Rent

= unearned income—the excess of market price over intrinsic cost. Economic rent taken by landlords, monopolists, and financial institutions has no counterpart in the technological requirements of production, but stems from legal and historical privileges that privatize the free gifts of nature or permit monopolistic power to charge access fees over cost for the use of basic infrastructure [1]

Description

Michael Hudson:

"Patten retained the classical definition of rent as unearned income—the excess of market price over intrinsic cost. Economic rent taken by landlords, monopolists, and financial institutions has no counterpart in the technological requirements of production, but stems from legal and historical privileges that privatize the free gifts of nature or permit monopolistic power to charge access fees over cost for the use of basic infrastructure. Patten believed that economies should minimize the cost of living and doing business by becoming as rent-free as possible, socializing monopolies outright, or at least taxing land, mining, and other natural resources, and regulating prices to minimize unnecessary rentier charges." (http://www.economics.arawakcity.org/node/972)

Discussion

David Harvey:

"All rent is based on the monopoly power of private owners of certain portions of the globe. Monopoly rent arises because social actors can realize an enhanced income stream over an extended time by virtue of their exclusive control over some directly or indirectly tradable item which is in some crucial respects unique and non-replicable. There are two situations in which the category of monopoly rent comes to the fore. The first arises because social actors control some special quality resource, commodity or location which, in relation to a certain kind of activity, enables them to extract monopoly rents from those desiring to use it. In the realm of production, Marx argues, the most obvious example is the vineyard producing wine of extraordinary quality that can be sold at a monopoly price. In this circumstance ‘the monopoly price creates the rent'.3 The locational version would be centrality (for the commercial capitalist) relative to, say, the transport and communications network or proximity (for the hotel chain) to some highly concentrated activity (such as a financial centre). The commercial capitalist and the hotelier are willing to pay a premium for the land because of accessibility. These are the indirect cases of monopoly rent. It is not the land, resource or location of unique qualities which is traded but the commodity or service produced through their use. In the second case, the land or resource is directly traded upon (as when vineyards or prime real estate sites are sold to multinational capitalists and financiers for speculative purposes). Scarcity can be created by withholding the land or resource from current uses and speculating on future values. Monopoly rent of this sort can be extended to ownership of works of art (such as a Rodin or a Picasso) which can be (and increasingly are) bought and sold as investments. It is the uniqueness of the Picasso or the site which here forms the basis for the monopoly price.

The two forms of monopoly rent often intersect. A vineyard (with its unique Chateau and beautiful physical setting) renowned for its wines can be traded at a monopoly price directly as can the uniquely flavoured wines produced on that land. A Picasso can be purchased for capital gain and then leased to someone else who puts it on view for a monopoly price. The proximity to a financial centre can be traded directly as well as indirectly to, say, the hotel chain that uses it for its own purposes. But the difference between the two rental forms is important. It is unlikely (though not impossible), for example, that Westminster Abbey and Buckingham Palace will be traded directly (even the most ardent privatizers might balk at that). But they can be and plainly are traded upon through the marketing practices of the tourist industry (or in the case of Buckingham Palace, by the Queen).

Two contradictions attach to the category of monopoly rent. Both of them are important to the argument that follows.

First, while uniqueness and particularity are crucial to the definition of ‘special qualities', the requirement of tradability means that no item can be so unique or so special as to be entirely outside the monetary calculus. The Picasso has to have a money value as does the Monet, the Manet, the aboriginal art, the archaeological artefacts, the historic buildings, the ancient monuments, the Buddhist temples, and the experience of rafting down the Colorado, being in Istanbul or on top of Everest. There is, as is evident from such a list, a certain difficulty of ‘market formation' here. For while markets have formed around works of art and, to some degree around archaeological artefacts (there are some well-documented cases, as with Australian Aboriginal art, of what happens when some art form gets drawn into the market sphere) there are plainly several items on this list that are hard to incorporate directly into a market (this is the problem with Westminster Abbey). Many items may not even be easy to trade upon indirectly. The contradiction here is that the more easily marketable such items become the less unique and special they appear. In some instances the marketing itself tends to destroy the unique qualities (particularly if these depend on qualities such as wilderness, remoteness, the purity of some aesthetic experience, and the like). More generally, to the degree that such items or events are easily marketable (and subject to replication by forgeries, fakes, imitations or simulacra) the less they provide a basis for monopoly rent. I am put in mind here of the student who complained about how inferior her experience of Europe was compared to Disney World:

At Disney World all the countries are much closer together, and they show you the best of each country. Europe is boring. People talk strange languages and things are dirty. Sometimes you don't see anything interesting in Europe for days, but at Disney World something different happens all the time and people are happy. It's much more fun. It's well designed.4

While this sounds a laughable judgement it is sobering to reflect on how much Europe is attempting to redesign itself to Disney standards (and not only for the benefit of American tourists). But, and here is the heart of the contradiction, the more Europe becomes Disneyfied, the less unique and special it becomes. The bland homogeneity that goes with pure commodification erases monopoly advantages. Cultural products become no different from commodities in general. ‘The advanced transformation of consumer goods into corporate products or “trade mark articles” that hold a monopoly on aesthetic value', writes Wolfgang Haug, ‘has by and large replaced the elementary or “generic” products', so that ‘commodity aesthetics' extends its border ‘further and further into the realm of cultural industries'.5 Conversely, every capitalist seeks to persuade consumers of the unique and non-replicable qualities of their commodities (hence name-brands, advertising, and the like). Pressures from both sides threaten to squeeze out the unique qualities that underlie monopoly rents. If the latter are to be sustained and realized, therefore, some way has to be found to keep some commodities or places unique and particular enough (and I will later reflect on what this might mean) to maintain a monopolistic edge in an otherwise commodified and often fiercely competitive economy.

But why, in a neoliberal world where competitive markets are supposedly dominant, would monopoly of any sort be tolerated let alone be seen as desirable? We here encounter the second contradiction which, at root, turns out to be a mirror image of the first. Competition, as Marx long ago observed, always tends towards monopoly (or oligopoly) simply because the survival of the fittest in the war of all against all eliminates the weaker firms.6 The fiercer the competition the faster the trend towards oligopoly if not monopoly. It is therefore no accident that the liberalization of markets and the celebration of market competition in recent years has produced incredible centralization of capital (Microsoft, Rupert Murdoch, Bertelsmann, financial services, and a wave of takeovers, mergers and consolidations in airlines, retailing and even in older industries like automobiles, petroleum, and the like). This tendency has long been recognized as a troublesome feature of capitalist dynamics, hence the anti-trust legislation in the United States and the work of the monopolies and mergers commissions in Europe. But these are weak defences against an overwhelming force.

This structural dynamic would not have the importance it does were it not for the fact that capitalists actively cultivate monopoly powers. They thereby realize far-reaching control over production and marketing and hence stabilize their business environment to allow of rational calculation and long-term planning, the reduction of risk and uncertainty, and more generally guarantee themselves a relatively peaceful and untroubled existence. The visible hand of the corporation, as Alfred Chandler terms it, has consequently been of far greater importance to capitalist historical geography than the invisible hand of the market made so much of by Adam Smith and paraded ad nauseam before us in recent years as the guiding power in the neoliberal ideology of contemporary globalization.7

But it is here that the mirror image of the first contradiction comes most clearly into view: market processes crucially depend upon the individual monopoly of capitalists (of all sorts) over ownership of the means of production including finance and land. All rent, recall, is a return to the monopoly power of private ownership of any portion of the globe. The monopoly power of private property is, therefore, both the beginning point and the end point of all capitalist activity. A non-tradable juridical right exists at the very foundation of all capitalist trade, making the option of non-trading (hoarding, withholding, miserly behaviour) an important problem in capitalist markets. Pure market competition, free commodity exchange and perfect market rationality are, therefore, rather rare and chronically unstable devices for coordinating production and consumption decisions. The problem is to keep economic relations competitive enough while sustaining the individual and class monopoly privileges of private property that are the foundation of capitalism as a political-economic system.

This last point demands one further elaboration to bring us closer to the topic at hand. It is widely but erroneously assumed that monopoly power of the grand and culminating sort is most clearly signalled by the centralization and concentration of capital in mega-corporations. Conversely, small firm size is widely assumed, again erroneously, to be a sign of a competitive market situation. By this measure, a once competitive capitalism has become increasingly monopolized over time. The error arises in part because of a rather too facile application of Marx's arguments concerning the ‘law of the tendency for the centralization of capital', ignoring his counter-argument that centralization ‘would soon bring about the collapse of capitalist production if it were not for counteracting tendencies, which have a continuous decentralizing effect'.8 But it is also supported by an economic theory of the firm that generally ignores its spatial and locational context, even though it does accept (on those rare occasions where it deigns to consider the matt er) that locational advantage involves ‘monopolistic competition'. In the nineteenth century, for example, the brewer, the baker and the candlestick maker were all protected to considerable degree from competition in local markets by the high cost of transportation. Local monopoly powers were omnipresent (even though firms were small in size), and very hard to break, in everything from energy to food supply. By this measure nineteenth century capitalism was far less competitive than now.

It is at this point that the changing conditions of transport and communications enter in as crucial determining variables. As spatial barriers diminished through the capitalist penchant for ‘the annihilation of space through time', many local industries and services lost their local protections and monopoly privileges.9 They were forced into competition with producers in other locations, at first relatively close by, but then with producers much further away. The historical geography of the brewing trade is very instructive in this regard. In the nineteenth century most people drank local brew because they had no choice. By the end of the nineteenth century beer production and consumption in Britain had been regionalized to a considerable degree and remained so until the 1960s (foreign imports, with the exception of Guinness, were unheard of). But then the market became national (Newcastle Brown and Scottish Youngers appeared in London and the south) before becoming international (imports suddenly became all the rage). If one drinks local brew now it is by choice, usually out of some mix of principled attachment to locality or because of some special quality of the beer (based on the technique, the water, or whatever) that differentiates it from others. Plainly, the economic space of competition has changed in both form and scale over time.

The recent bout of globalization has significantly diminished the monopoly protections given historically by high transport and communications costs while the removal of institutional barriers to trade (protectionism) has likewise diminished the monopoly rents to be procured by that means. But capitalism cannot do without monopoly powers and craves means to assemble them. So the question upon the agenda is how to assemble monopoly powers in a situation where the protections afforded by the so-called ‘natural monopolies' of space and location, and the political protections of national boundaries and tariffs, have been seriously diminished if not eliminated.

The obvious answer is to centralize capital in mega-corporations or to set up looser alliances (as in airlines and automobiles) that dominate markets. And we have seen plenty of that. The second path is to secure ever more firmly the monopoly rights of private property through international commercial laws that regulate all global trade. Patents and so-called ‘intellectual property rights' have consequently become a major field of struggle through which monopoly powers more generally get asserted. The pharmaceutical industry, to take a paradigmatic example, has acquired extraordinary monopoly powers in part through massive centralizations of capital and in part through the protection of patents and licensing agreements. And it is hungrily pursuing even more monopoly powers as it seeks to establish property rights over genetic materials of all sorts (including those of rare plants in tropical rain forests traditionally collected by indigenous inhabitants). As monopoly privileges from one source diminish so we witness a variety of attempts to preserve and assemble them by other means." (http://www.generation-online.org/c/fc_rent1.htm)

Discussion

Rent is the other side of the Commons

From The Ideology of Free Culture and the Grammar of Sabotage.

Matteo Pasquinelli:

"How does cognitive capitalism make money? Where does a digital economy extract surplus? While digerati and activists are stuck to the glorification of peer production, good managers but also good Marxists are aware of the Profits made on the shoulders of the collective intelligence. For instance the school of post-Operaismo has always carried on a dystopian vision of the general intellect produced by workers and digital multitudes: it is potentially liberating but constantly absorbed before turning into a true social autonomy. The cooperation celebrated by freeculturalists is only the last stage of long process of socialisation of knowledge that is not improving the life conditions of the last digital generations: in the end online "free labour" appears to be more dominant than the "wealth of networks." The theory of rent recently advanced by the post-Operaist school can disclose the digital economy more clearly.

Autonomist Marxism has become renown for shaping a new toolbox of political concepts for the late capitalism (such as multitude, immaterial labour, biopolitical production and cognitive capitalism to name only a few). In an article published in 2007 in Posse Negri and Vercellone make a further step: they establish rent as the nodal mechanism of contemporary economy thus opening a new field of antagonism. Until then Autonomist Marxism has been used to focus more on the transformations of the labour conditions than on the new parasitic modes of surplus extraction. In classical theory rent is distinguished from profit. Rent is the parasitic income an owner can earn just by owning an asset and traditionally is referred to land property. Profit on the contrary is meant to be productive and is referred to the power of capital to generate and extract surplus (from commodity value and workforce). Vercellone criticises the idea of a "good productive capitalism" pointing the becoming rent of profit as the driving force of current economy: below the hype of technological innovation and creative economy, the whole of capitalism is breeding a subterranean parasitic nature. So Vercellone's motto goes "rent is the new profit" in cognitive capitalism. Rent is parasitic because it is orthogonal to the line of the classic profit. Parasite means etymologically "eating at another's table," sucking surplus not directly but in a furtive way. If we produce freely in front of our computers, certainly somebody has his hands in our wallet. Rent is the other side of the commons - once it was over the common land, today over the network commons.

Becoming rent of profit means a transformation of management and cognitive workforce too. The autonomisation of capital has grown in parallel with the autonomisation of cooperation. Today managers are dealing more and more often with financial and speculative tasks, while workers are in charge of a distributed management. In this evolution the cognitariat is split into two tendencies. On one side the high-skilled cognitive workers become "functionaries of the capital rent"29 and are co-opted within the rent system through stock options. On the other side the majority of workers faces a declassing (declassement) of life conditions despite skills get more and more rich in knowledge. It is not a mystery that the New Economy has generated more McJobs. This model can be easily applied to the internet economy and its workforce, where users are in charge of content production and web management but do not share any profit. Big corporations like Google for instance make money over the attention economy of the user-generated content with its services Adsense and Adwords. Google provides just a light infrastructure for web advertisement that infiltrates websites as a subtle and mono- dimensional parasite and extracts profit without producing any content. Part of the value is shared of course with users and the Google coders are paid in stock options to develop more sophisticated algorithms." (http://www.rekombinant.org/docs/Ideology-of-Free-Culture.pdf)