Joe Collins — Getting to the bottom of this ‘shitty rent business’…

The rent-seeking argument emerging out of the progressive side of the mainstream economics community runs something like this: the top 1% are socially unproductive and receive obscene amounts of money by securing themselves into positions of ownership that permit them to misappropriate wealth. Taken to its logical conclusion this argument would suggest that ‘elites’ are the problem and once we mitigate their ability to appropriate unearned gains, we can get on with establishing a good society where there is relative equality of opportunity and a more desirable amount of economic inequality. Sounds great! But does it work and is it enough?

David Ruccio’s ‘sense’ on why this is happening is accurate – grotesque inequality has made marginal productivity theory untenable so the search is on for an alternative means to understand the post-GFC world....

Progress in Political Economy

Getting to the bottom of this ‘shitty rent business’…
Joe Collins | Department of Political Economy at the University of Sydney

James Petras — Pillage and Class Polarization: The Rise of “Criminal Capitalism”

Is criminal capitalism a step up or a step down from crony capitalism. Obviously, for these people it's been a step up.

With the longest work day, US workers score lower on the ‘living well’ scale than most western European workers. Moreover, despite those long workdays US employees receive the shortest paid holidays or vacation time (one to two weeks compared to the average of five weeks in Western Europe). US employees pay for the costliest health plans and their children face the highest university fees among the 34 countries in the Organization for Economic Cooperation and Development (OECD).

In class terms, US employees face the greatest jump in income inequalities over the past decade, the longest period of wage and salary decline or stagnation (1970 to 2014) and the greatest collapse of private sector union membership, from 30% in 1950 down to 8% in 2014.

On the other hand, profits, as a percentage of national income, have increased significantly. The share of income and profits going to the financial sector, especially the banks and investment houses, has increased at a faster rate than any other sector of the US economy.

There are two polar opposite trends: Employees working longer hours, with costlier services and declining living standards while finance capitalists enjoy rapidly rising profits and incomes.

Paradoxically, these trends are not directly based on greater ‘workplace exploitation’ in the US.

The historic employee-finance capitalist polarization is the direct result of the grand success of the trillion dollar financial swindles, the tax payer-funded trillion dollar Federal bailouts of the crooked bankers, and the illegal bank manipulation of interest rates. These uncorrected and unpunished crimes have driven up the costs of living and producing for employees and their employers.

Financial ‘rents’ (the bankers and brokers are ‘rentiers’ in this economy) drive up the costs of production for non-financial capital (manufacturing). Non-financial capitalists resort to reducing wages, cutting benefits and extending working hours for their employees, in order to maintain their own profits.

In other words, pervasive, enduring and systematic large-scale financial criminality is a major reason why US employees are working longer and receiving less– the ‘trickle down’ effect of mega-swindles committed by finance capital....

Sounds like Michael Hudson.

James Petras Website
Pillage and Class Polarization: The Rise of “Criminal Capitalism”
James Petras | Professor (Emeritus) of Sociology at Binghamton University in Binghamton, New York and adjunct professor at Saint Mary's University, Halifax, Nova Scotia

Randy Wray — How Wall Street’s Rent-Seeking Vampire Squid Sucks All Life Out Of The Economy

In economics there is the notion of economic rent—payment in excess of what is required to mobilize factors of production. For example, such rents accrue to those who have “cornered the market”—by artificially restricting supply of some resource, they are able to dictate usurious terms to buyers. We call them “rentiers”.

Here’s the point that is critical to understand: the rentier performs no useful function, and the economic rent can be eliminated without reducing the supply of the resources needed for production. This is why J.M. Keynes advocating “euthanizing” the rentier. As you know, “euthanasia” means “mercy killing”—you kill to reduce pain and suffering. Keynes was serious about this—his recommendation came in the final chapter of his great General Theory, as one of his two fundamental policy proposals.

Brilliant lede. Best short explanation of economic rent and rentier I've seen yet. Great to see it being brought into MMT analysis.

Economonitor — Great Leap Forward
How Wall Street’s Rent-Seeking Vampire Squid Sucks All Life Out Of The Economy
L. Randall Wray | Professor of Economics, UMKC

Marshall Auerback — Should we tax excess corporate profits?

In North America, the reversal of the net lending/borrowing position of the business and household sectors is of critical importance in understanding the evolution of financial capitalism over the last decade, with much of the speculative drive having been fueled by the growing savings of the corporate sector. It was the rentier behaviour of the corporate sector, with the latter finding it ever more lucrative to engage in financial acquisitions, which largely led to an abandoning of productive investment since the 1990s.

When an economy becomes financialised and therefore far less productive, it becomes more prone to fraud, greater financial instability, and higher rates of unemployment. But it serves the interests of the economic rentiers. Minsky was right: you need a “big government” to act as a stabilising bulwark against the financialisation of the economy. Taxing retained corporate earnings is clearly another aspect of dealing with the ravages of money market capitalism.

Michael Hudson calls it "taxing away economic rent."

Macrobits
Should we tax excess corporate profits?
Marshall Auerback | Corporate Spokesperson, Pinetree Capital Ltd.
(h/t Kevin Fathi via email)


Cant' get clearer and more succinct than this about the role of fiscal deficits:

Deficit spending by the government is merely the counterpart of private sector saving. What government deficit spending does is to permit the private sector to achieve its level of desired saving. When the latter changes, government spending ought to be adjusting in the opposite direction to offset it (unless the current account balance happens to do the job).