The Corruption of Capitalism


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This page is based on qoutes from the book
The Corruption of Capitalism – Why Rentiers Thrive and Work Does Not Pay
by Guy Standing, 2021, 2017, 2016.



‘The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords, to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies?’

[John Stuart Mill, Principles of Political Economy, 1848]

Since this book was written, the trends it describes have gathered strength, while the global Covid-19 pandemic and Britain’s ill-judged exit from the European Union have revealed the inequities of rentier capitalism for all to see. Yet governments of all complexities, cacptured by the rentiers, have shown little appetite for systemic change, at most proposing to tinker this or thay policy that they hope will defuse calls for radical action.

This introduction to a new edition documents the salient features of rentier capitalism exposed by the pandemic and Brexit. It argues that these events have strengthened the need for the policies outlined in the final chapter, notably the creation of a new income distribution system anchored by a basic income.

Let us begin, however, by recalling an event in Britain that epitomises the malefic influence of rentier capitalism. In a June 2016 public stunt, just before the referendum vote on EU membership that month, a flotilla of thirty fishing boats loaded with Brexiteers made it up the Thames to the House of Parliament in Westminster, headed by former merchant banker Nigel Farage, the most prominent leader of the Leave campaign. The slogan ‘British fish for British people’ proved significant in the narrow victory for Brexit.[1] Small-scale fishers were persuaded that their plight was due to the EU’s Common Fisheries Policy, which is why most voted for Brexit and later for the Conservatives in the general election of December 2019.

In reality, their problems were the outcome of corporate power. The Brexit government, not the EU, was responsible for allocating quotas for fishing in British waters, once the total allowable catch had been set. And it was the British government that had given – not sold – rights to this national asset, mostly to a few large-scale corporates. Over two thirds of the quotas were then, and are still, in the hands of just twenty-five companies, while only 6 per cent have gone to the 76,000 small-scale fishers, even though they made up 79 per cent of Britain’s fishing fleet. Some 29 per cent of the total quotas have been given to merely five families, all of whom are on the Sunday Times Rich List.[2]

There was one thing wrong about Farage’s antics on that flotilla in June 2016: the boat he was on belonged to a UK-registered Dutch fishing company that ‘owned’ more of the allocated fish quotas than any other – over 20 per cent of the total allowable catch. A year earlier, off the Cornish coast, a supertrawler over 100 metres in length – the largest in the British-registered fishing fleet – owned by that Dutch company was boarded by the Royal Navy and found to have 632,000 kilos of illegaly caught mackerel. In Bodmin Court, the skipper and owner were fined £102,000, indluding costs, but were allowed to sell the fish, which fetched £437,000, and to keep their freely given quota, their property rights.[3]

It was not the first major offense committed by the corporations so favoured by the government. In 2011-2012, directors and partners of thirteen of the twenty-five most privileged fishery companies were convicted in a huge overfishing case in Scotland, known as the ‘black fish’ scam.[4] The companies had clandestinely landed 170,000 tons of undeclared herring and mackerel, worth about £63 million. The convictions did not stop those companies from continuing to receive their large quotas. It is a case to cite against those who claim that quota systems – or private property rights – induce long-term conservation and sustainable fisheries.

In Britain and elsewhere where transferable quota systems have been introduced, quotas have become a valuable, tradeable commodity. Powerful fishing companies have accumulated more and more quota that they can then lease to other fishers, gaining rental income. And quotas are being acquired by so-called ‘slipper skippers’, who never go to sea but make their money from leasing the quotas to those who do.

In the Fisheries Act, passed in 2020, the British government committed itself to preserving the existing quota system. Those holding most of the quotas will probably gain from any post-Brexit expansion of the quotas awarded to UK-registered vessels. Meanwhile, the small-scale commercial fishers will find they have been duped, or sold down the river, as it were.

The fishing industry is a vivid case of rentier capitalism, with profits linked directly to the enclosure of the commons (the fish in their natural habitat) and the artificial creation of private property rights (the gift of quotas) entrenched despite law-breaking. The protection of those property rights, even in the face of blatant illegality, is class politics at its worst.


The epochal events – the Brexit vote in the UK and the election of Donald Trump as President of the United States – occurred just after the first edition of this book was written. Both events reflected a populist vote against the insecurity, inequalities and austerity induced by the system of rentier capitalism described in the book, which has channelled ever-increasing amounts of income to a minority in a global Gilded Age. Battered by the Covid-19 pandemic and with Brexit disruption adding to its economic woes, the UK finally limped out of the European Union with a thin trade deal on 31 December 2020. And on 20 January 2021, the Trump presidency came to its ignominious end, shadowed by the insurrection he incited and a second impeachment. Yet populist rage and partisan division will live on while the fundamental causes remain unaddressed.

In a book published in 2011, this writer predicted on page one that if the insecurities and aspirations of the precariat were not addressed as a matter of priority, a ‘political monster’ would emerge, a poulist who would drag society towards a ‘politics of inferno’.[5] Though Trump was to prove to be such a monster, he was not the first, and will not be the last, to exploit grievances and anger to gain political power.

A cleverer successor to Trump could emerge on the authoritarian right in the United States. In Britain, the Johnson government seems bent on weakening the ability of Parliament and the judiciary to check the actions of the executive. Around the world, on every continent, strongmen have been gaining and holding political ground. Unless rent-seeking can be curbed and unless the desperate need for basic economic security for all is recognised and met, politics everywhere will grow uglier still.

If the twentieth century was the American century, the twenty-first seems destined to be the Asian century. The Trump presidency also reflected a turning point when the United States ceased to be the hegemonic rentier economy. As Chapter 2 explains, the USA shaped the international architecture of globalisation from the 1980s until the financial crisis of 2007-08, thereby facilitating rent extraction by its multinationals and financial institutions. At the same time, the plutocrats and the elite serving them used their financial wealth to sway the US government in favour of what might be called ‘pluto-populist’ fiscal and monetary policy. The essence of this, copied around the world, involved big reductions in taxes on capital and the rich, with smaller tax cuts for middle-income earners, together with lavish subsidies to help corporations and the wealthy stay in the country or compete against imports.

Advocates of the policy claimed it would lead to more investment and economic growth, the benefits of which would ‘trickle down’ to lower-income workers. That has not happened. Rentier greed is boundless, their lobbying capacity awesome. They always want more: But that becomes, and has become, a self-threatening sickness. Tax cuts and subsidies have created a huge debt problem.

In response, public spending has been slashed, causing a visible decay in the social and economic infrastructure in what is meant to be the world’s richest country. Homelessness mounts, schools deteriorate, roads decay, bridges collapse, productivity stagnates, inequalities multiply and resentment festers. Populist politicians have emerged to take personal advantage, blaming foreign nations for the country’s woes. They have turned to protectionist measures behind a rhetoric of ‘America Fist’ and ‘Make America Great Again’. Yet the American disease is there for all to see; the Biden presidency will find it hard to reverse the decline.

Trump launched a deregulatory crusade, ordering his officials to cut hundreds of regulations, jettisoning environmental safeguards and giving more scope to US corporations to earn rentier income, ostensibly to boost economic growth and ‘American jobs’. Before Covid-19 struck, the USA had indeed generated many extra jobs, but they were mainly low paid jobs for the growing precariat. And while the USA tried to come to terms with its self-inflicted financial crisis of 2007-08 and its loss of faith in free trade, the geopolitics of rentier capitalism shifted profoundly. Every economic transformation involves a new geographic centre of economic dynamism. This time it is China and the Pacific Basin that are destined to be the epicentre of the next phase of a Global Transformation.

The 2007-08 financial crisis marked the point at which China became a bigger trading partner than the United States for over half of the countries in the world. By 2018, two thirds of countries (128 out of 190) traded more with China than with the USA, and ninety countries traded more than twice as much with China as with America.[6]

China has been consolidating its growing economic power in various ways, including the construction of its Belt and Road Initiative, the new Silk Road intended to integrate China with Europe and Africa as well as with the rest of Asia. Already it has halved the time it takes to send heavy freight from China to Europe to eighteen days. Meanwhile, Chinese enterprises and plutocrats are buying up property and companies all over the world. They have worked out that the returns from property and other assets often exceed the returns from manufacturing investment. China has become the principal rentier economy of the world.


The financialisation unleashed in the 1980s has acquired the Midas touch; it turns all it touches into gold but thereby destroys the living. It paralyses governance: finance ministers do whatever finance demands to avoid ‘capital flight’ and deepening recession. It buys politicians through lobbying and ‘revolving doors’. And financial globalisation has raised inequality, because its benefits, such as they are, go primarily to the affluent, while the associated economic volatility and more frequent financial crises hit the poor hardest.[7]

In the 1950s, when mainly used for saving and lending, banks contributed about 2 per cent to the US economy. By the time of the financial crash in 2008, that had quadrupled.[8] In the UK, financial intermediation accounted for about 1.5 percent of profits in the 2970s; by 2008, the share was 15 per cent. Since then, finance has gone from strength to strength. Though their contributions to the UK and US economies has remained stable at 7-8 per cent of GDP, by 2017 financial companies accounted for a quarter of US corporate profits. Yet only about 15 per cent of lending was for new business investment, the rest going to facilitate trading in stocks, bonds, property and other assets.[9]

Similarly, only about half of UK-owned bank assets are loans to non-bank borrowers, mostly for buying property, while lending for manufactural investment accounts for less than 4 per cent of assets.[10] Since so much of the money at the disposal of banks and financial institutions is in speculative finance, one could say that most economic growth in the twenty-first century has been fictitious.

According to the bank of England’s chief economist, the long-term economic cost of the financial crash of 2007-08 in terms of permanently lost output was more than the total annual world GDP.[11] But the banks whose reckless lending triggered the crash were bailed out, while ordinary people suffered the fallout. Governments and central banks have reacted to the even deeper pandemic slump in much the same way. The Economist estimated that the value of lost output in 2020 and 2021 alone could top $10 trillion, more than the annual GDP of every country in the world except the USA and China.[12] And since the effects, economic and social, will persist well into the future, the final tally will be much higher.

The value of financial assets provides one way of measuring the extent of financialisation. In 2017, financial assets held by financial corporations, including derivatives, totalled 1,056 per cent of UK nominal GDP. In Japan, the figure was 739 per cent; in France 649 per cent; in Canada 648 per cent; in the USA 509 per cent; in Germany 461 per cent; and in Italy 396 per cent.[13] To that should be added financial assets held by non-financial corporations, which have grown sharply in recent decades. In the USA, non-financial firms received five times as much revenue from financial activities in 2017 as they did in the 1980s.[14]

In terms of balance-sheet size, by 2013 the UK financial system was over five times larger than at the end of the 1970s, signalling the fragility of an interlocked financial system. As an official review of Britain’s economic statistics put it: ‘Financial stress in a few, or even a single, institution can quickly spread like a virus to the rest of the economy through the nexus of inter-institutional linkages. [15]

This means that government is virtually a prisoner of finance. Ironically, in the 1970s, one critisism of Keynesianism by the newly dominant neo-liberal and monetarist economists was that, once trade unions and workers knew that government would do whatever it could to maintain what it called ‘full employment’, they would push up wages, so creating an inflationary bias. This was the essence of ‘rational expectations’ theory. Under rentier capitalism, a similar theory should apply with respect to finance.

In the early phase of rentier capitalism, governments turned over decisions on monetary policy to their central banks, thereby reducing democratic control. In the UK, the Bank of England was granted independence in 1998 by the New Labour government, with a remit to target the rate of price inflation. Initially, there was a deflationary bias to monetary policy, with high interest rates well suited to the banks and the development of securitisation – creating bundles of debt as securities to sell to investors. But, true to the Midas touch, finance has also benefited from the subsequent era of very low interest rates ushered in by the 2007-08 financial crash.

With the threat of inflation negligible, central banks pumped money into the financial markets to stimulate the economy. This was a wasteful way of promoting growth. Instead of helping lower-income households, who spend a high proportion of their income on basic goods and services, quantitative easing (QE) chiefly benefited the wealthy by increasing the value of financial and property assets. Moreover, low borrowing rates led to an acceleration of financialisation through the growth of private equity funds.

QE by the Bank of England, its independence probably only a convenient fiction, amounted to £75 billion between 2009 and 2013. Yet the current governor, Andrew Bailey, admitted that the bank did not know what it was doing. In October 2020, he told the House of Lords Economic Affairs Committee that he agreed with the former chairman of the US Federal Reserve that QE ‘works in practice but not in theory’.[16] He then admitted that there had been no proper evaluation. Earlier, the bank estimated that without QE, the real prices of equities listed on the London Stock Exchange in 2014 would have been 25 per cent lower than they actually were.[17]

Meanwhile, finance has marched on. In Britain, private equity now owns more than 3,400 companies employing 800,000 people, from water supply monopolies to restaurant chains and veterinary practices. In the USA, private equity controls assets totalling more than $4 trillion, and the 8,000 firms it runs account for 5 per cent of US GDP and employment.[18] Its business model has been variously described as ‘termite capitalism’ and ‘looting’.[19] Private equity funds borrow cheaply to buy up firms;maximise returns and profits; sell some of the firm’s assets, often to entities registered in tax havens; and then cash out or go ‘bankrupt’ with minimum equity at risk. Recent examples include well-known Debenhams in the UK and J.Crew in the USA.

Private equity firms also own care home chains across Britain. Understaffed and under-equiped due to cost-cutting in the pursuit of profit, the residents and staff of these privatised care homes were hit particularly hard when Covid-19 struck in early 2020. And, in the midst of the pandemic, the US owner of The Priority, a chain of 450 mental healthcare facilities across Britain, sold it to a Dutch private equity firm, which owns a similar business in Germany.[20] The cash-strapped National Health Service now pays private equity to profit from providing a health service that was once part of the social commons within the NHS.

Meanwhile, the awesome firepower of the financial oligopolies grows and grows. At the end of 2020, New York-based BlackRock, the world’s biggest asset management company, controlled $8.68 trillion in managed assets, equivalent to a tenth of world GDP. Founded in 1988, BlackRock has become the undisputed financial master of the universe, not only as a major shareholder in most listed companies globally but also, more insidiously, through its vast Aladdin technology platform, which is used both by clients and by competitors.

As described by the Financial Times, Aladdin ‘links investors to the markets, ensures that portfolios hold the right assets and measures risks in the world’s stocks, bonds and derivatives, currencies and private equity … Today, it acts as the central nervous system for many of the largest players in the investment management industry’.[21] Users include Vanguard and State Street, the second- and third-largest asset managers after BlackRock, as well as leading insurance companies and pension funds, and huge non-financial corporations including Apple, Microsoft, and Alphabet, Google’s parent.

In February 2017, BlackRock revealed that Aladdin was being used to manage $20 trillion of the world’s assets. It has not issued later figures, presumably not wishing to draw too much attention to its global monpolistic position. However, in early 2020, the Financial Times calculated that just a third of its 240 clients had $21.6 trillion sitting on the platform, equivalent to 10 per cent of global stocks and bonds. That would suggest that, in all, at least 20 per cent of the global financial marketplace, and possibly more, is being managed by a single algorithmic technology platform whose inner workings are known only to BlackRock. It is a ‘black box’.

The very success of Aladdin, which has powered BlackRock’s superior asset performance, has brought with it not only potential conflicts of interest for its owner but also serious risks for the global financial system. Dangerous herding behaviour, as trillions of dollars react similarly to events or shocks, could lead to market collapse. And Aladdin would be a very enticing target for hackers. It brings to mind a scenario from Robert Harris’s chilling novel The Fear Index, about an algorithm designed for a fictional hedge fund that fatally turns on its creators.

The Covid-19 pandemic has proved another bonanza time for financial capital. While hundreds of millions of people were struggling to survive, governments and their central banks rebooted finance, just as they had after the financial crash of 2007-08. Early in the pandemic, market intervention by the US Federal Reserve totalled an unprecedented $23.5 trillion.[22] In a year in which at least 1.7 million people died from coronavirus and unemployment soared, world stock markets ended 2020 up 13 per cent and US stock markets reached record highs.[23]

The primacy of finance has corroded a fundamental claim of advocates of capitalism, that a system of private property rights encourages long-term accumulation of investment. In fact, it does the opposite. It encourages short-termism because both managers and shareholders gain by moves that push up share prices. In the 1970s, the average share traded on the world’s major stock markets was held for seven years; nowadays it is held for a few months, and many shares change hands in minutes or even, through automated trading, in seconds.

Market responses to the pandemic have reinforced this trend, aided by near-zero interest rates and trillions of dollars of central-bank and government stimuli. The average holding period for US shares was just over eight months in 2019. As one portolio manager said: ‘Capital doesn’t have a price thanks to all this stimulus. The covid-19 crisis has accelerated the trend of short-termism in investing’.[24] The share of portfolio holdings replaced in a twelve-month period increased to 92 per cent in mid-2020, from a previously unprecedented high of 85 per cent a year earlier. Despite the growth of ‘passive’ index-tracking funds, which hold on to shares as long as they remain in the relevant index, the current system is better described as ‘sharedealer’ rather than shareholder capitalism.

Reinforcing this theme, online trading apps, such as RobinHood, Betterment and Wealthfront (‘robo-advisor’ startups), that allow commission-free retail investment in stocks have encouraged individuals, and young people in particular, to gamble on the markets, taking small-scale punts on buying and selling shares directly. Day trading has soared in countries around the world, rich and poor. Shares have been truly commodified. The claimed moral basis of shareholder capitalism has gone.

There is emerging evidence that participation in financial markets encourages right-leaning views on society and economics, including support for market-friendly policies and less regulation.[25] And, as Hyman Minsky pointed out in 1986, in a period of rapid financial innovation, regulations cannot adapt quickly enough, presaging a prolonged period of economic instability.[26]

Minsky also noted that financialisation fosters that instability. Take house purchase as a simple example: if you pay cash for a £100,000 house and sell it for £200,000 a year later, you double your money minus the lost interest you would have earned by keeping the cash in the bank. If you buy that house with a deposit of £10,000 and a mortgage of £90,000 and then sell it for £200,000, after paying off the mortgage you clear £100,000 minus interest on the £90,000. If interest rates are low, as they now are, you gain almost ten times the cash you put in. So there is an incentive to finance asset purchase with debt, encouraging debt for speculation, leading to steadily rising asset prices and financial bubbles that eventually burst.

The current situation does not augur well. Finance is ahead of the politicians and will surely do what it can to keep it that way. And as long as ‘independent’ central banks do their bidding, finance will continue to thrive on instability.

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