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Rentier Society

The greatest drag on the economy today is the capture of excessive rents by the property class. Unlike they claim, the rich do not create jobs. As landlords and speculators, they live off of the hard-earned income of their tenants. The money that would have otherwise been spent on goods and services by tenants is in fact removed from the productive economy by owners, and saved, put into property, or used to speculate in the stock market. Although long-term value investors still participate in the market, they are increasingly rare, as stock valuations no longer represent or reflect the productive output of listed companies. The market today is one of various forms of conflict of interest, insider trading, short-term positions, high speed trading, and fee-based brokering which leaves the average investor holding the bag. Like the rental market, it is another wealth transfer system from the disappearing middle class to the wealthy property and capital class.


It is no coincidence that the economic collapse of 2007, which bankrupted the middle class and caused many to lose their mortgaged homes, subsequently produced record returns in the stock market for the few wealthy owners of capital and property. The reason that the market bounced back so quickly was because the government had committed to spend $7.7 trillion to bail out the large banks and other financial institutions that had destroyed the United States economy, on the logic that if not, financial chaos would ensue. Well, it did, but just for the average American that subsequently saw jobs disappear, houses foreclosed on, and rental costs skyrocket; and for cities and states across the country that were now mired in unsustainable debt, having invested their funds in the market. Meanwhile, those still in work found themselves taking on more responsibilities, as job descriptions grew to include nearly everything, and companies took the opportunity to squeeze more productivity out of their workforce by employing fewer people. The increased liquidity in the market that came from the government simply printing money (so-called quantitative easing) was almost entirely captured by the wealthy property and capital class and their brokers and bankers, while unemployment hit historic and critical levels. So, in effect, the financial collapse ended up being the largest government-abetted wealth transfer from the poor and middle class to the rich in United States history with little or no productive growth to show for it.


This financialization of the economy, which hit its stride in the 80s (remember hostile takeovers and the savings and loan scandal?), has now reached its goal: the creation and consolidation of a two-tiered society, composed of the 1% percent who run the system and the 99% who have come to depend on it, and have sacrificed their American Dream as a result of ignorance, complacency, and/or fear. As a result, the 99% own nothing, the 1% percent own everything and live off the rents paid by the 99%. Financialization, or the pricing of all goods and services according to an intermediary “market” run by the capital and property class, produces a society characterized by gross inequality, poverty, and ultimately conflict. While corporate charters were originally created in England to finance large public works projects, corporations have long since been distorted to abet all manner of speculative (read: unproductive) economic activity. Simply put, the financial market we have today produces little or no real value for the average person, nor was it intended to: It no longer produces much-needed infrastructure and/or infrastructure improvements, since government and municipal bonds are increasingly used to service debt; and as a leverage-based, speculative market, it does not provide jobs, either. Companies producing goods and services provide jobs, not stock valuations per se. To the contrary, a high stock valuation may be, and has often been, the result of aggressive cost cutting that results in job losses. 


The advent of platform capitalism practiced by the IT industry is an extension of this financialized economy. These companies, among the most highly valued in the market, extract rents through the use of citizen’s personal property, sale of personal private information, and user fees. Many, if not most of these businesses are built on debt and sustained by IPOs and private investors, many do not produce anything tangible or truly useful (which did not previously exist), and most do not employ many people, because they are algorithms administered by a skeleton crew of coders, managed by a few founders, many of whom have no intention of creating a viable business, but simply hope to sell out to bigger players.


In fact, IT companies are job destroyers because their business model is, in addition to leveraging citizen’s (and public) resources, to replace people with computers anywhere possible. And while it might be beneficial to have computers take over repetitive administrative tasks, so that citizens can focus on more creative pursuits that characterize the much dreamed of and discussed society of leisure, this hasn’t come to pass because the automated platforms of the IT industry are monopolies where all the rents accrue to the owners, at the expense of the users who create the value. Instead of a society of leisure, where people work less and are able to focus more on their interests, the IT business model of platform capitalism produces a society of Ubered (in)dependent contractors working for low wages and piece rates to produce the value that the platforms profit from. Sound familiar?


As a result of housing cartels that limit housing supply to drive up rents and property values in coastal California, owners of IT platforms (read: monopolies) and upper management in that and other industries, are increasingly the only people who can buy into the housing market, or who are able to pay the premium housing costs to live in the most desirable areas of a city: in other words, the vibrant, walkable, social and commercially active neighborhoods and downtowns that existed before the sprawl homogenization of post WWII development.


Meanwhile, IT platforms such a AirBnB have a direct impact on the housing market by creating a short-term exchange for housing at the expense of long-term renters. In sum, by charging high rents and paying low wages, the few wealthy owners of digital and/or physical property and capital live off of the productive labor and income of the many non-owning wage workers, keeping them in a poverty trap from which they can’t escape, resulting in an economy characterized by permanent stagnation. Ultimately, we have to conclude that the rentier society we have today is fundamentally unsustainable.

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