In a recent series of three posts at Salon, Michael Lind of the New America Foundation argues that this threat of rentiers is back and causing mass stagnation in an age of huge wealth. Lind believes that an anti-rentier agenda could unite a broad coalition, including “owners of productive businesses as well as workers, populist conservatives and liberal reformers.”
Meanwhile, conservatives are trying to assemble their own coalition by developing an economic agenda suited to where the country is right now. Tim Carney at the Washington Examiner called for a free-market populism, one that shows that “big government expands the privileges of the privileged class.” Others see a younger generation of conservative activists as harbingers of this approach to economic policy.
If that’s the case, where might we see overlap on the left and the right, and where might we see stark differences?
Lind defines rentiers as those who “use their natural or artificial monopoly power to extract excessive tolls, fees and other recurrent payments from the rest of society, including productive businesses.” These excessive payments form an “unearned increment,” in Henry George’s popular phrasing from more than a century ago. This increment comes from more productive parts of the economy, including both businesses and workers. Others, like Michael Hardt, look to the passiveness of rentier income, and how that contrast with the actively fought for profits of industry and business.
The first issue that could bring left and right reformers together is the government as an active agent in creating market power.
Many conservatives, like liberals, have been looking at how excessive copyright law grants too much power to private individuals. The Mercatus Center in November published a book, "Copyright Unbalanced," and several conservatives came to the defense of Derek Khanna, an RSC staffer who was fired after publishing a conservative critique of excessive copyright. (Khanna is now focused on allowing people to unlock their phones.)
Zoning and housing regulations designed to protect incumbent landowners’ property values, or to promote the use of cars even in dense urban environments, have also come under attack from both liberals and conservatives. The idea that the financial sector is above the law, meaning either criminal law or the legal regimes used to fail firms, is also bringing people together, if only superficially.
There’s also been surprising movement on monetary policy. Rather than letting the economy stagnate to protect passive investors, “market monetarists” have pushed for the Federal Reserve to take more aggressive action, including adopting a target of nominal GDP. This would do a better job of balancing full employment and price stability than the current single-minded obsession with inflation rates. This approach has garnered support from many liberal economists, including Christina Romer, and more mainstream conservatives such as Larry Kudlow are moving in this direction.
However, there are problems. One issue is that free-market populists tend to only see problems where government is acting, consciously or unconsciously, to boost monopoly power. More reformist liberals would tend to see market power itself as something that occurs naturally and needs some sort of public accountability.
Hence reformers will look more to public regulation, public ownership or public competition to counter these issues. Public options, rate regulations, open-access regulation or public ownership are all among the many tools in the toolbox of curbing excessive market concentration. Conservatives, however, traditionally push for privatization of government services, even though this can just lead to more sophisticated versions of rent-seeking, cronyism, waste and unaccountability.
Another point of disagreement is on taxation. The modern right has a deep focus on reducing taxes and avoiding new ones. However, going back to Henry George, taxation is one of the key ways of combating rents. George wrote that rents are “a value created by the whole community.” As such, it is appropriate that this value is taxed from the individuals who get it, unearned, and distributed to the community by lowering other taxes or providing public goods.
Beyond specific taxation of rents are the issues of capital and inheritance taxation. It is remarkable how little the taxation of capital income or inheritance came up in the debates over the “fiscal cliff,” even though there were major changes for both. Most of the debate was about how the “rich” should be defined as an income bracket ranging from $250,000 to $1 million, not what kind of system we want for the taxation of capital or inheritance. But given that, according to IRS data, the top 0.01 percent of income earners get more than 80 percent of their income from capital income, these issues have major importance to the distribution of income in this country.
Much as Piketty found a “U-shaped” curve to inequality of income, he finds one for inheritance in France and postulates this trend is likely to be occurring in the United States as well. Piketty argues that “[o]ur empirical and theoretical findings suggest that inherited wealth will most likely play as big a role in twenty-first-century capitalism as it did in nineteenth-century capitalism.” The best way to learn about the future of the economy will soon be to join the Jane Austen Society.
Here again the left and the right will likely break. Historically, the right views inheritance as the right of the bestower to give something, or for people to do whatever they want with their property. However liberal reformers have viewed inheritance as an issue related to the right of the recipient to receive something. What could be more of an “unearned increment,” or unearned and undeserved rent income, than someone just happening to be the child of a rich person?
Though the disagreements between conservative and liberals will be major, both as a matter of theory and practice, when it comes to an anti-rents agenda, there are many policy reforms that could benefit both individuals and the economy as a whole. And there’s one thing that is certain: Like inequality, the rent issue will become more of a problem going forward.