What’s wrong with rent and the rentier?

The problem of rent is not that it is unearned. It is the rentier’s monopoly power.

Housing rent and the divisive issue of rent controls are once again at the forefront of political debate and struggle in the advanced capitalist territories. In the United States, for example, California lawmakers have recently approved a state-wide rent cap and both Alexandria Ocasio-Cortez and Bernie Sanders have proposed national rent controls. Meanwhile, in the face of these advances, opponents are striking back, the Economist (and myriad others) dismissing rent controls as ‘an old and rotten idea’.

Though perhaps the most visible to ordinary households, housing rent is just one among the numerous forms of economic rent that figure significantly in contemporary capitalist economies. If, following heterodox economists, we understand rent generically as income derived from control of a scarce asset of some type, then it includes not just rents on land or housing but on financial assets, intellectual property assets, mineral resources, infrastructure assets and several others. Such rents have proliferated and expanded to such an extent in recent decades that Thomas Piketty and others have described the emergence of a new era of rentier capitalism.

One of the hallmarks of almost all writing on rent and rentierism from the political left is that it is normative and negative: Nobody approves of the rentier. This critique is longstanding – think Hobson, Keynes, Veblen, even Ricardo, not to mention Marx – and it has been revived in recent years in lockstep with the revival of rentier capitalism itself. We have seen a slew of forceful new books by prominent left-oriented commentators on the economy that all amount to denunciations of rent and the rentier.

These latter-day denunciations all come at rent from the same critical angle. Contrasting rent with other forms of capitalist income – the most common distinction that is made is between rent on the one hand and the profit of ‘productive’ capitalists on the other – the critics castigate rent for being unearned and the rentier for thus being undeserving of her income. Rentier capitalism is the economy of something-for-nothing.

Yet there is a problem with this critique: it is fundamentally liberal. In labelling rent and only rent as ‘unearned’, the critique implicitly – and sometimes explicitly – legitimates other types of capitalist income and accumulation. But if Marx taught us anything it is that all capitalist profit, whether appropriated by rentiers or not, is unearned. The ‘productive’ capitalist’s income, too, derives from the private control of a scarce existing ‘asset’, in this case the means of production.

The point, then, is not that rent is not unearned. Sure, rent is unearned. But so also is non-rentier profit. Sure, rentier capitalism is an economy of something-for-nothing, but capitalism is an economy of something – surplus value – for nothing. Rent’s unearned nature cannot, therefore, be the basis for a robust, credible and specific critique of rent and the rentier.

In a new article, I set out the contours of an alternative critique, one that proceeds from Marx but takes him in an unorthodox direction. The problem specifically of rent, I argue, is monopoly power.

It is of course true that monopoly power is not unique to rentierism. It frequently characterises other forms of capitalist enterprise as well. But rentierism is distinctive insofar as it is the form of capitalism to which monopoly power is inherent. Monopoly infuses the way in which rentier assets are owned and controlled. And it infuses the manner in which such assets are commercialised to generate rental income. In short, the rentier sweats monopoly from every pore. And that is the problem.

The rentier’s monopoly power is problematic in at least two important respects.

First, like all monopoly, it is antithetical to capitalist dynamism and innovation, or what Marx termed capitalism’s ‘revolutionisation’ of production. For all his hostility to capital and capitalists, Marx couldn’t help but admire capitalism’s productive feats, writing for example with Engels in the Communist Manifesto about its accomplishment of ‘wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals’. And Marx was in no doubt as to why capitalism was so dynamic, what it was that drove capitalists to innovate. Competition did.

Remove from the equation what Marx described as competition’s ‘coercive’ force, and capitalists are apt to slumber. The economy ossifies. And that, on a generalised basis, is what one finds today with rentier capitalism. One gets weak investment and declining growth, or something along the lines of what the American economist Alvin Hansen, writing in the late 1930s, called ‘secular stagnation’.

Second, with the monopoly power of rentier capitalism one also gets intensified exploitation of workers. Liberal critics of monopoly power have long focused their critique thereof on the monopoly prices that monopolists are often able to charge for their products and services. But in the 1930s and 1940s the Polish economist Michał Kalecki showed that it isn’t just the price of what they sell that monopolists use their monopoly to influence. It’s also the price of what they all buy: labour power.

The greater the ‘degree of monopoly’, as Kalecki termed it, the greater capital’s leverage is vis-à-vis workers (they have so-called ‘monopsony’ power) and the greater its ability to force down the price of labour, resulting in a higher share of income for the capitalist class and a lower share for workers. Today, with rentierism resurgent and – accordingly – real wages stagnant or falling for all but those at the upper end of the income distribution, Kalecki’s insights carry the weight of renewed force.

Breaking the power of rentier capital is a sine qua non for a progressive politics today. One crucial mechanism would be redistribution of the ownership of key assets, for instance into community or state hands. Another would be limiting the ability of rentiers to extract rents in those instances where assets remain in private hands, which of course is where measures such as rent controls on housing come in.

Cutting rentier capital down to size obviously would not resolve all of the problems associated with contemporary capitalism by any means. But it would be a step in the right direction.

This post is based on the article by Brett Christophers, “The Problem of Rent,” in Critical Historical Studies, vol. 6, no. 2 (2019): 303-323 and first appeared on the Marxist Sociology Blog of the American Sociological Association.