When the history of our times gets written, historians will shake their heads, wondering why so few remarked on what was going on before their eyes. Rather than allow foreigners and immigrants and the EU to be blamed for the ills of great swathes of our working populations who became prey to the fantasies of a Boris Johnson or a Donald Trump, why did the political classes not identify and correct the real source of the just grievances that drove support for such warped politicians?
The US and Britain in particular have created an economic system of organised plunder, resulting in widespread precarious livelihoods. Over the last generation we have witnessed the rise of rentier capitalism, supercharged by new technologies, to establish economic structures in which having and owning has been vastly privileged over doing, creating and risk-taking. The share of profits in national income has risen, the share of wages fallen while work has become organised around short-term contracts. The decline in the incentive to make and innovate has been accompanied by a weakening in the rate of productivity growth.
Last week there were the first signs that change was afoot. As a last hurrah for the old order, the share price in Airbnb, a company founded on creating a digital platform on which a multitude of mini-landlords can offer stays in their home for VAT-free rents, doubled in the first day of trading.
But a day earlier the US Federal Trade Commission, in conjunction with 48 state attorneys-general, launched the most aggressive bipartisan company break-up lawsuit for 40 years. Their target was Facebook for how it has bought up competitors, notably Instagram and WhatsApp, to create what founder Mark Zuckerberg calls a protective “moat around itself” and so build a unique treasure trove of personal data. It has thus offered advertisers – who pay lavishly for the privilege – one of the most effective vehicles for targeted advertising ever created.
But it has also snuffed out what might otherwise have been a densely populated and diverse communications industry, appropriated the private data of billions to inflate its profits into monopoly rents and helped destroy the business model of the western media, with implications for democracy, not to mention hundreds of thousands of jobs. Such is the achievement of unbridled rentierdom.
In the 19th century, rentier capitalism was understood as just that – an economic system organised to deliver rents and dividends to a middle class of “dividend-clipping” shareholders and small landlords, who became widely deplored for living off the efforts of others. The economist John Maynard Keynes called for their euthanasia. He believed that if the state could ensure full employment, the power of rentier capital to set the terms of economic engagement would be greatly reduced.
An indulgent government will be forced to allow consolidation of the markets into monopolies
For a period after the war it looked as if he might be right, but he reckoned without the rise of libertarian economics, backed by rightwing politicians and self-interested corporations, who argued that capitalism worked best freed from any regulation or intervention. The old mindset – that to have and exploit assets from a position of monopoly and so manufacture unearned rents rather than compete, innovate and create – quickly re-established itself, now turbocharged by the development of digital platforms.
In this, the UK – as Professor Brett Christophers sets out in arguably one of this year’s most important books, Rentier Capitalism – has excelled. Only last week the London Stock Exchange revealed it aims to complete a £22bn takeover of data company Refinitiv, with the aim of becoming a stock market Facebook lookalike; in its case creating a global digital platform for trading shares and data – and so make enormous rentier profits.
As Christophers writes, the UK’s Deliveroo, TaskRabbit, Upwork, Turo, Flutter, Auto Trader, Rightmove, Moneysupermarket, Just Eat and various others are all driving towards similar objectives – to have a dominant market position that they can exploit like a Google, Amazon or Facebook.
Britain is the number-one platform operator in Europe – good news if regulators ensure the markets remain innovative, open and competitive. Bad news if they transmute into rentier structures – now much more likely as expansion into the EU will be denied and an indulgent British government, with its back against the wall economically, is forced into allowing their consolidation into monopolies within our smaller market.
Rentier capitalism is thus set to become more rampant. The array of industries in which this is already the core business model is mind-boggling. It’s there in infrastructure and the utilities (think port charges or BT’s margins); banking and property (think hitherto upward-only commercial rent reviews); intellectual property (think the protections, for example, afforded to design templates, drug patents and sound recordings); in energy (think how North Sea oil and gas reserves were turned over to oil companies so cheaply).
One of the few sources of making and doing at scale has been inward investors, transforming, for example Britain’s car industry. But inward investment has shrunk from 10% of national output in 2016 to below 2% in 2018: without access to the EU markets, it will remain very low. One of the Tory party’s former strengths was its links to business; now its links, to the extent it has any at all, are to rentier capitalists. Our collective future has been pawned, intensified by Brexit – and we’ve become a country to be plundered by old and new rentiers alike, just as the rest of the world wakes up to the menace.