Ricardo was right: unless one can enforce 'productive' behaviour from rentiers, sustainable Growth is not an option -while emerging Asia succeeded, the West and Latin America failed, caught in their 'neo-liberal trap'. A tribute to Geoff Harcourt.

Abstract

The 1980s neo-liberal reforms led the West -both developed and Latin America- to capitulate to rentiers at the worst possible time given rapid technological change and evolving world order. Instead of productive flexibilities, they delivered the rigidities of a 'neo-liberal trap', with its growth-retarding trilogy: a 'market inequality-augmenting, investment-weakening, and productivity growth-retarding' scenario. These reforms turned loose the 'uncreative-destructiveness' of a rentier-based accumulation by indiscriminately strengthening rentiers' property-rights, which allowed them to build an economy and a political settlement -even an ideology- in their own image. In such distorted markets, technological change and international trade could only create market opportunities, but not the necessary 'compulsions' so that they are taken up. Following Geoff Harcourt's lead, I analyse this self-destructive rentier-drive returning to 'classical economics'; in my case, to a broad Ricardian perspective on rents and rentiers. Emerging Asia, meanwhile, was able to take these opportunities by being able to redirect rentiers' income towards socially desirable investment strategies -aimed at 'demand adapt' and 'supply upgrade' their productive strategies. Bretton Woods was a guide. But in the West, as rentiers gained the upper hand, the resulting process of 'rentierisation' -of which financialisation is just one, although leading, aspect- is now proving as toxic for inequality, investment and productivity-growth as it is for our democracy.