I am sitting here diving into a brand new copy of a book - Progress and Poverty - that was written 140 years ago, in 1879. And it occurred to me I should write you about it because the ideas in this book are as relevant to the 21st century as any other school of economic thought.
Forgive me for writing long comments. I do it here because I have been reading Credit Writedowns for a long time and know that if anyone understands the economic, financial, and political “center,” it’s Ed H.
One application of an expanded definition of rent is the use of the petrodollar to gain advantage over the price of labor and commodities in other countries. The use of Keynes’ original idea of the bancor as the global reserve currency would have gone a long way towards eliminating the possibility for America to use currency (and the military) as a means for creating empire.
It seems the U.S. has become service oriented due to its ability to export inflation to countries with a lower exchange rate relative to the dollar, which has become something of a positive feedback loop, in the sense that globalization begets more globalization. The period of Great Moderation depended on cheap inputs, cheap credit, and rising rent and speculation.
I would guess that one illustration of how much IP has become so important over the years is that the rent it generates is a large enough contributor to GDP that it gave TPP and TTIP such urgency and importance.
Replacing rent with productive income from the point of view of an economy deeply caught up in the positive feedback loop of globalization seemed impossible for so long. Maybe Trump’s trade wars can work to shake the system up enough to make people question why they thought things were so impossible to do.
Perhaps if we’d had the bancor, Factor Price Equilibrium would have become a race upwards towards increased living standards and increased synergies internally within countries and externally between countries. FPE has, in our rent seeking world, been a race downwards. The rust belt and angry Trump voter are testimony to this.
With Western banks looking to lend into economies like China’s, the attraction of rent and bubbles makes them want to extend the line of countries that we can take advantage of via currency differentials. I’m sure part of the concern for new vertical supply chains has this need in mind: finding new and cheaper labor and commodities that we can export inflation to.
The neoliberal status quo wants to continue to create a money supply and subsequent surplus of money ready to take advantage of speculation, which once again makes Asia a jewel in the rentier’s crown.
The need for Henry George’s idea of rent to be expanded has never been greater. If anyone can give this movement the ability to hold its own against the tidal wave of attacks the neoliberal center is sure to throw at it, it’s economists like Ed Harrison.