Dear Friends,
It seems to me, once an economy is based almost entirely on rent seeking, that economy must soon collapse, along with the nation. Rent seeking is a zero sum game and so an economy based on it will produce nothing, it only consumes… itself. Eventually, that lack of production will deliver inflation, currency collapse and economic ruin. Making rent seeking a poor long term strategy to gain national wealth. Rent seeking is quite profitable in the short term though… for the rent seekers. It is very costly to everyone else. There are many examples of rent seeking economies and not one is economically stable. In fact, those nations that have economies that are characterized as rent seeking, are called, “Third World.” They are rife with corruption, crime and cronies.
Sub Sahara Africa and Marxist South America are filled with countries that have embraced the rent seeking economic model. Some will arise out of it for a short time but always fall back into the cesspool of rent seeking sooner or later. Because the culture of the elite in those nations is utterly corrupt. Countries like Argentina, despite it’s abundance of natural resources and hard working people, is hobbled economically by the absolute corruption of the elite. Argentina goes through a spate of hyperinflation every decade or so. Not due to it’s being in the southern hemisphere but because of it’s rent seeking economy. Zimbabwe is an example in Africa. Every country that has rent seeking as its primary economic activity is poor, oppressed and corrupt.
Rent seeking not only feeds from government corruption, but feeds government corruption, making the whole affair a symbiotic relationship. Moreover, to continue the analogy, together, rent seeking and government corruption form a slime mold. A structure that supports and protects both. The rent seeker gets profit for nothing. There is no easier way to get rich than that, and people, like water and electricity, take the easiest path to ground. Rent seeking is only possible where the government has created barriers or when government fails in its duty to keep the peace. In both circumstances, the fault is of the elite in charge. Either they are inept and allow violence, intimidation and coercion, else they are corrupt and abet it. Nevertheless, once established, a slime mold is nearly impossible to eradicate.
Once rent seeking becomes invisible because it is so prevalent, it is only a matter of time before it becomes the primary economic activity. Because, whenever there are huge profits to be made, economic actors will swarm to that activity until it is perfect competition. The gold rush for example. Once rent seeking becomes easy and opportunities plentiful, why drudge away creating something of value to others, when simply intimidating them out of money is easier and more profitable? Soon, no one will build anything, only create barriers, remove barriers or exploit the weaknesses of others. An economy that produces nothing of value is one that eats itself. Unlike an Ouroboros however, rent seeking has a limited lifespan, because eventually the nation runs out of itself to eat.
Incentives matter, if rent seeking is easier than earning, then people will gravitate to rent seeking as their primary means of making a living. Like the gold rush, self interested human beings will rush to rent seeking. We are after all subject to natural law. The moment government opens the door to rent seeking, that door will be thrust open by the rush of people seeking an easy living. Productive economic activity will be replaced by rent seeking, and eventually the nation will fail… once it runs out of itself to eat. Ask yourself, “Is rent seeking obvious or hidden?” If it is hidden, as it is in the US, then it is pervasive. So endemic that we don’t notice it, as someone who lives in a sewer doesn’t notice the odor. If you look, do you see evidence of rife rent seeking? Has the slime grown too strong already?
Sincerely,
John Pepin
