It Could Happen Here - Why Is Rent So High?

Episode Date: August 1, 2023

Mia walks through some of the history and theory of landlords as a class and rent as a concept to explain why modern rents are so high. Donate to the Burgerville Worker's Union Fund: bit.ly/burgerdefenseSee omnystudio.com/listener for privacy information.

You should probably keep your lights on for Nocturnal Tales from the Shadowbride. Join me, Danny Trejo, and step into the flames of fright. An anthology podcast of modern-day horror stories inspired by the most terrifying legends and lore of Latin America. Listen to Nocturnal on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hi, I'm Ed Zitron, host of the Better Offline podcast, and we're kicking off our second season digging into tech's elite and how they've turned Silicon Valley into a playground for billionaires. From the chaotic world of generative AI to the destruction of Google search, Better Offline is your unvarnished and at times unhinged look at the underbelly of tech

brought to you by an industry veteran with nothing to lose. Listen to Better Offline on the iHeartRadio app, Apple Podcasts, wherever else you get your podcasts from. Curious about queer sexuality, cruising, and expanding your horizons? Hit play on the sex-positive and deeply entertaining podcast, Sniffy's Cruising Confessions. Join hosts Gabe Gonzalez and Chris Patterson Rosso as they explore queer sex, cruising, relationships, and culture

in the new iHeart podcast, Sniffy's Cruising Confessions. Sniffy's Cruising Confessions will broaden minds and help you pursue your true goals. You can listen to Sniffy's Cruising Confessions, sponsored by Gilead, now on the iHeartRadio app or wherever you get your podcasts. Hi, this is Mia. So before we get to today's episode, last Friday, the rank and file of the Burgerville Workers Union, which is the country's first successful fast food union, went on strike against a campaign of disciplinings and firings of primarily trans and POC workers by the bosses, who are once again trying to crush the union.

The strike has worked so far, but they need support from the community to help pay workers and help these people feed their families so they can continue fighting the bosses' capitalism and building democracy in the workplace. You can go to bit.ly slash burgerdefense to donate to their fund. We will have a link to that in the workplace. You can go to bit.ly slash BurgerDefense to donate to their fund. We will have links to that in the description. And yeah, thank you all so much. And now on to the show. It's a solo Mia episode of It Could Happen Here, the podcast where things fall apart

and sometimes we put them back together. I'm your host, Mia Wong, and today we are going to be talking about why the rent is so high. Now, okay, there's a lot of sort of ways that you could, in theory, approach this question. And I decided that I think one of the most useful approaches to it is you take a sort of a more a more sort of historical and theoretical approach. And I think the start of any kind of sort of theoretical approach to rent is by asking what rent actually is. And the answer to this, and this is something that is that is relatively consistent across most of sort of classical political economy and and you see this in some of sort of neoclassical economics is that the thing that's special about rent is that rent unlike you know anything else is money that you get because you own something not because you you know have produced anything and this means that know, the landlord does not produce anything of value at all.

All they do is extract value from other sectors of the economy. Now, this has a wide, wide variety of sort of political and social effects. Marx saw the landowning class as an obstacle to the development of capitalism and this is an idea the idea that again landowners specifically as a class that is different from the sort of capitalist class or the working class hinders the growth of capitalism is an idea that a lot of different people across the basically the entirety of the political spectrum have shared at various times. And this causes some very, very strange alliances, particularly in places like Latin America, where you still have economies that are, you know, not entirely based, but economies that have enormous landowners who drive sort of vast

portions of both the economy and of the sort of political process. And in Latin America, and this is true in a lot of other places, it was not uncommon for you to get what's known as developmentalism, which is an ideology based on using essentially protectionist measures, things like tariffs, sometimes capital controls, restrictions on kinds of investment that foreign companies can do. Sometimes, I mean, just straight up the nationalization of natural resources in order to develop an industrial economy. the nationalization of natural resources in order to develop an industrial economy. Now, developmentalism, as are most sort of alliances against the landed elite, are politically messy. It draws on a range of ideologies from, you know, like pretty right-wing nationalists, some very, very, very scary people are technically developmentalists, to liberal and also centrist factions whose sort of productive and social base is in a specific kind of sort of domestic capitalist

who's interested in sort of producing stuff locally, and also to people like Bolivia's Evo Morales, who is, you know, broadly considered a socialist, although I think his commitment to anything like socialist politics is tenuous at best. socialist, although I think his commitment to anything like socialist politics is tenuous at best. But all of these sort of political groups can and do and have at various times worked together. This is actually one of the bases of Morales' – well, I guess it's not really Morales' party anymore, but even Morales' MAS, which was a very sort of explicit alliance between sort of left-wing social movements and then more sort of moderate centrist factions who were effectively developmentalist. This is sort of a representation of a very common kind of developmentalist politics, which is, again, this alliance between sort of left and capitalist factions who ally against large landowners on the basis that feudalism,

which is usually the way that the power of large landowners is conceived, is an enemy to both of them. Now, this isn't how states that use developmentalist strategies have to work. Germany, for example, uses a lot of developmentalist techniques to industrialize in the late 1800s. But the old landowner class, the old sort of like German aristocracy is allied with the capitalists in Germany. And the two, you know, the two classes, the sort of German aristocracy and the capitalist

class effectively merge. On the other hand, landowning classes are often implacably hostile to industrialization. And countries that essentially annihilated the landowning classes by carrying out land reform tend to perform better economically than their counterparts who left their landowning class intact, which contributed to the enormous success of the economies of countries like China, Japan, Taiwan, and Vietnam, who, despite their enormous sort of ideological and political differences, all carried out land reform in the 20th century were rewarded with eventually like very very powerful and large-scale industrial economies but you know you might be saying mia you've kind of put the cart in front of the horse here you you've talked about you know you you've gone into some of the sort of political effects of rent first but you haven't actually, you know, explained how rent actually works. And so that is what I'm going to do next. And to explain how rent works, I'm going to turn to an unusual source. The work of the great Venezuelan anthropologist Fernando Coronil.

Coronil's a fascinating character. He studied anthropology at my alma mater, the University of Chicago under Terence Turner, a guy who I think 99% of people have never heard of before, but is probably most famous now for being also, you know, for also teaching David Graeber and being a sort of major influence on his work. Now, unlike David Graeber, while Cornel was at the University of Chicago, he tried to get permission from the Cuban government to go do fieldwork in Cuba. And, you know, so he gets to Cuba and he's like negotiating with the government and the government tells him to fuck off. So, okay, he tries to go back to the US, but Immigration and Nationalization Services, the INS, which is basically the predecessor of like Immigration Services, ICE and the Border Patrol, INS was sort of dissolved in 2003 when the sort of like i i i don't know

exactly what the technical term for it is but with the consolidation information of the department of homeland security which is really truly a thing that i think we tend to think it was only present but is actually about 20 years old and i i am older than there's also you know, this sort of outside the scope. This episode is like an enormously fascist institution that centralized an enormous amount of sort of political power in these like terrifying surveillance and police bureaucracies. But, you know, OK, so they're back, back, back, back, back to the Fernando Cornell story. So he got to go back to the U.S but ins which is predatory for all this stuff like arrest him immediately and they deport him and ban him from the u.s on the grounds that i he he was that they suspected him of being a quote subversive agent now and again i i cannot emphasize this

enough the sequence of events here is that he tries to go to Cuba and the Cuban government tells him to fuck off. And so he goes back to the US and the US government is like, oh, yeah, no, this guy who the Cuban government just refused to let to do fieldwork. This this this guy is definitely a Cuban agent. a Cuban agent. So his entire sort of like life gets derailed by this. He winds up, I think, back in Venezuela for a while. I think he, it takes like almost like 20 years for him to be able to get back to the US and finish his PhD. But, you know, when he does, and sort of in the process of this, he becomes a very, very famous and well-respected anthropologist. Now, when I was at UChic u chicago like all the people who sort of trained corneal that that whole generation and really like the whole sort of school of anthropology that he came from which is a very very interesting school that you know if you want to like read about this kind of stuff i i read david graber's uh towards an anthropological

theory of value i might do an episode on it at some point later but all of that stuff is gone but but i ran into a professor who knew him back in the day and he told us that cordial was you know on the one hand very respected academic like very sort of like upstanding like member of the academic community also incredibly popular as like a partier who just get absolutely wasted and start dancing on tables this guy absolutely rips um you know and i think a very few people outside of anthropology have ever heard of him but in anthropology corneal is important enough to like if you write about the state you at least have to like mention him and you know that doesn't necessarily mean that like most of the people who say the words the magical state which is the name of his sort of famous book, actually have read it.

But I did read this book. I've read this book multiple times. And it's really, really interesting. Now, The Magical State, Nature, Money, and Modernity in Venezuela is probably most famous as a history of the Venezuelan state. But that doesn't mean that it's sort of exclusively about that history. And in fact, you know, it really can't be. In order to think about the Venezuelan state, you have to think about oil. But you also can't think about oil in the way that most histories of oil think about it,

which is a story about sort of like high geopolitics, right? If you look at the histories of oil, right? It's about like high geopolitics and like prospecting and like tracking oil prices over time. And, you know, the sort of most famous book in this genre is Daniel Yergin's The Prize, which is a fine book, but it shares in this sort of tendency to kind of – unless they're writing about like a guy going prospecting, right? There's this tendency to sort of ignore the sort of material characteristics of oil and the sort of political effects of the extraction process and a lot of other aspects of oil that are very, very important. And what Corineo realizes is that oil is intricately tied to sort of the political conception of nature, to systems of land ownership, and also to Venezuelan statecraft. Now, this may seem a bit far afield, but in order to understand oil, you have to think about rent and rent extraction.

And that's what Cornel does in ways that are both sort of profoundly interesting, and I think in a lot of ways profoundly ahead of his time. Welcome, I'm Danny Thrill. Won't you join me at the fire and dare enter? Nocturnum, Tales from the Shadows, presented by iHeart and Sonora. An anthology of modern-day horror stories inspired by the legends of Latin America. From ghastly encounters with shapeshifters. inspired by the legends of Latin America. From ghastly encounters with shapeshifters to bone-chilling brushes with supernatural creatures. I know you.

Take a trip and experience the horrors that have haunted Latin America since the beginning of time. The horrors that have haunted Latin America since the beginning of time. Listen to Nocturnal Tales from the Shadows as part of my Cultura podcast network, available on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hi, I'm Ed Zitron, host of the Better Offline podcast, and we're kicking off our second season digging into how tech's elite has turned Silicon Valley into a playground for

billionaires. From the chaotic world of generative AI to the destruction of Google search, Better Offline is your unvarnished and at times unhinged look at the underbelly of tech from an industry veteran with nothing to lose. This season, I'm going to be joined by everyone from Nobel winning economists to leading journalists in the field and I'll be digging into why the products you love keep getting worse and naming and shaming those responsible. Don't get me wrong though, I love technology. I just hate the people in charge and want them to get back to building things that actually do things to help real people. I swear to god things can change if we're loud enough. So join me every week to understand what's happening in the tech industry

and what could be done to make things better. Listen to Better Offline on the iHeartRadio app, Apple Podcasts, wherever else you get your podcasts. Check out betteroffline.com. On Thanksgiving Day, 1999, a five-year-old boy floated alone in the ocean. He had lost his mother trying to reach Florida from Cuba. He looked like a little angel. I mean, he looked so fresh.

And his name, Elian Gonzalez, will make headlines everywhere. Elian Gonzalez. Elian, Elian. Elian Gonzalez. Elian, Elian. Elian Gonzalez. At the heart of the story is a young boy and the question of who he belongs with. His father in Cuba.

Mr. Gonzalez wanted to go home and he wanted to take his son with him. Or his relatives in Miami. Imagine that your mother died trying to get you to freedom. At the heart of it all is still this painful family separation. Something that as a Cuban, I know all too well. Listen to Chess Peace, the Elian Gonzalez story, as part of the My Cultura podcast network, available on the iHeartRadio app, Apple Podcasts,

or wherever you get your podcasts. Or wherever you get your podcasts. It goes through what you could, I guess, call the economic history of concessions of rent, right? Starting with the classical economists. We're not that interested in the classical economists because, quite frankly, if you're – I don't know. If you're running into a neo-Ricardian analysis of what rent is, like, I don't know. You're already a specialist. Like, stuff is happening for you that is quite interesting, quite odd. But we're mostly going to ignore them because the original classical economist's work has – it's largely not the way people think about this now. And to the extent that people sort of claim to be derivatives of like these people, like people claiming the lineage of Adam smith like that's kind of sketchy instead we're going to turn to corneal's analysis of the way that neoclassical economics thinks about rent

now corneal someone who has spent a lot of time in the sort of literature of like oil pricing and sort of theories of sort of price formation and the state of the markets or the effect of political actors on it etc etc etc and he argues that there's basically two ways of thinking about rent in terms of a commodity like oil there is a macroeconomics view in which the rent someone who owns oil extracts when people have to buy it from them you know okay so like like if you're a landowner right you get rent because you own the thing and then people have to like take it like people need it you have it so you get to extract rent from it just by virtue of sort of having it um in in in the microeconomics view

when someone like pays the rent right what that, is they're paying for what's called natural capital or capital that's, you know, provided by nature that someone now owns to like the miracle of private property. And so for these people, rent isn't something that's extracted at all, right? It's just someone getting paid for their capital because the way that they think about, you know, about something like oil is that they think oil is just sort of natural capital now okay it's like this is this is in some sense you know it's like okay what like who cares about this this is a kind of like this this seems very obvious but there's also a macroeconomics perspective which is very different and the macroeconomics

perspective holds that you know rent isn't a payment for capital at all. It's something paid to landowners by capitalists. And the rent that these landowners get is basically the difference between what it costs you to get the oil out of the, you sort of the landowner to get the oil out of the ground, and what it costs the person who has the highest price of production to get the oil out of the ground. Now, OK, for reasons that are very complicated that I can't get into here. Basically, the person who is like the worst at getting oil out of the ground is the person who sets what the price of oil is. So, you know, the sort of like highest possible extraction price tends to be the price and then you know the the the micro the the sort of macroeconomic analysis of of what rent is right is that it's a thing that capitalists pay to landowners you own natural resources and the

amount of money they get is based on how much cheaper it is for like that you know that landlord to get their oil out of the ground than it is for like the landlord who's like the worst at this. And this is a real question, right? The question is, is someone who's getting rent paid to them, is that rent payment for capital that they own? Or is it money from capitalists that capitalists have to pay to a non-capitalist class? And Corneal's answer is like well obviously rent is extracted from surplus value because landowners don't produce value but there's two different sort of places that they can get this value from and this is where we have to get into something that's kind of weird and that is the two different kinds of rents. But, okay, before we get into the two kinds of different rents,

do you know what else there's two different kinds of? Yeah, that's right. It is the products and services that support this show. Welcome. I'm Danny Thrill. Won't you join me at the fire and dare enter? Nocturnum, Tales from the Shadows, presented by iHeart and Sonora. An anthology of modern day horror stories inspired by the legends of Latin America.

From ghastly encounters with shapeshifters, From ghastly encounters with shapeshifters to bone-chilling brushes with supernatural creatures. I know you. Take a trip and experience the horrors that have haunted Latin America since the beginning of time. Listen to Nocturnal tales from the shadows as part of my cultura podcast network available on the iheart radio app apple podcast or wherever you get your podcast hi i'm ed zitron host of the better offline podcast and we're kicking off our second season digging into how tex elite has turned Silicon Valley into a playground for billionaires. From the chaotic world of generative AI to the destruction of Google search, Better Offline is your unvarnished

and at times unhinged look at the underbelly of tech from an industry veteran with nothing to lose. This season, I'm going to be joined by everyone from Nobel winning economists to leading journalists in the field, and I'll be digging into why the products you love keep getting worse, and naming and shaming those responsible. Don't get me wrong, though. I love technology. I just hate the people in charge and want them to get back to building things that actually do things to help real people. I swear to God things can change if we're loud enough, so join me every week to understand what's happening in the tech industry and what could be done to make things better. Listen to Better Offline on the iHeartRadio app, Apple Podcasts, wherever else you get your podcasts. Check out betteroffline.com.

On Thanksgiving Day, 1999, a five-year-old boy floated alone in the ocean. He had lost his mother trying to reach Florida from Cuba. He looked like a little angel. I mean, he looked so fresh. And his name, Elian Gonzalez, will make headlines everywhere. Elian Gonzalez. Elian Gonzalez. Elian. Elian. Elian Gonzalez.

At the heart of the story is a young boy and the question of who he belongs with. His father in Cuba. Mr. Gonzales wanted to go home and he wanted to take his son with him. Or his relatives in Miami. Imagine that your mother died trying to get you to freedom. At the heart of it all is still this painful family separation. Something that as a Cuban, I know all too well. Listen to Chess Peace, the Elian Gonzalez story

as part of the My Cultura podcast network available on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. And we're back. I hope you have enjoyed both of the different kinds of products and services that support the show. And, okay, I promised you two kinds of rent, and I'm now going to give you two kinds of rent. So the two kinds of rent, there is something called differential rent. And differential rent is kind of close to

the sort of macroeconomic perspective we talked about earlier. So differential rent is rent that's set by the price of production on the market, right? Now, as we sort of mentioned, prices tend towards the highest price of production. It's set by the people who are worst at producing it. And differential rent is the rent that the rest of the market gets by costing it by you know by it costing less for them to extract oil than it does you know for for someone who's like the worst at extracting oil i corneal explains this in terms of uh for a long time the u.s was sort of the price leader of oil and it was the price leader of oil because the american like property rights system is so

absolutely bonkers that it makes it really really hard you have to like you have to like individually negotiate with like every person who owns a cow pasture in nebraska in order to sort of like extract oil from them and this this makes the production process like very expensive and so everyone else in the world is getting this differential rent because they have like a less completely like wild system of property. So the product of this is everyone else is getting differential rent because it's way cheaper for them to produce oil than it is for the US to produce oil. So differential rent is a product of your efficiency, right? It's how it's in the amount of money that's based on sort of the price of oil it's based on how much better you know because you're still selling the oil at

like the same price right but the amount that you get you know the amount of rent that you get is is the difference between how much it costs you to get this oil out of the ground and how much it costs like some the some sort of american dipshit who has to spend all this time negotiating with like 30,000 individual landowners in the US to do it. So that's differential rent. But there's also something called absolute rent. Now, absolute rent is very, very, very different from differential rent because absolute rent is not really determined by sort of production prices or like the market or supply and demand at all absolute rent is determined by the social power of the landowner and this has really interesting effects right because again absolute rent isn't based on

the production process and is instead based on you know the social it's it's a social product of power land and this you know this this means that landlords and rent extractors can do something that capitalists aren't supposed to be able to do they can get profits that are larger than the general rate of profit and they could do it just by virtue of being powerful and owning land and this has a bunch of very very very weird knock-on effects, right? If you've ever seen landlords talk about rent, right? You've seen the consequences of this. These people genuinely believe that they have a sort of moral right to returns with no risk

all of the time, and that all of society should be structured in such a way as to guarantee that they have this free income that they do fucking nothing to do other than own buildings. And it should be guaranteed. You know, it should be structured to guarantee this by forcing tenants to pay rent literally no matter what is happening. You know, like regardless of shit like, I don't know, a pandemic. Now, the other sort of important difference is that is the absolute rent does not obey the laws of supply and demand. It is a product of social power. It's the power of land ownership itself, and it's also sort of the power – the social power is not just purely the product of land ownership. of the landowning class and the extent to which they're backed by the state and you know sort of militaries and it's polices and this causes economists who are attempting to use supply and demand to explain rent to get very very important events very wrong one of the things

that corneal points out is that morris edelman who a very, very famous oil economist, predicts in 1972 that the price of oil is going to collapse based on oversupply and competition. Instead, the price of oil between 1973 and 1974 increases by 400 percent because oil producers banded together to exercise their power. And this organization, known as OPEC, becomes a genuine world power. Here's how Corineo puts it. The sharp increase of 1973 and 1974 in oil prices did not result from a world shortage of oil. It was, rather, the outcome of a long historical process by which OPEC nations, acting as landowners, developed the means to extract a rent on the basis of their ownership of the oil fields, an absolute rent, in addition to the differential rents they had collected in the past.

In 1973, a set of converging political and economic conditions helped establish their collective ability to restrict the world supply of oil. With this power, OPEC felt entitled to set market prices of oil, thus freeing the level of rent from the previous constraint of the market price. Now, rent itself, absolute and differential, would come to determine the market price of oil. Now, you may be asking yourself, Mia, this is all well and good for describing how the price of oil changes, but what does this have to do with me? And the answer is that while Coronil is specifically focused on resource rents for obvious reasons, he is doing a study of the state of Venezuela, you can apply this analysis to the kind of rent that we all pay. If you follow Corineo's conclusions about absolute rent through to the American rental market,

it produces startlingly different conclusions about the source and nature of the so-called housing crisis that are traditionally presented. If rent levels are a product of the social power of the landlord class, then behavior that's otherwise inexplicable, like landlords sitting on empty properties instead of renting them out at lower rates, suddenly become clear. legal evictions, landlords can extract both differential and absolute rent, allowing them to tell the market to take a hike and setting ever-increasing rents that renters have no choice but to pay or be swept aside in brutal anti-homeless raids. This has massive consequences on any potential strategy to reduce rent. OPEC, remember, was able to use its social power to increase the price of oil by 400% even in a period when the actual supply of oil was enormous, by pure virtue of organization and the power of their land ownership. While American landlords are certainly weaker and less organized than OPEC,

their social power is still such that increasing supply is not guaranteed to drive down prices because in a situation governed by the extraction of absolute rent, rent is not determined by prices, prices are determined by rent. On the other hand, this means that you can reduce rent by breaking the social power of the landlord. And indeed, even in very hot housing markets like Toronto and Los Angeles, this strategy can and has worked. Tenants unions, which deploy the power of collective bargaining and the social solidarity of renters to combat the power of

landlords, have succeeded in reducing rents and can and will continue to do so. But these efforts are only the beginning of a process that finally answers the question, why are rents so high? If rents are high because of the social power of landlords, the way to bring rents down is to crush the bastards completely and expropriate them, to seize every last building and plot of land from every landlord in the country, and drive them as a class from the political mainstream into the pages of history. And then, and this is crucial, not to replace them with another landowning class or, as the Leninists proposed that it actually did, replace them with the state. Only by destroying the category of landlord, not by regulating it or nationalizing it, can we finally escape the long nightmare of rent and enter a

world where people's ability to live is determined not by the sort of capricious and arbitrary will of a small class of landowners, but on their human need for housing. will of a small class of landowners, but on their human need for housing. This has been It Could Happen Here. You can find us in the usual places. And yes, go into the world and make the world without rent a reality. It Could Happen Here is a production of Cool Zone Media. For more podcasts from Cool Zone Media, visit our website, coolzonemedia.com,

or check us out on the iHeartRadio app, Apple Podcasts, or wherever you listen to podcasts. You can find sources for It Could Happen Here updated monthly at coolzonemedia.com slash sources. Thanks for listening. You should probably keep your lights on for Nocturno, Tales from the Shadow. Join me, Danny Trails, and step into the flames of fright. An anthology podcast of modern day horror stories inspired by the most terrifying legends and lore of Latin America. Listen to Nocturno on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hi, I'm Ed Zitron, host of the Better Offline podcast, and we're kicking off our second season digging into tech's elite and how they've turned Silicon Valley into a

playground for billionaires. From the chaotic world of generative AI to the destruction of Google search, Better Offline is your unvarnished and at times unhinged look at the underbelly of tech brought to you by an industry veteran with nothing to lose. Listen to Better Offline on the iHeartRadio app, Apple Podcasts, wherever else you get your podcasts from. Curious about queer sexuality, cruising, and expanding your horizons? Hit play on the sex-positive and deeply entertaining podcast, Sniffy's Cruising Confessions.

Join hosts Gabe Gonzalez and Chris Patterson Rosso as they explore queer sex, cruising, relationships, and culture in the new iHeart podcast, Sniffy's Cruising Confessions. Sniffy's Cruising Confessions will broaden minds and help you pursue your true goals. You can listen to Sniffy's Cruising Confessions, sponsored by Gilead, now on the iHeartRadio app or wherever you get your podcasts.

New episodes every Thursday.