Monday 14 October 2013

Government was always a rent-seeker and it's now the biggest robber baron by far

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In broad terms profits are a consequence of imperfections in the market - I know this because it's in the first few chapters of the economics text book I had at A-level. In that utopian perfect market there is no rent ergo no profit. However, what makes markets so wonderful isn't this de facto rent-seeking but the consequences of exchange. In most cases (in theory, in every case) I get something I want and, in doing so, allow you to get something you want.

If I were one of those people who think 'neoliberal' is a swear word and consider markets to be akin to beating you over the head and steal your stuff then I would be all aquiver about these evil profiteers and their rent-seeking behaviour. This is not to suggest that those evil profiteers do not seek rents but to remember that the real world meaning of 'rent-seeking' isn't about markets per se but about the fixing of markets to favour the rent-seeker.

Rent-seeking is a culture in which the principal route to wealth is not creating wealth, but taking possession of or benefiting from wealth created by others.

So says the Financial Time (and who am I to argue). Indeed that definition makes reference to the Rhine's medieval robber barons charging river tolls.

Now let's switch a bit in our focus - away from rapacious plutocrats - and look at government. The government we might, in our naivety, want to protect us from those profiteers. The problem here is that government, in its origins and subsequent behaviour, has always behaved as a rent-seeker. For sure, the feudal lord in his shiny armour promised to protect the serf (from whence the lord's wealth derived) but this was via taking from the serf that which was his - the product of his skills and labour.

To do this government's exercised controls over those things that might threaten their ability to take rents by force. Thus governments created monopolies - chiefly and most powerfully a monopoly of money. They did this absolutely and specifically so they could continue to seek those rents, the rents that paid for the baron's new horse and the king's new crown.

I know, I heard you shouting 'stop' and talking of democracy. But the truth is that democracy didn't see the end of that capture of markets through rent-seeking. In truth that capture has extended through the rhetoric of what Tony Blair called "schools-'n'-hospitals", a sort of 21st century version of giving the masses food and entertainment. Over the period from the 1870s to the turn of the 21st century, government nationalised health care and education drawing schools, universities, hospitals and much else within the control of government - handing them over to rent-seekers within those businesses and then, when those rent-seekers caused problems with the masses (by not being good enough), bringing in external rent-seekers to create a sort of faux competition.

Note how the main form of rent-seeking - taking wealth rather than creating wealth - comes in the form of taxes. In the UK this is over four pounds in every ten - a triumph of rent-seeking beyond the wildest dreams of those medieval robber barons with their ship tolls. And within each of those places seeking rent there are the enthusiasts for more - the teacher unions, the BMA and medical colleges, the CBI. A whole host of well organised (and paid) folk each agitating for more rents, for more taxes to be grabbed from the pot of wealth.

We seek behaviour comparable to those robber barons where the poorest in the land are rolled over for taxes - think for a second about the justice of someone earning just £12,000 having to cough up taxes so some public sector plutocrat can earn over £200,000! That is the sort of immorality that would bring joy to the Sheriff of Nottingham's dark heart.

So next time you see someone frothing about 'neoliberal rent-seekers' or some such other left-wing nonsense, just tell them that the government is by far the biggest rent-seeker. And that government has always been the biggest rent-seeker, indeed government exists purely to capture wealth for those who control government to spend on what interests them.

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2 comments:

singapore sling said...

The people who literally are rent-seekers are private landlords whose extortionate rents are paid via housing benefit, the bill for which goes through the roof due to lack of social housing and the fact that you lot encourage the overclass to pull away further and, while driving people out of social housing, will just end up paying Rachman's grandsons even more.

Why does no one on the right seem to grasp that, even if there were full employment (which won't happen in a neoliberal economy) you WILL have things like this happening so long as the jobs that need to be done don't pay enough for people to afford living in much of the country- and ill-paid work such as retail, for obvious reasons, can't relocate- and that's before we even come to mention people on disability benefit, virtually all of whom are genuinely disabled (the consequences of the crackdowns on non-existent "scroungers" are there for all to see in the horrors the ATOS scum inflict on people) and those who can't find work due to the ruinous state of the economy.

PS- I accept that the previous government bear a lot of blame, but given that they were Thatcherites and I slagged them off at the time, invoking what they did as an "argument" against me is NOT going to work. I don't give a toss if they did something akin to the bedroom tax in 2008. They were wrong then and you lot are wrong now.

Luke said...

I can't make up my mind if the whole public choice/rent seeking government idea is

a) A groundbreaking insight, for which Buchanan deserved a Nobel

b) Stating the blooming obvious and/or updating Parkinson's law but with less jokes

c) An excuse for rich right wingers to pay less tax by claiming to be on the side of the low income tax payer against high paid bureaucrats

d) An idea appealing to individualist/survivalist cranks preparing for the last days (Buchanan used to like chopping his own wood rather than rely on Gubm't or utilities to provide electricity - hello, division of labour anyone?)

e) All of the above.

I think I go for a, c and d.