http://www.bbc.co.uk/iplayer/episode/b04xw2x8/the-superrich-and-us-episode-1

I have to admit that as I settled down to watch this 2-part BBC2 documentary, I was prepared for the worst: a programme on the 0.001% made by some people lower down in the 1%, lingering on their luxury lifestyles, narcissistic personalities and fawning minions, with scarcely a hint of criticism beyond the odd ineffectual mention of greed, and ending up with a politically safe ‘balanced agnosticism’ or untroubled bewilderment. But I was wrong.

The Super-Rich and Us broke the mould. It linked the rise of the super-rich to growing inequality and to austerity, and to the financial boom and crash. It took the trickle-down theory to pieces, went back to the 1970s and the subsequent rise of indebtedness as a source of profit or lenders, and for those who managed risk, who saw inequality as a way to make money. It even referred to debt as a means of wealth extraction. It exposed how tax inspectors were promoted for fostering a ‘relationship’ with companies rather than making them pay their taxes. It recognized the UK as a tax haven and the error of imagining that attracting the super-rich would benefit the British economy. It showed that greater inequality did not result in more growth. It acknowledged the huge rise in housing costs and the booming market for luxury property and goods bought not for use but as ‘investments’. There were a couple of apologists for the rich telling us that they didn’t believe you could make the poor rich by making the rich poor, as if anyone wanted to do that (a bit of polarisation to the point of absurdity is always a good way of avoiding an awkward issue).

And it got some of the right people on: Thomas Piketty, David Graeber (author of the brilliant Debt: the First 5000 Years), Nick Hanauer (the US billionaire who rejects many of the myths about the rich wants more equality), Ha-Joon Chang (the alternative economist), Danny Dorling (prolific author on inequality), Matt Whittaker from the Resolution Foundation, and Deborah Hargreaves from the High Pay Centre. Jacques Peretti did a good job as the interviewer/investigator, avoiding the egoism and gush of the usual suspects fronting these sorts of programmes.

No doubt BBC2 will be charged with ‘bias’. If anyone wants to put on 2 episodes arguing against it, I hope BBC will let them. That would be better than the ridiculous expectation that every programme should achieve ‘balance’.

Anyway, you’re waiting for the ‘but’:

Well first, although it did mention wealth extraction, it failed to make explicit the dependence of the super-rich on unearned income – the crux of the matter when it comes to evaluating the legitimacy of extreme wealth. So while it did say austerity and stagnating pay for the majority were products of the rise of the super-rich, it didn’t get to the heart of the matter, to the mechanisms by which the rich extract wealth from others, though some were at least implicit in its coverage of debt and interest payments.

Second, it used those dangerous, ideological words ‘investment’ and ‘investor’, without showing how they cover both real investment in new activities (wealth creation) and financial investment that just provides the investor with a yield at the expense of others (wealth extraction), and regardless of whether any real investments result from them.

Third, there was also little on the return of plutocracy – the infiltration and capture of the state by the super-rich and their political supporters, servants and sycophants, though some of the super-rich did recognize that one day the 99% may realize what has been done to them, and rise up.

Lastly while it did mention Citibank (bailed out by the American people in 2008 after

Photo: Maxine Simpson yachtfan. Creative Commons

sustaining huge losses in the crash), and its services to the super-rich, it missed an opportunity to reveal the shocking contents of its ‘Plutonomy’ reports, produced for its ultra-rich clients but leaked to the press in 2006. The last of these reports, sensitively titled Plutonomy Rising Tides Lifting Yachts, reassured its readers that “the rich are likely to keep getting even richer, and enjoy an even greater share of the wealth pie over the coming years.” However, they needed to be vigilant:

“RISKS — WHAT COULD GO WRONG? 
Our whole plutonomy thesis is based on the idea that the rich will keep getting richer. This thesis is not without its risks. For example, a policy error leading to asset deflation, would likely damage plutonomy. Furthermore, the rising wealth gap between the rich and poor will probably at some point lead to a political backlash. Whilst the rich are getting a greater share of the wealth, and the poor a lesser share, political enfranchisement remains as was – one person, one vote (in the plutonomies). At some point it is likely that labor will fight back against the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich. This could be felt through higher taxation on the rich (or indirectly though higher corporate taxes/regulation) or through trying to protect indigenous [home-grown] laborers, in a push-back on globalization — either anti-immigration, or protectionism. We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.” (emphases in the original)

Democracy is a dangerous thing if you’re a member of the plutocracy. As the BBC2 documentary noted, the 99% could stop the 1% at any time – and the Ministry of Defence, represented by Rear Admiral Chris Parry*, has already warned of a backlash if inequalities deepen – but you can be sure that the plutocracy will fight hard and dirty to resist this.

* The report is summarised here. For Parry’s class interests see this on his view of state school pupils and their families.

Photo: Broderick, heyjoewhereyougoinwiththatguninyourhand, Creative Commons

The knee-jerk reaction of the Right to criticism of inequality is to call it ‘the politics of envy’. No need to engage with arguments, just slap down the critics with a smart-arse phrase that saves the need to think. My critique of the rich is about the politics of injustice, not envy; indeed, like most critics of inequality I think envy is a mistake and part of the problem.

Envy, as a vice, involves resenting those who have something that we’d like to have ourselves, such as a special ability or an advantage, where there is nothing unfair in the way they have got those desirable things; for example if it is a matter of natural luck, like having beautiful eyes, or a product of hard work, imagination and intelligence, or some mixture of all these.

Adam Smith, that much misunderstood – because rarely read – founder of economics, described envy as an “odious and detestable passion”, defining it as “that passion that views with malignant dislike the superiority of those who are really entitled to all the superiority they possess.”[i] But the rich do not owe their wealth to superiority, unless we mean their superiority at exploiting unfair systems.

Envy of the rich means resenting the rich and yet wanting to be rich oneself. This implies despising those who have inherited money and other advantages and who can live off unearned income based on control of assets, because it’s them, not you, that’s doing it! Those who are envious in this way make the mistake of missing the unfairness of the situation, and instead resent the fact that someone else – not them – is the beneficiary. It’s unethical.

And it’s a mistake to envy the rich for their disproportionate power over others; again the envier just wants to be in that position instead. Never mind that it’s arbitrary, that it can’t be generalised to everyone, and that it’s undemocratic.

Envy of the rich and their lifestyles is also misplaced because vast private material wealth is wasteful: it distorts economies so that they overproduce luxuries for the rich and underproduce goods for the poor. It wastes the earth’s resources; and the carbon footprints of the rich are far more excessive than other peoples’ – far beyond what the earth can sustain. And many of the rich are banking on unsustainable growth, or get unearned income from the fossil fuel energy system and so have a vested interest in continuing to trash the climate. This is hardly something to envy! 

Finally, it’s a mistake to envy those for whom getting money and material wealth is an end in itself and who put this before everything else. They show a complete lack of wisdom in terms of understanding human well-being. Those who can come to terms with the fact that we are social beings, dependent on others, needing them, and who appreciate the importance of giving and of love and friendship are wiser and more likely to be happy.

But actually if you think about it, while the desire to be like those richer than us is common, this is not usually driven by bad feeling towards the rich, but by something more akin to admiration. The problem here is not envy but misplaced admiration, because as my book shows, the wealth of the rich has more to do the fact that property rights are defined in such a way that those who control certain kinds of property can use it to extract wealth from others without creating wealth for them in return. Free-riding on the wealth produced by those in a weaker position than you is hardly ‘admirable’, or something deserved to which the recipients can justifiably claim to be ‘entitled’, and it has no particular connection to superiority. Rich landlords don’t need to be superior. They just need to own houses or land when other people lack these so they can get something – rent – for nothing. There’s nothing admirable in this.

Talented people who give others a lot of pleasure, such as sports stars, musicians or actors are of course generally viewed with gratitude and admiration by those who love their work, and they often wish they could be as good as them. Sometimes we say we ‘envy’ stars their talents, but we don’t mean envy in the sense of ‘malignant dislike’ of them – quite the opposite. Some of them may make a lot of money in the process, particularly where they gain access to global communication and advertising systems that reach huge audiences, as economist Sherwin Rosen explained.[ii] Consequently, fans sometimes feel conflicted about their heroes. It’s not unusual to love a pop star’s music but be angry at their use of tax havens to avoid paying tax, and lots of football fans think top footballers are overpaid. In such circumstances a conflicted response is absolutely understandable. We admire their talents, but don’t approve of their excessive wealth or the attitudes that often go with it.

So neither envy as a vice, nor envy in the softer form of wishing one had something others have while admiring them rather than resenting them for it, is appropriate for the rich.

But the bizarre thing about the politics of envy jibe is that some on the Right seem to believe envy is actually a good thing. Here’s London’s Mayor, Alexander Boris de Pfeffel Johnson:

Photo: bixentro, Creative Commons

“I stress – I don’t believe that economic equality is possible; indeed some measure of inequality is essential for the spirit of envy and keeping up with the Joneses that is, like greed, a valuable spur to human activity.”[iii]

Johnson was born into a rich family and sent to public schools, including Eton, so he hardly needed a ‘spur’; like many public school boys he oozes a sense of entitlement from every pore, and is seemingly incapable of self-doubt. Like Tony Blair he assumes wealth is a reflection of contribution, of special ability, including high IQ. This is what we should say to them: ‘What do you have that you did not receive? And if you received it, why do you boast as if it were not a gift?’ (1 Corinthians 4:7).[iv]

[i] Adam Smith (1759) The Theory of Moral Sentiments, Liberty Press, VI.iii.16, p.243-4

[ii] Sherwin Rosen (1981) ‘The economics of superstars’, The American Economic Review, Vol. 71, No. 5., pp. 845-85

[iii] Boris Johnson 2013 ‘What would Maggie do today?’ Margaret Thatcher Lecture, 27^th November

[iv] I came across this in a great book by Gar Alperovitz and Lew Daly – Unjust Deserts, published by New Press, New York in 2008. I’m an atheist by the way, but a good quote is a good quote.

Congratulations and Happy Christmas to the New Era residents!

The best news this Christmas?: the New Era tenants have won their high profile battle against Westbrook Partners, the New York property firm that bought up their estate in London in order to put up the rent and get in richer tenants. If they’d succeeded many of the tenants would have ended up homeless. Faced with bad publicity in the season of good will, Westbrook decided to retreat in order to free-ride again elsewhere; so they sold the estate on to the Dolphin Square Foundation, a charity providing low cost housing.

But a few days later, a survey by the National Housing Federation found that more than a quarter of the people in private rental accommodation are having to cut back on food to meet their housing costs, and just under a quarter had cut back on heating. (Guardian 23rd December 2014).

So the problem of using housing as a source of unearned income by renting it out remains, and in cities all over the world, landlords big and small, seek to buy up properties precisely for this purpose, often removing existing tenants in order to raise the rents. Housing simply as property is for living in. Housing as an ‘investment’, a source of unearned income is ‘improperty’, as J.A.Hobson called it.

The usual argument of mainstream economists is that ‘market rents’ should be charged, this being seen a matter of facing up to inevitability (‘you can’t buck the market’, as Margaret Thatcher famously said) – of acknowledging a natural law. And they don’t mean rents that will cover maintenance costs (i.e. fair rents), but rents as high as they can go. Intervening to hold down rents to an affordable level for low and middle income tenants is seen as some kind of inadmissible ‘distortion’ of the market, which by making markets less efficient will damage the economy. For mainstream economics it’s ‘efficient’ to set rents at the going market rate, because then that will balance supply and demand. It may do, but that may mean that those whose incomes are too low to be able to afford them, will end up homeless. ‘Demand’ only counts in free market economics if it’s backed up by money. Allowing land and property to go to the highest bidder is sometimes described as allocating it to ‘the highest and best use’. This is usually justified as allowing the property to be rented (or sold) to whoever is ‘willing’ to pay the most, as when a chainstore outbids some residents for land. But of course, potential tenants differ massively in how much they can afford to pay. What people offer to pay for anything reflects not just how much they want or need it, but their income. Interestingly, economists don’t call these inequalities in purchasing power a ‘distortion’ of the market.

Photo: Charleston’s TheDigitel, Creative Commons

What’s more the market for houses is not like that for cakes. Their supply does not readily adjust to demand, and there are no substitutes for housing as there are for cakes. Housing is a basic need, so its production and distribution should be regulated so that everyone can meet their needs. And that should include state-housing.

Rent is unearned income for the landlord, a private tax on others, and a deadweight cost on the economy. Mainstream economists don’t like to be reminded that landlords “love to reap where they have not sowed”, as Adam Smith said, or that David Ricardo, John Stuart Mill, Karl Marx, Henry George, R.H.Tawney, Michael Hudson and a host of others agree that rental income has no justification, other than power. Recently, a more critical US economist, Joseph Stiglitz, has argued that increasing urban land rents have been a major component in the economic crisis.

So yes, it’s wonderful that the New Era residents have won, but two things still need fixing. At present we have thousands of people on incomes too low to afford adequate housing, and housing costs that include a large element of deadweight costs imposed by private landlords to provide them with unearned income. Until these are resolved, the wider problem underlying the New Era case will remain.

Photo: bensonk42, Creative Commons

In the brave new world of neoliberalism, everyone is encouraged – ‘empowered’ – to choose freely what to buy, do, eat, what health care to have, what schools to attend, what to invest in, so their opportunities are maximized. If they’re smart, savvy and ‘hard-working people’, they’ll be able to navigate successfully through this world of opportunities. Society, which as Margaret Thatcher told us does not exist, apparently has no structures, no deep, enduring inequalities, no extraordinary imbalances of power, no privileges or discrimination, no inheritance of huge advantages and disadvantages, no free-riding by the rich. There’s just a mass of individuals-from-nowhere encountering each other on a level-playing field of competition and markets. Winners and losers emerge, of course, but their success or failure is deserved so it’s a meritocracy.[1] We need risk-takers, special enterprising people who have the ability to make things happen, apparently.

We’re supposed to be ‘entrepreneurial selves’[2], constantly doing improving things in order to sell ourselves to others in the market of life, enlarging and ‘leveraging’ our ‘skillsets’ (sounds more impressive than skills, eh?), updating our cv’s, networking, using social media to promote ourselves, in competition with everyone else, so we can get ahead. Don’t think of the losers this inevitably creates, you wouldn’t want to be seen with them anyway; stay focused and positive. This is the route to success – and of course, to wealth and well-being.

I don’t remember becoming aware of the concept of the curriculum vitae – or resumé as Americans call it – until I was in my early 20s. Now I’ve heard that even primary school kids are introduced to it. Neoliberalism has colonised schools and universities, and continues to extend its influence into the minutiae of life within them.

You might expect that it would encourage pupils and students to become independent thinkers and actors, inquisitive and adventurous, well on the way to becoming skilled and self-reliant – entrepreneurs of their own lives. But ask anyone involved in education and you’ll find out that it hasn’t turned out that way. Instead of encouraging independent thought, the neoliberal education system is increasingly ‘teaching-to-the-test’, producing students who don’t want to take the risk of thinking independently and who just want to know the answers that will get them the grades.

It would be short-sighted and unfair to blame the students, though. Why? 2 reasons:

1. With the burial of the post-war ideal of full employment – which was largely achieved for 30 years – young people face a very real threat of failure and unemployment – and of course, huge debts too. Now, taking risks in your assessments by learning and thinking independently is hardly an attractive option when grades matter so much for getting into university and for getting a job. ‘What should I have written to get a top mark?’ ask some students when they get their work back. If tutors say go and read, question, explore and think, it sounds like they’re cheating them, moving the goalposts.
2. League-tables and audits: UK education is under the cosh of competition through league tables. Grades become the holy grail. In the stunningly unimaginative and mechanistic model of education in which all learning has to have pre-set, unambiguous objectives and ‘measurable outcomes’, grades are the primary measure of both students, tutors, schools, colleges and universities, while the content and the pleasure of exploring and learning are secondary. No wonder there is grade inflation. No wonder some teachers are tempted to drop heavy hints to their students about the ‘correct’ answers.

Worry about the future plus the reduction of education to a qualifications factory adds up to anxious, cautious students who understandably want their upper second class degree to ensure that they’re at least not disadvantaged in the labour market. And given chronic job shortages, employers faced with narrowing down hundreds of applicants per vacancy to a few find grades and league table rankings an easy way of doing this.

Photo: DonkeyHotey, Creative Commons

So where’s the space for creativity, adventure, experimentation, risk taking? And you do need time and space – so you can get absorbed, experiment and indeed play. A bit of daydreaming, wondering and walking can also help, especially if they follow some focused work – it’s surprising how often it’s then that you get the answers you were looking for. It’s all to do with allowing the right hemisphere brain to take over for a bit. And you need security too, so you’re not afraid of making mistakes, for the road to originality is paved with them. Comedian John Cleese and educationalist-cum-comedian Ken Robinson have made entertaining videos about these very things.

Our neoliberal culture is inimical to all of these, with its constant pressure to multi-task, scattering our minds with stimuli that turn out to be unsatisfying, and achieve (maximize your ‘deliverables’!), and with its chronic impatience – the shareholders want their money and they want it now. A few iconic firms like Apple may promote an image of creativity and even the pursuit of beauty, but don’t be fooled, the bottom line is the bottom line, and Apple pursues it ruthlessly.

The main thing neoliberal education provides for the economy is not independent, entrepreneurial students, but indebted individuals – a source of unearned income for whoever owns the debt – trained to comply with whatever is demanded of them.

[1] Actually, some of the founders of neoliberalism knew this was nonsense. Frederik von Hayek, Thatcher’s guru, said outcomes in markets owe a great deal to luck, though he wondered if children should be told this, in case it discouraged them from making an effort. Hayek, F.A. (1976) ‘‘Social’ or distributive justice’ in his Law, Legislation and Liberty, Vol. 2, p.74. Similarly: ‘the value which a person’s capacities or services have for us and for which he is recompensed has little relation to anything we call moral merit or deserts.’ Hayek, F.A. (1960) The Constitution of Liberty, p. 94. Neoliberal politicians prefer not to know this because they realise it wouldn’t play well with the electorate, or indeed with the rich who fund their parties.

[2] This is a term inspired by the work of Michel Foucault on neoliberalism and care of the self. See his Birth of Biopolitics lectures.

It was Milton Friedman – one of the founders of neoliberal economic doctrine in the 1980s – who popularized this phrase. Was he right?

The short answer is yes.

Just as a clock that’s stopped is right twice a day, Friedman got two things right. One was that even in the Café Utopia, where delicious lunches like this don’t cost customers any money, they’re not really free, because someone has to cook and serve them, which costs them time and effort.* OK the apples that fall off my tree are free, but even eating them requires me to go out and pick them up before the bugs get them. Some useful things, like sunshine, are free, but to put together a lunch somebody has to do some work.

It may still be possible for many people to get free lunches, free in the sense that they are costless to the recipient, requiring no payment in money or work (like washing up in the Café), but they will always be a cost to someone else. Children are given free lunches by their parents, but their parents or someone else has to grow the food or work for money to buy it and then cook it, so it’s not free for the provider. That’s fine: it’s a gift – a great thing to do, and of course young children can’t be expected to cook for themselves.

But the problem is that our economic system also allows some people to get fabulous free lunches – I’m not talking beans on toast here – even though, unlike children, they’re perfectly capable of producing something useful in return. And they get them not because they need them, but because they can. If they own land, they may be able to rent it out to others that lack land. Their free lunch comes in the form of rent; because the land already existed, they didn’t have to work to produce it. Even if they bought the land with their hard-earned money and then rented it out, the money they paid to the previous owner would be equivalent to rent. Once they’d bought it, and become the landlord, they could get rent without doing anything. They wouldn’t be selling the tenants something they’d produced, so it’s parasitic. A free lunch too far.

Private banks have a free lunch ticket because they’re allowed to create money when they lend – just by typing figures into the borrowers’ account, so it’s hardly ‘work’ – and then get the money back with interest added. Why do we keep getting all those junk letters and emails offering us ‘cheap’ credit? Because those offering them are seeking free lunches at our expense.

Owners of firms can get free lunches because by law, they are entitled to determine what happens to the revenue from the sale of goods and services produced by their workers, even if they do no work themselves. And as I show in my book there are other ways of getting unearned income – free lunches – too.

In practice, neoliberalism is a system that promotes free lunches on the basis of control of key assets that others need. Neoliberal government budgets consistently cut back on free lunches provided in response to need through the welfare state (i.e. democratically regulated), and enlarge the scope for rentiers to get free lunches on the basis of power.

In effect, this is what my book says: more and more, capitalism has become a system in which the rich get free lunches at the expense of the 99%.

* What was the other thing was that Friedman got right?: his statement that land value tax is ‘the least bad tax’, but you can read about that in chapters 4 and 22 of Why We Can’t Afford the Rich.

Photo: Dominic Alves, Dominic's Pics, Creative Commons

1. How would you like it if you and others voted a party into government, only to find that once it got into power it could not introduce the policies you’d voted for because big business would sue the government for millions or billions if it did?
2. What if policies that protect the environment, health or employment conditions or the public sector (like the NHS) were particularly likely to trigger such lawsuits? What if the government were sued for billions for refusing an energy company permission to drill for oil or shale gas, or for trying to impose employment protection measures?
3. And what if your government were ‘tried’ in a secret international court consisting of corporate lawyers, with no democratic accountability to anyone?
4. And what if all this were brought about by a new international trade pact that had been negotiated between corporate lawyers and government officials in secret, with no democratic input from your elected representatives, and all with the aim of allowing a race-to-the-bottom in standards regulating corporate power?
5. And what if, in response to leaks of details about the trade pact, members of the public protested to their government, only to be either dismissed in a patronising ‘don’t-you-worry-your-little-heads’ manner or shouted down aggressively.

It sounds like a nightmare. But it will become a reality if governments ratify the Transatlantic Trade and Investment Partnership. 1 -3 haven’t happened yet in Europe, but will. 4 already is happening, and 5 has already happened. 1-3 have already happened where similar trade pacts are already in existence.

• In Australia the Philip Morris tobacco company is suing the government for attempting to make plain packaging compulsory.
• In Argentina, in the financial crisis, the government responded to popular anger about rising costs of living by freezing energy and water prices, only to find itself hit by over 40 law suits issued by the private companies involved, and had to pay $1.15 billion in compensation.[1]
• In Ecuador “Occidental faces a range of allegations in Ecuador in relation to abuses of the country’s human rights, social and environmental laws. The corporation was found to have breached contract terms in relation to a share transfer deal, as a result of which its contract was cancelled. Occidental immediately retaliated by filing a billion dollar ICSID [International Centre for the Settlement of Investment Disputes] claim. In October 2012 the Ecuadorian state was ordered to pay $1.7 billion plus interest in compensation, the equivalent of fifteen years worth of social welfare payments for the country. The Ecuadorian government is attempting to appeal the ruling.”[2]

              Photo: Byzantine_K, Creative Commons

As for 4 (above), government dismissals of protests, you can read Tory grandee Ken Clarke here. And you can listen here to a shocking attempt by MPs (on the Business, Innovation and Skills select committee) to silence David Babbs, a representative of the online campaigning group 38 degrees, putting questions about TTIP. Funny isn’t it – how, in the UK, the Conservatives and UKIP fret about the power of the EU in Brussels, but refuse to talk about the impending loss of sovereignty to TTIP (also being negotiated via Brussels). And whereas we at least have a European parliament, there won’t be a TTIP parliament: it will be a no-go area for democracy. Neoliberal economic doctrine is anti-democracy.[3] So is neoliberal politics, only covertly. If TTIP is accepted it will be a huge victory for the global plutocracy over democracy. Some anti-TTIP campaign links:

George Monbiot article: http://www.theguardian.com/commentisfree/2013/nov/11/eu-us-trade-deal-transatlantic-trade-and-investment-partnership-democracy

Wikileaks on TTIP: https://wikileaks.org/tpp/pressrelease.html.

Stop TTIP (This is a pan-European campaign): https://stop-ttip.org/

SumOfUs: http://action.sumofus.org/a/tpp-lawsuits/

38degrees https://secure.38degrees.org.uk/page/s/vince-cable-fix-ttip#petition

UK HM government petition https://submissions.epetitions.direct.gov.uk/petitions/56884/signature/new

 Please make your voice heard!

[1] Corporate Europe Observatory (2013) ‘A transatlantic corporate bill of rights’, 3 June, http://corporateeurope.org/trade/2013/06/transatlantic- corporate-bill-rights. [2] McDonagh, T. (2013) ‘Unfair, unsustainable and under the radar’, San Francisco: Democracy Center, http://democracyctr.org/new-report- unfair-unsustainable-and-under-the-radar/. [3] See Mirowski, P. (2013) Never Let a Serious Crisis Go to Waste, London: Verso

Photo: Dominic Alves, Dominic's Pics, Creative Commons

Andrew Sayer, Polly Toynbee and Richard Wilkinson at the launch

I’m very happy to say Why We Can’t Afford the RIch is now published, and available here

The launch was on Tuesday 25th November in London. The talks and discussion were expertly chaired by Polly Toynbee, and after a short overview of the book by me, and a response by Richard Wilkinson, of the Equality Trust and co-author of the excellent The Spirit Level, there was a lively debate on the book’s analysis and on what needs to be done.

Doreen Massey spoke about the need to identify what specific issues touched ‘raw nerves’ among the public, that might be linked to more general issues of the critique of neoliberalism’s support for the rich and super-rich. Ann Pettifor argued for campaigning for full employment (among other things). There were questions about the distinction between the idle rich and the working rich (see p.104ff in the book). There was some discussion of inherited wealth and inheritance taxes. Others spoke about the need to challenge the social norms about what different kinds of work are worth, and what jobs needed valuing more, and funding more. Climate change and the role of big energy companies was another topic. And as if those issues weren’t big enough, we also got onto big questions like what is an economy for?; what is wealth? (is it just accumulated stuff, or money or the circumstances that enable people to flourish).

So it was a constructive and refreshing debate. I hope the book prompts more people to join in.

The week before I did a pre-launch lecture on the book in Cardiff. You can watch this here:

Update: New Era

The continuing story of the New Era estate – already the subject of two posts here – where the existing residents are set to lose their homes as a result of its purchase by Westbrook Partners of New York who want to replace them with tenants who can afford 3 times as much rent.

But the campaign is gathering strength. The mayor of New York has condemned the firm for its ‘predatory’ behaviour in his city. But Boris Johnson, mayor of London is dragging his feet over the whole issue. See the latest video on this, featuring the campaigners, here:

An eye-rollingly dumb question?

It’s for living in, obviously. And unlike patio heaters, leaf blowers or jet-skis, it’s an absolute necessity. And that’s what it is for most of us.  But it’s also a necessity that is in short supply and very expensive. This means that those who have more of it than they need for their own use, can also use it for extracting unearned income from those who have none. It’s unearned income because, apart from maintenance or improvement costs, it’s something for nothing, because the housing already exists. Whether it’s small-time buy-to-let housing for students, or big time property magnates buying up estates in inner London, it’s what J.A.Hobson, writing at the end of the 19th century called ‘improperty’: property used not to live in or produce things with, but as a means to extract rent from those who don’t have such property and can’t afford to buy it.

http://www.theguardian.com/uk-news/video/2014/nov/21/new-era-residents-fight-us-owners-westbrook-london-estate-video

This video from the Guardian is a must: it links the wealth extraction practices of major property companies to the human costs paid by people like the residents of the New Era estate in London. Westbrook Partners, the US firm that is buying the estate, intends to push up rents far beyond what the current residents can afford. True, they will have to do some refurbishing to persuade richer tenants to move in instead, but what they are after is not merely payment to cover those costs but a major flow of unearned income simply from their control of the property. They get this simply because they can.

Is it right that people should be made homeless in order to get more rent from property? Is it right, indeed that housing should be used primarily as improperty rather than essential property?  Just to be clear, I’m not questioning ‘private property’ here. Owning your own home for your own use is fine, just as owning your own furniture or socks is fine. And if land values weren’t so inflated, more people could afford to buy their own home. What I am questioning is private improperty.

And social housing is fine too, for here the rent charges need pay only for construction and maintenance costs. (While we include these in the term ‘rent’ in everyday life, in economic theory, the term excludes such payments.) But if local authorities have to borrow money to build housing and they pass on the interest charges to the tenants and other local tax or rate payers, then this sets up a conveyor belt of unearned income flowing first as rent to the local authority, and then passed on as interest to the lenders. (As I explain in my book, interest payments are another form of unearned income.)

Diana Parkhouse, Creative Commons

The pensions connection

The film says Westbrook Partners have ploughed $11billion into property on behalf of ‘investors’. How altruistic. The big time ‘investors’ are generally the rich and super-rich. But as the film says, there are also ‘investors’ like workers’ pension funds – for fire fighters in the illustration. All pensions, whatever their form, are ultimately a means by which those too old to work are funded by those young and fit enough to do so. This can be arranged by democratically-approved transfers between these two generations through state pensions. As such they are likely to be based on judgements of what the recipients need, and what the ‘donors’ can afford. But private pension funds operate on the basis of power, not consent and need. By controlling sources of unearned income – rent, interest, profit, dividends, speculative gains – those who can afford private pensions – mostly the better off half of the population in the UK – can piggy-back on this power to extract wealth from the economy to fund their pensions, and without the consent of those the money ultimately comes from.

Maybe, like so many of the rich, Westbrook probably imagine that they are special ‘wealth creators’, but they are primarily wealth extractors. Their success is the other side of the stagnation or decline of incomes among the majority. It’s also got a lot to do with why many households have to spend more of their income just on having a roof over their head.

And it’s not only unjust but dysfunctional for the economy:

“In modern Britain, it seems, putting up the rent is somehow regarded as economic growth. The US dominates in technology. Germany makes millions of cars, Japan still makes consumer electronics. Britain produces buy-to-let landlords. How our competitors must envy our success.” (Patrick Collinson, Guardian, 2006)

I reported in my last post on Richard Benyon, the rentier (and richest MP at Westminster), and the tenants of the New Era Estate in London. His family firm Benyon Estates had joined a consortium buying up the estate in order to push up rents by up to 400%. Inevitably, this will drive the current tenants out, probably into extreme hardship. This is one example, of a wider process of rent hikes driving out low income people from the centre of big cities. It’s a kind of ‘social cleansing’.

Well, thanks to the tireless campaigning of the New Era tenants, who have brought this to the notice of the public, Benyon has been shamed into withdrawing from the consortium. (Maybe shamed is too strong a word. He protests  – boasts? – that his family have been landlords in the area for 125 years. So what? Is that supposed to show some kind of moral commitment or loyalty? Are we supposed to think of him as a ‘custodian’ who has done everyone a favour by looking after his properties?)

What it does mean is that they have been extracting unearned income in the form of rent from residents for that period – ‘in their sleep’, and living off the labour of others, as John Stuart Mill said of landlords back in 1848.

But though this is a symbolic victory for the tenants, it’s not an economic one, because the rest of the consortium  – Westbrook Partners, a New York-based property ‘investment’ company, i.e. a rentier organisation – is still pursuing the deal. So the tenants are now going after them. As reported in the Guardian, Westbrook have form in the rentier game. You can support NewEra4All and sign their petition to Parliament at Change.Org

The fact that Benyon is the richest MP in Parliament, that he voted for the hated bedroom tax on people in state housing – while having his own palatial pile in Berkshire, and that he has consistently defended landed interests, joins up several dots. But it would be a mistake to think that the problem was just one of a rogue landlord and establishment politician.

The problem is private landlordism, especially under-regulated landlordism in general. It’s a way of free-riding on the labour of others, for once you deduct construction and maintenance costs from rent, it’s pure unearned income for the landlord – something for nothing. It allows them to reap where they have not sown, as Adam Smith put it, or to extract payment for a disservice, as Winston Churchill put it. Other leading political economists, from Thomas Paine, David Ricardo, J.S. Mill, Karl Marx, Henry George, R.H. Tawney, J.A.Hobson, through to contemporary authors like Michael Hudson and Ann Pettifor have agreed. Neoliberal governments, have been throwing money at rentiers, most clearly through their buy-to-let and build-to-let schemes.[1]

Whether the landlord’s name is Richard Benyon, Westbrook Properties, or Joanne Bloggs, the game is the same, and it’s the game that we need to stop.

We need a land-value tax, and as the New Era residents say: social housing not social cleansing!

[1] Actually, neoliberal economic theory, does not endorse landlordism. Even guru Milton Friedman favoured a land tax as ‘the least bad tax’. But neoliberal politicians’ priority is courting power and money, not following a theory, and they prefer not to know the difference between creating wealth and extracting it from others through rent.

Behind the story of a millionaire Tory MP and tenants facing homelessness.

Richard Benyon features in a really important article by Aditya Chakrabortty in the Guardian on 11^th November, telling the story of the shocking changes in London’s housing market that are ousting working class tenants as a result of speculators moving in to replace them with richer tenants who can cough up more rent.

It focuses on the New Era housing estate, built in the 1930s by a charitable trust, which now houses working class tenants, the kind of people who do vital jobs that keep London going. The Tory MP Richard Benyon, supposedly the richest MP in Parliament, estimated personal wealth £110 million, much of it inherited, is part of a property consortium that is buying up the estate, with the aim of putting up the rent on this appreciating asset. [1]

Tenants have already had a £160 a month rent rise, and face a further hike from present levels of around £640 a month to c. £2,400 a month. Given the lack of alternative low cost housing in London this means many face probable homelessness. There lives are likely to be wrecked. There is worse, for the government is actually throwing money at the landlords and so-called developers.

I urge you to read Aditya’s brilliant article – brace yourself for outrage – but I just wanted to add something:

What do we call someone like Benyon?

Various expletives may come to mind, but I’d call him a rentier. What’s that? It’s someone whose income comes from controlling an existing asset like land, buildings, or productive equipment and infrastructure, and using it to extract payments from those who need access to them to live but don’t have any rights over them.

The rentier’s income is unearned, a windfall, a form of wealth extraction, because it is not derived from providing any new goods and services. Most people of course are dependent on a job for their income, and their job is likely to be one that contributes to the provision of goods and services, from bread and butter, to computers and software, to school lessons and eldercare. Their income is earned.

‘Rentier’ is usually pronounced with a French accent, but it really doesn’t matter how you say it. It’s an old word that went out of fashion in the latter part of the last century – interestingly, just at the time when rentiers were making a comeback! Neoliberal economic policy is all about increasing the power of rentiers to extract wealth from others. I’ve written more about it in my book.

Photo: Wikipedia commons “John-stuart-mill 1“. Licensed under Public domain via Wikimedia Commons.

This is what John Stuart Mill wrote in 1848:

“Landlords grow rich in their sleep without working, risking or economising.

“If some of us grow rich in our sleep, where do we think this wealth is coming from?  It doesn’t materialize out of thin air.  It doesn’t come without costing someone, another human being.   It comes from the fruits of others’ labours, which they don’t receive. “

“The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. . . . What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies?”

Many of the rich and super-rich are rentiers or partly rentiers. Many actively seek new sources of rent and other kinds of unearned income, in their waking hours too. They are active rentiers.

Many rich people claim they are not rentiers because most of their income comes in the form of salaries, not rent or interest or capital gains. These are the people the media often call ‘the working rich’. But many are working for rentier organizations, most of whose work is seeking new sources of rent and interest and collecting other forms of unearned income by controlling key assets. The financial and property companies for which many of the rich work are wholly or partly rentier organizations, and so their employees are rentiers-at-one-remove.

We need to start using the R word again. As Aditya’s article shows, neoliberal economic policies increase the power of rentiers to extract wealth from others.

We can’t afford rentiers!

[1] You can check Benyon’s class background and biography at http://en.wikipedia.org/wiki/Richard_Benyon