This week, the Financial Times launched its New Agenda – an eye-opening series of articles on the disorderly state of world politics that calls for a “reset” of the global capitalist system to make it more inclusive and committed to “profit with purpose.”
Splashed onto its front and back cover on a bright yellow background, the intervention marks a striking development for a publication whose pink pages have long been associated with the free-market worldview of City and Wall Street bankers. Yet its central message fits a broader pattern in the paper’s editorial line, which has recently seen it call for a worker-led economy in the US and even the possibility of a caretaker Corbyn government in the UK.
It is therefore worth paying attention to what the FT’s writers have to say, for the change in tone reflects an underlying shift in the plate tectonics of British and global politics. Clearly such ambitious calls for reform would have been inconceivable without the profound crisis of legitimacy now confronting the political and financial establishment, or the strong pressure exerted from below by popular movements and an increasingly assertive left.
In this light, one contribution to the series stands out in particular: the opening piece by Martin Wolf, the paper’s chief economics commentator, which presents a damning critique of “rentier capitalism” for undermining both economic productivity and liberal democracy.
Rentiers are generally considered damaging because they extract “unearned” value from the economy. They invest their money in unproductive assets like stocks, government bonds and real estate, or reap excessive profits through their control over (artificially) scarce property or the operation of monopolies. As John Stuart Mill once said of the landlords of his time, rentiers “grow rich in their sleep without working, risking, or economizing.”
For Martin Wolf, rentier capitalism therefore refers to a system “in which market and political power allows privileged individuals and businesses to extract a great deal of such rent from everybody else.” Calling on business leaders to help bring about a return to a more democratic political system and a more dynamic and competitive capitalist economy, he ultimately makes the enlightened liberal’s case for saving capitalism from itself.
By opposing the “bad” capitalism of the unproductive rentier to the “good” capitalism of productive enterprise, however, the conventional liberal narrative overlooks the ways in which the two are inextricably intertwined. The result is that it paints an idealised image of a supposedly pure and uncorrupted capitalism as something much more benign than what it really is, has ever been – and probably ever will be.
In reality, the concentration of wealth and power in the hands of a few privileged rentiers is not a deviation from the competitive logic of capitalism, but its logical outcome. While we can certainly make a theoretical distinction between an unproductive rentier and a productive capitalist, in reality the former can easily transform themselves into the latter by shifting investments into what appears to be a more lucrative line of business.
This kind of shift tends to be particularly pronounced in the wake of major crises, when less profit is to be had in productive enterprise, impelling capitalists to seek monopoly rents or put their money into speculative assets instead. It is exactly what the Medici family did in Renaissance Florence, when they transformed themselves from textile traders into bankers after the crisis of the fourteenth century. The wealthy merchants of Amsterdam, too, became “periwig” rentiers as the Dutch Republic declined in the eighteenth century.
Considered from a more long-term perspective, then, the rise of the rentier class is by no means an aberration from the capitalist norm: it is a common recurrence that tends to accompany periods of protracted economic decline. This is why the French historian Fernand Braudel once called it “a sign of autumn” – lauding the final phase of a long expansion, which is inevitably followed by a period of disorder and reorganization.
The same process has been unfolding once again, albeit on a much larger scale, since the crisis of the 1970s. Picking up steam since 2008, it has given rise to a new crop of rentier capitalists and platform monopolists – from Amazon to Facebook, Goldman Sachs to GlaxoSmithKline and Pfizer – that exert not just immense market power, but also a great deal of political influence.
Capitalism never came with a reset button – and the impetus behind past attempts to limit the system’s excesses certainly did not originate within the boardroom.
It is in this context that the FT now calls on “leaders in the boardroom and beyond” to help “reset” capitalism and create a more dynamic and inclusive economy. It is a nice sentiment that would certainly do well over champagne around the campfire at Davos. But capitalism never came with a reset button – and the impetus behind past attempts to limit the system’s excesses certainly did not originate within the boardroom.
Indeed, if history teaches us anything, it is that the wealthy and powerful will fight tooth and nail to preserve their political and economic privileges – and where possible will double down to expand them. As the billionaire investor Warren Buffett once candidly put it, “there’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” If anything is going to change, the impetus will have to come from below.
Back in the 1930s, John Maynard Keynes, the leading enlightened liberal of the time, still saw “the rentier aspect of capitalism as a transitional phase which will disappear when it has done its work.” He firmly believed that “the euthanasia of the rentier, of the functionless investor, will be nothing sudden, merely a gradual but prolonged continuance of what we have seen recently in Great Britain, and will need no revolution.”
This is the pre-edited version of an article published by the New Statesman.
Today’s enlightened liberals, it seems, will have us believe the same thing. It is a tempting narrative for establishment thinkers that certainly marks an important advance from the earlier commitment to free-market dogma. But capitalism never gradually euthanised the rentier; it merely transformed his role over time – and is now growing ever more attached to his wealth and power. If we leave it up to the suits in the boardrooms to decide, the rentier class will certainly keep demanding its privileged place in the autumn sun.