Making Capitalism Great Again? A Critique of the “Rentier Takeover” Thesis

Mason’s critique is fair to read, but misses the mark, by a very long shot.

Hudson was talking about the financial capital takeover of industries i.e. the financialization of industries, as opposed to Marx’s predicted industrialization of finance.

This is the paper from Hudson (2021) that Mason was responding to: Finance Capitalism versus Industrial Capitalism: The Rentier Resurgence and Takeover

The very first sentence of the abstract reads:

Marx and many of his less radical contemporary reformers saw the historical role of industrial capitalism as being to clear away the legacy of feudalism—the landlords, bankers, and monopolists extracting economic rent without producing real value. However, that reform movement failed.

Mason argued that Amazon, Walmart etc. are still “industries” and as such should be counted as industrial capital. But this is not what Hudson was talking about - Hudson meant the financialization of these industries leading to monopolists extracting economic rent (for example, the high inflation from 2022 was in part caused by monopolists raising prices, claiming an anticipation in energy cost increase).

A prime example is Boeing. Is Boeing an industry? Of course, it is still the world’s leading aviation manufacturer, but the top management has since been taken over by Wall Street bankers, whose direction focuses on stock market performance, share buybacks and handing out dividends to shareholders. This management style that incessantly pursues quarterly profit inevitably leads to reckless cost-cutting and mass layoffs to pay off their shareholders. The 737 MAX scandal - which almost never occurred in Boeing’s history - was a direct consequence of such financialization process.

Another example was Intel’s mass layoff in 2022 even when receiving billions of handout from the CHIPS Act:

Indeed, when Vermont senator Bernie Sanders attempted to attach conditions to those subsidies — including a ban on stock buybacks, a cap on executive pay, a government equity stake, and union neutrality provisions — he was thwarted by Democratic leaders.

At the time, Democrats blocking Sanders’s initiative were bolstered by Intel CEO Pat Gelsinger, who insisted that if the legislation did not pass immediately, the company could move factories overseas and hold up already-planned investments.

When lawmakers ultimately passed the bill in July, Intel abruptly began changing its rhetoric about new domestic investments: That very same day, the company announced it was cutting back on capital spending by billions of dollars, but still intended to issue a “strong and growing dividend” for shareholders.

Mason critique missed the fact that the vast majority of American industries has been financialized to such an extent that nearly 90% of corporate income is spent on share buybacks rather than investing in capital expenditure (means of production). The financial capitalists don’t care - like parasites, once the host has been sucked dry, they will simply hop on to the next industry to feed from.

My hot takes follow.

Mason first talks about how public investments to decrease reproduction costs is not without contradiction, like trying to decrease labor costs directly as well. This is not at odds with Hudson et al whatsoever, it's a long-recognized contradiction in the development of industrial capitalism. Universal school accompanied industrialization at the same time that companies lobbied to decrease their own taxes to fund those schools. But nevertheless, the point is that the creation of that infrastructure won out despite the contradictions, and so did transportation, electrification, etc. This repeated itself in many contexts and with very different political movements in charge, with the main commonality being industrialization.

So, this is simply not a critique of the subject matter. It's as if someone read the cover and the Wikipedia summary and then decided they had an opinion to share with the world.

The next critiques are about saying cases where industrial capital is given credit for creating public investments had financialized characteristics as well, like land speculation. Again we have to revisit the idea of contradiction, because nobody is saying pure industrial capitalism existed separate from finance. The question is who is in the driver's seat. Buying land and building transit to it under the expectation of factories and houses being built along it is purely financial. But what would come of that investment if there wasn't industrial capital to pay the rents? Why does industrial capital want to build on transit in the first place - and why are the land speculators confident they'll build there? And why doesn't finance capital do this anymore?

Mason kind of gives Hudson et al some credit here, but also the main point is fairly unclear and is mostly left at the implication that if you can point to finance being historically important that means you've contradicted Hudson et al. The case is made poorly and the logic is unsound.

Mason then tries to make the case that the rise of finance is actually oscillatory, as if this contradicts Hudson et al. This... just doesn't do that? Mason conspicuously cites nothing to support the implication that the thesis of domination by finance is that it was a smooth global transition. Mason ends the paragraph by alluding to imperialism without using the word, lol.

Then we finally get to the strangest sections, though they do still follow a pattern that feels like straw manning, or maybe just non-sequiturs presented as if they have relevance. Some examples.

There is a widespread view that gains from ownership of financial assets have displaced profits from production even for many nonfinancial corporation [...]

An important aspect here is to distinguish between bulk means of income reported on balance sheets and control over enterprise. One of Hudson's main criticisms is that the rentier economy makes an appearance alongside commodities. It includes insurance, for example. The health insurance industry is a good example of this. It rakes in huge profits from debt and financial assets, sure. But it also rakes in huge amounta of money through monopolization and a manipulation of the availability and application of the commodities themselves, such as whether you get a treatment and how much it costs. Medical billing is a fight between commodity producers (hospitals) and the rentiers (insurance) and it changes how the entire commodity process functions. It's not just skimming off the top of an existing industrial capital (service) industry, it makes the industry itself massively more expensive. In short, the money made through direct finance is very large, but it's even larger than Mason is talking about, as Mason is crediting all profits made by, e.g., hospital services, to industrial capital.

But we can easily just do some basic comparisons. Other countries consume just as much or more healthcare services without forcing so much medical debt (and worse outcome) on their populations. An initial estimate of the impact should begin by attributing all of the excess healthcare expenses taken on by Americans, for example, to financialization.

Mason then repeats logic like this a few times. At one point they talk about most household debt being a mortgage, contrasting this with debt-funded consumption. I'm sure this floats in a lot of contexts in economics, but it is an absurd dichotomy in this scenario. Owning a place to live is also an act of consumption, you do actually need to live somewhere, and if you weren't paying a mortgage you'd be renting. It has a dual character due to the financialization of housing, but this is exactly the thing being criticized by folks like Hudson! Transformation of housing from even being a commodity to being a financial asset has driven the costs of housing up massively, so everyone attempting to have housing security is massively overpaying. They are forced to buy a financialized asset rather than mere commodified housing. To do so, they take on huge debts that they pay off for basically the rest of their lives.

This line really takes the cake: "Contrary to Hudson’s picture of an ever-rising share of income going to debt service, interest payments in the United States now total about 17 percent of GDP, the same as in 1975."

Imagine comparing debt servicing to GDP when criticizing Hudson's view, lol. The basic thesis Mason is trying to criticize holds that large amounts of GDP are unproductive and represent ballooning debt. If the economy has "grown" through unproductive sectors and debt servicing stays at the same rate, this means that the volume of debt service has significantly increased. Denominator went up through financial fictions, quotient stayed the same, so numerator also increased.

Also... why isn't the denominator household income adjusted for inflation (etc)? What a switcheroo!

Mason then lists 3 billionaires and says they got rich because they own specific companies not general financial assets. First, this cannot be taken seriously as an economic analysis trying to follow up listing even basic statistics. But even if we take this example, all 3 of them are tech monopolists that use monopoly power to leverage rents from their consumers. Zuckerberg through the monopoly of network effects and buying up competitors, ensuring that they are the only ones who can be paid for certain kinds of advertising (and charging absurd prices). Bill Gates, famous for the FUD strategy and eliminating the competition via "anticompetitive" (i.e. monopoly) tactics. Jeff Bezos, whose company is entirely debt-leveraged in order to create and maintain a monopoly on online ordering. Monopolies are also a feature of industrial capitalism, so you might not think I'm making a great counterpoint, buy I think it's important to recognize that all of these companies are heavily financialized and tend to focus their work more on maintaining their monopolies than actually creating valuable products, and are thus extracting rent. This happens to such a great extent that tech startups rarely even plan to compete for a significant amount of time - they are intentionally designed to get bought up by one of the monopolies. Often, the productive thing those startups made is then shuttered - the real goal was to prevent competition. Thus, the monopolies reverted the productive cycle in order to continue extracting rent.

Mason finally ends with a really awkward transition to claiming that Hudson et al's hypothesis has problems for advocacy, makes it so that those on the left decide to make alliances with industrial capital in order to fight finance. This is a simplistic narrative and I think it's Mason projecting their own reaction to the analysis than what anyone has advocated for. Hudson actually does basically nothing in terms of advocacy outside of getting Westerners to hate China or Russia a bit less by pointing out how what they're doing is economics that assists the public more than what the imperial core does. This makes me wonder what it is that Mason wants to advocate for that they perceive is stymied by Hudson's argument.

I can't really comment on the historical notes there about the dynamics of financial and industrial capital, but I definitely agree with you that none of those digital monopolies he cited could be classified mainly as industrial capital. Except maybe Wallmart, which is not digital (AFAIK), but is still mostly just a consumer-facing monopsony.

A few (possibly wrong) ideas here, but I believe that the existence of software has created the perfect conditions for rent-seeking, since software is incredibly cheap to reproduce and distribute, but can't effect change in the material world without expensive hardware or humans. Because of that, a corporation can consolidate a Doctorow's Chokepoint in a new market at light-speed, but the actual productive (and expensive) work-force mostly exists outside their employ.

And since the average worker doesn't have enough money for that much rent, the corporations make the most of it cannibalising smaller companies, with shit like Windows licenses for companies, paying to have your posts be read by your followers on Metabook, Google taking a massive cut on apps payments, or stores on Amazon having to pay to have their products appear when searched.

I'm not sure why Hudson, Doctorow and Varoufakis keep calling this "feudalism" but I don't think they're fully wrong in drawing a distinction between those two sections of the bourgeoisie, even if it can't be exploited for revolution.

because they started businesses that do stuff

Well that is fundamentally wrong on its face. The people that own the highest valued companies didn't make shit. They bought or inherited it. (Obvious example being Elon Musk).

As for criticizing rentiers without any broader examination of the system the produces and enables rentiers is just trying to reapply Adam Smith to modern economics.

I'm not very smart but this all sounds very stupid.

Adding to my last comment, the rentier economy we live in right now is a product of markets being monopolized by a handful of cartels.

My idea is that the products the different industries offer have reached the "diminishing returns" stage. This means that in order to make an improvement to a commodity, you have to exponentially invest in development. Industries have to invest more in development, for a smaller quantitative improvement. Think of moore's law in computing power, you can't keep doubling the computing power by just putting more transistors, we inevitably reach a physical limit. This is a building up on the falling rate of profit theory developed by Marx and the classical economist.

So in order to deal with this dialectic problem, industries have to either change paradigm and innovate, completely revolutionizing current processes of production (destructive creativity concept), or milk their cows, aka charge more for the same/less (bad and lazy and the reality we live in).

Before monopolies, industries couldnt just charge more for less because other ones would take over so you did see a golden age of innovation/entrepeneurship, but now that the markets have been inevitably conquered it is not happening. So in order to further progress society we have to unfetter the productive forces from the hands of the finance capitalists.

Edit: ill try writing a blog entry on this subject to improve it, criticism is welcome

I feel like Hudson work here is just a simplificaton of Lenin's book "Imperialism, highest stage of capitalism". To butcher some of it, finance capitalism took over when banks turned big enough (monopolies), they had access to the entire money capital of all the industrial capitalists.

I will write my full thoughs later.

Hudson and the rest of the https://nakedcapitalism.com/ https://wallstreetonparade.com/ Liz Warren book club are good at being finance and covid whistleblowers and reporting on JPMorgan's Epstein dealings. Ha Joon Chang & Stephanie Kelton type books are great at defusing the ideological bomb that is neoliberalism.

As far as actual solutions for what to do with their analysis, I don't think they see that as their job. I remember Hudson writing some UBI type thing ten years ago. They just whistleblow-blog.

What exactly does Roderic do? His website? His thinly veiled alts? I got him as a reply guy and honestly his gang is the worst. They couldn't even deal with me pointing out the internal superexploitation of parts of the working class in the imperial core without throwing a tantrum on alts. But they just make puppy dog eyes at you if you're over 10k. Mindless bastards

My most sincere recommendation is you take your thoughts directly to Roderic Day. I think the reaction will explain a lot.