The Global Rentiers

Paul Krugman makes a nice observation in his new(ish) blog:

Back in the pre-industrial world, big cities were mainly “rentier” cities – that is, their economic base consisted primarily of rich people whose income came from the land, serfs, etc. they owned elsewhere. These people lived in the capital not because it was where they worked – only the little people worked for a living – but because it had the best parties, not to mention access to the king...

Today’s Wall Street Journal (sub. Req.) has a story about the sources of London’s current boom: an influx of very wealthy foreigners, whose income comes from elsewhere. Middle Eastern sheiks, Russian beeznessmen, Indian industrialists, have become the backbone of London’s economy. It’s all helped a lot by British tax law, which gives big breaks to people who live in Britain but are “domiciled” elsewhere (don’t ask.)

Krugman adds that "it continues to amaze me how the 21st century is starting to look like the 17th century with fancier technology: tax farmers, mercenaries, and now rentier cities."

Of course, the rentiers and the industrial world coexisted for a long time, well into the twentieth century, even as the overall shape of cities became proletarian. Pick your favorite French novelist: the chances are good that their income came from their families' landholdings, not their books. Today instead, in addition to the global capitalist class, we have the hipster-artist, the heiress-clubgoer, and the forty-year-old who live off of their parents' rent-controlled apartment. Plus ça change.