Can anyone explain to me the concept of rent and rent extraction, as it is used in the two quotes below? This is the first time I have seen the term used in quite this fashion.
"Producer service knowledge commodities feed into other commodity chains that do lead to a final realization of capital (the concentration of financial rents by producer service providers and their relationship with other lead firms in the chain is a topic worthy of further discussion)" (Brown et al. 2010: 24).
Brown, E. et al 2010. World City Networks and Global Commodity Chains: towards a world-systems' integration. Global Networks 10(1): 12-34.
“This systematic, planned transfer of externalities and risk onto downstream populations, in the context of a structurally under-funded and under-capacity national regulatory system, gives project developers an opportunity for resource rent capture and ‘extra-normal’ profits. For Ban Sivilay’s forty-eight households, RMR’s estimated net THPC-induced damages of $300 per family per year implies a direct economic loss in the range of $172,000 over the past twelve years. Over the forty-year contract between THPC and the GoL, this would represent a rent extraction from Ban Sivilay of $600,000 in present value...I argue that it is not possible to consider the relationships between agrarian transition and outmigration in Ban Sivilay without also considering the nature and extent of such large-scale resource rent extractions” (Barney 2012: 79-80).
Barney, Keith. 2012. Land, Livelihoods, and Remittances: A Political Ecology of Youth Out-migration across the Lao-Thai Mekong Border. Critical Asian Studies 44(1): 57-83.
Economic Rent is in at least one sense the above and beyond profits that a monopoly or cartel receives because they set their own prices and are not calculated through competitive market supply and demand. I have also seen rent used in the payments that agents or firms receive for the use of their capital.
I am sure there are other definitions but nonetheless I hope this helps.
One of the best discussions of rentier capitalism masquerading as the free market is Dean Baker's The end of loser liberalism (free pdf). Rent is income guaranteed by political privilege as opposed to profit (incomes from sales of commodities) and interest (the cost of borrowing). An example is the huge dividend to Big Pharma guaranteed by protection of patents. Another is intellectual property in DVDs. Apple's attempted monopoly linking its popular products to sales through iTunes is another. At one level it is a shift back to an emphasis on distribution over production. Before the industrial revolution if a bright boy wanted to get ahead he had to get a gun. After, for a time at least, making things cheaper than competitors was the way to get rich. Of course political privilege for capital never went away, but the present situation referred to in these examples emphasises the unusual degree to which big capital now relies on political protection to secure revenues. The dismantling of effective regulation of industrial corporations and banks generates unearned income from predation on weaker populations. In other cases, state power is actively marshalled to secure such income. The free market ideology has succeeded in distracting even its opponents from recognizing that latterday capitalism has reverted to the principles of accumulation under the Old Regime. Hence the extraordinary inequality of our times.
William and Keith, thank you for your illuminating words. I will put Dean Baker's work on my reading docket.
Excuse me if Dean Baker addresses this issue, but is there any set of methods developed to gage the effect of rent over and against profit and interest? I suppose such a project would either have to be 1) an historical analysis, 2) comparative, or 3) somewhat hypothetical.
Sorry for the double post, but a thought just occurred to me. It seems to me that, in an economic downturn (recession or depression), someone, somewhere, is likely to be making a tidy profit. If we take economies as systems (and who wouldn't), then it seems to me that the circulation of capital is set against the pooling and accumulation of capital.
As they say, it takes money to make money, and in an economic downturn, fewer people seem to have money to weather it; but as prices drop, those with the capital to grab (real estate, say) have an enhanced opportunity to do so, and then sit on their enhanced accumulations.
Does this reasoning seem sound? If so, then it seems to me that rent might be a great example of the conversion of symbolic, social, and even cultural capital into economic capital.
Your follow-up point is a bit naive, Joel. The problem with buying in when things are cheap is that no-one knows when the market is going to bottom out. Keynes lost his shirt more than once selling short.
Marx has an abstract analysis in Capital. Value (V = total sales) is composed of v (variable capital or wages) and s (surplus value). The rate of exploitation is s/v. S in turn is made up of profit, rent and interest which correspond to different classes -- industrial capitalists, landlords, bankers. He goes to great lengths to show that, whereas the bourgeois revolution was fought by capitalist to oust the landlord class from power, by the mid-19th century the battle had been won and rent and interest were subordinate to profit in the organization of business. The others took what they could get, but didn't call the shots. Markets were broadly competitive at this stage and firms were owned by individual entrepeneurs.
The question for today is whether capitalist firms (now dominated by large corporations) generate revenue mainly from profits on sales of the products they make and whether they do so under monopoly or competitive conditions. Or do they depend more on rents as income from property rights secured by political power?
Take Sony, for example. They used to make their money from selling machines like Walkman, TVs, Playstation. Now 75% of their income comes from DVDs. These are not traditional commodities. Their sale rests on legal protection of their exclusive right to reproduce them when the world can do so for free. And whereas if I steal your cow, you don't get the milk, with digital copies no-one loses the ability to consume the commodity. Hence they put tremendous effort into DRM and the legal apparatus supporting it. The US exports TRIPs, the intellectual property treaty, on threat of barring non-signers from the US market and, if need be, of invasion.
So what is the difference between King George imposing an East India company monopoly on the American tea market and George W invading Iraq in order to hand over monopoly profits to Halliburton and some oil companies? This is not an empirical question, but rather one of historical judgment.