Introduction
The rentier economy (economic rent) occurs when an entity collects funds for a service whose value surpasses its economic and social utility. This often manifests as an individual or group acquiring sources of wealth and essential elements of labor and production.
The acquiring group does not create products or manufacture goods, but rather increases the costs of production and living for people, projects, and the economy (Cost Opportunity).
This economy drains thought and effort, monopolizes natural resources and public services, and consequently restricts the freedom to earn and live, thereby directing revenues, profits, and funds to those who do not deserve them.
Historically, in the absence of the nation-state system, the monopolization of real estate and natural resources were the most prominent forms of the rentier economy. Today, it has evolved into seemingly sophisticated patterns.
Historical Examples
For example, a feudal lord who blocks a public road or the only bridge over a river crossing his land will not open it to others except for a high fee, while he neither produces goods nor provides added value to society and the macroeconomy.
Another example is a wealthy individual who lends money, perhaps even to the authorities, at very high interest rates. The repayment process might end with him marrying the borrower’s beautiful daughter, or acquiring their home, family, and land. He might also gain political leverage if he lends to the authorities.
An Unfair Equation
In the rentier economy equation, the service monopolist—which may originally be free—earns as much as or more than the original stakeholder, unlike an investor who injects capital into a project.
Furthermore, the service element transforms from an auxiliary factor into an intrusive, indirect partnership that increases costs and may lead to project failure, while the service provider remains resilient.
The concept of the rentier economy has recently expanded to include subleasing state lands, and subleasing documents and licenses required to start and practice businesses, which are originally provided free of charge or at reduced fees by the state.
Rent-Seeking in the Age of Technology
Rent-seeking services have evolved into what is known as the sharing economy. Experiences have shown their harm to business owners and their personal assets, such as vehicles and homes, sometimes leading to losses for small investors.
With technological advancement, the rentier economy has shifted, at the hands of a new generation of feudal lords, to monopolizing technology and workspaces. Wealthy individuals like Elon Musk and Jeff Bezos (from affluent families) establish electronic services and then lease their use for high fees.
Sharing economy services are based on the acquisition by capital owners of essential production elements and personal assets: people, payment methods, homes and buildings, public transportation networks, and then imposing high fees on those who own assets and need the commodity, which can reach up to 30% above the product price.
Most electronic applications ride on the back of assets to deliver goods without producing them, meaning without providing real qualitative value. Examples include various types of “Uber” and applications for renting private rooms and homes (AirBnB).
Similarly, “workspace rental services” activities, such as central or ghost kitchens and “serviced offices,” involve leasing large spaces, then dividing and subleasing them as small shared offices for incubators and new businesses. One of the most famous examples a few years ago was “WeWork.”
WeWork ended up with a loss of $1.9 billion from revenues of $1.8 billion.
Most rental applications and services are based on monopolization and acquisition. Businesses may perish, but the service endures.
Ending in Losses
Business and asset owners bear the greatest burden in maintaining and managing their assets, hiring assistants, working 24/7 for the service provider without a stable fixed income, insurance, retirement pension, or compensation for leave and injury. They can also be easily dismissed and replaced due to a single customer complaint.
These services also deplete infrastructure, the administrative system, the trade and industry system, and the state’s public services and economy.
A research paper published by the “Columbia Law Review” titled “The Acquisition Economy: Uber, Information, and Power” mentioned the advantages of sharing economy companies. However, it criticized and warned against the “acquisition” process undertaken by these companies and their informational and logistical dominance over consumers and participating businesses.
The strangest thing is that rent-seeking services claim to exist to help small business owners and the community, who, if these rent-seeking practices did not exist, would not need their costly services.
And God knows best…
