Archive for September, 2012

9-30-12 Rent-seeking

Published by under Interplay








Rent-seeking is a new term to me.  As Joseph Stiglitz explains in The Price of Inequality: How Today’s Divided Society Endangers Our Future, it is an old concept in economic circles. Rent-seeking is the capitalist equivalent of the feudal rack-rents which buried thousands of Irish in famine graves in the mid-1800′s. Or, as shown in the powerful Ermanno Olmi 1978 film Tree of The Wooden Clogs, when a displeased manor house could send a poor Italian family wandering homeless and helpless.

Specifically, rent-seeking applies to economic (i.e. financial) returns garnered from favorable political treatment. Stiglitz refers to engineered market advantages through subsidies to business interests. It is simple and effective. With a good marketing plan the scam can be sold to the struggling poor as a program to create good jobs. If you cut through the purple prose, the truth glares back at you.

Benjamin Friedman (NYRB 10-11-12): ”From 2000 until the financial crisis hit in 2007, total production in the United States expanded by 18 percent after allowing for inflation; the income of the family just at the middle of the nation’s income distribution rose by not even one half of one percent.”

A more inscrutable economist term is negative externalities. It means corporations push the cost of doing business onto society as a whole. Government. Taxpayers. You. Me. Those costs might be environmental degradation. They include the costs to society we are currently paying as we flounder in the whirlwind created by Wall Street’s selling unsound mortgages through fantastic maneuvers which no one, often not even the bankers themselves, understand.

One negative externality, the cruelest of all, is exposed by the pamphlet whose cover is at the top of this post. The Montana Migrant & Seasonal Farmworkers Council is an arm of a non-profit begun 30 years ago in El Paso, Texas – of all places – to pick up the broken lives left behind by our well-subsized agri-business. The non-profit surviving on grants, private donations, government assistance, “Provides basic health care to agricultural workers and their families through program nurses, dental hygienists and behavioral health counselors . . . Services are provided regardless of ability to pay . . .  If you anticipate any large medical bill we may be able to help you apply for Medicaid or other assistance.”

These are the workers referred to as welfare kings and queens, paid too little to cover the most basic expenses, left to the mercies of catch-as-catch-can community organizations and Christian charity.  Republicans want to strip them of even the little they have.

It is not as far as one may have thought from the feudal days of old.


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