Inequality has become one of the central political topics of our time, even if the debate prompted by such figures as Thomas Piketty has thus far had little impact on government policy, and the trend towards ever-higher concentrations of wealth continues its inexorable march. According to the French economist Philippe Askenazy, the ‘fascination with the 1 per cent’ that has characterized much work in the field has blunted its critical edge.footnote1 Askenazy, who specializes in the study of work, and served on the French government’s Conseil d’Analyse Économique in the early years of the Hollande presidency, argues for a shift in focus towards the primary distribution of income and wealth. Much of the recent discussion has been limited to arguments for re-distribution after the fact, through taxes and social spending, thereby ‘naturalizing’ the sources of inequality in the primary distribution between capital and labour, ultimately leading to an impasse.
The prevailing orthodoxy accounts for the stagnation or decline of working-class incomes in Western economies by reference to productivity. The majority of workers are said to be less productive, either because competition from lower-income countries has reduced the value of the goods and services they produce, or because new technologies have made their labour redundant. Askenazy’s new book, Tous rentiers!, challenges such views. He argues that social-democratic parties, in reproducing the ‘productivity’ story, have surrendered to fatalism. By accepting primary distribution as ‘natural’, they are limited to proposing redistributive measures only—themselves problematic in the global economy—or abandoning the pursuit of equality altogether for the mirage of ‘equal opportunity’. Meanwhile the devaluation of work performed by the mass of people is pushing capitalism into a deflationary spiral. He links this dysfunctional primary distribution to the ability of powerful actors to capture ‘rents’—incomes deriving from certain socio-economic or political advantages, rather than their contribution to production. Those advantages can be challenged, and the primary distribution to which they give rise is therefore malleable. A second theme of the book is the ideology of private property, which is used to buttress existing rents by linking them to property rights. The notion of a ‘property-owning democracy’, sustained in particular by owner-occupation in housing, serves to defend the predatory claims of the strongest. Plain-spoken, trenchant and often witty, these discussions express a clear leftwards shift in Askenazy’s outlook.
In mainstream economics, ‘rent’ refers to a flow of income greater than would be needed to secure the resources in question. Thus, it would be possible to compress or reallocate such income without impairing production. The concept has its origin in Ricardo’s account of ground rent: as economic development takes place through capital accumulation, a share of the increased output goes to landlords, even though they have made no additional contribution to its production. Subsequently economists applied the term to other income flows. An important example is monopoly rents: were the market power of a monopolist to be reduced, there need be no reduction in the output of the commodity concerned (indeed, one might expect its output to grow). This overlaps with the notion of technological rents: if one firm acquires a more efficient process than its rivals, it might enjoy prices based on the established but now inefficient methods, and thus accrue ‘super-profits’. Such rents may be reinforced by patent law. Some wage incomes can be said to involve a rent, if a worker receives a higher wage than they could get elsewhere. This relates to the distinction between ‘insiders’ and ‘outsiders’, with the latter receiving the same wage they could obtain in another job, the former with a premium over that level. Then there are also the very high ground rents extracted by landlords from development in certain cities. The French in particular often refer to ‘situational rents’—advantages for some agents arising from their place in specific geographic, organizational or other structures. In the British context, there is the scandalous multiplicity of situational rents created by the outsourcing of public services and the sale of public assets.
Tous Rentiers! adopts what Askenazy calls ‘a broader and more neutral definition: rents are advantages which can be appropriated (accaparés) consistently by economic actors (capitalists, landlords, employees, the self-employed, entrepreneurs, states . . .) through economic, political or legal mechanisms which they may be able to influence.’ The seizure of rents in present-day capitalism is protected by an ideology of ‘propertarianism’ (propriétarisme), which defines certain jobs as ‘unproductive’, even as they generate productivity gains that boost rents further still. Redefining primary distribution today is not just a question of justice or public health, he argues: ‘By denying labour’s contribution to the production of wealth and stigmatizing as unproductive those who sustain development, capitalism condemns itself. A revaluation of work is essential if we are to escape from the wage deflation which today is locking economies into stagnation.’
As Askenazy points out, the primary distribution is also an index of social recognition for the value of one’s work: receiving a monthly income of €600 plus a wage subsidy of €400 is not the same as earning €1200 and paying €200 income tax. Beyond these considerations, excessive concern with the 1 per cent (or 0.1 per cent, or 0.001 per cent) over-simplifies the pattern of inequality. Askenazy offers a neat demonstration of the limits to Thomas Piketty’s account, which relies on the equation α = r × β: that is, α, the share of capital in national income, is equal to r, the rate of profit times β, the capital/income ratio. Behind this formulation is a tendency to view both the rate of profit and the capital intensity of production as ‘natural’, or determined by technical factors and the workings of competition. Askenazy turns Piketty’s formulation around (r = α / β) to give a completely different, Marxist, interpretation. The rate of profit r depends on the rate of exploitation, α, divided by β, the organic composition of capital: both of these determinants, the first most immediately, result from social conflict between labour and capital.
Rather than accept the ‘naturalist’ interpretation of inequality, Askenazy maintains, it is necessary to understand the upheavals that have given rise to new rents and allowed their seizure. He notes the role played by three ‘especially powerful’ factors in recent decades: the collapse of Communism and incorporation of China into global market circuits; the weakening of trade unions and destructuring of the working class (salariat); and new sources of rent linked to technological change and urban agglomeration. In principle, the growing importance of intangibles and agglomeration factors in economic development ought to devalue the claims of capital, as the giant enterprises of the digital age hardly need physical capital anymore. Instead, capital benefits from regimes that extend and reinforce property rights, the two most important being real estate and ‘intellectual’ property. The development of highly productive economies in major cities gives rise to rents of agglomeration, frequently appropriated by the owners of real estate: London, where Askenazy thinks feudal forms of land ownership still persist, is a key example. The financial sector, by providing mortgage credit, is also able to capture part of these rents. (Of course, it would be possible to limit this trend through political action by rent control and the provision of public transport.) A key aim of official policy has been to extend the range of private-property forms. Askenazy draws particular attention to intellectual property—exemplified by the exploitation of pharmaceutical patents, which drive up healthcare costs—and the privatization of data harvested from the internet.
However, Askenazy points out, capitalists are not the only ones able to capture rents. He also gives examples of how it can be done through the ‘world of labour’. A key factor is indispensability or ‘criticality’ (criticité), an idea borrowed from engineering, used in this sense to measure the loss a particular group can impose, multiplied by the probability of that loss. Companies may view particular types of employee as capital in human form (L’humain-capital, notably sports and film stars—not to be confused with human capital in its usual sense of acquired skills and knowledge). Some groups may be functionally indispensable, such as programmers who defend electronic infrastructure against hackers, or traders in financial companies. Criticité may also be institutional. In this context, Askenazy notes two contrasts between Britain and France. British lawyers earn more than their French counterparts because of the opacity and complexity of common law; on the other hand, pharmacists in France are in a stronger position because of a regulatory structure that restricts competition (for example, by limiting the number of pharmacies in a given area). Even when there is intense competition, political mobilization can be used to capture rents for a group, such as the European truck drivers who contest price increases for diesel or higher road taxes. The senior management teams of large companies illustrate another—‘self-referential’ or ‘endogamous’—form of corporatism and rent capture.