Review by ARVIND SIVARAMAKRISHNAN
The world’s dominant economic system is rentier capitalism, not neoliberalism or anything else. In rentier capitalism, having and owning — thereby controlling access — is enormously more profitable than making or serving. Rent is ‘income derived from the ownership, possession or control of assets in conditions of limited or no competition’, and it depends centrally on the conditions under which access to an asset is sold; even asset scarcity matters much less.
Brett Christophers brilliantly shows how rentierism is global, and his very readable, even compelling, narrative gives dozens of salutary examples. One is that of the transnational company Arqiva, which controls most of the United Kingdom’s TV and radio broadcast sites, and the infrastructure for radio broadcasting. It also owns most of the telecom towers, and its fees come from terrestrial TV stations and mobile phone companies. Arqiva makes, extracts, and provides nothing. It controls access.
In fact the UK has almost always had a rentier economy; the landed aristocracy quickly joined the industrialists, and their own descendants inherited immense unearned wealth in the form of land. Even the 1945-75 period, when the United Kingdom had something like an industrial economy, was ended by rapid restructuring into a rentierised system, not a financialised one.
Under severe pressure from the financial sector, the British state both led and drove that transformation, and Margaret Thatcher finally destroyed the post-war order (probably as much for social reasons like reinforcing the notorious English class hierarchy as for purportedly economic ones).
After the discovery of undersea hydrocarbon fields — such British natural resources are Crown property — Thatcher used fossil-fuel revenues to reduce the budget deficit and to pay a skyrocketing social-security bill as the economy crashed. The government leased the fields to the corporates for free, and made no attempt to use the revenues — set at very low rates — for investment (Norway invested its oil revenues, and its sovereign wealth fund is now apparently over a trillion dollars). By the 1990s, UK hydrocarbon revenues were ‘precisely zero’. British manufacturing has never recovered, and very large sections of the labour force have been causalised.
In every sector, rentierisation causes monopolisation — the rentier ‘sweats monopoly from every pore’ — and vastly widened inequalities. Supermarket chains exclude rivals by buying land around their outlets. Rentier systems have an inherent pressure towards monopolisation, quite apart from the natural monopolies British businesses got in the privatisation of water, gas and electricity, and the railways. Those cut-price selloffs also included substantial areas of public land.
Finance shows some of the worst rentier excesses. Christophers lucidly explains the bewildering range of financial activities that emerged after the British so-called Big Bang of 1986; the first regulator said he let them do ‘whatever consenting adults did in private’. For example, collateral rehypothecation — capped in the United States but not the UK — means that in the UK a bank can borrow money, say a bond, and sell that to a third party before buying it back for return to the first holder. By late 2007, $4.5 trillion had been made thus, ‘out of thin air’.
In addition, the range of credit arrangements that emerged created a paradise for lenders and fixers. Many firms started hugely profitable financial services apparently unconnected with their main activity, and banks made short-term borrowings at low interest rates but lent at long-term high interest rates. The banks, in effect, monopolised the creation of credit itself.
The bubble burst in 2007, but the politicians evaded the issues (Gordon Brown, British prime minister from 2007 to 2010, said they had underestimated the scale of criminality involved). The state, which simply invented vast amounts of money to rescue the banks after the crash, had actively protected the financial sector, thereby exposing it to moral hazard on a colossal scale, with predictable results.
The IPR hurdle
Rentierism also dominates other sectors. Intellectual property rights (IPRs) seriously restrict access, innovation, and advances in knowledge, and are now hindering GDP growth. In pharmaceuticals, IPRs have the effect of killing millions of people around the world. As for income, McDonald’s make as much from franchisees’ rents as from food sales, and all Subway outlets are franchised; rents, not food, are Subway’s main business.
In resource extraction, giants like Anglo-American, Glencore, and BHP Billiton usually work under contracts in the global South; these give them more power than the concessions they use in the North — and they always fight the politicians very hard to get what they want. Although listed on the London Stock Exchange, they hold most of their physical assets in former imperial territories; their methods still show a form of resource-imperialism at the expense of marginalised peoples in the South and the North.
A truly global form of rentierism is based on platforms, such as labour platforms for taxi bookings, or capital platforms for buying or renting goods. On commodity platforms — like the London Stock Exchange — we trade ‘almost anything’, including financial risk. We very rarely know what fees such platforms charge.
The fourth type — attention platforms — is the biggest. Facebook and Google charge advertisers for our attention; Facebook, the ‘biggest surveillance-based enterprise’ in human history, knows far more about us than any government has ever known. Platforms sell our data to advertisers for unimaginable profits and apparently pay almost no taxes; the bigger ones are already near-monopolies. Just like the traditional media, they decide what does or does not appear, how it is monetised, and what their technology allows and rejects.
As for outsourcing, this necessarily worsens workers’ pay and conditions. Winning contracts becomes the contractor’s core business, the road to rentier monopolies. Bigger firms do nothing but state-outsourced work in major sectors, and often do it atrociously badly. The state contracts to clean up the mess, and many contracts run for as long as 40 years, at apparently no risk to the contractor.
In sum, Christophers paints a very bleak picture, but he makes grounded, practical proposals, not least on curbing monopolies. He may well have woken us from a global nightmare.
The author is a former Visiting Professor at IIT Madras