No such thing as a free lunch?

Cafe UtopiaIt 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.

Lloyds bank

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%.2014-09-24 15.41.59

* 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.

TTIP versus democracy


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:

Wikileaks on TTIP:

Stop TTIP (This is a pan-European campaign):



UK HM government petition

 Please make your voice heard!

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

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


Screenshot 2014-11-28 17.37.39

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:

Screenshot 2014-11-28 17.21.51

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:





Screenshot 2014-11-28 17.24.48

What is housing for?

An eye-rollingly dumb question?

It’s for living Screenshot 2014-11-23 10.49.46in, 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.

Screenshot 2014-11-23 10.19.41

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

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)2014-09-24 15.41.59

Benyon retreats to free-ride again


Benyonrentscrabble10.49.47 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

Screenshot 2014-11-16 10.19.28

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.2014-09-24 15.41.59




What do you call Richard Benyon?

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

2014-11-13 18.27.40

Richard Benyon features in a really important article by Aditya Chakrabortty in the Guardian on 11th 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!2014-09-24 15.41.59

[1] You can check Benyon’s class background and biography at

Dangerous Words No. 1: ‘Investment’


Words matter. Where they describe economic practices they tend to be heavily laden with moral and political baggage. Who wouldn’t rather be called an ‘investor’ rather than a ‘speculator’, or an ‘entrepreneur’ rather than a ‘capitalist’?[1]

For hundreds of years there have been struggles over the use of such terms. Re-labelling a dubious practice like ‘gambling’ ‘risk management’ can work wonders. Or think of the stroke of genius in calling debt ‘credit’: instead of a dreadful burden, we feel blessed: Hey, I’m ‘credit-worthy’ – my bank is confident that I’m a reliable and successful person!

What about investment then? It’s surely a good thing. Who could be against investment? ‘Investors’ must surely be good people.

But the term can mean two very different things: 1) a kind of wealth creation, and 2) a means of wealth extraction.

  1. Think of investing in equipment, a new firm, a school, a training programme, wind farms. Here the term is used to refer to wealth creation – things which improve the provision of goods and services: better machines, new products, new skills, cleaner energy, and so on. But . . .
  2. Think of gains ‘investors’ might get from spending, lending, buying stocks or bonds and other financial assets, buying up existing property and waiting for its value to go up, and speculating. Investments of this second kind – we might call them ‘financial investments’ – need have no connection with investments of the first kind. They need not create anything new. All they are supposed to do is provide a return for the ‘investor’, wealth extraction, regardless. On this definition, gambling is a form of investment.

Using the same word for these two radically different things is a great way of passing off wealth extraction as wealth creation. True, sometimes, the second kind of investment can be connected to the first kind, so the investor or funder gets some of the benefits of the objective investment in new ways of producing goods and services. But with the shift of the financial sector from servant of the economy to master over the last 30 years, the second meaning has become dominant in practice and more disconnected from the first. Most of what it funds is not productive industry but lending against existing assets: in the UK lending by the financial sector to productive businesses declined from 30% to 10% of its lending in the bubble preceding the crash, and has stayed low since, while lending to other financial institutions and the property market grew.[2] But then, to the financial sector £1 million profit from useless speculation is no different from £1 million from any other source. But the difference matters to the economy as a whole and hence to us.

When the 1% – or others – talk about ‘investment’ and ‘investor’, watch out for this verbal sleight-of-hand. We should speak truth to power, and challenge it. 2014-09-24 15.41.59

I’ve written more about this in Chapter 2 of Why We Can’t Afford the Rich.

[1] John Lanchester has just published a book called How to Speak Money, which has its merits, but revealing the political uses of economic language and the way it cons people is not one of them, in fact in treating the language of money and finance as merely quirky, technical jargon, it depoliticizes it. Marieke de Goede’s 2005 book, Virtue Fortune and Faith has a more academic and penetrating take on the language of finance.

[2] CRESC (2009) An alternative report on UK banking reform, p 65, http://www. report on banking V2.pdf