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OP-ED: The evils of rentier capitalism

  • Published at 09:36 pm September 17th, 2020

Are we headed towards greater inequality?

We have started to realize the multi-dimensional crises that capitalism’s pervasiveness has created in our society. The Covid-19 induced economic fallout has brought existent inequalities and uncertainties to the front. Besides, the pandemic has aggravated many crises. One such impending crisis is the rise of rentier capitalism. 

Many of the think-tanks in Dhaka have found that job cuts in the cities around the world are forcing people to return to the villages. 

The issue is real; however, the cause is not just the economic recession ensued by the pandemic. The pandemic has just revealed the unsustainable features of our globalized economy that are heavily based on rentier income. 

Rentier capitalism refers to a system where income comes from possession of scarce assets. In today’s world, largest rental incomes come from land, property, or financial investments. In the book, The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay (2016), Guy Standing has claimed that the problem with the existing form of capitalism is that “incomes from labour are dropping, while rental income is mounting.” Many recent phenomena reveal the crises created by rentier income, and following the pandemic rentier capitalism is set to gain momentum.

n exodus from the urban to the rural

Globally, we are experiencing a mass exodus of people out of big metropolises reversing the long rural-urban migration trend. A loss of income means many are now unable to carry on the expenses of urban living, thus taking refuge in smaller cities or rural areas. Bangladesh is experiencing a similar tendency. 

Recently, Power and Participation Research Centre (PPRC) and Brac Institute of Government and Development (BIGD) published a study report on “Livelihoods, Coping, and Support during Covid-19” -- it shows urban to rural migration has increased from 6% in April to 13.3% in June. The rate of migration from the urban areas of Dhaka is as high as 15.6%. 

The study included 7,638 households across the country, and specifically referenced four distinct causes of outflux from cities. House rent, health care expenditure, transportation costs, and utility expenses are the driving forces behind this mass return to villages. Nonetheless, the major cause is the higher rate of house-rent in Dhaka. A different estimate suggests more than 50,000 families failing to carry rental payments were forced to leave Dhaka since May 2020. 

The increasing possibilities of rental income motivate everyone to invest all the savings in properties which can be rented out. Hence, house-rent has reached a tipping point in Dhaka and all the urban dwellers are feeling the heat now as income has shrunk.

Why an increasing pressure on the rural economy?

Not only are informal sector workers leaving Dhaka -- many white-collar workers also lost their jobs and returned to the villages. Besides, many prospective international migrants who were planning for their first migration could not make it due to the shutdown and the economic fallout. Hence, an economic pressure is building up in the rural areas.

Centre for Policy Dialogue (CPD) estimated that every month, thousands of people travel abroad for work, and the number reaches up to 600,000 every year. These people are now facing uncertainty -- being stuck in limbo. They are mostly from low and lower-middle income households, and an economic crisis is looming over the families.

The rural economy also had to absorb international migrants of the country who came for holidays but could not return when Covid-19 called for all out shutdown. The temporary returnees are now left with little possibility of return. The Expatriates’ Welfare Ministry revealed, at least 95,062 Bangladeshi migrant workers returned from 26 countries between April and August.

These people who are currently out of work with diverse backgrounds and skill-sets are likely to set in motion a number of crises. Many claim this return migration is going to strain the rural economy.

The evil of rentism

Why should an increased number of somewhat skilled/semi-skilled people with some savings and/or access to informal/formal loans become a burden for the rural economy? One can find the answer by exploring what these returnees are involved with returning to the villages. 

In many newspaper reports, one can see numerous stories of people that show an increase of rentier activities in the rural areas. Many families who moved to the village are taking out informal loans to lease agricultural lands with an expectation of ensuring food for the family. During the last six months, there have not been many job circulars either, which pushed people towards leasing properties or taking informal loans. 

Many migrant workers who are stuck, have lost jobs, or could not migrate for the first time are also taking out loans and leasing properties. Therefore, rent income is rising for the land-owning class, which will create a vicious circle of poverty and graver inequalities in future. 

The problem with rentier income is that rent-seekers are the idle spectators who give nothing back in the system of production as David Harvey claimed in the Seventeen Contradictions and the End of Capitalism (2014). Rentier capitalism is a double-valence; an increasing pressure of rent is forcing people out of the cities while engulfing them into the “circuits of rents” in the rural areas. To reverse the aggressive evil of “rentism” a new income distribution scheme is needed. A basic income for all and high taxes on all forms of rental income can propel productive activities, reducing rent-seeking initiatives. 

Employment generation programs, training to increase employability of the workers, enhancing the supply-chain of locally produced products, etc could help ease the crises for a brief period. Only stimulus packages for the informal sector, or provision of small and medium enterprise (SME) loans will not solve the problem. Rather it will help boosting rural rentier capitalism. The pervasive nature of capitalism cannot be halted unless we can ensure meeting of basic needs for all. 

Mohammad Tareq Hasan is an anthropologist and teaches at the University of Dhaka.

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