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RENTS AND RENTIERS

August 28, 2017

RENTS AND RENTIERS

Let’s get academic and explore some definitions and redefinitions of words and phrases used by economists in the course of plying their trade. Piketty in his book, Capital in the Twenty-First Century, devotes several pages in his discourse on merit and inheritance to give us the evolving meaning of rent and rentiers along with a section on the society of petit rentiers. Before I read Piketty’s book I didn’t know that I was myself a petit rentier, but now I know.

Let’s define some basic terms per Piketty, who uses rents and rentiers in their original descriptive sense. Thus rents produced by an asset are nothing more than income on capital, whether in the form of rent, interest, dividends, profits, royalties, or any other legal category of revenue, provided that such income is simply remuneration for ownership of the asset independent of any labor, and rentiers merely describe those who live off such rents. (It seems to me that it makes a difference on how such rent-bearing assets were acquired, whether through investment by the rentier from funds acquired by labor or by inheritance or by other income derived from capital, but I leave that issue of merit and how such funds were acquired for another day.}

While the terms rents and rentiers were used descriptively by nineteenth century novelists such as Austen and Balzac, whose rich characters offered no apologies for being rich and society by and large accepted and acknowledged the dominion of wealth, that is not the case during the twentieth century or today, where the terms “rent” and “rentier” have taken on pejorative connotations. Rentiers are now described as the enemies of democracy by many since they do not “work for a living” but are rather living off the work of others and are now normally depicted by novelists and TV writers in a negative light if not denounced as lazy, immoral and undeserving. (I suspect without knowing that Marxian influence of the  19th century and early 20th century progressive Republicans such as Teddy Roosevelt and William Howard Taft and their condemnation of trusts and the Gilded Age had something to do with this drastic change in how we look at “rent” and “rentiers,” which persists to this day.)

I agree with Piketty that there is some justification for this public disdain and that this change in social representation of inequality is in part justified, but that it rests on a number of misunderstandings. Capital, after all, is a critical component in market economies irrespective of inequalities it may cause or may be claimed to have caused and we should be working to regulate and control those inequalities rather than removing all influence of those who provide capital to a market economy which cannot function without capital input.

As an aside commentary, currently under-regulated and tax-coddled capital and financiers have lopsided influence over our market economy and act as though they were the only ones involved, but capital, though essential, is but one component of our economy. Another essential component is labor, and we have certainly regulated and continue to regulate labor since Reagan’s firing of the air controllers in the late 20th century started the bloodletting while giving full rein to capital in controlling our market. We have seen the results of our failure to regulate capital with Bush’s Great Recession, the bailouts, mortgage fraud, etc., but irresponsible politicians have apparently learned nothing and have failed and are still failing to regulate banking and other corporate investment practices to this day, thus inviting another such disaster, as I often write, and now, with a clueless and irresponsible president in the Oval Office, I think public attention is once again diverted  by his antics from the potential for an overhanging global economic meltdown due to our laissez faire regulation of banking and other business practices.

Back to the topic – Piketty notes that “There is something astonishing about the notion that capital yields rent, or income that the owner of capital obtains without working. There is something in this notion that is an affront to common sense and that has in fact perturbed any number of civilizations, which have responded in various ways.” Thus we have had usury laws and religious edicts against the charging of interest etc., but rent is and has always been a reality in any market economy where capital is privately owned, and the fact that the definition of rent has been expanded beyond landed capital into stocks and bonds and other forms of industrial and financial capital is not relevant – income from such assets or other such sophisticated and esoteric instrumentalities now or yet to be is still rent.

To end this post in an attempt at humor – As indicated earlier, I found that I am a petit rentier. I have some income-bearing property from which I derive income and which I acquired through work and not inheritance, though after taxes and other expenses, I can see why I am defined as a petit rentier (petit is a French word for small). Since many today artificially lump rentiers (petit or otherwise) into a group as “enemies of democracy,” I suppose I could be said to qualify. Imagine! A lifelong pro-labor advocate, pro-union liberal, son of a coal miner etc. who happens to have piddling capital assets that he wouldn’t object to having regulated for the public good – and an enemy of democracy? Not guilty!  On the contrary, democracy is my first love, and as I often write, it is one of the last few things left worth dying for.     GERALD        E

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