot with guys like Walter Reuther, reposing in the comfortable assurance that there was more than enough to go around.  As Charlie did not quite say: ironically, what was good for General Motors really was, in a narrow and restrictive sense, good for the country.

You are ahead of me here: you are saying--yes, but the discomfort of adjusting to a world of global competition did not necessitate a massive transfer of wealth to the rentiers.  Now, that is an interesting proposition.  Did it not? I want to say you are right but I would love to know more about just how (and who).   You may be tempted to say "more socialism," but I can promise you that if you put it in the abstract, my eyes will glaze over.  Indeed I suspect that one reason--maybe the main reason--why the fat cats have been able to make off with so much of the swag is the profound and near-universal distrust of anything that smacks of a communitarian solution.  We like private discretion and private initiative.  The problem seems to be that somewhere along the line, we've lost the distinction between capitalism and finance.  Fair enough; but Hudson hasn't forgotten.  To find out just how unlocked the barn door was--now that the horse has been stolen--his piece would be a fine place to begin.

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