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 the challenges of rapid technological change and evolving world order. Instead of productive flexibilities (à la emerging Asia), they delivered a 'neo-liberal trap' with its Ricardian growth-retarding rentier trilogy: a 'market inequality-augmenting, investment-weakening, and productivity growth-retarding' scenario. What these reforms actually did was to turn 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 create market opportunities, but not the necessary 'compulsions' to be taken up. Following Geoff Harcourt's lead, I analyse this 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 redirecting 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.