The Financial Rentier in the 21st century

• Autores: García, Alfredo D.; Guerra, Ezequiel; Nicolini LLosa, José L.
• Año de publicación: 2018
• Idioma: inglés
• Tipo de recurso: documento de conferencia
• Materia: Ciencias Económicas; rentiers wealth; financial wealth
• Institución: Universidad Nacional de La Plata

The purpose in this work is to measure rentiers wealth in the world economy in 19862015. The non-rentiers are wage earners, capitalists and governments. We focus on the following question, hitherto unexplored in the literature. While accumulating financial wealth, the rentiers are the only agents who both inevitably generate indebtedness for those involved in production and potentially contribute to financial instability. This seems relevant given the trend rise in rentiers financial wealth. We find that rentiers financial wealth relative to world GDP increased from an average of 101% in 1986-1992 to an average of 188% in 2000-2015. To measure rentiers wealth, we propose a new and simple methodology based on the following definition. Based on the Keynesian-Kaleckian tradition, in this paper rentiers are defined as firms, institutions or individuals, who derive their income only from property rights. Rentiers do not employ labour. Rentiers’ financial assets may indirectly finance production through the financial system that we do not discuss. The non-rentiers either spend their income or save it to eventually spend it. The rentiers hoard their savings accumulating wealth. If a consolidated world balance sheet was made, rentiers would be the only final accumulators of financial assets. The non-rentiers group would be the net debtor in the aggregate. The resources to pay the rent to the rentiers come out of production as measured in GDP. In other words, to sustain GDP trend growth, the non-rentier group borrows through time. The literature has overlooked the fact that, as different from other forms of inequality that may or may not contribute to insolvency, only a trend rise in rentiers wealth to GDP necessarily contributes to weaken aggregate solvency. For clarity, some examples of rentier behaviour are firms when accumulating financial assets beyond their productive requirements only to protect their degree of monopoly. Persons are rentiers when accumulating wealth above what is needed for a reasonably prosperous life. Institutions behave as rentiers when accumulating financial assets per se (e.g. Pension Funds). We shall come back to this.
Facultad de Ciencias Económicas