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There are three fundamental issues that lie at the heart of our current economic malaise. The first is unearned income and wealth derived from land rent. The second is the creation of money by privately owned banks and the third is rent seeking that is used to juice profits out of intellectual property through copyright and patents.

But the political class across developed Western economies are not in the least bit interested in addressing these fundamental issues. This is often because the yet unearned wealth of lobbyists restricts opportunities for real wealth creation. This means monopolies grow larger and larger and as they do more and more people are excluded from the economy. If we are really interested in reducing extreme inequality we have to address the root causes. The only place to start is to call out the rentier economy as a structural issue that no progressive society can actually afford.

Economist, author of ‘Plunder of the Commons’ and co-founder of the Basic Income Earth Network, professor Guy Standing, met up with Renegade Inc. to discuss rentier capitalism and reclaiming the commons.

 

Financial capital in pursuit of a free market economy

Professor Standing’s snapshot of Britain in 2019 is one dominated by financial capital in pursuit of a free market economy that oversees vast inequalities and huge increases in economic insecurity across the entire Western world reminiscent of the beginning of the 20th century:

The current crisis of legitimacy can be defined as a “very dramatic phase”, says Standing, in terms recognized by Karl Polanyi who wrote about what he called ‘a threat of the annihilation of civilization’ indicative of the rise in fascism, bolshevism, the Great Depression and Second World War. This contrasts with the period of relative stability during the 1950s and 1960s.

“It wasn’t a perfect period by any means”, adds the professor: “I don’t want to glamorize the 1950s or 1960s but we had a period of industrial citizenship. It was a closed economy model. But what happened with Thatcher and Reagan in the 1970s and 1980s, in particular, was the beginning of what I call ‘a global transformation’…”I would say that we are in the maelstrom of a terrible tragedy that’s unfolding and we’re at the crisis point of this global transformation”, says Standing.

The economist likens the said transformation to the construction of a global market system, what Polanyi terms as another disembedded phase – in other words, an epoch defining disconnect between the economy and society.

No such thing as society

Margaret Thatcher made the infamous phrase ‘There is no such thing as society’. “What she meant by that”, says Standing, “is that the institutions of our society built up over the centuries which protect us against market forces, should be dismantled because they are preventing these forces working by ‘distorting’ them.”

This global transcribing of Darwinian theory into the socioeconomic sphere during the 1980s “is what can be termed ‘neoliberalism’ and the pursuit of free markets” in which “everything is dominated by individualism, privatization, dismantling of institutions of solidarity and things like that”, says Standing.

The philosophical and ideological underpinnings of neoliberalism are to be found in the tracts of  Fiedrich von Hayek. It was Hayek’s approach to economics that laid the foundations for Thatcherism.

The price of everything and the value of nothing

“When [Thatcher] was elected leader of the Conservative Party in 1975 her first meeting of her shadow cabinet is famous for the fact that she went in and she produced this book by Friedrich von Hayek. She thumped it down on the table and said. ‘This is what we believe’. “He [Hayek]”, says Standing, “was completely adamant that only things that had a price, have a value so anything that doesn’t have a price can be dispensed with, given away, sold, etc. The tragedy has been that by putting a price – a monetary value – on things that have real use value we actually end up devaluing their use value.” And in that process we have lost respect for things that don’t have a monetary price: a park, a beautiful lake, a beautiful cathedral, a beautiful library, a beautiful care centre that’s part of our public wealth that’s being built up over generations. They don’t have a value for these people because they don’t have a price.”

Standing continued:

“The Thatcherite doctrine was that you liberalised markets and you allow the free flow of markets. Now the irony of that was that what happened initially is that financial capital – particularly the big United States based Wall Street based finance houses – became the dominant force of the world. The outcome of that is today, in 2019, we have the most unfree market economy system ever constructed.”

This unfree market system is forged through an international architecture – what Standing refers to as “rentier capitalism” – in which mainly income goes to the owners or controllers of financial, physical and intellectual property. Under the Hayek, rentier capitalist system this form of income is predicated on the notion that monopolies are temporary. “Rentier capitalism was constructed by allowing for monopolies”, says Standing.

Rigged system

The professor, whose thinking diverges from the Schumpetrian gale of creative destruction notion, posits that monopolies have a way of protecting themselves against this process. Following the publication of Standing’s book The Corruption of Capitalism, the professor was asked to speak to the chief executives of some of the biggest corporations in the world. Rather than receiving negative reactions to his speeches, a Forbes magazine entrepreneur of the decade winner acknowledged Standing’s truism that the system is rigged.

“I was basically saying”, says Standing, “you lot are the recipients, you’re the plutocracy and you are getting the rental income from the rest of the world. The billions and billions you’re getting is because of the structures that you put in place.”

Standing continued:

“What happened was that in 1994 the leading financiers, the US government, the British government of the time and some of the multinational corporate executives basically forged – through the World Trade Organization and the World Intellectual Property Organization – a very little noticed Act called Trade Related Aspects of Intellectual Property (TRIPS). And what this did – very very cleverly in terms of what their agenda was all about – was it basically globalized the American system of intellectual property rights.”

In other words, TRIPS  protects the elites monopoly position in terms of guaranteeing a monopoly profit income flow. It guarantees this outcome not only in terms of patents, but industrial brands and copyright. Standing adds some figures.

“So you copyright on something now you can have copyright for ninety five years after your death. And so at the moment something like between 20 to 25 percent of all the world’s income is going to the holders of intellectual property rights. And what’s happened is that they’ve introduced a wonderful legal process, the Investor State Dispute Settlement (ISDS).”

Apogee of rentier capitalism

“What this means”, says Standing, “is that if any government, in any country, introduces any law or any reform that affects the future profits of a multinational corporation, the multinational corporation can sue the government. The ISDS has resulted in thousands of millions of dollars and pounds being transferred from poor country governments to corporations. This is the apogee of rentier capitalism.”

“In addition”, says Standing, “what’s happened is that governments have adopted policies to suit the rentiers. And in particular what they’ve done is they’ve churned out huge subsidies. They claim that this is to induce foreign direct investment in their country. But research from around the world has shown it actually doesn’t make any difference. What it does make a big difference to is their corporate incomes. Now to give one example in this country: In 2011 George Osborne introduced the patent box tax break. What this did was it halved the corporation tax that firms coming into this country, who had patented things, had to pay.”

Standing continued:

“Now this was a donation, a huge donation. What is the implication of subsidies? Subsidies are paid from government revenue so therefore you create – what they – call is a budget deficit. Well the budget deficit arises because you’re giving away a lot of money therefore you have to either raise taxes or – because we don’t want to raise taxes for our rich supporters – cut benefits.”

Undermining the public good boosts private profits

The negative impacts on society in which everything is assigned a monetary value are obvious. Professor Standing opines that it’s imperative that the notion of society be revived in order to curtail the profit motive in relation to public service provision. Standing cites the example of UK water privatization as an illustration of how the monetisation of a public asset is detrimental to society but beneficial to profits.”Thames Water is owned by a multinational private equity fund mainly in Germany and Dubai and various foreign places and they are interested in short term profits”, says Standing, who adds:

“Interestingly, Thames Water has been taking short term profits and giving their shareholders billions of pounds in dividends, not investing in our water supply and not looking after our preservation of water. But a couple of years ago Thames Water was found to have been pouring millions and millions of gallons of untreated sewage into our national river, The Thames. They were taken to court and they were found guilty and they admitted that they were guilty and they got a token fine slammed on them.”

This practice is not merely an example of a business financial externality, but what Standing calls a “blatant corruption and a threat to national security and people’s lives.” For Standing, Thames Water’s negligence should have resulted in instantaneous loss of ownership. “We need to get our common assets back. I’ve got this manifesto which has got 45 things to be done”, says Standing.

However:

“the most important thing is we should say that every corporation or person who is making profits from our commons or is imposing costs on us, the commoners, should be paying levies into building up a capital fund along the Norwegian type model or along the Alaska Permanent Fund model and using the dividends you can invest in ecological and sustainable investments etc. But out of it you can pay people a modest basic income. And that I think is an essential part of the next phase.”

Basic income for everybody

This can be paid for by tax revenues currently lost to the exchequer as a result of uncollected taxes and regressive tax reliefs. “If you rolled back those regressive tax reliefs – many of them are just completely indefensible – you could easily pay out a beginnings of a really good basic income for everybody. Second, we have now under this government introduced year after year a personal income tax allowance system which is actually regressive because it benefits higher income people much more than a lower income person. Recent calculations – which I’ve included in my new report for John McDonnell – shows that if you abolish that and use the same money – that you are allowing out – you could give every single person in this country, each week, £48. It’s not enough to live on, of course it isn’t, but it’s the base. There are many people in this country who when they’ve paid their rent and their food have £20 left each week. So we can afford it”, says Standing.

“The necessary transformation requires political mobilization of a new kind. Looking back historically, you never get change without collective action of some sort. I believe we’re seeing the beginnings of a precariat Politics of Paradise – I call it – in which more and more of the young and educated are operating with a new language, new concepts, new objectives. They want the change. And I say to everyone and I say to all age groups, We all must play our part”, says Standing.

In addition, says the professor:

“We have to be doing what the Extinction Movement is beginning to do and I support that with all my heart because that is going to be about our children and grandchildren, their future. They’ve got to have a future. And it’s the same with basic income, we must mobilise ourselves, we must do what we can in our own little way. There was a famous story – which I don’t think is apocryphal, I think it’s true – Franklin Roosevelt was president in the White House and one day a group of 30 odd people came to see him about a particular policy. So he allowed them in and he listened to them for half an hour and at the end he said to them, “Right, you’ve convinced me. Now go out in the streets and force me to do it.”

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