By Michael Hudson and Sharmini Peries
Posted December 22, 2016.
When Adam Smith and John Stuart Mill and even Marx wrote about free markets, they meant a market free from the idle rich. These were primarily the idle landlords who collected land rent on a hereditary basis without working. Also, financers and the bankers, who had long insisted that governments create monopolies to give them in lieu of debt repayment.
The whole idea of industrial capitalism was to get free from these unnecessary costs. An economy doesn’t need a landlord class to collect rent. It doesn’t need monopoly rent. But around the late 19th century the landlords fought back and they claimed there was no such thing as unearned income. They claimed that rentiers were productive, not parasitic.
The essence of classical economics was to say there’s a difference between value and price. Value is what it really costs to produce goods and services. This cost can be expressed in terms of what it costs to hire labor at a living wage. Everything that’s not a real cost is just a privilege, a legal right to put up a toll booth and extract rent. More…