XR, however, concentrate upon another form of capture. That is the exploitation of the natural resources of the planet to make what is called profit, but which is actually rent.
Most of us are familiar with the idea of rent as a periodic payment to someone who owns an asset, such as a house or building, for its use. This, though, is a very limited understanding of what rent means in economics, although it does provide an insight into the issue of concern.
If the rent referred to is of land, then that part which accrues to the land itself, rather than to its improvement by placing a building upon it, is a description of a pure surplus arising to the owner of that land which they have done nothing to earn, apart from acquiring it is property to which they can claim title. The person making payment for that land is, then, simply paying a reward for scarcity to someone who has done nothing to earn it. Of course, the land gets no share of that return. As a consequence this is an example of what is properly called economic rent.
Economic rent is a payment made for use of resource which is not necessary to incentivise its production. That rent has nothing to do with the production process as a result. It is, instead, a simple return paid because there is no other way to access the resource. The control of access is then, the basis for charging that economic rent.
And that is the basis on which so much of the economy has been organised over the last forty or so years. Resources within ever larger parts of the economy have been made scarce either by restricting ownership to small groups in society or by creating artificial barriers around patents come with copyrights and trademarks, many of which have been located in tax havens. The resulting surpluses have been called profit, but they have actually been economic rent charged to most in society, which is why the labour share of the economy has fallen and most people feel worse off
Simultaneously, labour has had its return reduced by increasing its availability, and by reducing its power to organise. The aim has been to reduce its scarcity.
So, one the basis of this analysis what should XR be saying?
I suggest that the message should not be that it is opposed to capitalism per se. What it should be is that XR opposed to a form of capitalism that is built on the basis of the exploitation of natural resources for the benefit of a few at cost to the many in society who are at risk as a consequence. And what it wants is that this exploitation be brought to account.
Patents aren’t natural resources. The construction of patents is – sure, it might be overdone – a deliberate attempt to create rents so as to increase the investment in technological advance.
Natural resource rents are also rents. But they’re different from those deliberately constructed patent ones. One way they’re different is that this neoliberal age of the past few decades has gone all out to tax to hell and back those natural resource rents. When the oil started flowing the UK insisted upon up front payments, royalties, higher tax rates on the resultant profits and more. British Gas was paying 75% on one gas field. Spectrum is one of those gifts of nature and the government charges tens of billions for access to it – quite rightly too. The Crown is charging for the seabed to put windmills upon – taxation of a resource rent.
We’ve specifically built a taxation system which, as far as possible, sends resource rents to government leaving extractors and exploiters of them with only normal profits on their use an employment of them.
How damn stupid is this man?
This last point is particularly important if the target for action is the City of London. There is no analysis in existing accounting that shows the amount of profit that a company makes that arises as a consequence of its exploitation of natural resource. We simply do not know what that number is.
Tosser. So, how do governments set royalty rates for mineral resources then? Actually, they keep raising them until no one bothers to come extract. Which is about when more than the resource rent is being taxed then, isn’t it?
Nor do we, come to that, as a consequence know what is a fair reward to those who run these businesses for the entrepreneurial effort that they might expand on its behalf, over and above that part of their payment which is simply due as a wage for their labour expended. Without a record of economic rents it is impossible to know what that true sum should be.
Economists tend to say that if they’re making – sustainably – more than the average return to capital then they’re exploiting a rent or two. You know, Sir John Mirrlees, the Nobel winner on taxation, discussing the correct taxation of corporate profits?
And, as yet, accounting is resisting calls to be accountable for this use of natural resources. The method of climate accounting that the International Financial Reporting Standards Foundation and the Task Force on Climate-related Financial Disclosures are proposing are simply measures of emissions. This data they treat as something of curiosity to be kept outside the financial accounting framework, meaning that it does not impact on profit, or the estimation of economic rent that is implicit within their definition of profit. As a consequence, there is nothing in their accounting methodology that requires a process of change to end this exploitation.
What is not happening is what I am calling for, which is a form of accounting that requires the elimination of carbon and other greenhouse gas production within large companies. This is what sustainable cost accounting (SCA) does.
Jeebus on his sodding pogo stick.
Climate change is about the externalities of emissions, not economic rents to natural resources. If governments taxed away every last vestige of natural resource rent (as Aramco does with Saudi oil, Scotland would like to do and should with N Sea oil)) then we’d still be left with the emissions and externality problem – as we are with Saudi oil.
But then, you know, logic and knowledge shouldn’t stand in the way of a good grift, should they?
So, what could XR ask for? If they took a demand for SCA to the City of London and said this is what they wanted they would have an argument to sit down at the table with.