Wither the Rentier Class?

By JC

Today’s read is an interview by the Saker of Michael Hudson, who the Saker refers to as “the best economist in the West”. We can quibble about politics and the economic fallout designed and approved of by the rentier class as they prepare their August meeting, but how often is it that we look to history and economic theory when trying to understand the present, and plan for the future?

Hudson’s voice in the debate rising about how to structure economies, in the face of the failure of the Soviet-style communism and the failure of “free market” capitalism to meet the needs of any but the elite, is a welcome respite to the usual left-right and neolibertarian-socialist views on economy. Throw in the debates over the so-called “free trade” agreements, and we have a global economy swirling down the drain into a 21st century economic version of the dark ages.

Enjoy!

The missing item in today’s economic reforms is what classical economics focused on, from the French Physiocrats through Adam Smith, John Stuart Mill to Marx and his contemporaries: freeing industrial economies from the rentier carry-overs of European feudalism. The focus of classical value and price theory was to free economies from economic rent, defined as unearned income simply resulting from privilege: absentee land rent, mineral and natural resource rent, monopoly rent, and financial interest. The aim should be to prevent rent-extracting activities – defined as purely predatory transfer payments, an economically unproductive zero-sum activity.

The classical labor theory of value aimed at isolating those forms of income (land rent, monopoly rent and interest) that were socially unnecessary, and simply were legacies of past privilege. The halfway alternative was to tax land rent and monopoly rent (Henry George, et al.). The socialist alternative was to take natural rent-producing sectors into the public domain.

Europe did this with the major public utilities – transportation, communications, the post office, and also education, public health and pensions. The United States privatized these sectors, but created regulatory commissions to keep prices in line with basic cost-value. (To be sure, regulatory capture always was a problem, especially when it came to railroad charges…

Classical economics was a doctrine of how to industrialize and become more competitive – and at the same time, more fair – by bringing prices in line with actual, socially necessary costs of production. The resulting doctrine (with Marx and Thorstein Veblen being the last great classical economists) was largely a guide to what to avoid: special privilege, unearned income, unproductive overhead.

The aim was to create a circular flow model of national income distinguishing real wealth from mere overhead. The idea was to strip away what was unnecessary – what Marx called the “excrescences” of post-feudal society that remained embedded in the industrial economies of his day. When the great classical economists spoke of a “free market,” they meant a market free from rentier classes, free from monopolies and above all free from predatory bank credit.

Of course, we know now that Marx was too optimistic. He described the destiny of industrial capitalism as being to liberate economies from the rentiers. But World War I changed the momentum of Western civilization. The rentiers fought back – the Austrian School, von Mises and Hayek, fascism and the University of Chicago’s ideologues redefined “free markets” to mean markets free for rentiers, free from government taxation of land and natural resources, free from public price regulation and oversight. The Reform Era was called “the road to serfdom” – and in its place, the post-classical neoliberals promoted today’s road to debt peonage.

Today’s Cold War may be viewed in its intellectual aspects as an attempt to prevent countries outside of the United States from realizing that (contra Thatcher) there is an alternative, and acting on it. The struggle is for the economy’s brain and understanding on the part of governments. Only a strong government has the power to achieve the reforms at which 19th century reformers failed to achieve.

The alternative is what happened as Rome collapsed into serfdom and feudalism.

 


  1. Economics befuddles me, JC. thanks for this piece.

    Part of it is that, at least with classical economics, they don’t have to be right about anything to advance in the profession. They stumble from disaster to disaster pretending to know what’s going on. Milton Friedman once remarked that theoretical models did not need to mimic the real world to be useful, something to that effect. The demand curve, for instance, simply doesn’t accurately forecast anything.

    Steve Keen does some good work from my view, http://www.debtdeflation.com/blogs/, but I get befuddled there too, as economics simple does not penetrate my cranium.

  2. Interesting quote. “Only a strong government has the power to achieve the reforms at which 19th century reformers failed to achieve.”

    I’m guessing that Hudson is referring to Marx and Veblen. And would a “strong government” resemble Cuba, North Korea, and Venezuela?

    • Last I checked Venzeula was a parliamentary democracy under siege by a fascist/capitalist regime from up north. Cuba has been embargoed and terrorized by this same regime for over fifty years. Your perceptions need new management.

      I had to laugh yesterday listening to a libertarian podcast, in that they lamented people’s need for top-down authoritarian control. They were describing the corporatate structure but did not know it. The corporation and the military are harsh and controlling and dehumanizing. Regular government structures are far more benign, in case you fail to notice. Governments that turn fascist, as ours has, resemble corporations, their masters.

      Be careful you do not get what you wish for. It will eat you alive.

      • Soooo I got two out 3 right? Cuba and the Norks?

        • Cuba is complex, ying/yang, as much of their oppression was brought about by being under a CIA terrorist attack, which you don’t comprehend. North Korea I don’t comprehend.

          • You don’t comprehend because you can’t blame our influence on their miserable state.

          • Again, hard to argue with a man who doesn’t know the basic facts of history. The U.S. Set out to destroy the Cuban regime in 1960, the Bay if Pigs but a ruse to confuse Kennedy into,launching a full-scale invasion. He didn’t bite, and in the end he got bit by the very apparatus designed to murder Castro.

            We cannot know how things would have turned out for Cuba had we left it alone to develop. after the Bay of Pigs Casteo realized another invasion was imminent, and so turned to the USSR for a deterrent. Krushchev obliged. You might actually know about that part of history.

            • Wasn’t talking ’bout Cuba.

            • Good thing. It is not your strength.

    • steve kelly

      You are quessing. What did 19th century reformers do? A good place to start. Nation-states have lost soverignty, have been captured the same way regulatory commissions have been captured by rentiers. Germany or Scandinavian (half-way alternative) counties might be might make a fairer contemporary comparison for discussion.

  3. Hudson seldom allows comments to his posts at his site.

    Kinda like “strong governments”.

  4. I said Venezuela was a “parliamentary” democracy, and knew it was wrong even as I wrote it. But I didn’t know the correct term, presidential republic with a legislative assembly, far more democratic than the U.S., as our democracy is fake. None of our democratic functions work, elections don’t matter, public opinion is managed, a police state is barely hidden from view. We murder our leaders in broad daylight. Bread and circuses abound here.

    In Venezuela, an imperfect place too, at least public opinion can and does have an effect on public policy, far more so than here. It is interesting that in your mind Venezuela is like North Korea, as that is American propaganda at work. Our leaders would like to launch a military attack to do regime change there and put the oligarchy back on top, but to get American public support, they have to demonize them first. So far, it has not worked, and the Venezuelan government has survived two American-backed coups.

    • I think that N. Korea is an ultimate goal of Ven. leader.

      • Hard to argue with that statement. I mean, it’s beyond reason and utterly ignorant, but again, hard to argue with it.

      • steve kelly

        Swede, you do know that Soviets and US occupied Korea in 1945? That was before the Korean War just to be clear. I don’t think that’s a good example, but amusement for you, of course.

        • No US influence now. N. Korea is a bitter pill for you guys to swallow.

          No corporations, no free market, total poverty causing mass starvation, political protesters are murdered or jailed along with their families.

          • steve kelly

            Swede,

            I was not clear. Soviets occupied North Korea, US occupied South Korea. Soviets left, we did not. First proxy war vs.
            China. Occupation does something to a country and its people..

        • By the way what do the three countries I mention have in common. They jail protesters.

          N. Korea seldom keeps them long, they just kill ’em, Cuba has 200 political prisoners, and Ven. has jailed the opposition leader.

          http://www.nytimes.com/aponline/2015/05/23/world/americas/ap-lt-venezuela-jailed-opponent.html?_r=0

          You say Ven. isn’t a North Korea want-to-be?

        • We jail protesters here too, and beat the living bejesus out of them. Remember Chicago? OWS? Seattle? Are you blind? What the hell did Bradley Manning do to deserve the torture and jail sentence he endured?

          Venezuela is under attack right now, swarming with CIA agents. One reason Cuba has survived as long as it has is due to internal security, spying on its people, as they have been able to ferret out many CIA operations and arrest and kill them. The US. terror state necessitates such actions. (Castro warned Chavez that the US. while it hates democracy, will use democracy as window dressing to attack its enemies.)

          You’re kind of like Pete, all about surface phenomena.

          • Mark, Cuban political prisoners are jailed indefinitely. Any OWS or Seattle rioters have been let out long ago, even the ones who did property damage.

            Any proof on the CIA’s involvement?

            • You don’t know anything about Cuba, so shut up please. Seriously. You think you know stuff but you’ve yet to lift your head out of the ditch you live in.

              “We had been operating a damned Murder Inc. in the Caribbean.” (LBJ) referring to CIA.

              You’re annoying Swede. Your greatest strength is your ignorance.

            • Before you claim that I got frustrated and “insulted” you here Swede, please know that ignorance is not stupidity. The information that you need is available and easily accessed. That you want me to bring it to you, to “prove” something widely known, researched, published investigated, is a daunting task, as it requires that I bring volumes of information to you with the understanding that you’d rather remain ignorant. Why would I do your job for you? Are you lazy?

              One nice book on the subejct, based in the Church Committee hearings of the late 70’s, the only time the legislative branch has ever investigated CIA, is called “The Fish is Red: The Story of the Secret War Against Castro” by Warren Hinckle and William Turner. You might also look up “Operation Mongoose,” and it might also help in your understanding to know that one of the Lee Harvey Oswalds floating around in the early 60’s was being set up to take the fall, to be the patsy in the murder of Castro. Later his role was modified.

              It’s up to you, not me, to inform youself of these things.

  5. Yeah Mark, no murders with Castro.

    • This is the problem with you Swede. You are intellectually inert, unable to move off a dime.

      • We should do a poll here Mark.

        Who’s more flexible you or I?

      • I don’t care about the poll, but the answer is easy: Me.

        I do not claim that Castro is a saint, or that the Cuban government is a shining example of virtue. They were f***** either way – an economic embargo and state terrorism from the US or an oppressive regime under Castro. Had the Soviets not put missiles there, the US would have attacked and hundreds of thousands would have died. The Joint Chiefs even had a 9/11-style false flag event, Operation Northwoods, to justify the attack. An American aircraft woudl have been shot down, ad the Cubans blamed. Fact.

        You only know a small part of the story, and not much of that. You are, again that word, ignorant. Not stupid. Ignorant.




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