WEBVTT - Why Is Rent So High? 0:00:00.520 --> 0:00:04.160 Hi, this is Mia. So before we get to today's episode, 0:00:04.400 --> 0:00:07.480 last Friday, the rank and file of the Burgerville Workers Union, 0:00:07.520 --> 0:00:10.600 which is the country's first successful fast food union, went 0:00:10.640 --> 0:00:13.520 on strike against a campaign of disciplinings and firings of 0:00:13.600 --> 0:00:17.320 primarily trans and POC workers by the bosses who are 0:00:17.520 --> 0:00:20.520 once again trying to crush the union. The strike has 0:00:20.520 --> 0:00:23.040 worked so far, but they need support from the community 0:00:23.120 --> 0:00:26.120 to help pay workers and help these people feed their 0:00:26.120 --> 0:00:29.520 families so they can continue fighting the boss's capitalism and 0:00:29.520 --> 0:00:32.880 building democracy in the workplace. You can go to Bitley's 0:00:32.880 --> 0:00:35.760 Slash Burger Defense to do it. To their funds, we 0:00:36.040 --> 0:00:39.400 will have links to that description. And yeah, thank you 0:00:39.440 --> 0:00:47.519 all so much, and now on to the show. It's 0:00:48.320 --> 0:00:50.960 it's a solo meda episode if it could happen here 0:00:51.120 --> 0:00:54.080 the podcast where things fall apart and sometimes we've put 0:00:54.080 --> 0:00:57.600 them back together. I'm your host, Mia Wong, and today 0:00:57.640 --> 0:00:59.480 we're going to be talking about why the rent is 0:00:59.480 --> 0:01:03.440 so high? Now, Okay, there's there's a lot of sort 0:01:03.440 --> 0:01:06.200 of ways that you could in theory approach this question, 0:01:07.160 --> 0:01:10.520 and I decided that I think one of the most 0:01:10.600 --> 0:01:12.760 useful approaches to it is you take a sort of 0:01:13.880 --> 0:01:16.760 a more a more sort of historical and theoretical approach. 0:01:17.959 --> 0:01:20.840 And I think the start of any kind of sort 0:01:20.880 --> 0:01:23.600 of theoretical approach to rent is by asking what rent 0:01:23.680 --> 0:01:28.120 actually is. And the answer to this, and this is 0:01:28.160 --> 0:01:31.720 something that is that is relatively consistent across most of 0:01:31.840 --> 0:01:34.560 sort of classical political economy, and and you see this 0:01:34.880 --> 0:01:38.399 in some of sort of geoclassical economics, is that the 0:01:38.440 --> 0:01:42.640 thing that's special about rent is that rent, unlike you know, 0:01:42.760 --> 0:01:46.760 anything else, is money that you get because you own something, 0:01:46.840 --> 0:01:50.440 not because you you know, have produced anything. And this 0:01:50.560 --> 0:01:55.559 means that you know, the landlord does not produce anything 0:01:55.600 --> 0:01:58.320 of value at all. All they do is extract value 0:01:58.320 --> 0:02:03.680 from other sectors of the economy. Now, this has a wide, 0:02:03.760 --> 0:02:07.920 wide variety of sort of political and social effects. Mark 0:02:08.000 --> 0:02:10.560 saw the landowning class as an obstacle to the development 0:02:10.600 --> 0:02:14.000 of capitalism. And this is an idea. The idea of 0:02:14.000 --> 0:02:17.560 that again, landowners specifically as a class that is different 0:02:17.960 --> 0:02:20.240 from the sort of capitalist class or the working class, 0:02:22.520 --> 0:02:26.120 hinders the growth of capitalism is an idea that a 0:02:26.200 --> 0:02:29.519 lot of different people across the basically the entirety of 0:02:29.560 --> 0:02:33.520 the political spectrum have shared at various times and this 0:02:33.720 --> 0:02:37.280 causes some very very strange alliances. Particularly in places like 0:02:37.360 --> 0:02:40.480 Latin America, you still have economies that are you know, 0:02:40.760 --> 0:02:44.359 not entirely based, but economies that have enormous landowners who 0:02:44.440 --> 0:02:47.320 drive sort of vast portions of both the economy and 0:02:47.440 --> 0:02:52.160 of the sort of political process. And in Latin America, 0:02:52.200 --> 0:02:54.000 and this is true in a lot of other places, 0:02:55.160 --> 0:02:57.560 it was not uncommon for you to get what's known 0:02:57.560 --> 0:03:01.200 as developmentalism, which is an ideology based on using essentially 0:03:01.240 --> 0:03:05.720 protectionist measures, things like terroriffs, sometimes capital controls, restrictions on 0:03:05.800 --> 0:03:08.760 kinds of investment that foreign companies can do. Sometimes I 0:03:08.800 --> 0:03:11.680 mean just straight up the nationalization of natural resources in 0:03:11.760 --> 0:03:17.240 order to develop an industrial economy. Now, developmentalism, as our 0:03:17.400 --> 0:03:20.560 most sort of alliances against the land and elite, are 0:03:20.800 --> 0:03:25.840 politically messy. It draws on a range of ideologies from 0:03:25.919 --> 0:03:29.400 you know, like pretty right wing nationalists, some very very 0:03:29.480 --> 0:03:34.000 very scary people technically developmentalists, to liberal and also centrisfactions 0:03:34.639 --> 0:03:38.640 whose sort of productive and social base is in a 0:03:38.640 --> 0:03:41.480 specific kind of sort of domestic capitalists who's interested in 0:03:41.480 --> 0:03:46.360 sort of producing stuff locally, and also to people like 0:03:46.400 --> 0:03:49.920 Bolivia's Evo Morales, who is you know, broadly considered a socialist, 0:03:49.920 --> 0:03:53.120 although I think his commitment to anything like socialist politics 0:03:53.200 --> 0:03:56.400 is tenuous at best. But all of these sort of 0:03:56.480 --> 0:04:00.000 political groups can and do, and have various times work together. 0:04:00.000 --> 0:04:03.120 So this is actually one of the bases of Morales 0:04:03.240 --> 0:04:05.480 as well. I guess it's not really Moralysis Party anymore. 0:04:05.520 --> 0:04:11.440 But even Morales's MS, which was a very sort of 0:04:11.480 --> 0:04:14.120 explicit alliance between sort of left wing social movements and 0:04:14.160 --> 0:04:19.279 then more sort of moderate centrist factions who were effectively developmentalist. 0:04:20.320 --> 0:04:23.479 This is a sort of a representation of a very 0:04:23.800 --> 0:04:27.200 common like kind of developmentalist politics, which is again this 0:04:27.320 --> 0:04:29.920 alliance between sort of left and capitalist factions who ally 0:04:30.000 --> 0:04:33.600 gets like large landowners on the basis that feudalism, which 0:04:33.640 --> 0:04:35.040 is which is usually the way that like the sort 0:04:35.040 --> 0:04:37.840 of the power of large landowners is conceived, is an 0:04:37.960 --> 0:04:42.640 enemy to both of them. Now, this isn't how sort 0:04:42.640 --> 0:04:47.520 of develop like states that use developmentalist strategies have to work. Germany, 0:04:47.600 --> 0:04:50.480 for example, uses a lot of developmentalist techniques to industrialize 0:04:50.480 --> 0:04:52.880 in the late eighteen hundreds. But you know, the old 0:04:52.960 --> 0:04:56.400 landowning class, the old sort of like like German aristocracy, 0:04:56.560 --> 0:05:00.159 is allied with the capitalists in Germany and the to 0:05:00.279 --> 0:05:02.359 you know, the two classes, the sort of German aristocracy 0:05:02.400 --> 0:05:05.720 and the capital's class effectively birge. On the other hand, 0:05:06.360 --> 0:05:11.560 landowning classes are often implacably hostile to industrialization, and countries 0:05:11.560 --> 0:05:14.640 that essentially annihilated the landowning classes by carrying out land 0:05:14.680 --> 0:05:18.640 reform tend to perform better economically than their counterparts who 0:05:18.720 --> 0:05:21.760 left a landowning class intact, which contributed to the enormous 0:05:21.760 --> 0:05:24.159 success of the economies of countries like China and Japan, 0:05:24.240 --> 0:05:27.520 Taiwan and Vietnam, who, despite their enormous sort of ideological 0:05:27.560 --> 0:05:30.200 and political differences, all carried out land reform in the 0:05:30.240 --> 0:05:35.600 twentieth century were rewarded with eventually by very very powerful 0:05:35.600 --> 0:05:38.600 and large scale industrial economies. But you know, you might 0:05:38.640 --> 0:05:40.440 be saying, ya, you've kind of put the cart in 0:05:40.440 --> 0:05:43.760 front of the horse here. You've talked about, you know, 0:05:44.000 --> 0:05:46.479 you've gone into some of the sort of political effects 0:05:46.520 --> 0:05:52.520 of rent first, but you haven't actually, you know, explained 0:05:52.560 --> 0:05:56.640 how rent actually works. And so that is what I'm 0:05:56.640 --> 0:06:00.440 going to do next. And to explain how rent works, 0:06:00.480 --> 0:06:03.760 I'm going to turn to an unusual source, the work 0:06:03.880 --> 0:06:08.480 of the Great Venezuela and anthropologist Fernando Corneal. Corneal' is 0:06:08.520 --> 0:06:12.400 a fascinating character. He studied anthropology at my alma mater, 0:06:12.440 --> 0:06:15.920 the University of Chicago under Terrence Turner, a guy who 0:06:15.960 --> 0:06:18.039 I think ninety nine percent people have never heard of before, 0:06:18.080 --> 0:06:21.400 but is probably most famous now for being also you know, 0:06:21.760 --> 0:06:23.960 also teaching David Graeber and being a sort of major 0:06:24.000 --> 0:06:28.880 influence on his work now. Unlike David Graber. While Corneal 0:06:29.240 --> 0:06:31.640 was at the University of Chicago, he tried to get 0:06:31.640 --> 0:06:34.280 permission from the Cuban government to go do field work 0:06:34.279 --> 0:06:36.640 in Cuba, and you know, so he gets to Cuba 0:06:36.640 --> 0:06:38.520 and he's like negotiating with the government and the government 0:06:38.520 --> 0:06:41.279 tells him to fuck off. So okay, he tries to 0:06:41.320 --> 0:06:44.960 go back to the US. But Immigration and Nationalization Services, 0:06:45.000 --> 0:06:48.400 the i INS, which is basically the predecessor of like 0:06:48.640 --> 0:06:51.800 Immigration Services ICE in the Border Patrol i INS was 0:06:51.800 --> 0:06:53.840 sort of dissolved in two thousand and three when the 0:06:53.960 --> 0:06:57.679 sort of like I don't know exactly what the technical 0:06:57.760 --> 0:07:00.479 term for it is, but with the consolidation of of 0:07:00.480 --> 0:07:04.400 the Department of Homeland Security, which is really truly a 0:07:04.440 --> 0:07:05.839 thing that I think we tend to think it was 0:07:05.880 --> 0:07:09.600 only present, but is actually about twenty years old, and 0:07:09.720 --> 0:07:14.240 I am older than it was. Also, you know, this 0:07:14.320 --> 0:07:17.280 sort of outside the episode is like an enormously fascist 0:07:17.800 --> 0:07:20.640 institution that centralized an enormous amount of sort of political 0:07:20.680 --> 0:07:25.440 power in these like terrifying surveillance and police bureaucracies. But 0:07:26.120 --> 0:07:28.240 you know, okay, so they're back back back back to 0:07:28.280 --> 0:07:30.680 the Fernandic coordineal story. So he guys to go back 0:07:30.680 --> 0:07:33.200 to the US, but Ans, which is the predecessory for 0:07:33.240 --> 0:07:37.280 all this stuff, like arrest him immediately and they deport 0:07:37.400 --> 0:07:40.880 him and ban him from the US on the grounds 0:07:41.200 --> 0:07:45.600 that he was that they suspected him of being a 0:07:45.680 --> 0:07:51.720 quote subversive agent. Now, and again I cannot emphasize this enough. 0:07:52.240 --> 0:07:55.960 The sequence of events here is that he tries to 0:07:56.040 --> 0:07:59.000 go to Cuba and the Cuban government tells him to 0:07:59.040 --> 0:08:01.840 fuck off, and so he goes back to the US 0:08:02.320 --> 0:08:04.880 and the US government is like, oh, yeah, no, this 0:08:05.000 --> 0:08:07.360 guy through the Cuban government just refused to let to 0:08:07.400 --> 0:08:09.640 do field work. This this this guy is definitely a 0:08:09.680 --> 0:08:14.440 Cuban agent. So his entire sort of like life gets 0:08:14.440 --> 0:08:16.400 derailed by this. He wants up I think back in 0:08:16.480 --> 0:08:19.560 Venezuela for a while. I think it takes like twenty 0:08:19.560 --> 0:08:22.160 almost like twenty years for him to be able to 0:08:22.160 --> 0:08:24.600 get back to the US and finish his PhD. But 0:08:24.920 --> 0:08:26.360 you know, when he does and sort of be in 0:08:26.440 --> 0:08:29.720 the process of this, he becomes a very very famous, 0:08:29.720 --> 0:08:35.360 as well respected anthropologist. Now when now was it you Chicago, 0:08:35.440 --> 0:08:37.240 like all of the people who sort of trained Corneal 0:08:37.320 --> 0:08:39.760 that that whole generation and really like the whole sort 0:08:39.800 --> 0:08:42.800 of school of anthropology that he came from, which is 0:08:42.920 --> 0:08:45.400 a very very interesting school that if if you want 0:08:45.440 --> 0:08:48.920 to like read about this kind of stuff, I read 0:08:49.000 --> 0:08:52.480 David Graeber's Towards an Anthopological Theory of Value. I might 0:08:52.480 --> 0:08:54.320 do an episode on it at some point later, but 0:08:54.400 --> 0:08:57.760 all of that stuff is gone. But but I ran 0:08:57.800 --> 0:08:59.880 into a professor who knew him back in the day, 0:09:00.120 --> 0:09:02.720 and he told us that Corneil was. You know, on 0:09:02.720 --> 0:09:04.280 the one hand, very is back to the academic like 0:09:04.360 --> 0:09:07.400 very sort of like upstanding, like member of the academic 0:09:07.440 --> 0:09:11.360 communitee also incredibly popular as like a partier who just 0:09:11.400 --> 0:09:14.520 get absolutely wasted and start dancing on tables. This guy 0:09:14.720 --> 0:09:20.040 absolutely rips, you know, and I think a very few 0:09:20.040 --> 0:09:22.000 people outside of anthropology you've ever heard of him. But 0:09:22.040 --> 0:09:24.760 in anthropology, Corneil is important enough to like, if you're 0:09:24.800 --> 0:09:26.640 right about the state, you at least have to like 0:09:26.840 --> 0:09:30.680 mention him. And you know, that doesn't necessarily mean that, 0:09:30.720 --> 0:09:33.080 like most of the people who say the words that 0:09:33.120 --> 0:09:35.240 the Magical State, which is the name of his sort 0:09:35.240 --> 0:09:38.439 of famous book, actually have read it. But I did 0:09:38.480 --> 0:09:42.880 read this book. I've read this book multiple times and 0:09:43.800 --> 0:09:49.199 it's really really interesting. Now. The Magical State, Nature, Money, 0:09:49.200 --> 0:09:52.120 and Majority in Venezuela is probably most famous as a 0:09:52.160 --> 0:09:55.520 history of the Venezuelan state, but that doesn't mean that 0:09:55.559 --> 0:09:59.280 it's sort of exclusively about that history, and in fact, 0:10:00.280 --> 0:10:04.040 you know it, it really can't be. In order to 0:10:04.160 --> 0:10:08.920 think about the Venezuelan state, you have to think about oil. 0:10:10.559 --> 0:10:14.200 But you also can't think about oil in the way 0:10:14.280 --> 0:10:17.080 that most histories of oil think about it, which is 0:10:17.080 --> 0:10:20.000 a story about sort of like high geopolitics. Right. If 0:10:20.040 --> 0:10:21.760 you look at the history of oil, right, it's about 0:10:21.760 --> 0:10:27.000 like high geopolitics and like prospecting and like trekking oil 0:10:27.040 --> 0:10:30.040 prices over time, and you know, the sort of most 0:10:30.040 --> 0:10:32.480 famous book in this genre is Daniel Jurgen's The Prize, 0:10:32.480 --> 0:10:37.200 which is a fine book, but it shares in this 0:10:37.320 --> 0:10:40.280 sort of tendency to you know, kind of you know, 0:10:40.600 --> 0:10:43.440 unless they're writing about like a guy going prospecting, right, 0:10:43.480 --> 0:10:46.440 there's this tendency to sort of ignore the sort of 0:10:46.520 --> 0:10:50.760 material characteristics of oil and the sort of political effects 0:10:50.840 --> 0:10:53.320 of the extraction process, and a lot of other aspects 0:10:53.320 --> 0:10:57.720 of oil that are very very important. And what Corineal 0:10:57.840 --> 0:11:03.640 realizes is that oil is intricately tied to sort of 0:11:03.640 --> 0:11:07.160 the political conception of nature, to systems of landownership, and 0:11:07.160 --> 0:11:12.080 also to Venezuelan state craft. Now this may seem a 0:11:12.080 --> 0:11:15.040 bit far afield, but in order to understand oil, you 0:11:15.200 --> 0:11:19.720 have to think about rent and rent extraction. And that's 0:11:19.720 --> 0:11:22.080 what Corneal does in ways that are both sort of 0:11:22.120 --> 0:11:24.600 profoundly interesting and I think, in a lot of ways 0:11:24.600 --> 0:11:38.440 profoundly ahead of his time. So Corneal, like us, asked 0:11:38.440 --> 0:11:43.080 the question what actually is rent? Now? For you know, 0:11:43.559 --> 0:11:48.719 Corneal goes through rent and a lot you know, and 0:11:48.920 --> 0:11:50.959 it like goes through what you could, I guess called 0:11:51.040 --> 0:11:53.439 economic history of concessions of rent, right, starting with the 0:11:53.440 --> 0:11:58.160 classical economists. Uh, we're not that interested in the classical 0:11:58.160 --> 0:12:01.640 economists because quite frankly, if you're if I don't know, 0:12:01.679 --> 0:12:04.520 if you're running into a neo Ricardian analysis of what 0:12:04.600 --> 0:12:07.480 rent is like I don't know, you're you're already a specialist, 0:12:07.600 --> 0:12:11.000 like stuff is stuff, stuff is happening for you, thus 0:12:12.960 --> 0:12:16.599 quite interesting, quite odd, but where we're mostly going to 0:12:16.640 --> 0:12:20.320 ignore them because the original classical economists' work has it's 0:12:20.440 --> 0:12:23.760 it's largely not the way people think about this now, 0:12:24.000 --> 0:12:27.959 and to the extent that people sort of claim to 0:12:28.080 --> 0:12:32.120 be derivatives of like these people that people claiming the 0:12:32.120 --> 0:12:36.760 lineage of Adam Smith, like, eh, that's kind of sketchy. 0:12:37.520 --> 0:12:39.680 Is that we're going to turn to Corneal's analysis of 0:12:39.720 --> 0:12:44.080 the way that neoclassical economics thinks about rent. Now. Corneal 0:12:44.120 --> 0:12:45.880 someone who has spent a lot of time in the 0:12:45.920 --> 0:12:48.720 sort of literature of like oil pricing and sort of 0:12:48.760 --> 0:12:52.040 theories the sort of price formation and the state of 0:12:52.080 --> 0:12:54.120 the market or the effect of political actors on it, 0:12:54.160 --> 0:12:57.680 et cetera, et cetera, et cetera, and he argues that 0:12:57.679 --> 0:13:02.040 there's basically two ways of thinking about rent. In terms 0:13:02.080 --> 0:13:06.400 of a commodity like oil. There is a macroeconomics view 0:13:06.400 --> 0:13:09.400 in which the rent someone who owns oil extracts when 0:13:09.440 --> 0:13:11.439 people have to buy it from them, you know. Okay, 0:13:11.440 --> 0:13:13.439 so like like if if if you're a landowner, right, 0:13:13.800 --> 0:13:16.240 you get rent because you own the thing, and then 0:13:16.240 --> 0:13:19.600 people have to like take it like people need it. 0:13:19.760 --> 0:13:21.439 You have it, so you get to extract rent from 0:13:21.440 --> 0:13:25.160 it just by virtue sort of having it in the 0:13:25.200 --> 0:13:32.600 in the microeconomics view, when someone like pays the rent, right, 0:13:33.120 --> 0:13:35.840 what that is is they're paying for what's called natural 0:13:35.880 --> 0:13:39.760 capital or capital that's you know, provided by nature that 0:13:39.880 --> 0:13:42.600 someone now owns through like the miracle of private property. 0:13:43.040 --> 0:13:46.160 And so for these people, rent isn't something that's extracted 0:13:46.200 --> 0:13:49.080 at all. Right, it's just someone getting paid for their capital. 0:13:49.120 --> 0:13:53.240 Because the way that they think about, you know, about 0:13:53.280 --> 0:13:55.680 something like oil, is that they think oil is just 0:13:55.720 --> 0:13:59.760 sort of natural capital. Now, okay, it's like this is 0:13:59.800 --> 0:14:01.520 this is in some sense, you know, I was like, okay, 0:14:02.040 --> 0:14:04.520 who cares about this? This is kind of like this this 0:14:04.559 --> 0:14:09.880 seems very obvious. But there's also a macroeconomics perspective which 0:14:09.880 --> 0:14:14.679 is very different. And the macroeconomics perspective holds that you know, 0:14:14.760 --> 0:14:17.760 rent isn't a payment for capital at all. It's something 0:14:17.840 --> 0:14:22.480 paid to landowners by capitalists, and the rent that these 0:14:22.560 --> 0:14:26.840 landowners get is basically the difference between you know, what 0:14:26.880 --> 0:14:28.840 it costs you to get the oil out of the 0:14:28.960 --> 0:14:30.600 you use sort of the landowner to get the oil 0:14:30.600 --> 0:14:32.240 out of the ground, and what it costs the person 0:14:32.280 --> 0:14:34.600 who has the highest price of production to get the 0:14:34.640 --> 0:14:37.720 oil out of the ground. Now, okay, for reasons that 0:14:37.760 --> 0:14:40.480 are very complicated that I can't get into here, basically, 0:14:40.520 --> 0:14:43.720 the person who is like the worst at getting oil 0:14:43.760 --> 0:14:45.640 out of the ground is the person who sets what 0:14:45.640 --> 0:14:50.200 the price of oil is. So you know, the sort 0:14:50.240 --> 0:14:53.000 of like highest possible extraction price tends to be the price. 0:14:53.080 --> 0:14:57.160 And then you know, the micro the sort of macroeconomic 0:14:57.480 --> 0:15:01.440 analysis of what rent is, right is that it's a 0:15:01.480 --> 0:15:04.600 thing that capitalists pay to landowners who own natural resources, 0:15:04.640 --> 0:15:06.360 and the amount of money they get is based on 0:15:06.400 --> 0:15:10.360 how much cheaper it is for like that you know, 0:15:10.480 --> 0:15:12.760 that landlord to get their oil out of the ground 0:15:12.760 --> 0:15:15.040 than it is for like the landlord who's like the 0:15:15.080 --> 0:15:18.200 worst at this. And this is a real question, right. 0:15:18.360 --> 0:15:21.920 The question is is someone who's getting rent paid to them, 0:15:22.200 --> 0:15:25.800 is that rent payment for capital that they own, or 0:15:25.920 --> 0:15:28.960 is it money from capitalists that capitalists have to pay 0:15:29.000 --> 0:15:32.760 to a non capitalist class. And Corneal's answer is like, well, 0:15:32.800 --> 0:15:36.360 obviously rent is distracted from cirplus value because because landowners 0:15:36.400 --> 0:15:41.680 don't produce value. But there's two different sort of places 0:15:41.880 --> 0:15:45.560 that they can get this value from. And this is 0:15:45.560 --> 0:15:47.800 where we have to get into something that's kind of weird, 0:15:48.760 --> 0:15:53.240 and that is the two different kinds of rents. But okay, 0:15:53.400 --> 0:15:55.200 before we get into the two kinds of different rents, 0:15:55.200 --> 0:15:58.360 do you know what else? There's two different kinds of Yeah, 0:15:58.400 --> 0:16:01.080 that's right. It is the products and services that support 0:16:01.080 --> 0:16:14.240 this show. And we're back. I hope you have enjoyed 0:16:14.840 --> 0:16:17.520 both of the different kinds of products and services that 0:16:17.520 --> 0:16:22.480 support the show. And okay, I promise you two kinds 0:16:22.480 --> 0:16:24.560 of rents, and I'm now going to give you two 0:16:24.640 --> 0:16:29.240 kinds of rent. So the two kinds of rent, there 0:16:29.320 --> 0:16:33.480 is something called differential rent, and differential rent is kind 0:16:33.480 --> 0:16:36.240 of close to the sort of macrocive we talked about earlier. 0:16:36.960 --> 0:16:39.880 So differential rent is rent that's set by the price 0:16:39.920 --> 0:16:43.480 of production on the market right now, as we sort 0:16:43.480 --> 0:16:46.720 of mentioned, prices tend towards the highest price of production. 0:16:46.760 --> 0:16:48.560 It's set by the people who are worse of producing it. 0:16:49.040 --> 0:16:51.320 And differential rent is the rent that the rest of 0:16:51.360 --> 0:16:54.280 the market gets by costing it by you know, by 0:16:54.400 --> 0:16:56.840 it costing less for them to extract oil than it does, 0:16:57.440 --> 0:17:00.720 you know for someone who's like the worst at extracting oil. 0:17:03.480 --> 0:17:06.760 Corneil explains this in terms of it. For a long time, 0:17:06.800 --> 0:17:09.040 the US was sort of the price leader of oil, 0:17:09.440 --> 0:17:11.280 and it was the price leader of oil because the 0:17:11.320 --> 0:17:15.359 American like property right system is so absolutely bonkers that 0:17:15.480 --> 0:17:17.240 it makes it really really hard. You have to like 0:17:17.560 --> 0:17:20.520 you have to like individually negotiate with like every person 0:17:20.560 --> 0:17:23.399 who owns a cow pasture a Nebraska in order to 0:17:23.440 --> 0:17:26.360 sort of like extract oil from them. And this makes 0:17:26.359 --> 0:17:29.640 the production process like very expensive. And so everyone else 0:17:29.680 --> 0:17:32.560 in the world is getting this differential rent because they 0:17:32.560 --> 0:17:39.119 have like a less completely like just wild system of property. 0:17:39.520 --> 0:17:42.480 So the product of this is that everyone else is 0:17:42.480 --> 0:17:44.639 getting differential rent because it's way cheaper for them to 0:17:44.640 --> 0:17:46.840 produce oil than it is for the US to produce oil. 0:17:47.359 --> 0:17:50.240 So differential rent is a product of your efficiency, right. 0:17:50.400 --> 0:17:53.040 It's how it's an amount of money that's based on 0:17:53.080 --> 0:17:54.600 sort of the price of oil, and it's based on 0:17:54.640 --> 0:17:57.080 how much better, you know, because you're st selling the 0:17:57.119 --> 0:17:59.720 oil at like the same price, right, But the amount 0:17:59.800 --> 0:18:02.280 that you get, you know, the amount of rent that 0:18:02.320 --> 0:18:04.760 you get, is the difference between how much it costs 0:18:04.840 --> 0:18:06.440 you to get this oil out of the ground and 0:18:06.480 --> 0:18:10.760 how much it costs like some sort of American dip 0:18:10.760 --> 0:18:12.840 shit you as to spend all this time negotiating with 0:18:13.359 --> 0:18:16.800 like thirty thousand individual landowners in the US to do it. 0:18:17.840 --> 0:18:21.280 So that that's differential rents. But there's also something called 0:18:21.320 --> 0:18:26.280 absolute rent. Now, absolute rent is very, very very different 0:18:27.200 --> 0:18:32.120 from from differential rent because absolute rent is not really 0:18:32.160 --> 0:18:35.439 determined by sort of production prices or like the market 0:18:35.520 --> 0:18:38.800 or supply and demand at all. Absolute rent is determined 0:18:38.800 --> 0:18:42.640 by the social power of the landowner. And this has 0:18:42.840 --> 0:18:46.400 really interesting effects, right because again absolute rent isn't based 0:18:46.440 --> 0:18:50.280 on the production process and is instead based on you know, 0:18:51.400 --> 0:18:54.479 the social it's it's it's a social product of power 0:18:55.760 --> 0:18:59.960 and this, you know, this, this means that landlords and 0:19:00.040 --> 0:19:02.920 rent extractors can do something that capitalists aren't supposed to 0:19:02.960 --> 0:19:05.440 be able to do. They can get profits that are 0:19:05.560 --> 0:19:07.960 larger than the general rate of profit, and they can 0:19:08.040 --> 0:19:11.800 do it just by virtue of being powerful and owning land. 0:19:13.280 --> 0:19:15.400 And this has a bunch of very very weird knock 0:19:15.400 --> 0:19:18.359 on effects. Right. If you've ever seen landlords talk about rent, right, 0:19:18.359 --> 0:19:21.840 you've seen the consequences of this. These people genuinely believe 0:19:21.840 --> 0:19:24.600 that they have a sort of moral right to returns 0:19:24.920 --> 0:19:27.360 with no risk all of the time, and that all 0:19:27.400 --> 0:19:29.880 of society should be structured in such a way as 0:19:29.880 --> 0:19:32.399 to guarantee that they have this free income that they 0:19:32.480 --> 0:19:35.320 do fucking nothing to do other than own buildings, and 0:19:35.400 --> 0:19:37.400 it should be guaranteed, you know, it should be structured 0:19:37.440 --> 0:19:40.840 to guarantee this by forcing tenants to pay rent no literally, 0:19:40.880 --> 0:19:45.360 no matter what is happening, you know, like regardless of shit, 0:19:45.480 --> 0:19:50.680 like I don't know, a pandemic. Now. The other sort 0:19:50.720 --> 0:19:53.960 of important difference is that is that absolute rent does 0:19:54.000 --> 0:19:56.240 not obey the laws of supply and demand. It is 0:19:56.280 --> 0:19:58.840 a product of social power, you know, it's the power 0:19:58.880 --> 0:20:02.120 of land ownership itself health, and it's also sort of 0:20:02.160 --> 0:20:04.320 the power you know that the social power is. It's 0:20:04.320 --> 0:20:06.760 not just purely the product of light ownership. It's also 0:20:06.760 --> 0:20:09.560 a product of the organization of the land owning class 0:20:09.680 --> 0:20:12.120 and the extent to which they're backed by the state 0:20:12.160 --> 0:20:15.160 and you know, a sort of militaries as polices, and 0:20:15.720 --> 0:20:18.760 this causes economists who are attempting to use supply and 0:20:18.840 --> 0:20:24.680 demand to explain rent to get very very important events 0:20:25.040 --> 0:20:27.840 very wrong. One of the things that Corneal points out 0:20:27.920 --> 0:20:30.560 is that Maurice Aidelman, who is a very very famous 0:20:30.560 --> 0:20:36.200 oil economist, predicts in nineteen seventy two that the price 0:20:36.240 --> 0:20:42.240 of oil is going to collapse based on oversupply and competition. Instead, 0:20:42.920 --> 0:20:45.280 the price of oil between nineteen seventy three and nineteen 0:20:45.280 --> 0:20:48.840 seventy four increases by four hundred percent because oil produces 0:20:48.880 --> 0:20:53.080 banned together to exercise their power, and this organization, known 0:20:53.080 --> 0:20:57.480 as OPEK becomes a genuine world power. Here's here's how 0:20:57.520 --> 0:21:01.440 Corneil puts it. The sharp inc of nineteen seventy three 0:21:01.480 --> 0:21:04.360 and nineteen seventy four in oil prices did not result 0:21:04.400 --> 0:21:07.639 from a world shortage of oil. It was rather the 0:21:07.680 --> 0:21:11.160 outcome of a long historical process by which OPEC nations, 0:21:11.320 --> 0:21:15.119 acting as landowners, developed the means to extract a rent 0:21:15.160 --> 0:21:17.760 on the basis of their ownership of the oil fields, 0:21:18.880 --> 0:21:22.439 an absolute rent in addition to the differential rents they 0:21:22.480 --> 0:21:25.600 had collected in the past. In nineteen seventy three, a 0:21:25.680 --> 0:21:29.920 seat of converging political and economic conditions helped establish their 0:21:29.920 --> 0:21:33.679 collective ability to restrict the world's supply of oil. With 0:21:33.800 --> 0:21:37.040 this power, Opek felt entitled to set my market prices 0:21:37.040 --> 0:21:39.960 of oil, thus freeing the level of rent from the 0:21:40.000 --> 0:21:44.480 previous constraint of the market price. Now, rent itself, absolute 0:21:44.520 --> 0:21:47.840 and differential would come to determine the market price of oil. 0:21:49.800 --> 0:21:52.199 Now you may be asking yourself, VIIa, that this is 0:21:52.240 --> 0:21:56.879 all well and good for describing the price of how 0:21:57.359 --> 0:22:00.199 for describing how the price of oil changes? But what 0:22:00.200 --> 0:22:03.040 does this have to do with me? And the answer 0:22:03.160 --> 0:22:06.280 is that while Corneal is specifically focused on resource rents 0:22:06.320 --> 0:22:08.720 for obvious reasons, he is doing a study of the 0:22:08.720 --> 0:22:12.480 state of Venezuela, you can apply his analysis to the 0:22:12.520 --> 0:22:15.399 kind of rent that we all pay. If you follow 0:22:15.600 --> 0:22:20.040 Corneal's conclusions about absolute rent through to the American rental market, 0:22:20.560 --> 0:22:24.320 it produces startlingly different conclusions about the source and sort 0:22:24.359 --> 0:22:26.680 of nature of the so called housing crisis that are 0:22:26.720 --> 0:22:30.399 traditionally presented. If rent levels are a product of the 0:22:30.400 --> 0:22:33.879 social power of the landlord class, the behavior that's otherwise 0:22:33.920 --> 0:22:36.920 inexplicable like landlords sitting on empty properties instead of renting 0:22:36.960 --> 0:22:41.840 an amount at lower rates, suddenly become clear armed with 0:22:41.840 --> 0:22:44.080 the backing of the state's secure at social power by 0:22:44.119 --> 0:22:47.199 carrying out evictions, and with the state's implicit backing to 0:22:47.240 --> 0:22:51.520 carry out technically illegal evictions, landlords can extract both differential 0:22:51.560 --> 0:22:54.879 and absolute rents, allowing them to tell the market to 0:22:54.960 --> 0:22:58.320 take a hike as setting ever increasing rents that renters 0:22:58.320 --> 0:23:00.520 have no choice but to pay or be swept decided 0:23:00.560 --> 0:23:05.040 in brutal anti homeless rays. This has massive consequences on 0:23:05.119 --> 0:23:09.240 any potential strategy to reduce rent. Opek, remember, was able 0:23:09.280 --> 0:23:11.480 to use its social power to increase the price of 0:23:11.520 --> 0:23:14.120 oil by four hundred percent, even in a period where 0:23:14.119 --> 0:23:18.000 the actual supply of oil was enormous, by pure virtue 0:23:18.000 --> 0:23:22.080 of organization and the power of their landownership. While American 0:23:22.160 --> 0:23:24.840