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Paul Krugman, New Keynesians, and the rentier

June 7, 2011

“New Keynesian” Paul Krugman drifts a bit toward the “old” Keynes today, and directs his ire at the rentier.

 (T)hinking of what’s happening as the rule of rentiers, who are getting their interests served at the expense of the real economy, helps make sense of the situation.

What I guess I’d say is that the creditor-oriented mindset permeates the whole world of men in suits sitting around tables talking policy.

The rentier class was quite strong during the time of the “old” Keynes – i.e. John Maynard himself – but its reach and power has greatly expanded.  Just 500 corporations today control nearly 40% of all global revenue.  These massive goliaths are “owned” by passive stockholders who know little of the underlying business and bring nothing to the table other than their hoards of wealth.  We find the exact same ownership dynamic with all firms traded in the world’s stock exchanges.  Add to this the bond rentiers, those passive “investors” who, though performing no service other than risklessly holding a currency, expect and demand high interest rates, and we begin to learn the nature of our rulers.  We live within a dictatorship of the rentier and Krugman’s men in suits know the fundamental law: high interest rates and profits must be maintained, limited only by the need to protect the very life of the system upon which they feed.

The difference between the “new” Keynesians and the “old” is that Keynes saw more clearly the adverse power of this dictatorship and lived in a time in which he could more safely attack their interests.  Can you imagine any mainstream economist writing, as did Keynes, that “Interest rewards no genuine sacrifice, any more than does the rent of land”?  Or call for the “euthanasia” of the “functionless” rentier and the substantial socialization of investment?  Impossible to imagine!  Instead all we hear across the political spectrum is fear and “worry” of what the “markets” (i.e. rentiers) will do to us if we don’t impose ever harsher austerity.

It’s good to see Krugman recognize that we’re ruled by the rentier.  But what’s the solution?  Are these rentiers deserving of their rents?  Is it compatible with democracy?  Does “New Keynesian economics” provide an ideological prop for this class?  Keynes was not at all a socialist and valued his own upper class, but compared to the left pole of today’s mainstream discourse, he sounds downright Marxian.

Come on Paul!  Are we to be forever beholden to the men in suits?  Isn’t there some far more egalitarian economic theory you can pull out of your Nobel bag?  Or is that perhaps far too dangerous?

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