Dean Baker, like many others in recent years (such as Joseph Stiglitz, Josh Bivens and Lawrence Mishel, and Paul Krugman), tries to make sense of the “well-documented upward redistribution of income” that has been taking place for the past four decades in terms of rents.
What Baker has in mind are four categories or areas of rent: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals.
Now, I have no problem accepting the idea that rents have been captured by corporations and individuals within corporations in all four of those areas. In fact, I’d extend the list to include, at a minimum, the following: pharmaceuticals, insurance, and real estate.
But I think Baker makes at least two fundamental mistakes: First, he counterposes his rent story to a focus on a redistribution from labor to capital. Second, he wants to argue that there’s “nothing intrinsic to capitalism that led to this rapid rise in inequality.” The two problems are, in fact, connected.
Let me explain. What Baker is missing in his rent story is an explanation of where the rents come from. He does have a theory of prices, since rents can be explained as stemming from above-normal or monopoly prices. But he needs a theory of value, in order to explain where the surplus that is ultimately captured as rents is initially created. In other words, what he’s missing is a theory of surplus-value.
And that surplus-value is, of course, something that is intrinsic to capitalism. Capitalism simply can’t exist, in any of its various forms, without the appropriation and redistribution of surplus-value. One of those sets of redistributions takes the form of rents.
Why does this matter? In Baker’s view, it is necessary “to restructure the market to generate qualitatively different outcomes” while leaving capitalism in place. It’s like rearranging the chairs on the deck of the Titanic. Ultimately, the ship sinks and only a select few get away in lifeboats.
The theory of surplus-value is connected to a fundamentally different project: the critique of capitalism itself. In other words, the goal is to eliminate exploitation and any redistributions of the surplus that aren’t connected to creating and strengthening nonexploitative economic arrangements. To continue my analogy, what we need is a radically different kind of ship, one that can do a much better job of steering clear of icebergs and of protecting the people on the ship even if such an obstacle is encountered.