for the taking

Michael Lind has a pretty good three-part series up on Salon (1, 2, 3) about distinguishing between the “useful” and “useless” rich — i.e., between people who actually are “job creators,” who actually do drive innovation, and those whose livelihood comes from rent-seeking, twisting the tax code, and fixing (economic) fights. The most interesting bit is in the middle part, where Lind describes the “Rentier Agenda”: the specific policies that the “useless” rich pursue in government to make themselves richer. Lind names three — low taxes for their kinds of income; privatizing and/or deregulating natural monopolies; and aggressive anti-inflationary policy.

The first of these is well-known — a lot of income has been spilled over the capital gains tax already. But the other two are less commonly cited. Here are Lind’s explanations of each:

Privatizing natural monopolies. The classic productive capitalist wants to found a company to provide a new, socially useful good or service and make money by sales. In contrast, the classic parasitic rentier wants to bribe the state legislature into privatizing and selling state roads so that he or she can make money without effort or innovation every time somebody drives and pays a toll. Not only progressives but mainstream conservatives used to agree that natural monopolies, such as many infrastructure services — water, electricity, transportation — should be either publicly owned or publicly regulated utilities. Today, however, some plutocrats, seeking guaranteed, recurrent streams of money for little or no effort, fund politicians and ideologues who favor privatizing or deregulating infrastructure and public utilities and cutting or voucherizing Social Security and Medicare, to force the elderly to buy financial products and costly health insurance from the rentier sector.

Anti-inflationary macroeconomic policy. The rentier class overlaps largely with the creditor class, much of whose wealth is in the form of debts that must be repaid by governments, businesses and individuals. In all times and places, the creditor elite has lived in fear that its wealth may be reduced by inflation, which permits the debtors to repay their debts in currency, which is nominally the same but in reality of ever-dwindling value….

Indeed, because rising wages in tight labor markets can sometimes contribute to economy-wide inflation, the creditor class can tolerate or even approve of high levels of sustained unemployment that devastates much of a nation’s population while depriving productive businesses of great numbers of consumers.

The point about inflation is really worth hitting. For many people, ’70s “stagflation” is still within living memory, and of course any discussion of inflation inevitably brings out some character who wants to tell you about postwar Germans carrying wheelbarrows full of marks to the baker’s. No one ever bothers to talk about the peculiar context of either problem, of course (OPEC intransigence and punitive demands for war reparations, respectively) — merely to invoke them as spectres in the battlements is enough. People are afraid of inflation.

But they shouldn’t be. Moderate inflation can actually be mildly beneficial for most working people. Many of us owe a substantial amount in debt, and inflation eases the pain of that debt (because you pay back a 2012 debt in 2013 dollars, which are worth less to you). In inflationary periods, wages tend to rise, so you aren’t losing money on that front. And, of course, government benefits like Social Security are inflation-indexed.

The people who really lose out are those who own a lot of debt — i.e., banks and people who own sophisticated financial instruments. Sometimes, it’s true, that includes pension funds, which means, eventually, pensioners themselves. But in broad strokes Lind is right — the insistence on tamping down inflation even when unemployment is high is a strategy that benefits the rentier class most of all while doing little for the rest of us. (Especially given that the much-hyped inflation often fails to materialize at all.)

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