“Rent seeking” is one of those mysterious economists’ terms that describe an important way we get fleeced by the mega-rich. And “fleeced” is the right term. The sheep’s fleece is involuntarily removed to enrich the herd owner; the sheep don’t have any say. They end up cold and unhappy, their clothing expropriated.
According to classical theory, a person who contributes something to the economy, either his labor, his knowledge, or his special skill, is rewarded with money. The greater his contribution to the common good, the greater is his reward.
The mega-rich are swamping us
with rent seeking.
But suppose an employer arbitrarily cuts his workers’ pay by 20%. This is called “rent seeking”. The employer is seeking more money for himself, but he is contributing nothing to the general welfare to earn it.
The term came from the days of giant land owners, when the landlords rented land to farmers, and could raise the rent to enrich themselves at will. But economists found that the term was just as useful to describe any behavior in which more money was sought without a concomitant contribution to the general welfare. The result of rent seeking is always unearned money for special interests with no contribution to the general welfare. I would even go so far as to say there was a net loss to the general welfare, tiny in each case, but huge in the aggregate. It is pure greed in action, and it costs each of us dearly.
Rent seeking is pure greed in action.
The mega-rich are swamping us with rent seeking. It is one of the major factors that created the gross imbalance in wealth in the country today. The most pernicious supporter of the trend is Congress. Millionaires make up a large part of the Congress, and they behave in ways that tend to make the rich richer because they are rich themselves, and depend on the mega-rich to get them re-elected. Much of what they do makes no contribution to anyone but the rich. Their sacred duty to the common welfare is forgotten.
Take the example of the pricing of medications. Let us first remember that selling medicine is not like selling television sets. No one has to have a TV, but millions of people depend on medications for life itself. Providing their meds is a sacred trust, and Big Pharma has violated that trust.
In 2003 Billionaire Big Pharma convinced Millionaire Congress that the prescriptions we all buy should be at the price the manufacturers set. There could be no bargaining. No one could buy the same drug from someplace else, such as Canada, where they were already available at a much lower cost. No large health care provider, no government agency, could use its power to purchase a drug in large quantities to obtain a better price. It was a set-price monopoly that ignored the public interest in favor of rent seeking by an industry well known for its greed. Lest we believe they must have such huge profit to offset their research costs, there is this inconvenient fact: they spend more on promotion than they do on research.
The most pernicious supporter
of rent seeking is Congress.
In other words, we the people were placed at the tender mercies of the most mercenary of mercenary industries by the very people we elected to protect us from just this sort of injustice. This fleecing has cost us billions, and created crisis conditions for millions. Do I buy the meds this month, or buy food?
That’s what rent seeking means. Big Pharma made no additional contribution to earn their monopoly privilege. They got it through dirty politics, and it remains as much a moral outrage today as it was nine years ago, a monument to pure greed.