From 1980 to 1987, I lived in the Boston area while continuing to teach at UMass. During that time, I was a regular at the lectures put on by a center for the History and Philosophy of Science run by Bob Cohen and Marx Wartofsky, two wonderful members of the BU Philosophy Department. The lectures were delightful affairs, on every conceivable topic under the sun, and a distinctive feature of them was that no matter how obscure the topic, somehow a leading expert would show up in the audience to challenge the speaker. One evening, as I recall, a member of the Worcester based UMass Medical School gave a talk on Aztec medicine, leaving us all to wonder what we could possibly ask during the question period. Not to worry! A young man stood up, declared himself to be of Aztec heritage, and proceeded to grill the speaker.
The last few days has made me feel a little bit as though I were back at BU. My son tells me to read a book on MMT. I do so, write a blog about some ideas in it out of my profound ignorance, and Tom Hickey pops up to put us all in the picture with a series of long, enormously knowledgeable comments. It really is wonderful.
I am going to stop blogging about MMT because I almost immediately exhausted my fragile grasp of it, but one thing Tom Hickey said triggered some thoughts that I should like to lay before you. Here is the passage, from one of his comments:
“Addressing inequality is a social issue more than an economic one, but it is also an economic one that needs to be addressed for optimization. Economically, this would involve taxing away economic rent as "windfall profit," that is, gain from ownership rather than productive contribution. Economic rent includes financial rent, land rent, natural resource rent, and monopoly and monopsony rent, as well as socialized negative externality.”
It is the word “rent” on which I wish to expand, from a Marxist perspective. These remarks will pull together several things I have said here before. I first encountered discussions of rent in Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations. Smith was of course writing about land rent, the price the landed gentry charged entrepreneurs who wanted to grow crops on their land. Smith is scathing in his critique of the gentry, whom he views as leeches sucking the life blood out of England [of course, he may be more than ordinarily negative because he was Scots]. He draws a sharp distinction between the work done by the farmers employed by the entrepreneurs, which he calls productive labor, and the work done by the clouds of servants waiting hand and foot on the gentry, which he calls unproductive labor. The first sort of labor creates wealth, and is thoroughly praiseworthy; the second gobbles up wealth, and threatens to lead England to ruin. Ricardo, forty-one years later, echoes Smith in his Principles and warns that the rents charged by the gentry threaten to bring economic growth to a standstill.
It was well understood by both Smith and Ricardo that in the division of the annual product – the “wealth of the nation” – the interests of the entrepreneurs and the workers were diametrically opposed. What went to one class as profits diminished what was left to the other class as wages. Rents, Ricardo demonstrated, came out of profits, not out of wages.
Speaking more broadly, a rent is a payment demanded by the legal owner of a scarce and non-substitutable resource entirely independently of any contribution made by the owner to the productive enterprise in which it is used. The gentry didn’t do anything for their rents. They just owned the land and demanded payment before allowing it to be used, a demand backed up by the law, the police, and if necessary the army. Owners of patents do the same thing, as do owners of broadcast frequencies, and mines.
In the early days of capitalism, when most often the owner of a firm also managed it and perhaps invented some of the productive techniques used by the firm, it was easy to imagine, as both Smith and Ricardo did, that the entrepreneurs earned their share of the firm’s income. The entrepreneurs saved up their money by skimping on their household spending, and lived upright, frugal lives [The Protestant Ethic and the Spirit of Capitalism, anybody?] They went to their factories and managed them for long hours, directing the labor of their employees. Oftentimes, they invented new productive techniques, or adapted existing ones in more economical fashion. In short, from any reasonable point of view, they earned their take from the enterprise, which economists called profit.
But things changed as capitalism developed, until now, almost the entire contribution to production by the owners has been internalized in the firm. I have written about this before on this blog and will not repeat myself [although I do enjoy the reference to an old Burt Reynolds movie.] These days, what do capitalists do? They give permission. They allow their employees to use the capital that they own, a permission for which they charge a price.
In short, they collect rents.
Capitalists qua capitalists [as we say in the Philosophy trade] collect rents. To be sure, some of them – the Steve Jobs’s and Jeff Bezos’s of the world – do other things as well, and God bless them for that. But the vast preponderance of capital in the world these days is collecting the equivalent of the rents that the idle gentry demanded from the go-getting entrepreneurs in the good old days.
So, do we need capitalists? No.
Don’t take my word for it. Go read a really fine book, now thirty-nine years old, by David Schweickart, called Capitalism or Worker Control?