How Rent Makes Poverty
- Please send as far and wide as possible.
Editor, The Konformist
How Rent Makes Poverty
This article is reprinted here with the permission of the Baltimore
(Copyright 2006 by The Baltimore Chronicle. All rights reserved.
Republication or redistribution of Baltimore Chronicle content is
expressly prohibited without their prior written consent.)
This story was first published on November 17, 2006.
by Julian Edney
A recent Los Angeles Times article shows an increase in child
poverty to be connected with housing costs which are spiraling out
of reach. Real wages are down again, while living costs are spiking:
a second report in the same newspaper shows the asking rent for
Southern California residential units now averaging $1,413 per
month, far above a working class family's means. To keep a roof over
their heads, many are moving to unsafe neighborhoods like Central
and South Los Angeles, working multiple jobs to pay rent, and living
in seriously overcrowded units, causing the children to suffer.
South Los Angeles statistics resemble those of some third world
countries: poverty rates are high (over 30% in some zip codes), the
children's schools are abysmal, child disease rates are high, birth
weights are small, and violent crime rates are high. Fear, poor
nutrition and bad education all ripple forward into the children's
adulthood, perpetuating the poverty.
That type of article is not uncommon for the Times but it omits the
point that nothing will be done. First, these statistics are part of
a national problem and you can always point to more expensive rents
in New York, and worse health sinks in Boston and New York. Second,
the liberal line is that nobody really understands the causes of
poverty, which are like the branches of a tree, multiple and
entangled. National experiments like the War on Poverty failed, so
nothing official is planned, and liberals have become quiet.
So we have fallen back on the market solution. This is the
conservatives' way. Conservatives say they understand: they blame
poverty on sloth, bad behavior, and having too many children. They
don't approve of government handouts because such a policy would be
a reward for indolence. Cheer up, say conservatives. While there is
inconvenience to some, the system grows wealth; it continues to
serve the greatest good for the greatest number. Because the economy
is so huge and diffuse, you cannot pin the actions of one person
onto the pain of another. In fact, the dynamics are mystical (the
invisible hand). Using a dollar quantity for the poverty line
reframes suffering and removes the moral sting. According to
conservatives, the solution is to leave things alonelaissez-faire.
My thesis is that since the damaging consequences of poverty are
profound and lasting, they can never be justified by saying that the
economy is making some people wealthy. If it can be shown that the
added wealth of some directly causes the suffering of others, then
the problem becomes a moral one again. Further, if there were a
single cause which we could adjust, then we could not hide behind
the thicket of multiple-causation theories. We would be accountable
for our inaction.
The cause is rent.
Economists have thrown an impenetrable veil over the concept of rent
(economists' definitions make many things incomprehensible) so I
will clarify, briefly. Adam Smith said, rent is the quantity of
money left over after a producer's (farmer, factory owner's) cost of
production, and the landlord can take it. In other words, if a
farmer rents a field and grows and sells his crop, then after
subtracting his costs, the money left over can be charged by the
landlord. That seems like a lot, but the landlord has the power to
stop the whole operation. Amazingly, that definition has stood since
Smith's day. It was modified by Ricardo, who added that the quality
of the location also affected the rent, and Malthus, who added that
rents also respond to supply and demand. Malthus also wrote that
rent may be inflated by land monopolies and by price fixing. Of
course you can rent a car or a washing machine or an apartment, and
in all cases the owner's power is that he can stop your operation
unless he gets what he wants. Smith's definition is dispassionate;
morally it is a cold vacuity. His definition also meant that the
rent is calculated after the production season, and that it will go
down if the producer has a bad season. All these variations are
The only strong disagreement came later from Henry George, an
American, who in 1897 pointed out certain realities: rent doesn't go
down and up: it is correlated with land values, which go up and up.
Also, rents are charged in advance, so actually the tenant survives
on what is left after the landlord is paid. Next, monopolies (or
partial monopolies) are commonif a landlord owns a small town, all
his tenants will have to pay what he wants. Their only alternatives
are emigration or death, and that is not supply and demand, it is
greed. Also, rents, while big money on a national scale, do not grow
the nation's wealth. This is because the money is only moved around,
taken from the have-nots and given to the haves (what moderns would
call a zero-sum exchange). That is how fortunes are made at the
expense of the poor.
Henry George got into things. Because of the simple points that rent
has to be paid in advance and that rents always rise while wages do
not, he said labor takes home less and less. He makes his general
principle that "as land increases in value, poverty deepens."
Classically, Adam Smith claimed that all the efforts of people
seeking self-interest lift a society up, acting as a giant wedge
driven under the society. Henry George said that rents actually tend
to force the poor further down; the wedge is driven through the
society. Rent is the culprit, he said, it is the thing that prevents
a free market society benefiting everyone. It is eviscerating. It
accounted for the widening inequality of his day, and he had
powerful descriptions of American cities in which widespread
destitution could be found in the midst of the greatest abundance.
Since the law supports the haves, rent is legal robbery "..not like
the robbery of a horse or a sum of money, that ceases with the act.
It is a fresh and continuous robbery, that goes on every day and
every hour... a toll levied constantly and continuously...it
debases, and embrutes, and embitters."
Keep in mind, Henry George said, land is inert. So are landlords:
you do not have to exert any effort to sit and collect rents, so no
new work is put into the economy. It contributes nothing. The
opposite: as rents rise, it spurs a competitive rush to own land in
speculation, rather than to be productive.
Only Karl Marx took a rhetorical step further than George, arguing
that rent is a kind of exploitation, deliberately raised high by
profit-maximizing capitalists to keep labor impoverished and
desperate and willing to work at subsistence wages.
Another recent Los Angeles Times article describes the slow panic
now spreading through the working poor in old neighborhoods like
Echo Park and parts of Hollywood as building after building is
remodeled and street after street is gentrified. Rents are bracketed
up, tenants are forced out, and they can only find more expensive
places to live. Los Angeles rents have jumped 82% in the last 10
years to an average of $1,750.
Nationally, rents are so far above wages that of the 3,141 counties
in the United States, in only four of them can a person making
minimum wage afford a one-bedroom apartment.
Henry George lived in the Gilded Age, the age of the robber baron
when laissez-faire was melded with Social Darwinism. It was also the
time of the Populist uprising against landholders' exploitation of
sharecroppers. His descriptions of rich and poor juxtaposed fit
modern America so well, we wonder why his theory is out of fashion.
America has become more unequal than ever. Perhaps George was
forgotten because he was not a revolutionary and the publication of
his book Progress and Poverty did not start riots. And after the
Populist movement faded, the nation didn't do anything, again,
defaulting to the market solution.
Today laissez-faire is popular again, with its refusal to recognize
any moral wrong. A new wave of Social Darwinism holds that
inequality and injustice are in the nature of things. Conservative
economists are talking again about the invisible hand. There is the
same deafness to social issues. Demands for justice are dismissed as
too emotional. Any remedies that involve government planning are
denounced as socialist.
Henry George's solution was to tax land values to the point that
land ownership especially land monopolies would become
It is a general point that free markets do grow wealth, but they
also grow inequality. New health studies show that unequal
communities, states, and nations all have higher rates of certain
diseases and shorter life expectancies than do egalitarian
communities. If you live in an unequal society, your environment is
more violent, and the steepness of the inequality predicts a raft of
social ills. (Separately, poverty is correlated with poor health.)
So an obvious policy direction is to rebuild equality. That idea
threatens trickle-down ideology, so there will be enormous
resistance. But we have new economic evidence that wealth actually
grows stronger when there is more equality.
Renters are everywhere. 61% of Los Angeles families are renters. But
there is a glacial quietness on the topic of rent. Among people who
benefit from this silence are landlords who consider themselves
sensitive to social issues. They do not want to talk about rents.
Business is business, but for poor people, rent is always the
biggest expenditure. Millions and millions of families are just
getting by. There are others who have to choose between shelter and
food. For all these people, rent is fear.
Our national child poverty rate has been reported variously at 17%
and at 20.3%, but in Los Angeles County it is 24.6%.
Real, practical changes will not begin until poverty is reframed
back from a dollar quantity to a moral problem for the nation.
Rent should be made an open topic -- and a point of accountability.
Julian Edney holds a B.A. in Psychology from the University of
California, Riverside and a M.Phil. and Ph.D. from Yale University,
New Haven. He has written noted treatises on the topic of greed.
Rosenblatt, S. (2006) "More youngsters in L.A. County living in
poverty." Los Angeles Times, 19 October 2006, B2.
Haddad, A. (2006) "A home market that's tight: rentals." Los Angeles
Times, 19 October 2006, C1.
Leovy J. (2005) "A week of painful losses tests police chief's
mettle." Los Angeles Times, 12 Feb 2005, p. A 1.
Jenkins, C.D., Tuthill, R.W., Tannenbaum, S.I. and Kirby,
C.R. "Zones of excess mortality in Massachusetts." (1977) New
England Journal of Medicine, 296, 1354-6.
McCord, C. and Freeman, H.P. (1990) "Excess mortality in Harlem."
New England Journal of Medicine,322, 173-177.
Sapolsy, R. "Sick of poverty." Scientific American, 2005, 293, 92-99
George, H. (1879/1937) Progress and Poverty. NY: Robert Schalkenbach
Cleeland, N. (2006). "Low pay, high rent, wit's end." Los Angeles
Times , 24 October 2006, A1.
Out of Reach 2004. Washington DC: National Low Income Housing
Murphey, C. "Are the rich cleaning up?" 2000, Fortune, 24 September.
Frank, R.H. (1999) Luxury fever. NY: The Free Press.
Vleminckx, K. and Smeeding, T.M. (Eds) Child well-being, child
poverty and child policy in modern nations. 2001.