Editorial note: I found this in my archives and have not proofread it in depth yet as of 9/11/23. It will be posted on schedule without further editing if this hasn’t been edited out.
Wrote another essay… probably too long for where I meant to put it. Haven’t edited much yet either. Thoughts? (On rent seeking)
“Rent seeking“ is essentially the tendency in a capitalist economy for all economic activity to be manipulated to create passive income for investors. This is not an automatic or natural process, but it does seem to be an inevitable consequence of the very idea of capital. Basically the nature of capitalists (as in, owners of capital) is to manipulate their property interest and the processes associated with it in order to maximize their income and minimize the work required of them. Obviously the easy example of this is literal rent, such as in real estate, and we see this in entities who provide no real service other than access to physical space and charge enormous premiums. Most working people understand that landlords can be and usually are parasites on the working class, but I don’t think people realize that they are parasites on businesses as well. When you hear them complain about $15 an hour for flipping burgers, isn’t it odd that they aren’t also complaining about $15,000 a month for rent at every Wendy’s? Yet if you look at the budget of just about any retail business, rent is usually the largest line item, which is why one of the major advantages of the largest businesses is the ability to make massive investments in real estate. The greatest cost saving measure that allowed Walmart to become a dominant player was not low wages, but having the capital to purchase all of their own land and therefore get out of paying a tremendous percentage of their revenues to landlords as rent. That’s why most Walmarts are in suburbs and almost none are in established downtowns.
But again, rent seeking is inherent to all aspects of the economy, not just real estate. Another easy example is intellectual property licensing. Look at pharmaceuticals. These are products that are inexpensive and relatively simple to physically produce, but the manufacturers who own the patents to those chemicals charge literally whatever they feel they can get away with, often times making life itself unaffordable for the working poor. “Rent“ in this case is the manufacturer continuing to extract additional profit from something that they own without contributing additional labor or innovation. And like real estate rent, they will charge whatever they can get away with without any rational connection whatsoever to the cost involved in developing the property.
The frustrating aspect of rent seeking is that it doesn’t just affect prices, it affects the tangible quality of products and services as well. The popular idea of planned obsolescence is itself a form of rent seeking; rather than provide the best quality product that they can at a reasonable price, manufacturers and merchants of products instead engineer the absolute minimum quality and durability that they can get away with in order to get away with selling the same product repeatedly. Rent seeking also describes the tendency of companies to intentionally hold back features and improvements in order to force users to buy incremental products year after year, most popular in consumer electronics, but also in things like vehicles.
The one rent seeking trend that has me personally the most annoyed is cloud computing. The cloud computing paradigm is basically the idea of removing functionality from local devices and software and instead moving it to a remote server. Companies like Apple, Google, etc. offer insincere rationalizations claiming that this paradigm is somehow good for the consumer, but it’s generally not – in the era of pocket supercomputers, there’s no real reason to revisit the 1950s-1970s paradigm of centralized mainframe computing, except that doing so allows the capitalists to retain control and charge rent day after day, as opposed to allowing consumers to use the full power of the devices they’ve paid for. In fact, the “cloud” services are usually worse than what could be done locally – less reliable due to internet connections being inconsistent, slower because of communication lag, less secure, less reliable, and of course, most importantly, more expensive. Moving computing tasks to the cloud allows capital to not only convert what could be a one-time purchase to a continuing revenue stream, it also allows them to pilfer consumer data to sell for additional revenue. Notably, when you look at software companies like Adobe and Microsoft who have altogether removed the option to purchase lifetime licenses in favor of recurring subscriptions, the quality of the software either tangibly declines or visibly slows the pace of improvement – Adobe Acrobat Pro has not added meaningful features in decades, despite going from a one-time purchase sometimes as low as $99, to a subscription model with a minimum price of $180 a year, and Microsoft Office… well, in the nineties it was a lifetime license released every two or three years with new features, but since it became Office 365 coming up on a decade ago, I honestly cannot name a single useful feature that has been added, besides imposing cloud requirements on features that used to work offline and making it harder than before to work with files. All of this is rent seeking – making moves in the structure of products and services to minimize the value delivered and the cost expended while maximizing the profit extracted from consumers.
Rent seeking is responsible for many of our economic problems today, across many industries. Basically all of the problems in healthcare; drug prices, hospital fees, the whole idea of medical debt, and of course every aspect of the idea of health insurance, is all rent seeking – structural changes to how goods and services are delivered and billed in order to maximize profit extracted without increasing services provided. Rent seeking is also responsible for most government inefficiency, as capitalists obtain contracts to provide government services, such as Medicaid and Medicare administration, food stamp distribution, student loan servicing, even jails and prisons, and apply rent seeking behaviors to maximize the revenue extracted while minimizing the labor expended providing services. In our society, massive swaths of government services are administered by private contractors, and each and every one of those contractors, without exception, is engaged in rent seeking behaviors that increase costs and lower quality of service.
Rent seeking is a fundamental trait of capitalism. There really isn’t any way to structurally eliminate it while preserving the basic idea of the means of production being owned by people other than the laborers themselves. Any time you see the phrase “passive income” you are hearing about rent seeking behavior portrayed as a virtue.
I have tried not to move my personal views all the way to full communism. There are structural problems with institutional communism as well, and in basically every large-scale attempt at it, rent seeking behavior has still come in and perverted the system. Rent seeking, it turns out, is embedded in human nature even apart from any given economic system. It caused problems in the Soviet Union and in other nominally socialist countries, with government agents taking the place of capitalists in engaging in the rent seeking behaviors. North Korea and Russia exemplify government agents (dictators) carrying out the most extreme forms of rent seeking, finding ways to exploit literally the entire society for personal profit.
More research can be done, sure, but as I see it the best way to ameliorate the effects of rent seeking – which likely can never be truly eliminated – is with distributed ownership of resources. This means small businesses owned at least in large part by actual workers, and more importantly profits shared directly among workers, not captured by owners. Unions having a greater say in all company policies, not just aspects traditionally considered labor issues. There will still be rent seeking and various forms of corruption, but by engaging democratic labor principles throughout the economy, it can be better controlled and managed. Government action has never been effective at controlling rent seeking because of the tendency of rent seeking entities to seek and gain control of the government.
Right now, we are very much within late stage capitalism. Capital has gotten very good at capturing all economic activity. Whenever a new business activity comes along and threatens to disrupt things, capitalists buy it out. Basically the entire software industry is premised on the idea that, regardless of what product you are creating, the plan from day one is for the product to be sold to capital for rent to be maximized as soon as the product is proven. Look at Wordle – a disruptive startup piece of software, just a game, that as soon as it was well known was bought by capital and monetized for data harvesting and subscription sales. Look at dating apps – every app that was ever successful has been modified to be less effective, intentionally, in order to maximize revenue (by keeping users on the platform longer spending more money, as opposed to quickly finding a partner and moving on). All social media platforms. There’s no shortage at all of examples of how rent seeking destroys everything that starts off decent.
I am not an economist, just as I say a simple country lawyer. But these issues are fairly obvious to anyone who looks at them. Solutions are not obvious and basically every economist since even before Marx has worked on the issue in one way or another – Marx and Hegel striving to overcome or solve the issue, but many others simply working on how to make rent seeking more sustainable in order to prevent the revolutions that Marx and the like have all concluded are the inevitable result of end stage capitalism. And that’s where we are. The millennial and Z generations have had our economic opportunities stripped away from us. Wealth is more concentrated today than ever before, and working age people today have less wealth, less real estate, fewer small businesses, and less disposable income than any generation since the advent of modern social structures. Our forebears in the labor movement had made great progress on these issues, raising wages for workers and forcing capitalists to allow inroads for social mobility, but all of that is basically gone now through regulatory capture and propaganda-driven politics. Capital isn’t winning, it has fully won. Our parents, who benefited from the labor movement more than any generation, have abandoned the movement in favor of the “I got mine” mentality that Fox and others have marketed to them as virtue.
So where do we go? Is there a pathway forward away from a dystopian return to feudalism and slavery? I am not sure there is. But I don’t think we are all going to agree to give up without a fight. I am troubled by the fact that so many of us seem to understand the problem and so few have any workable ideas at all for how to fix it. I would really like to see a peaceful solution to this issue, but I cannot yet figure one out. And there never will be a simple solution. Perhaps the best we can hope for is to somehow wrest control of the government from capital and impose taxes on capital to start attacking its concentration. We need various kinds of wealth taxes – Warren’s idea of skimming a percentage off of all large wealth pools is a good start, protecting and increasing inheritance taxes and making it harder to dodge them with creative legal structuring is necessary, and restructuring the tax code to start taxing forms of wealth accumulation that are currently not taxed at all. I think that using the structure of government and taxation to forcibly interrupt the concentration of wealth is really the ONLY way to prevent the inevitability of violent mass uprisings and outright collapse of society. I just worry that people will give up and acquiesce to the role of being cogs in an economic machine that benefits only a few elites.