Radical imagination and the intellectual edifice — Jim Vrettos interviews Michael Hudson

Michael Hudson — On Finance, Real Estate And The Powers Of Neoliberalism
Radical imagination and the intellectual edifice
Jim Vrettos interviews Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Thomas Piketty explains why the world is ripe for ‘participatory socialism’ — Marcus Baram interviews — Thomas Piketty

Transcript of an interview about Thomas Piketty's latest book,  Capital and Ideology.

Fast Company
Thomas Piketty explains why the world is ripe for ‘participatory socialism’
Marcus Baram interviews Thomas Piketty

The Financial Times’ Martin Wolf Discovers that Rentier Capitalism and Financialization Increase Inequality and Hurt Growth — Yves Smith

Finally taking on economic rent, and financial rent in particular. This is not capitalism, which is about productive investment based on risk-taking, but rather rentier oligarchy based on expropriation through rent extraction. Rentiers are free riders on the systems. Martin Wolf uses his Financial Times bully pulpit to attack it before the parasites kill the host (ht Michael Hudson).

Naked Capitalism
The Financial Times’ Martin Wolf Discovers that Rentier Capitalism and Financialization Increase Inequality and Hurt Growth
Yves Smith

See also at Naked Capitalism

Two Entrepreneurs Explain Why the Health Insurance Industry Is a Direct Threat to Middle-Class Life

Joe Sanberg, a co-founder of Business for Medicare for All and Aspiration.com, which empowers customers to match their banking and spending with their values and Richard Master, a co-founder of Business for Medicare for All. and the CEO and chairman of MCS Industries, the leading supplier of mirrors, picture frames and wall decor in North America. Produced by Economy for All, a project of the Independent Media Institute

Lars P. Syll — Money in perspective

Keeper Keynes quote.

The reference is "Economic Possibilities for our Grandchildren," Section II, in John Maynard Keynes, Essays in Persuasion, New York: W. W. Norton & Co., 1963, pp. 358-373.

Lars P. Syll’s Blog
Money in perspective
Lars P. Syll | Professor, Malmo University

See also

Ideological through and through, because economics is joined at the hip with political economy, and, in fact, used to be called political economy. Political economic is, of course, joined at the hip with politics and politics is about power, hence, class structure and power. This implies that policy is an area that is deeply ideological and value-laden, and political economy informs and influences policy. Ergo, politics and and the disagreements over politics are largely values-based, hence ideological.

"It's the assumptions, stupid." And the assumptions are based on normative presumptions.

So much for value-free economics

Marshall Auerback — Trump’s Bogus Infrastructure Plan Takes the U.S. Further Down the Road of Rentier Capitalism

President Trump presented his infrastructure plan last week. If you’re keen on the idea of out-of-control privatized utilities gouging customers and manipulating energy markets, or consortia building overpriced, expensive toll roads (until they go bust), then you’ll love the president’s proposals. His mooted public-private partnerships are another variant of socialism for the rich and free market discipline for the rest of us. PPPs are like a religion that offers its adherents the promise of capitalist heaven via tax breaks, subsidized funding, and guaranteed returns, minus the discipline of private bank credit arrangements or potential bankruptcy, the costs of which are invariably borne by a public already experiencing the hell of significantly more restricted access (think toll roads and bridges), higher user fees or “slower lane” traffic (think the end of net neutrality), and the costs of bailouts if and when the venture goes bust....

No private market discipline is enforced on management because in most cases they are given control of what was once a public monopoly, which is simply converted into a private one. It’s rentier capitalism, plain and simple.... 

In essence, these public-private partnerships are one of the sick jokes that the neoliberal era visited on all of us in the name of economic efficiency and responsible government—a ‘joke’ because the beneficiaries of all this public largesse have been laughing all the way to the bank as stupid public officials continue to fall prey to their lobbying as they joyfully hand over the keys to the public purse. Trump is simply perpetuating the trend of allowing governments to continue to abrogate their true responsibilities to pursue and safeguard public purpose. Governments should never have become agents of private profit.…

Neoliberalism can be viewed as government as agent of private profit based on "free market" ideology that prioritizes private ownership over public because "efficiency," along with public policy that favors capital formation as the basis for growth, under the assumption that "a rising tide lifts all boats" (trickle down).

Naked Capitalism
Trump’s Bogus Infrastructure Plan Takes the U.S. Further Down the Road of Rentier Capitalism

Marshall Auerback

Cross-posted from Alternet

Samantha Eyler-Driscoll — Who Are the Top 1 Percent in America? The Answer from New Research Might Surprise You

A new paper challenges Thomas Piketty’s portrayal of an income distribution dominated at the top by passive rentiers who do nothing to earn their money, arguing that income inequality in America today is driven by the working rich.

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
Who Are the Top 1 Percent in America? The Answer from New Research Might Surprise You

Samantha Eyler-Driscoll

David F. Ruccio — Global rentier capitalism

… as the authors of the new report from the United Nations Conference on Trade and Development have explained, there is a growing concern that

increasing market concentration in leading sectors of the global economy and the growing market and lobbying powers of dominant corporations are creating a new form of global rentier capitalism to the detriment of balanced and inclusive growth for the many.

And they’re not just talking about financial rentier incomes, which has been the focus of attention since the global meltdown provoked by Wall Street nine years ago. Their argument is that a defining feature of “hyperglobalization” is the proliferation of rent-seeking strategies, from technological innovations to mergers and acquisitions, within the non-financial corporate sector. The result is the growth of corporate rents or “surplus profits.”...

What happens when economists assume away asymmetry, especially of market power.

Occasional Links & Commentary
Global rentier capitalism
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

Asher Schechter — UN Study Warns: Growing Economic Concentration Leads to “Rentier Capitalism”

Earlier this year, a Stigler Center paper by Luigi Zingales [Faculty Director of the Stigler Center and one of the editors of this blog] argued that market concentration can lead to a vicious circle, in which companies use market power to gain political power that in turn allows them to gain more market power, and vice versa. Zingales called this the “Medici vicious circle”: “Money is used to gain political power and political power is then used to make more money.”

A new UN report shows that this vicious circle is now a prominent feature of the global economy. Thirty years of hyperglobalization, according to the report, have led to sharp increases in global market concentration and a proliferation of rentierism, whereby the world’s largest corporations attempt to protect their market power through a variety of rent-seeking activities, such as lobbying or systematic abuse of intellectual property laws. While many of these companies are headquartered in the United States, the “endemic rent-seeking that stems from market concentration, heightened corporate power, and regulatory capture” has spread much further, leading to the emergence of “global rentier capitalism.”...

Neoliberalism = rentier capitalism

UNCTAD’s research is among the first to assess the rise in market concentration on an international scale. It also attempts to measure the growth of rents—that is, the income that large companies derive solely from the ownership and control of assets, rather than from innovation.

In order to do that, UNCTAD built a database comprised of financial statements made by publicly traded non-financial companies in 56 developed and developing countries between 1995 and 2015. Measuring the size of corporate rents is difficult due to the scarcity of data and the wide variety of rent-seeking activities companies can engage in, but the UNCTAD research team tries to approximate their magnitude by estimating surplus profits within specific sectors. Using the median value of firms’ rate of return on assets (ROA), they estimate the median performance of firms within a given industry. The difference between this estimate and the actual profits firms made is the surplus profit....

Market power begets political power, which begets further market power....

Throughout history, Blankenburg notes, economists and political theorists, from Adam Smith to John Maynard Keynes, have raised concerns that capitalism has a tendency to be captured by rentiers. The UNCTAD report echoes these historical concerns. “Rentier capitalism means that there isn’t just a few annoying rentiers in some countries that a bit of government intervention can rein in or neutralize,” says Blankenburg. “It is becoming an endemic part of capitalism, a new normal—at least for powerful corporations.”
The authors offer several remedies to tackle the rise of market power, among them tougher antitrust enforcement, the revision of existing trade agreements (and avoidance of signing new ones), and labor market interventions that focus on reducing inequality. “A good start,” they write, “would be to recognize that both knowledge and competition are first and foremost global public goods, and that their manipulation for private profit should be effectively regulated.”

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
UN Study Warns: Growing Economic Concentration Leads to “Rentier Capitalism”

Asher Schechter

Michael Hudson: Socialism, Land and Banking: 2017 Compared to 1917

Socialism a century ago seemed to be the wave of the future. There were various schools of socialism, but the common ideal was to guarantee support for basic needs, and for state ownership to free society from landlords, predatory banking and monopolies. In the West these hopes are now much further away than they seemed in 1917. Land and natural resources, basic infrastructure monopolies, health care and pensions have been increasingly privatized and financialized.

Instead of Germany and other advanced industrial nations leading the way as expected, Russia’s October 1917 Revolution made the greatest leap. But the failures of Stalinism became an argument against Marxism – guilt-by-association with Soviet bureaucracy. European parties calling themselves socialist or “labour” since the 1980s have supported neoliberal policies that are the opposite of socialist policy. Russia itself has chosen neoliberalism.

Few socialist parties or theorists have dealt with the rise of the Finance, Insurance and Real Estate (FIRE) sector that now accounts for most increase in wealth. Instead of evolving into socialism, Western capitalism is being overcome by predatory finance and rent extraction imposing debt deflation and austerity on industry as well as on labor.

Failure of Western economies to recover from the 2008 crisis is leading to a revival of Marxist advocacy. The alternative to socialist reform is stagnation and a relapse into neofeudal financial and monopoly privileges....

Neoliberalism is not working. Socialist resurgence, or something else?

Useful background and history lesson.

Michael Hudson at some of his best.

Naked Capitalism
Socialism, Land and Banking: 2017 Compared to 1917

Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), and Distinguished Research Professor of Economics at the University of Missouri, Kansas City
Crossposted at Vineyard of the Saker and SouthFront

Michael Hudson — Rentier Capitalism – Veblen in the 21st century

As the heirs to classical political economy and the German historical school, theAmerican institutionalists retained rent theory and its corollary idea of unearned income. More than any other institutionalist, Veblen emphasized the dynamics of banks financing real estate speculation and Wall Street maneuvering to organize monopolies and trusts. Yet despite the popularity of his writings with the reading public, his contribution has remained isolated from the academic mainstream, and he did not leave a “school.” The rentier strategy has been to make rent extraction invisible, not the center of attention it occupied in classical political economy. One barely sees today a quantification of the degree to which overhead charges for rent, insurance and interest are rising above the cost of production, even as this prices financialized economies out of world markets.

Michael Hudson
Rentier Capitalism – Veblen in the 21st century

See also


L. Randall Wray, Veblen’s Theory of Business Enterprise and Keynes’s Monetary Theory of Production, <i>Journal of Economic Issues</i>

Days of Revolt: How We Got to Junk Economics — Chris Hedges interviews Michael Hudson

Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City. He is the author of The Bubble and Beyond and Finance Capitalism and its Discontents. His most recent book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

CHRIS HEDGES: Hi, I'm Chris Hedges. Welcome to Days of Revolt. Today in a two-part series we're going to be discussing a great Ponzi scheme that not only defines not only the U.S. but the global economy, how we got there, in the first segment, and secondly, where we're going. And with me to discuss this issue is the economist Michael Hudson, author of Killing the Host: How Financial Parasites and Debt Destroy the Global Economy. A professor of economics who worked for many years on Wall Street, where you don’t succeed if you don’t grasp Marx's dictum that capitalism is about exploitation. And he is also, I should mention, the godson of Leon Trotsky.…

Real News Network
Days of Revolt: How We Got to Junk Economics

Chris Hedges interviews Michael Hudson

Brad DeLong — The Melting Away of North Atlantic Social Democracy

The social democratic economy model the major North Atlantic economies followed as recently as a single generation ago had five salient features.

•  First, that labor was important relative to ownership of wealth as a source of income. 
• Next, enterprise and savings were important relative to inheritance as a source of accumulated wealth. 
• Opportunity, while constrained by race and gender, was not that constrained by class—there was upward mobility. 
• Economic growth—both numbers of workers and the productivity of the average worker—was relatively rapid, with each generation clearly larger and more productive than its predecessor. 
• And finally, politics were relatively democratic, in that while the rich spoke with a louder voice, their concerns did not drown out the economic interests of others.

And Thomas Piketty’s central claim is that all five of these once-salient features of our social democracy are vanishing. We are, he believes, on a long-run historical trajectory to return us to a situation more like the nineteenth century, in which ownership of capital is more important relative to labor as a source of income; inheritance dominates enterprise and savings as a source of wealth; opportunity is tightly constrained by class of birth; economic growth is slow (both because of declining technological invention andbirth rates on the one hand, and because established wealth, which is hostile to the creative destruction that drives economic growth, possesses a bigger voice in shaping the political economy), and politics is dominated by plutocrats.

Capital in the Twenty-First Century has struck a chord—hence its 2.2 million copies. 

And it has excited a fierce debate, with more and more people finding it worth arguing about both for the reasons that it struck a chord and because of the fact that it has struck a chord.…

TPM
The Melting Away of North Atlantic Social Democracy
J. Bradford DeLong

Dan Kervick — Dismantling the Decadence of the Rentier Recovery

What’s happening in America? We’re creating a society that decreasingly values work and the sahring of the nation’s labor burden, and in which the most successful among us increasingly live off rents and ownership claims on the output generated by others. The success of the capital class in suppressing wage income and extracting capital income from cost-side profits during the recession constitutes their own private countercyclical self-recovery plan. The success of that approach explains why there has not been a notable call from the capital class for a more vigorous, job-producing recovery. And that alternative, capitalist-only formula for rentier recovery is conducive to an economic equilibrium based on risk-averse stagnation, safe asset hoarding, extraction schemes and plutocratic phobia of the public sector. 

There are various things we can and should do about this distortion of our economy and our decline toward a decadent system of rent, exploitation, stagnation, and caste solidification.…

Dan is much more sanguine than I am about repairing the capitalistic system. My view is that it is beyond repair and the only real solution is a system that reverses current priorities and puts people and the environment ahead of money and machines. But that would take actual democracy instead of oligarchy masquerading as democracy.

Rugged Egalitarianism
Dismantling the Decadence of the Rentier Recovery
Dan Kervick

Steve Bannister — Beyond Piketty musings

Eventually, later this century if my model holds at all, growth will go negative first derivative. Then demand for capital will surely shrink. And what will happen to capitalists then is unclear to me.

Maybe what Keynes predicted in GT, ch. 24?

Naked Keynesianism
Beyond Piketty musings
Steve Bannister

Ryan Cooper — Why everyone is talking about Thomas Piketty's Capital in the Twenty-First Century

The French economist's magnum opus explains the history of income inequality — and represents a real threat to the reign of the 1 percent

The Week
Why everyone is talking about Thomas Piketty's Capital in the Twenty-First Century
Ryan Cooper

Watershed moment for neoliberalism?

The English translation of French economist Thomas Piketty's magnum opus Capital in the Twenty-First Century is finally out, and it's made an enormous splash (see reviews here, here, and here). It's a brilliant, surprisingly readable work that synthesizes a staggering amount of careful research to make the case that income inequality is no accident. Indeed, Piketty argues that it is a feature of capitalism itself — unless governments take action to rein in capitalism's excesses.

That may sound like an obvious point to you. But the value of Piketty's work is that it shows that capitalism's postwar heyday — in which incomes at the bottom and the top actually converged — was a historical anomaly. Piketty's analysis of the last two centuries makes the case that capital in its natural state does not tend to spread out or trickle down, but to concentrate in the hands of a few.

This is news to those on the right who have long championed capitalism's egalitarian benefits. Conservatives have been far too complacent in believing that capitalism is the only possible economic system, and far too aggressive in attempting to demolish the structures that mitigate capitalism's worst side effects. If Piketty is correct, he has laid the intellectual groundwork for a resurgence of American socialism — and conservatives are starting to feel distinctly uneasy about it.

Elias Isquith — Paul Krugman bashes GOP for pushing America toward oligarchy

The New York Times columnist thinks the time to stop a slide into permanent inequality is running out

Salon
Paul Krugman bashes GOP for pushing America toward oligarchy
Elias Isquith

Izabella Kaminska — Attack of the killer rentiers

Paul Krugman recounts the point that rentiers are turning into that old horror movie cliche of the killer/zombie/psychopath who just won’t die quietly — even when you think you’ve killed him multiple times. In classic formulaic style, just when you least expect it, they rise again to try to take you down one last time.

The point refers to John Maynard Keynes’s famous observation that one day the global economy would rid itself of the plague of economic value-sucking rentiers by arriving at a post-scarcity moment. At such a time an abundance of capital would make economic rent an impossibility. Rates would naturally fall to zero to reflect the excess of capital, and rentiers would have to die.

Today we’re calling that idea “secular stagnation”. Which of course sounds more impressive than plain old “abundance” and new enough to be able to distance itself from Marxist economics.

Though, as economist Steve Keen has pointed out, there’s really not that much new or different about it all. Lefties, he notes, have been warning about the symptoms of secular stagnation — which include growing inequality — for over 30 years. And even Summers himself observed that the path towards stagnation probably began as far back as the 1980s; we just never diagnosed the problem properly at the time....

The Fiinancial Times — FT Alphaville
Attack of the killer rentiers
Izabella Kaminska

Izabella Kaminska — Property bubbles and ghost cities

I have a working theory about the premium property bubble in capital cities like London. There’ll be a post about it on AV soon. (Have been a little under the weather so it’s taken a while.)
In a nutshell, the idea is that the economy is plagued by a glut of misvalued capital — which is seeking preservation for as long as possible and at all costs. The preservation is not really about the dollar sum of that capital, but about preserving the position on the social hierarchy ladder that it provides for....


But, as per my German sun lounger analogy, owners of abstracted financial capital have lost perspective on what their capital rights represents. They wish to preserve not the wealth provided for by the means of production, but the superior social position that this used to entitle them to.
The truth, however, is that they are no longer entitled to that. Also, what they misunderstand is that they are no less well off as a result of losing that claim. It’s everyone else who is elevating to their wealth.
Nevertheless the search for the preservation of their past superiority continues — the days when they were adding social value — continues.
Consequently this capital flitters from one idle asset class to the next, avoiding at any cost an opportunity to invest in something productive — out of fear this might expose them to the sort of risk that might lose them their superiority claims forever. It’s worth noting that the constant speculative flittering is damaging in its own right.

Dizzynomics
Property bubbles and ghost cities
Izabella Kaminska

In a healthy capitalism, the purpose of real capital is production for consumption and financial capital is for further capital formation from gains from production, that is, for productive investment. When financial capital is accumulated as financial wealth for it own sake, neither for consumption not productive investment, rentierism and power, then capitalism becomes dysfunctional.

Randy Wray — Wall Street’s Rent Seeking Vampires Kill Innovation

I can't tell you how excited I am to see Randy going after rent-seeking. I had though that was missing as an MMT emphasis previously, although Michael Hudson has been on it for a long time. As Randy pointed out in his previous post, "euthanizing the rentiers" in the sense of ending parasitical economic rent and extractive rent-seeking was high on the policy agenda of Keynes at the conclusion of the General Theory.

While there are moral arguments against economic rent, rent-seeking is inefficient and constitutes an unnecessary drag on circular flow that inhibits productive investment and innovation. It also leads to inequality that also becomes an economic drag, as well as increasing the political power of wealth.

Perhaps most significantly in the long run, without addressing rentierism and rent-seeking, capitalism becomes increasing incompatible with democracy and distributive justice, and leads to corporate statism.

Even from the side of capitalism, economic rent and rent-seeking are also disruptive to price discovery in markets by favoring vested interests that able to extract rents and thereby to exact privilege as well. This leads to artificially imposed market power and artificial scarcity, as well as exclusion of disruptive innovation that would shift the status quo.

Economonitor — Great Leap Forward
Wall Street’s Rent Seeking Vampires Kill Innovation
L. Randall Wray | Professor of Economics, UMKC

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