Review By Ashley Nyiko Mabasa, Wits University Sociology Honours Student and YCLSA Branch Secretary
In The Corruption of Capitalism: Why Rentiers Thrive and Work Does Pay, Guy Standing outlines how SAPs created crony capitalists who corrupted African and Latin American systems of governance to establish themselves as “plutocrats”.
From the onset Standing explains how rentier capitalists generate their income through ownership and control of assets and not from directly exploiting labour power for profits. He identifies the relationship between rentier capitalists who dominate large corporates and crony capitalists who occupy positions in government, and how this liaison between the two variations of capitalists renders both types detached from the down-trodden masses of people. Standing succinctly highlights the overgrowth of rentier capitalist as they generate their income through private ownership and possession of assets that are limited – for example, land, accommodation and mineral resources. Standing borrows from Karl Polanyi’s “The Great Transformation,” showing how rentier capitalist emerged with the rise of national market economies in which Britain turned what was commonly owned, into fictitious market commodities such as land, labour and money.
In addition, Standing shows that free markets are social constructs. The argument he makes is that governments dismantled existing rural systems of regulation, redistribution and social protection that historically provided security and a sense of community. This forced people to sell their labour power to survive following their separation from their means of survival. Standing describes how the English government adopted the Speenhamland system which restricted rural emigration and gave farmers cheap labour. Whilst governments practised domestic policies of free market capitalism, colonising countries were provided with rental incomes from nations they colonised through imperialism.
Standing contends that between 1945 and 1970s, government subsided rental income. However, government limited rental income to those owning assets in different ways including through the nationalisation of industries viewed as national monopolies. For example railways and public utilities’, including regulation of the market to avoid speculation and encourage lending for productive activities. In the Chapter “The Origins of Our Times” Standing critiques neo-liberalism as a promoter of rentier capitalism.
Furthermore, around the 1980s, the world witnessed the surge of Global Transformation through the construction of a global market which rendered old regulation, social protection and redistribution outdated. The writer emphasises this era of neo-liberalism as one of re-regulation of labour markets and the encouragement of the privatisation of state enterprises. This neo-liberalism agenda was driven by the unholy trinity consisting of the World Bank, International Monetary Fund’s (IMF) and World Trade Organisation (WTO). In 1995, the neo-liberal influence of the WTO was seen in South Africa – which reduced local production in the automotive sector in order to cooperate with WTO rules.
Standing explains how Southern Asian countries such as Malaysia and Singapore became rentier economies by buying assets of other countries and investing in rich countries. Similarly, between 2000 and 2014, Chinese companies spent €46 billion on 1 000 direct investments in the European Union. In fact, neo-liberalism created an environment conducive for China’s government to buy European assets and help purchase subsidies from European Union governments. The Chinese government, through their state bank, bought most of the European and American corporation such as US mobile phone company Motorola, Italian tyre maker Pirelli, Swedish car maker Volvo and French resort operator Club Med.
Standing also shows how the capitalist mode of production has been restructuring the workplace. Chapter six illustrates how the precariat is growing all over the world boosted by companies such as Uber, Taxify, TaskRabbit and Amazon. In this chapter Standing also highlights how employment rises and simultaneously wages remain stagnant – this results in the rise of precarious jobs which are characterised by lack of job security, low social mobility and low income.
However, Standing points out that rentier capitalism tends to centralise their industries through patent such as those for cancer drugs which are overpriced. This overpricing occurs due to monopolisation of markets in a form of patents which are granted privately to owners of inventions, in this way, they get rent from their manufacturing. Standing also describes how when governments are perceived to be threatening private corporation’s profit or interest, they can get sued. For example, UK power investor Ruralec successful sued Bolivia $30 million through Investor-State Dispute Settlement (ISDS) after government nationalised the country’s largest energy provider in which Ruralec had an indirect interest – this is similar to how the Egyptian government was sued for increasing minimum wages by a French waste and energy group, Veolia, which claimed raising minimum wage hit production costs and profit. Put differently, capitalist businesses’ power to decide when and how to invest also gives them influence vis-à-vis to change state policies.
Standing also describes how under the capitalist mode of production, the state has less power in comparison to capitalist corporations – because the state needs to create jobs and generate tax for functioning of administration. Therefore, government has to reduce corporate tax and give subsidies to attract investment. For instance, Standing demonstrated that since the 1980s the corporate tax rates international have halved – in UK the corporate tax has been reduced from 50% in 1980s to 20% in 2015. In this case British corporation and wealth taxes are lower than income tax. The Spanish government reduced corporate tax from 30% to relatively 25% in 2016 favouring rentiers capitalists.
Standing argues that tax breaks for corporations are “also another form of protectionism, a bribe to induce multinationals to locate, stay or expand in the country” (p.96) the US government spends $80 billion a year on incentives and subsidies to companies which equates to 7% of their GDP. Most of the states cut public spending to direct funds to private corporations. In this case, the UK reduced public-sector research and increased subsidies for private industry research and development. This results in increasing inequality at the expense of public funds to boost private profit to attract investment.
Correspondingly, Standing highlights that the states have been cutting social spending justifying it through the need to reduce government borrowing. Standing underlines that states all over the world have been cutting public services under pretext to settle state debts. Ironically, in France, 60% of state debt deems to be illegitimate because its main cause of the increase was not government social spending but tax reductions for the wealthy. Standing proposes that cutting public debts can be done through raising taxes and purging regressive and inefficient taxes to private corporations.
In UK, student loans increased and reached £73.5 billion aided by undergraduates’ tuition fees in 2015/2016. Standing describes the process in which student maintenance grants were replaced with loans and how it deny poorer students access to education as well as ones who can take out loans with up to £53,000 of debt on average – instead it profits the Student Loans Company tremendously. Most undergraduate students pay students debts until the age 40 to 50. In the same breath, in Britain student accommodation is another niche of the rentier economy, with private investment of £6 billion in 2015 – most students’ accommodations are provided by profit making firms.
Free market capitalism emerged through altering nature into fictitious commodities and World Bank Berg report in 1981 urged privatisation and trade liberalisation. In regards to this, Guy Standing points out that states have been allowing privatisation of the “commons” which are supposed to be used by everyone – such as land, forest, water, knowledge, culture, and social.
Standing states that educational commons comprise of facilities that enable people to learn. Furthermore, he argues that education is a natural public good. However, commercialisation of education industry has changed education into a commodity. Promoted by neo-liberalism ideology, public schools budgets across the world has been squeezed while private schools have been boosted by subsidies and grants. When you consider this argument, it is clear that privatising and commercialising commons is another form of corruption aiming to generate rental income for those few who owns assets and have property rights and that it negatively affects the majority of people who are deprived from the use of commons.
Standing goes on to describe how rentier capitalists are outsourcing and off-shoring labour power and how this culminated into the creation of labour brokers. In contrast, McKinsey Global Institute predicted that between 2015 and 2025 “online platforms” could create 72 million full-time jobs. In 2015, Uber had over 1.1 million drivers operating in 351 cities in 64 countries. In the same breath, online tasking has moved to supplement many forms of professional work, such as accountancy, legal research, medical diagnosis and design. For example, UpCounsel in Califonia provides online lawyers and handles its taskers’ finances and document management.
Standing contends that technologies of 4th Industrial Revolution or Silicon Valley are destroying the distribution of our income. He describes recent formation of a “rental wedge” which has developed between growing profits, which are more concentrated than ever, and wages, which are declining and increasing insecure. Work is no longer a means to accumulate wealth, or even rise out of poverty. Standing notes that 48 million Americans use online software rather than professionals to do their tax returns. From this chapter, it is clear that mixture of digital technology and platform capitalism reduce number of jobs and changes the character of work and labour.
For Standing, global plutocrats and rentier capitalists have captured the state of the world and have been commodifying politics by controlling of media. He is not alone in this. Karl Marx in the “Germany Ideology” (1932) first argued that “The ideas of the ruling class are in every epoch the ruling ideas, i.e. the class which is the ruling material force of society, is at the same time its ruling intellectual force.”
The rentier capitalists, which Standing describes in his book, have corrupted the democratic system by making the playing field uneven for politicians. Rentier capitalists’ ideas are disseminated through large corporate media houses which they control and by “think tanks” – for example, in the USA six corporations own 90% of media. These media houses and private corporations drive their narratives to the masses – as these media institutions are controlled by rentier capitalists linked to political parties and their set of interests. For example, in 2012, America’s corporations spent over three-quarters of the $3.3 billion lobbying in the Washington DC and it has been noted that since 1974, there is no political party in UK that has won an election without support of “Rupert Murdoch and his media empire” (p257) which includes the Sky television channels, as well as the newspapers The Sun and The Times.
In addition, Standing, contends that rentier capitalists and politicians share the same social networks. For example, during the annual World Economic Forum in Davos, BlackRock, part of the Mont Pèlerin Society – is the world’s biggest asset manager and includes every listed company in the world – controlling $4.5 trillion in assets. Politicians and rentier capitalists’ socially network in the absence of the majority of people who vote and therefore largely ignore the social democratic system. Put differently, politicians (top bureaucrats and policy makers) happen to be situated in the same networks with the rentier capitalist who seeks to navigate their interests within the state. For example, government politicians are funded by people who gain their profits from tax havens, corrupting the intended democracy system. Often, most of these prominent politicians eventually get appointed to rentier capitalist board of directors – for example, George H. W. Bush, US Secretary of State Howard Baker, a former minister of US Defence, Former Britain Prime Minister John Major and former President of Philippines are all appointed to Carlyle Group which is the largest private equity company operating all over the world built on military contracts, which is linked to the Saudi Royal Family.
In the final chapter, Standing proposes empirical and pragmatic solutions to the corruption of capitalism. Standing notes that the democratic system is supposed to represent class interest and ideas – ideas and class interest of the poor masses. Political parties have to necessarily shift from serving financial interests of rentier capitalists.
Standing argues for tougher rules and strict enforcement on lobbying and that all countries should limit election spending and provide state funding for political parties. Furthermore, political parties should raise funds only from membership subscription and individual donations. According to Standing, revolt against rentier capitalist by precariat includes that patent be granted only for significant innovations and protected. And the ownership of the patents “granted on inventions” (p295) that come from publicly funded programmes should be shared with government institution concerned. This will improve the access to new drugs that are currently “prohibitively expensive” (Ibid).
In his conclusion, Standing asserts that in addition to the revolt against rentier capitalists, the state needs to establish the Democratic Sovereign Wealth Funds. This argument comes following the establishment of the Alaska Permanent or the Norwegian Government Pension Fund Global (GPFG) which is the biggest national sovereign fund in the world. The GPFG boosted the Norwegian state and it became rentier state which benefits the whole population of Norway including future generations. This increased the net worth of the state.
The National Sovereign Fund reduces inequality and poverty as well as generate wealth for the state and redistribute it to the whole population. Another revolt which Standing proposes is the establishment of a national basic income. The basic income would pay individuals a monthly sum. This will also deal with inequality, lack of social income and poverty currently experienced by precariat to the benefit of rentier capitalists.
Ashley Nyiko Mabasa
Wits University Sociology Honours Student and YCLSA Branch Secretary
Marx, K., 1935. Germany Ideology: Part I: Feuerbach Opposition of the Materialist and Idealist Outlook B. The Illusion of the Epoch. Marxists Internet Archive.
Masondo, D., 2018. South African business nanny state: the case of the automotive industrial policy post-apartheid, 1995–2010. Review of African Political Economy, pp. 201-219.
Standing, G., 2017. The Corruption of Capitalism Why Rentiers Thrive And Work Does Not Pay. London: Great Britain By CPI Group.
- Masondo, David (2018) in his paper “South African business nanny state: the case of the automotive industrial policy post-apartheid, 1995–2010.” Masondo pointed out that South Africa’s import duties for completely built vehicles and completely knocked down were reduced from 65% and 49% respectively to 20% in 2012 in order to comply with the WTO rules on liberalisation of trade and investment.
- Similar to the case of South Africa which spends R23 billion in the automotive industry as subsidise. ↑
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