Airbnb and the Rotten Results of Rentier Capitalism
What do we do when work no longer pays?
This post is in honor of International Workers Day, and, in some circles, also called: Universal Basic Income Day.
I have read a lot of books lately — more than 80 in the past three months. (List here.). Most are non-fiction, covering global democracy, economics and social issues, and, most importantly: inequality. Many I’ve read for research in my role at Democracy Earth Foundation.
Three books I’ve read and have been particularly impressed by are authored by Guy Standing, a Professor at University of London and recognized leader in the topic of Universal Basic Income.
This post will essentially be a review of Guy’s latest book ‘The Corruption of Capitalism — Why Rentiers Thrive and Work Does Not Pay.’
Before I get into Guy’s latest book, I must first give credit to Professor Standing on predicting the election of Trump. (At the least, Guy fore-shadowed Trump’s success by identifying the voting block largely responsible.)
In ‘The Precariat — The New Dangerous Class’ (Bloomsbury, 2011), Guy accurately predicted the political rise of a Trump-like leader. Quoting the cover:
“An emerging class of people facing insecurity and unstable low-paying labor that gives little meaning to their lives. Standing warns that the growth of the precariat is producing instabilities in society that are feeding populist extremism and the villainization of migrants and other vulnerable groups.”
The summary: “The precariat wants freedom and basic security.” Short of that, they are willing to burn the house down.
In ‘Basic Income — A Transformative Policy for India’ (Bloomsbury 2015), Guy writes the definitive book justifying the need for a Universal Basic Income. His work in India proves what most credible thinkers now conclude: It is high time we actually *implement* a UBI. We have done enough ‘pilots’ and we have done enough ‘research’.
‘The Corruption of Capitalism’ (Biteback Publishing 2016) also concludes that UBI is one of the essential solutions to inequality and a more secure society. The book warns of a pending and necessary “revolt” of the precariat if these key stress issues are not immediately addressed.
As the subtitle suggests, work no longer pays. What pays is owning something that one can charge rent for. On its face this seems like a positive development of capitalism, enabling Airbnb property holders to efficiently extract value from an underutilized asset. On the individual level, this ’rentierism’ seems like a good thing. But when you take a step back and look at the impact(s) to overall society, it is abundantly clear that an economy cannot function when 40% are not contributing productively to society but only collecting rent — i.e. the productivity value. — from the 60%.
Barcelona illustrates this perfectly. Mayor Ada Colau campaigned and won on a platform of capping Airbnbn rental registrations, which have driven 33% rent inflation (the largest in Spain). The number of people using Airbnb in Barcelona has tripled to 900,000 in just three years, with nearly 30% of hosts renting multiple properties, i.e. acting as professional landlords vs. “home sharers’. The net effect of the use of the platform is to enrich a rentier class while making the city itself less affordable to residents, who see the trend as a rot infecting the city from the inside out.
Housing is the obvious example of a “rentier” — not so obvious are: intellectual property, scarce capital, debt, stocks, subsidies and privatized public lands and institutions. All of these examples accrue non-productive income to the owners. The owners then take a portion of the profits to further protect and lobby for their position.
This cyle drives prices upward, resulting in where we are now — when working does not earn enough to cover the rent!
I don’t agree with the title of the book. Capitalism has not been “corrupted”. Rather, I would argue, that our capitalistic system has simply played itself out. Like the game of Monopoly — modeled after real life — eventually we arrive at the end-game. As we all know, money-makes-money and the game ends when all the assets are in the hands of the few, the ’winner’, and everyone else is bankrupt.
Anger towards billionaires is understandable but misconceived — we are at the natural endgame of capitalism — a point of individual innocence, but collective guilt. Rather than pointing fingers at the winners or labeling the system as corrupt, I prefer to take a viewpoint which does not blame or find fault. We all played the game; let’s stop…reset…welcome new players..and then restart.
At the same time, IF you are a player trying to enter the game at this late stage … well, it certainly looks corrupt to that potential player! Not only that, the existing players have no means of collecting “Pass Go” money. Maybe the rules have been bent towards influence?
When U.S. States were initially gave ‘incorporation rights’ to citizens, considered the greatest violation of such rights was the notion of ‘limited liability’. Under NO circumstances, the States regulated, could individuals limit their individual liability as a result of incorporating. Today, after decades of rule changes and lobbyist influences, ‘limited liability’ has become THE reason to form a formal, state-sanctioned entity.
The issues addressed chapter by chapter in The Corruption of Capitalism align nicely with the elements of a restart of the global capitalism game:
“The Plague of Subsidies” chapter … shows how subsidies create unnatural imbalances and underscore the need for fundamental tax reform.
“The Scourge of Debt” chapter … connects the dots leading to the need to reset the global balance sheet. Too much of society is in debt, upside-down and now part of the precariat.
“Plunder of the Commons” chapter … shows how previously-public land once provided a good share of ‘basic income’ to society. Such commons have been overly-privatized and now extracting value from society rather than providing.
“Labor Brokers: The Precariat Bears the Strain” chapter … illustrates how a select few (the 1%) have all the property and money while the rest of players struggle — and increasingly fail — to stay out of bankruptcy (often working multiple jobs).
“The Corruption of Democracy” chapter … covers “the institutionalize manipulation of democracy” where “just six corporations own 90 per cent of the media” and how “The Panama Papers revealed that no fewer than seventy-two former or current heads of state or government had benefited from tax havens”.
“Rent Asunder: The Precariat’s Revolt” chapter …outlines what is needed and concludes with “It is time for a fightback.”
The conclusion? Now that greater than 40% of the global economy are “rentiers”, the game must be reset. Too many participants are simply collecting rent. The money has made money. A very select few and very small percentage of the players really do own all the properties, houses and hotels.
Bernie Sanders is correct in pointing at the billionaire$ as the source of many ills. After all, they are the one’s sitting on all the assets and collecting rent from everyone else. However, Senator Sanders, I believe, is incorrect in placing the blame at their feet and for calling for a redistribution through disproportionate taxes.
Winning — as the billionaires have done — is not their fault. But no one would consent to play a game in which the winners are predetermined, which is the case for far too large of a percent trying to participate in capitalism today. The key is to reset the game in a way that is fair to ALL — globally.
In addition to the rule-following participants, over time many players have found ways to cheat the system, break various rules and hoard a disproportionate amount of money. Tax havens, crime organizations, oligarchs, the Swiss, the Panamanians…all are currently sitting on a LOT of cash — which causes very unnecessary and unhealthy scarcity of capital for the rest.
Would you sit down at a Monopoly game in which most of the Bank’s cash was stored in a vault that only one player could access?
The concluding solution laundary list of highlights as quoted from The Corruption of Capitalism:
- “The revolt. should aim to achieve ‘euthanasia of the rentier’, weakening mechanisms that produce rental income.”
- “A new distribution system in which wage earners and other receive part of the income accruing to rent and profits.”
- “Find appropriate forms of organization” as “the right to associate freely has been whittled away in many countries”
- “Resurrecting occupational bodies”
- “The trend to ever-stronger intellectual property protection must be reversed.”
- “Investor-State Dispute Settlement process should be radically reformed or abolished.”
- “The Citizens United ruling must be overturned.”
- “Tax credits should be phased out.”
- “Occupational licensing should be rolled back.”
- “Every country should set up a democratic sovereign capital fund.”
And, finally:
“BASIC INCOME SHOULD BE UNIVERSAL”
At Democracy Earth Foundation, we envision a more democratic world where a Universal Basic Income exists for all.
