Understanding the Rentier Class

Barry Ritholtz was moved by reading Paul Krugman's NY Times op-ed accusing "the rentier class" of being complaisant about the Great Recession and willing to let Washington dither rather than act to solve unemployment and the foreclosure mess.

Ritholtz found this old 1993 NY Times article by John Kenneth Galbraith that explains just why the rentier class can be so heartless:

There are the many who live in recession with a wholly secure livelihood and with a lessened fear of price increases, of inflation. They are in no real danger of loss or diminution of income. Present here are the more secure parts of the modern corporate bureaucracy. Its members see their brethren being shed. (The corporate elite is never fired or sacked; in the interest of efficiency, in is only shed.) However, those who are truly influential have no fear. They, always in the interest of efficiency, are the ones who do the shedding.

Similarly secure are many in the professions, professors, needless to say, some public servants, lawyers, doctors and media stars. Also very important is the modern large rentier class. And many who live on Social Security or pensions.

For all these, recessions mean stable or even falling prices and no serious reduction of income. Relatively secure also are those Kansas farmers, constituents of Senator Bob Dole, whose prices are guaranteed by the Government, whose expenses and labor costs are now stable.

Also, in an economy where services are increasingly important, a recession means a more willing and pliant labor supply, an underclass more available for the unpleasant toil that makes life for the rest of us more agreeable. And for employers. [...]

But monetary policy works against recession by reducing interest rates and therewith rentier income. This is by no means welcomed by those who enjoy such income. They are not without political influence. Any talk of an easier monetary policy automatically brings grave and urgent warnings of the danger of inflation. This, too, is a threat to those on stable incomes.

A recession in modern times is also for many far more attractive than remedial action against it.

I remember many years ago when my brother talked about having the job going around the pulp mill telling workers that they were laid off. Nice work if you can get it! You keep your salary while telling others to "buck up, there will be a better day, just get out there on the street and look for another job". It is so easy to give this advice when you have a job. But then came the day when the big shots at the pulp mill came to my brother and gave him his notice and he was out of a job. Ouch! Suddenly what was "the other guy's problem" hit home. This went from "the economy hit a soft spot" to "oh my god! this is a recession!"

The problem with the top dogs of society, the Marie Antoinette class, is that they never get to go through the refreshing moral fibre building joys of unemployment and worrying about how to feed the family with no paycheque. This makes it easy for the Marie Antoinette class to dance a society right up to the edge of a precipice and over it, you know, the story where Marie loses her head because the mob got tired of asking for bread and being told they should just each cake if they can't find bread.

People like Obama, the Republicans, and the Democrats find it easy to temporize. They are the lap dogs of the rentier class. They are like Leona Helmsley (the "queen of mean") whose dog got a $12 million trust fund from Helmsley. The politicians have posh jobs, gold-plated pensions, and lots of deep-pocketed friends more than willing to hire them as "consultants". So they, as a class, make "what, me worry?" Alfred E. Newman look like a nerve-wracked, broken down neurasthenic. They are set for life. So why would they stoop to actually try to fix America's problems?