I've written about rent-seeking before, in several places in fact. But this is a place to collect those thoughts in essay form.
What is rent-seeking?
Rent-seeking is one way to make money.
■ If you own land, mine copper (say) from that land, and sell it, you're what is technically called ... "productive." (I know, strange word; take your time learning it.)
■ If you own land that contains the only source of water in the county and you sell "your" water to the drought-stricken everyone-else, you are what is called ... a "leech."
My joke — you're living off of "economic rents" — the special position granted by your ownership of something you didn't create, but stumbled across. (See here for my views of "ownership".)
■ If you stole that land by buying lunch for the state legislature, in return for which they gave you the land by decree, you're a "thief and a leech."
My joke again — you're still a "rentier capitalist," though a corrupt one. Some would call that a Bain Capitalist, or a Wall Street Capitalist. You've done nothing illegal; you win by buying the law.
Keep that term "rent-seeking" in mind, and also that use of the law. This perfectly describes what the bulk of current economic activity is about.
Joseph Stiglitz, who is on a book tour, has some thoughts along these lines. This appeared in a Fox Business interview (h/t economist Mark Thoma; my emphasis):
Why does growing inequality matter? ...There's more of Stiglitz and his thoughts at Thoma's site, and in the original interview.
We care about inequality partly because we pay a high price in terms of our economic performance. We care about it also because of the impact that it has in every other aspect of our society -- our democracy, our rule of law, our sense of identity or a land of opportunity -- because we aren't anymore.
The people at the top are not the people who made the most contributions to our society. Some of them are. But a very large proportion (is) simply people I describe as rent-seekers -- people who have been successful in getting a larger share of the pie rather than increasing the size of the pie. ...
[W]e don't understand the extent to which our economy has really become a rent-seeking economy.
How has the financial sector contributed to the growing inequality?
Much of what goes on in the financial sector is this kind of rent-seeking.
The most dramatic example was the predatory lending and the abusive credit card practices, which took money from people on the bottom and the middle often in a very deceptive way, sometimes in a fraudulent way, and moved it to the top....
There is another example where the financial sector has been particularly bad. They pushed for laws like our bankruptcy laws that gave priority to derivatives. In bankruptcy, derivatives got protected and workers and everybody else has to swallow their losses. That encourages more risk-taking.
At the same time, they pushed for laws that made it more difficult for ordinary Americans to discharge their debt and (were) particularly bad for students who can't discharge their debt no matter what happens, no matter how they have been deceived by the schools, even in the event of bankruptcy. ...
What characterizes a rent-seeking economy?
I want to tie together a couple of concepts:
1. Being a rentier is much easier than being productive. Being productive involves work, actually making things.
To be a rentier, you just send out Big Louie (sorry, your collection agents) to gather the goods. Sometimes Big Louie is your friend the local sheriff.
2. A rent-seeking economy is not productive. We have been converting to a rent-seeking economy since Reagan started sending U.S. manufacturing overseas and rewarding (with money) people who made money by moving money around (rentiers).
As Kevin Phillips points out, one of the three signs of the end of an empire is the financialization of its economy — its conversion from productivity to "financial services" — extracting fees for moving money around. (See here for Spanish, Dutch and British examples; search on "Phillips".)
3. Rent-seekers, like most Big Money types, use their Money to buy the Law. Which means ...
4. Money and Law are fungible — exchangeable for each other. Who knew?
Actually most of us did; we just haven't said it that way. Shakespeare's version from Hamlet: "Oft 'tis seen, the wicked prize itself buys out the law."
Translation: You can often exchange stolen money for laws and rulings you want.
5. Rented money is called "debt" and debt collection is rent-seeking.
Look at the water example above. You have it; everyone else needs it. You thus have a special position, which you can use to collect income (economic rents) by owning the only source of what people need.
Once rent-seekers have, say, almost all the money in the world, they don't have to make anything else. They just rent out their money.
6. The interest of rent-seekers is to make everyone else pay their debts. Since rent-seekers typically use their money to buy the law, they use their money to make debt and bankruptcy laws most favorable to them.
What's wrong with that? This ...
7. When an economic system is clogged with too much personal debt, the whole system stagnates, producing a stagnant economy and often, a demand-driven depression.
Why? Think; what happens when everyone is paying off debt and no one is buying stuff? Answer: At best, nothing happens; the economy stagnates. At worst, a downward spiral of job loss and depressionary price collapse (deflation).
Or don't think: just look out the window. You're watching the milder form of what happens — a debt-clogged system in which little economically is happening. (This is why public debt has to take over for personal debt, by the way, but that's another discussion.)
8. In a system clogged by personal debt, the political Bigs — the Obamas, the Bidens and the Clintons — have to choose between the interests of the rentiers and the interests of, say, everyone else in the country.
Mostly, political Bigs choose the interests of their paymasters.
9. Thus my term — Rentier Rebellion — a political conflict in which rentiers use the political Bigs to put the squeeze on everyone else.
It kills the system, but hey ... fortunes of war, as they say.
How do rentiers win?
Let's summarize. Anyone can win at the rentier game. All it takes is:
- All the money in the world;
- A captured political system;
- A "democracy" filled with the easily (and eagerly) fooled;
- A rentier class with no conscience.
Don't lose sight of that last requirement — no conscience. The condition of "no conscience" can be defined as "treating other people as things to be used." (That actually is a good working definition.)
Once you breed a ruling class dominated by Trumpism (my term) — people whose only goal is to bend the world to their will, as exemplified in Trump's first book — you really are ruled by the conscienceless.
What can you do? What one always does before the last battle is lost — resist.
It's the only way to stay here and stay sane.
My rented thoughts,
GP
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