[How about this book] Wealth begets wealth... Unearned income breeds inequality

People Earning Money Without Production
Using Only Existing Assets Like Land
Capitalism Financialization Worsened Since 1970s Economic Globalization

Criticism Over Wealthy's Overconsumption, Resource Waste,
and Climate Change Impact

A person who ‘extracts’ wealth and services without creating them. The renowned British sociologist Andrew Sayer defines the rich in this way in his book The Rich and the Rentier Era. In other words, it can be understood as someone who enjoys the benefits of production without participating in productive activities. The rich obtain money without producing by controlling existing assets such as land, buildings, and (production) facilities. This can be seen as a narrow view of the rich. However, Sayer points out that modern capitalism has increasingly been structured to allow the rich to enjoy more of this unearned income. This is also why the original title of the book is Why We Can’t Afford the Rich. Sayer argues that structurally, it has become easier for the rich to extract wealth, and as a result, the most significant problem of modern capitalism?extreme inequality?is worsening. Above all, he emphasizes that the most serious issue is that climate change caused by the excessive consumption of the rich, who have accumulated wealth through extraction, threatens human survival.

From Sayer’s perspective, income is divided into two types: earned income and unearned income. Earned income is income obtained through the production of goods and services, while unearned income refers to income gained by owning sources of production such as land, buildings, and facilities. Historically, a representative form of unearned income has been ‘rent’ (地代), the payment for the use of land. Adam Smith, the ‘father of economics,’ also argued that policymakers should do their best to eliminate rent.

Sayer claims that today, the ways to increase wealth through rent are expanding. He points out that patents are the modern form of rent. He cites examples such as Microsoft (MS) Windows operating system (OS) and Wi-Fi technology. The practice of charging royalties using patents as a weapon is no different from the traditional method of controlling scarce resources to impose rent. Of course, compensation for technological development must be guaranteed. Developers need to be confident that they can recover the costs of development to have motivation for innovation. But what if those holding patents and copyrights charge users fees far exceeding development costs? What if pharmaceutical companies set exorbitant prices after developing highly effective new drugs for certain diseases? Excessive royalties limit the spread of benefits from innovation and diminish the meaning of innovation itself. In fact, as Microsoft founder Bill Gates has remained among the world’s richest for decades, many of today’s wealthy have increased their wealth through rent-seeking methods using patents.

Joseph Stiglitz, a Columbia University professor who won the Nobel Prize in Economics in 2001 and served as the chief economist of the World Bank (WB), agrees with this view. In his 2012 book The Price of Inequality, Stiglitz argued that “a significant portion of the returns earned by the rich is the result of increased rent-seeking.”

Sayer explains that over the past decades, as the scope of intellectual property rights (IP) has expanded to include seeds, software, management methods, and financial products, the sources of rent extraction have also broadened. Conflicts surrounding IP have increased, which has contributed to the growth of the legal market. On the other hand, Sayer points out that IP can hinder the competition of ideas essential for the development of knowledge and culture.

As unearned income through rent-seeking has increased, inequality has deepened. Examining the real income of U.S. households from 1979 to 2012, the real income of the first quintile (bottom 20%) and second quintile (20?40%) decreased by 12% and 0.1%, respectively. In contrast, the real income of the fifth quintile (top 20%) increased by 74.9%.

Sayer also notes that before the 1970s, such extreme wealth disparities as seen recently did not occur. In fact, from 1947 to 1979, the real income of the first and fifth quintiles in U.S. households increased by 121.8% and 98.6%, respectively. Sayer calls this period the ‘productivist capitalism’ era, during which wages and salaries rose with productivity improvements, allowing workers to share in the fruits of economic development. However, in the late 1960s and 1970s, as globalization progressed, the profitability of productivist capitalism began to decline. Capital flowed into finance and real estate sectors in pursuit of returns, leading to the financialization of capitalism, where the financial industry grew disproportionately. Financialized capitalism is a system that prioritizes making money from money. It is a system that strongly pursues unearned income.

In financialized capitalism, borrowing became normalized because it was a means to seek greater returns. However, debt from borrowing frequently led to financial crises. Due to the so-called ‘too big to fail’ theory, which argued that the already oversized financial industry could not be allowed to collapse, governments repeatedly injected taxpayer money to rescue banks during financial crises.

Sayer sharply criticizes, “Leverage (borrowing) was the core method by which banks privatized the gains from risk-taking using other people’s money while socializing losses by making ordinary taxpayers pay the price.”

Despite these serious problems in capitalism today, Sayer points out an even more serious issue: human survival and climate change. He emphasizes, “Climate change is the result of overconsumption.” The wealthy buy excessive amounts of clothes and order more food than they can eat, wasting resources.

Sayer shares a poignant proverb from the Indigenous peoples of America: “When the last tree is cut down, the last fish caught, and the last river polluted, only then will we realize that humans cannot live by money alone.”

The Rich and the Rentier Era | Written by Andrew Sayer | Translated by Jeon Gang-su | Yeomunchaek | 616 pages | 38,000 KRW

This content was produced with the assistance of AI translation services.