The Problem with Rentiers

Although many of us may have aspirations to be property tycoons the truth is that this kind of extraction of wealth is generally not good for society as a whole.

Rentiers are effectively sitting on healthy productive assets and extracting a rent from them in order for others to use these assets. This is most often property but it could be other productive assets too.

The big problem with rentiers is that they do not necessarily add any value to the assets that they extract wealth from. Also, they add little value to the economy as a whole. Rentiers are in contrast to say an investment in a company that manufacturers goods or provides services.

The goods or services generated buy a company are of value to the wider economy and can become the basis of further economic activity. A good example is a small good vehicle. It can be used productively to generate income buy the purchaser.

The same investment in a rentier business is often simply a passive extraction of a revenue stream.

Arguably many Western economies have become saturated with these kind of businesses. Everyone and his wife wants to be a property developer and generate passive income. It all seems very easy.

There are affordable loans to facilitate this and a whole host of TV shows that highlight the attractions of renovating and renting out properties.