Contextualizing Rents – An Interview with Jomo Kwame Sundaram  by Julien Vercueil and Adrien Faudot

1. Personal Intellectual and Professional Trajectory

RR. Let’s start with your training as an economist. You have studied in prestigious US universities (Yale, Harvard), before returning to Malaysia. What lessons did you learn from this unique experience as a foreign student in economics in the US?

JKS. In 1967, when I was 14, sterling was devalued. Suddenly, the little money I had was worth even less. Considered good in mathematics at school, and hearing of economics’ turn towards mathematics, I decided to study economics. I did well, but got into trouble for taking exams without official permission as I was not in any economics class. I was disciplined and left the military school I was attending. Kicked out of school, I read Gunnar Myrdal’s 3 volumes Asian Drama, Keynes, Galbraith, Samuelson, Friedman and a few other economists. As my parents did not have the means to put me through any Malaysian university, let alone abroad, I got a scholarship to study at Yale.

Entering in 1970, I applied to be under Professor Robert Triffin, a year before US President Nixon ended the Bretton Woods system’s US dollar peg to gold. Three months after arriving, Triffin asked me to take an “old friend” and two sons of his around the campus. At his house, I met his friend “Paul” who was quite funny during the tour. But only when we returned to the Triffins’ home for tea two hours later did I realise that I had just spent two hours with Paul Samuelson.

Triffin later allowed me to be the only freshman to join a weekly seminar with another old friend of his, Paul Sweezy. Sweezy was kind enough to also meet privately with another friend and I for another 2-3 hours every Monday during the 1971 spring semester. I learnt a great deal from Sweezy’s Socratic style as I also discovered the work of Brazilian pedagogue, Paulo Freire.

After supporting the Yale workers’ strike in the spring of 1971, I had to bear some consequences. Hence, I worked at least 70 hours weekly over the summer of 1971 as my financial aid did not rise with higher fees. Thankfully, 40 hours was at the Economic Growth Center, which was not mainstream neoclassical with Gustav Ranis at the helm. As the youngest there, I had to do what no one else wanted to do. This meant I met and worked for many different people: Ranis, Carlos Diaz-Alejandro, Steve Hymer, Steve Resnick, Rick Wolff, Vahid Nowshirvani, Hugh Patrick, Richard Cooper and others graciously indulged me.

More importantly, I got to know many economics PhD students, from whom I learnt much. I learnt much on the history of economic ideas from David Levine and his mentor, Don Harris, Kamala’s Jamaican father. Besides Smith, Ricardo, Sraffa, Mill and others, I studied classical political economy insights on economic surplus as well as the significance of general equilibrium theory and the Cambridge capital controversies. I read Latin American dependencia plus Francois Perroux, Samir Amin and Charles Bettelheim, mainly in translation, sometimes struggling with Latin languages I had barely learnt. As I discovered Michal Kalecki, Joan Robinson, Maurice Dobb and others, the Economic and Political Weekly from Mumbai became my biggest intellectual influence. We students also managed to invite Jim O’Connor and Anwar Shaikh, among others, to give seminars.

Moving to Harvard after three years at Yale was poorly planned and frankly disappointing. During my first year there, my father passed away unexpectedly. As an only child, I was concerned about my mother and paternal grandmother who lived with us. By then, I had also enrolled to study law by correspondence, imagining it would give me more professional independence. When I approached them, one possible thesis supervisor after another indicated they were leaving Harvard’s Economic Department including Wassily Leontief, Alexander Gerschenkron, Albert Hirschman, Kenneth Arrow and Lance Taylor. Thankfully, Bill Lazonick, Arthur MacEwan, Sam Bowles, Steve Marglin and Harvey Leibenstein were helpful.

While trying to earn some income to help out at home and reading broadly on issues of the times, I found economics at Harvard much less interesting than at Yale. Although I have never taken a course in Sociology, historical sociologists – such as Orlando Patterson and Theda Skocpol, even Barrington Moore – helped me to appreciate the social class relations of surplus extraction. But Noam Chomsky at MIT, nutritionist Nevin Scrimshaw, George Wald and Richard Lewontin in biology, all at Harvard, and Howard Zinn at Boston University made the greater Boston area interesting.

Besides the Economics Department, I also taught in the Social Studies program, besides Third World film and Southeast Asia at the Institute of Politics. The latter was in collaboration with historian Ngo Vinh Long during the Spring of 1975 when the US had to leave Vietnam and Cambodia. Besides giving seminars at MIT and beyond, I later taught a course on the state and economic development at Yale while finalizing my doctoral thesis for Harvard in the Fall of 1977.

Before the Munich Olympics, I travelled overland ‘low-budget’ from Oostende in Belgium through then Yugoslavia, Greece, Turkey, Iran, Afghanistan, Pakistan to Chennai in India in the summer of 1972, soon after the Indo-Pakistani war. A year later, after finishing at Yale, I travelled by public transport through much of South America. But I was advised to leave Allende’s Chile in June after being personally attacked, perhaps because I was conspicuously foreign-looking.

I was corresponding with Samir Amin in Dakar and Justinian Rweyemamu in Dar-es-Salaam to possibly join them in mid-1974 when I learnt of my father’s passing in February, forcing me to abandon my plans. So, despite being named after two African anti-colonial leaders, it was another two decades before I reached the continent.

My main regret about returning immediately to work in Malaysia was missing the opportunity to gain international experience in the South. Also, it became more difficult to follow developments in much of the rest of the South at a time when communications were more primitive. As communications and air travel improved over the decades, some of these problems receded in significance. In the mid-1980s, the Malaysian prime minister supported efforts to create the South Commission and later, the South Centre, opening up new intellectual space. In 1987, I was lucky to be away on sabbatical at Cambridge when many friends were detained without trial for varying periods of time.

Intellectually, I became more acutely aware of problems of generalizations and abstractions, common in economic analysis, especially theorization. Growing awareness of the superficiality of so much knowledge we have, use and rely on, and problems of misleading analogies made me much more modest about what I thought I knew and understood.

Importantly, realizing the problems of inappropriate comparisons and simplifications of complexities led to greater awareness of huge gaps in my understanding of the real world. Besides, engagement in policy debates over the decades led to greater appreciation of the limitations of my non-economic knowledge. All this deepened my earlier rediscovery of and greater appreciation for policy pragmatism and philosophical realism.

Although I long survived the Malaysian university environment by working hard without seeking credit, promotion or position, I was finally forced to take ‘early retirement’ in 2004. Luckily, friends helped out, and by a twist of fate, I joined the UN secretariat in 2005 at a senior new position, essentially to serve as head of economic and development research, or chief economist. The post had been ‘won’ by the G77 caucus of developing countries to improve the quality and relevance of the research by the prolific Department of Economic and Social Affairs. Despite limited human and financial resources, and unexpected problems, including internal resistance, we made some progress, largely thanks to cooperative, if not sympathetic and supportive colleagues. I would like to think that we helped pave the way for the UN to propose the Global Green New Deal from 2008, and to collectively craft the Sustainable Development Goals later.

2. Mainstream and Heterodox Economics and the Challenges of Development

RR. We would also like for you to share your views about development economics and economic institutions. Do you think that what some scholars called the “institutional (re-) turn” (Jessop, 2001) in economics has helped scholars to think the relations between their approaches and other social sciences (history, political science and sociology, among others) anew? According to you, what are the main benefits of this cross-fertilization for the economics of development?

JKS. When the ‘institutional turn’ is referred to as a ‘return’, it typically refers to European traditions of classical political economy, including Adam Smith, Karl Marx and John Stuart Mill, or Max Weber and Karl Polanyi. This partial list ignores many others. An ‘institutional return’ also implies echoes of earlier traditions of knowledge, especially relating to understanding the history of human societies. Hence, much can be made of Arnold Toynbee and other rediscoveries of earlier seminal work, e.g., of Ibn Khaldun, inter alia.

The main problem in my view is the twentieth century Anglophone universities’ invention of disciplines – economics, anthropology, sociology, psychology, politics. Only geography and history, often treated as part of the humanities, reject these artificial disparities. Even in the late nineteenth century, knowledge was not so segmented. The defeat of Germany during the Second World War inadvertently impoverished economics as appreciation of the German historical tradition suffered. This has meant neglect, not only of economic history, but also of the history of economic thought.

The post-war embrace of logical positivism and mathematization of analytical abstraction became ends in themselves, at the expense of better understanding inter-connectivity, reflexivity and dialectics. I am appreciative of the value of economic statistics, but saddened by the contemporary fetish for leading statistical indicators. While attractive for various reasons, this lazy and superficial preference for composite indices is not only misleading, but even dangerous.

Instead of a multidisciplinary approach to, say, development, I would be in favour of a new forward-looking interdisciplinarity. The economics profession belatedly acknowledged this with the reluctant embrace of Daniel Kahneman and behavioural economics. But there are also almost absurd caricatures, with official endorsement of so-called evidence-based policy-making with the abuse of randomized control trials, as Sanjay Reddy and others have shown.

JKS. In the history of economics, arguably even before French physiocracy, there have been implicit recognitions of the labour theory of value. Adam Smith was elaborated by David Ricardo and Piero Sraffa to understand capital as embodied labour. This view is still shared by many in the world except by marginalist economists who equate values with prices reflecting subjective utility.

What we now refer to as the economics of distribution has long been understood differently in terms of what E. P. Thompson and others popularized as “moral economy”. Michael Hudson and David Graeber have focused on debt, credit and usury, going back at least five millennia. Thus, our view of rents can be traced back to what used to be referred to as the ‘social’ – as opposed to the ‘biological’ – surplus. This currently ‘heterodox’ view was actually the orthodoxy for millennia, as one sees, for instance, in the history of the Abrahamic religions – Judaism, Christianity and Islam.

What you term the new orthodoxy on rents and rent-seeking – related to ‘public choice’ theory – should also be seen in relation to the work of Anne Krueger and Jagdish Bhagwati. All implicitly accept the notion of a surplus, part or all of which constitutes rent and other related economic phenomena, e.g., Bhagwati’s “directly unproductive profit-making”.

There is no single microeconomics, even within what is termed the orthodoxy. Austrian School microeconomics is quite different from more traditional neoclassical microeconomics. Among neoclassical economists, there are a variety of different, competing, even contradictory explanations of alleged market imperfections, distortions and failures. So, sharing a common vocabulary about imperfect or even monopolistic competition does not get us very far.

Further, there is a whole range of rents which have different origins, sources or causes. Also, the very existence of rents does not necessarily generate rent-seeking activities. Even when there is rent-seeking, the incentives do not ensure parity between rent-seeking costs, seen as wasteful, and the rent itself. The disparities can be due to various factors which may not lend themselves to the typically mechanical analysis of rent creation and seeking.

So, I no longer insist on what I used to emphasize regarding the correct use of terms, vocabulary and language, e.g., all kinds of people using ‘rent-seeking’ when they mean ‘corruption’. Instead, we should focus on major economic phenomena and problems in generating and distributing the surplus, to enhance our shared understanding of policy options affecting the issues, problems and purported solutions involved. Mushtaq Khan has been focusing since, inter alia, on understanding and pragmatically eliminating corruption.

RR. This book deals with natural resources rents (chapter 7) and financial rents in Malaysia (chapter 8). Could you present your views about the main articulations between these two types of rents, in the case of Malaysia or in a more general context?

JKS. There are a variety of natural resources as well as financial rents. It is dangerous, even misleading, to essentialize any of these different types of rents. Hence, analysis of seemingly similar rents varies with context. For example, analysis of rents from tin mining varies crucially with context, and not only with the political economy of tin mining. For instance, in colonial Malaya from the late nineteenth century to the early twentieth century, there were major technological changes involving tin dredging techniques. But it was not simply a technical issue, but advantaged British mining companies with more capital and mining concession land. This contrasted with deep lode tin mining in Bolivia or open-cast mining. The change in US strategic metals stockpile policies in the early 1980s also changed the tin market rather fundamentally. In addition, there are other changes, e.g., due to various types of business cycles, wartime requirements and so on. How much can we really generalize about natural resource rents given the many different specificities involved in just tin mining at different points in time.

Likewise with financial rents. There are those who try to project Rudolf Hilferding’s analysis from a century ago to the present. Others try to think through what Keynes would have to say. It is also interesting to contrast Keynes in the General Theory against what he had to say on British policy, for the UK and for the empire, e.g., in India. Likewise, I greatly appreciate Hyman Minsky, but there has been a temptation to mechanically extend his analysis to all manner of subsequent macro-financial phenomena.

The chapter on financial rents in Malaysia in the book did not anticipate many subsequent phenomena, including government-led consolidation of commercial banks early this century, or later obscuring of the distinction between commercial and investment banking in Malaysia after the 1990s’ US repeal of the 1933 Glass-Steagall Act. These and other developments strengthening property and contractual rights have affected financial intermediation by commercial banks. But some important recent phenomena associated with financialization – such as share buybacks in the US – have been less significant elsewhere, including other economies pursuing ‘unconventional’ monetary policies. Thus, while appreciating the need to abstract in developing analysis, one has to be careful with ahistorical and acontextual generalizations.

3. Rents and Economic Development

RR. At a macroeconomic level, rents are associated with internal and external monetary distortions. Based on your professional experience, what kind of policy tools are particularly relevant to mitigate or overcome these distortions in a country characterized by a raw materials-dependent growth regime? In particular, is there a particular strategy for such an economy that could protect it from exchange rates distortions and over-fluctuations arising from world markets?

JKS. This kind of analysis is problematic for a whole range of reasons. Centuries ago, the Dutch swapped Manhattan for a tropical island expecting the latter to be far more productive and lucrative. It made good economic sense then because tropical agricultural products, in this case spices, were highly prized then. It tells us a lot about their understanding of their times, and how it contrasts with our retrospective analysis? Much later, WA Lewis showed the decline of the prices of tropical agricultural products compared to their temperate counterparts. So, what does it mean to describe such phenomena as due to market ‘distortions’? Also, in many situations, such distortions serve as incentives, and may be deliberate in order to influence economic behaviour.

A ‘raw materials dependent growth regime’ presumably refers to one producing primary commodities for export. Its growth correspondingly relies on and is hence constrained by external markets. Most agricultural societies have long fallen into this category although most produce for both external and domestic markets. The US is the world’s largest agricultural exporter, followed by the Netherlands, which is only a sixth of the size of the UK! Since early this century, there has been a significant shift from wheat to maize, mainly due to the US bioethanol mandate, which, of course, is a ‘distortion’. Developing countries are discouraged from having ‘distortive’ trade tariffs to promote food security, but the widespread use of agricultural subsidies for food production in the rich countries of Europe, Japan and North America is not deemed ‘distortive’.

Ironically, small farmers of developing countries are widely portrayed and seen as ‘market distorting’. Producing relatively small quantities of similar products, they typically lack market and political power, i.e., the ability to influence market prices and public policy. Those producing for export are largely ‘price takers’, normally unable to influence market prices. When governments intervene with tariffs to ensure minimal food supplies, the received analytical framework of rents and rent-seeking portrays them as ‘distorting’ prices in international trade.

Undoubtedly, there are no easy policy options, as confirmed by the history of various price intervention schemes over the last century. Most schemes have also been subject to bias, favouring those with more policy influence. For example, during the 1920s and 1930s, several rubber output restriction schemes favoured large British owned plantations at the expense of smallholdings in Malaysia. Domestic rice production was encouraged by the colonial state to minimize spending foreign exchange to import rice, especially from outside the sterling zone, i.e., the British Empire. This was done by various means, e.g., attaching crop cultivation conditions to agricultural land for peasants. but not British owned plantations. Although needed to feed labourers producing rubber and tin exports to earn foreign exchange for the British Empire, rice imports were to be kept to a minimum by increasing domestic output.

More than half a century after independence, the policy continues. Instead, developing countries should encourage farmers to safely produce more vegetables and fruits to improve diets as well as reduce micronutrient deficiencies and food-related non-communicable diseases.

RR. Rents are also very much linked with income distribution issues. In your opinion, and speaking exclusively of developing economies, what should be governments’ priorities to tackle the distributional consequences of rent extraction that so often end up in an institutional, political and economic lock-in described as a “rentier regime”?

JKS. Rents are fundamentally about economic distribution more generally, not just of incomes. Some illicit rents are likely to be reinvested in ways associated with ‘money laundering’. With the simple three incomes from contributing factors of production, it is often presumed capitalists reinvest profits while landowners do not reinvest rents and wage-earners do not have enough incomes to invest. This caricature is not very helpful in the world today, and may even be misleading. There is no empirical basis for the presumption that rentiers do not reinvest their wealth to enhance their gains.

Rents today are mainly from intellectual property (‘tech billionaires’) or finance, and there is little empirical basis for these old behavioural caricatures. Recent news reports of higher US rural land prices have been attributed to the super-rich buying up such land, also suggestive of the fungibility of finance. Presuming the fungibility of finance is much more meaningful than presuming the fungibility of capital, as the World Bank has done in offering policy advice assuming the inter-changeability of ‘natural capital’, ‘human capital’, or worse, ‘cultural’ or ‘social’ capital.

As rents are not unique to developing countries, one cannot be sure there are policy prescriptions unique to them. One should also be sceptical of any suggestion of ‘one size fits all’ solutions for all rent-related issues. Most claims to rents are specific, and therefore need to be addressed particularly. But the answers are not straightforward either, even from a public policy perspective. There are different issues involved in, say, rural land, as opposed to urban land, or residential vs commercial property. Or rubber land vs rice land, and so on, depending on the analytical and policy concerns involved. So, if the priority is to keep food prices down and affordable, policy design should ensure that outcome. If public policy seeks to minimise the use of toxic chemicals, such conditions may well be imposed.

At the risk of caricature, consider two island republics in Southeast Asia, both run by corrupt dictators. The former averaged 3% growth over a quarter-century while the latter averaged 8% over the same period. The difference was that the former opened its capital account, allowing its elite to take their money out and hide it abroad. And while the latter was not water-tight, it was attractive enough for the dictator’s family and cronies to make much more by investing domestically. Little was ‘wasted’ on ‘rent-seeking’ to secure these opportunities largely allocated by the dictator. The former is denounced as a brutal dictatorship while the even more murderous latter regime is hailed as a development miracle. This simplistic story is no morality tale, but reminds us of the difficulties of political economy analysis using any set of partial indicators.

Only historically informed analysis of the ‘political settlement’ can consider the range of policy reform options. Of course, these should be considered against pragmatically possible as well as realistically probable developmental options. And while policy space typically requires fiscal space, inter alia, many other conditions need to be considered, including both national and international circumstances.

RR. In terms of structural policies, what kind of property rights reforms (nationalization or other ways of avoiding entire private property on non-renewable resource deposits) could be used to limit the effects of rents on inter-generation inequality?

JKS. Inter-generational transmission of inequality has become much more difficult to check, involving creative new combinations of property rights with educational advantage, typically justified in terms of meritocratic ideology. Meanwhile, Michael Sandel and others have challenged meritocracy as the legitimating ideology for inequality in our age. Meritocracy suggests that inequalities in society are due to differential capabilities despite equal opportunities offered by society.

This has become more evident in recent decades, especially in the Anglo-American space, which has seen economic liberalisation and financialization across national borders. Tens, if not hundreds of thousands of accountants and lawyers are employed in a range of activities to minimize tax liabilities of various kinds, including those related to various inheritance, trust and other related arrangements. Even a powerful large developing country, such as India, has often had to play catch up with the Mauritius authorities, backed by international finance via consultants. Thus, most developing countries feel helpless playing ‘catch-up’ in the face of such relentless financial innovation and flexibility.

The Paris-based Organization for Economic Cooperation and Development (OECD), the club of rich countries, has long blocked developing countries from participating as equals in international tax cooperation. Instead, until a decade ago, it mainly focused on undermining ‘offshore’ tax havens, especially in developing countries, ignoring ‘onshore’ tax shelters in the rich countries of the North Atlantic. Although it has broadened its focus since, developing countries still do not participate as equals, having a limited voice in shaping cooperative frameworks.

Your question correctly points to the significance of property rights and related laws. Katarina Pistor of the Columbia Law School has greatly advanced our understanding of how the law has ‘codified’ capital, especially property and contractual rights so crucial to recent financial innovation.

RR. As far as raw materials and fossil energy are concerned, rents arise from a mode of production and extraction that seems to have jeopardized our ability to sustain the current level of income in the developed world over the long term. Can the fear of climate change succeed in reforming the current rentier regimes, while practically all other attempts – and crises – have failed to do so?

JKS. There are many different ways of looking at the challenge of global warming and climate change. Some are partly captured by the notion of externalities, associated with Arthur Pigou, among others. Fossil fuels undoubtedly involve resource rents. But greenhouse gas emissions are not solely or necessarily associated with fossil fuel combustion, e.g., from agriculture. Hence, it is not clear that rent analysis offers the most useful way of addressing this particular problem.

A state’s fiscal space and means are largely determined by its ability to effectively capture segments or fractions of the surplus, i.e., rents. One criterion for progress is to effectively deploy expenditure for the public purpose, e.g., defined in terms of development and equity. But there does not seem to be any compelling reason why regimes will reform themselves to address climate change. Global warming is especially difficult to address as it involves not only collective action broadly conceived, but also inter-generational distribution considerations, both of which do not easily lend themselves to optimal solutions.

As in international trade, there is growing recognition of the problems of the uneven distribution of costs and benefits as well as collective action involved. Paul Samuelson recognized this problem and proposed a solution for the US, which enabled Kennedy to open up the economy after almost a century of protection to accelerate manufacturing. But no one has come up with a fair mechanism to transfer from ‘winners’ to ‘losers’ across international borders. And this is why it is disingenuous for advocates of trade liberalisation to claim, without any foundation in international trade theory or evidence, that trade liberalisation ‘lifts all boats’.

To put it bluntly, there is no shared fear of climate change enough to sufficiently incentivize the many transfers needed to adequately address global warming. Addressing the relationship of externalities to traditional measures of output, growth and economic welfare seems far more promising than relying on such a shared sense of threat. Yet, such an approach alone is not sufficient to adequately address the challenges of mitigating and adapting to climate change.

As developing countries struggle to cope, rich countries are mainly interested in getting them to undertake more mitigation. None of the 2009 promises to finance climate action in the South – by Nicolas Sarkozy, Gordon Brown and the European Commission – has actually materialized. Current delivery levels are less than half the already inadequate hundred billion US dollars annually promised then. Most climate finance is merely earmarked, diverted official development assistance (ODA), rather than additional ODA. Meanwhile, ODA has declined to an average of under 0.3% of rich countries’ national incomes, less than half the 0.7% promised over half a century ago, with numbers lower than during the first Cold War!

RR. What is your position regarding the discussions about the role of the state in the industrialization and modernization of developing economies? What role can the state play to overcome the structural lack of investment in industrial capacities, especially in countries suffering from Dutch disease-related distortions and difficulties?

JKS. I have long been an advocate of selective industrial or development policy, involving the promotion of needed or desired investments and technologies, not necessarily in manufacturing alone. But good intentions have never been enough. We need to recognise the many problems which have emerged, even before such developmental ambitions were captured, compromised and even corrupted by some of the new elites.

A crucial tool or aide in this connection is the analysis of rents and how these can incentivize or subvert developmental efforts. Such rents are all presumed to involve wasteful ‘rent-seeking’. Thus, rents have become a misleading simile for corruption, etc. But this ethically inspired association prevents serious analysis of economic incentives and behaviour as well as their outcomes, besides options for reform, rectification or rejection. Hence, the challenge now is still for careful critical analysis of how to achieve development in this day and age. This must consider both constraints inherited from the past and those imposed by the international context. The realm of possibility is crucially shaped by the state, including resources available, fiscal and otherwise.

So-called ‘Dutch disease’ is a problem now generalized to cover all resource exporting countries. Developing countries achieved high growth in the mid-1970s, when commodity prices were high and real interest rates low, as high nominal interest rates were matched by high inflation. Most resource rents were rarely well captured and deployed developmentally, although there are important and notable exceptions, some of which have been well studied.

Often, foreign resource-extracting companies secured much of these resource rents together with their domestic enablers. In recent decades, the World Bank’s Extractive Industries Transparency Initiative claimed to have reduced what the domestic enablers received. But all this implies is more for the foreign resource extractors since mineral commodity prices did not fall as a result. Little accrued to the domestic economy, let alone to the needy within them. Relatively little has been deployed for developmental purposes, especially with greater financialization and fungibility of finance.

The World Bank famously discouraged taxes on foreign gold mining companies in Tanzania, ostensibly to minimize corruption, dubbed ‘rent-seeking’. Tanzania is now Africa’s third largest gold producer, after South Africa and Ghana, with little tax on mining by foreign companies. This was, supposedly, to avoid possible abuse by Tanzanian parties. Following Bank advice, the low-income country does not tax the mining companies, but instead effectively subsidizes them by providing needed infrastructure to enable easy transportation of ore from the mines to the port for shipping abroad. Other related reforms were promoted in the name of infrastructure provision, ‘good governance’, transparency and ‘anti-corruption’.

4. Further Research

RR. So far, we have focused on the links between economic development and rents coming from fossil fuel extraction. Do you think that industrialized countries face – and suffer from – specific forms of rents that could be of interest for further research?

JKS. Analysis of growth, investment and distribution is fundamental to the study of economics. As the economic surplus is crucial to our understanding of post-subsistence economies, analysis of the surplus has been central to the study of economics from the outset. By the middle of the nineteenth century, if not earlier, it was widely recognised that ‘perfect competition’ is the exception, rather than the rule, the naïve assumption of textbook economic teaching.

The classic use of the term still refers to land or ground rents associated with agricultural land productivity. While variations in agricultural land rents are, at least, centuries-old in parts of the world, many other rent claims are relatively new, and still subject to innovation, e.g., associated with financial innovation, other real property or the built environment. Meanwhile, the producer surplus, resource, financial and other rents – including those associated with property, contractual and other legal rights – are all part of modern economies. Also, the consumer surplus is shared by consumers according to various institutional arrangements.

Hence, rent analysis is not only central to understanding economic distribution, but also incentives to invest in the real economy which influence growth. Thus, for example, if Europe seriously commits to Mazzucato’s ‘mission economy’, it is unlikely that it will be primarily driven by state investments. Instead, it will need (rent-seeking) incentives to induce private investors to invest in priority areas.

Another crucial policy challenge is how to induce needed investments to accelerate carbon neutrality, instead of relying on much cruder instruments such as carbon pricing or taxation. Advanced countries also have to deal with the implications of uneven financialization, especially with the proliferation of new financial instruments and assets with more financial innovation and less constraints to cross-border flows.

RR. You have also worked on the role played by religion in economic development. Do you think that certain religious conceptions regarding what economists call rents could be used in some countries to curb rent-related institutional and political barriers to development?

JKS. Despite the changing significance of religion in the world, the influence of beliefs and belief systems on economic behaviour remains salient, albeit in new ways. We have had a lot of misleading, but nonetheless influential analyses by people ranging from Max Weber to Samuel Huntington pontificating on the basis of contemporary prejudices, rather than serious analyses. For example, Huntington distinguishes the Judaeo-Christian civilization from Latin America, conveniently inventing a post-Second World War category and denying centuries of anti-Semitism associated with Christians.

My own limited work in this area has forced me to go beyond Orientalist simplifications. In my part of the world, the influences of Islam and what is termed Confucianism are said to be most relevant. In reconsidering religious texts and history, the surplus, its legitimacy and distribution have been central to Abrahamic and some other religions.

Historically, the Arabic term riba has been interpreted as either usury or interest. However, the late Dr Ziaul Haque, an economic historian of early Islam, understands it as the economic surplus. He distinguishes different types of surplus significant at the time of the Prophet. The question then is what that implies for contemporary Islamic economic analysis, which remains preoccupied with the prohibition of riba.

However, it is unclear how much influence and impact such new thinking has achieved. The ahistorical turn in the study of economics has also influenced such heterodox approaches as well.

Many thanks again for answering these questions!

(This article was originally published in journals.openedition.org)