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Published On: Wed, Aug 21st, 2019

Capitalists or Rentiers

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By Khalid Muhammad Musa

True capitalist ideologues seem to have abandoned rentierism altogether, but I believe including it as a branch of capitalism may be beneficial in helping demystify the level of ferocity it has exhibited to a certain extent…
Economic rent, rent-seeking and rentierism are all obscure economic jargons in modern economics. Neoclassical economics has all but wiped it off the face of the discipline merging its schism with capitalism fundamentally analogous. Capitalists and rent-seekers are now more or less inextricable. Rent seeking can be interpreted in different forms; monopolies overcharging due to market failures, the Medici vicious circle quid pro quo a la subsidies, tax exemptions or exclusive production licenses and so on.
A rentier state coined in Marxist discipline entails economic practices of monopolization, cronyism and any form of favoritism in the pursuit of financial, intellectual or physical access. The term ‘rent’ in its simplest form is the receiving of payment for the use of a property and elucidated in economics as the difference between what people are paid irrespective of their productivity and what they would be paid respective of their productivity. A typical example being the fertile land owner who with the same effort can utilize his own land just like other farmers to possibly higher productivity. The income received from the farmers is rent.
The ability and essentially freedom to transform knowledge into innovation is the widely celebrated attribute of capitalism and innovation into economic growth the complex and divisive contribution. Capitalism currently coupled with rent seeking in its practical form is a system that makes us optimize both our virtues and vices, and the same can certainly be said of communism or any other system as individuals can always find loopholes in systems and will always intrinsically make irrational decisions. This has prompted the advocacy of behavioral economists towards government intervention to a certain extent to curb market imperfections or in some cases instigate it. The idea and empirical practicality that capitalism provides for better optimization of our virtues than communism or perhaps a lesser optimization of our vices is the fact upon which the system is predicated as being successful.
We all love inspiring capitalist parvenu stories, but can’t quite distinguish it from rent-seeking. This can be attributed to the emergence of neoclassical economics, having conflated land and capital, the idea of economic rent began to disappear and the two bifurcated factors of production could suddenly serve the same purpose. Income from capital and land were both regarded as profit. And Given the loss of vocabulary to accurately distinguish between capitalists and rentiers, rent seeking is hence regarded as capitalism. Political scientists define rent seeking as influencing the government to get special privileges to capture income and wealth produced by others. Taking a look at the Nigerian business landscape some practices align with classical economics as proof of having rentiers masquerading as capitalists.
The banking sector is heavily involved with the Asset Management Corporation of Nigeria (AMCON) due to an inordinate amount of non-performing loans. Incorporated in 2010 AMCON has had to acquire non-performing loans from most indigenous banks in order to avert a looming financial crisis in the economy. In the space of nine years, it has amassed a portfolio of loans worth trillions of naira from obligors predominantly in the oil and aviation sector as a result of mismanagement, cronyism and nepotism, all elements of rentierism.
The burgeoning non-performing loans have been due to a several reasons, the most interesting pertaining to corporate due diligence. Companies are reported to have been given loans without attaining adequate requirements leading to illicit waivers and defeating the purpose of capitalism. Several other companies are able to get loans notwithstanding their lack of requirements largely due to relationships with bank CEOs or higher powers, this provides for an unwarranted financial advantage and hence rendering it rent-seeking.
Government contracts are an archetypal economic rent largely due to an expedient symbiosis. From crony appointments to firsthand information about bill manipulation and submission, they exhibit true characteristics of rentierism.
The oil industry is also plagued with rapacity in the form of subsidy fraud; this consists of false oil declaration in order to inflate subsidy payments, extorting or in some cases conniving with the government to gain financial/competitive advantage or in other words economic rent.
Government intervention in order to provide a competitive advantage to certain individuals/corporations is paraded as a backbone of capitalism and in a sense justifiable. Modern capitalism encompasses greed, ruthlessness and even schadenfreude. It is however imperative to note that this is somewhat in contrast with Adam Smith’s teachings. The invisible hand promotes self-interest in a totally different manner to government exploitation and laissez-faire economics denounces government involvement. But of course, the conflation of land and capital has reinvented a core aspect of capitalism as demarcated in classical economics. And although contrary to its fundamental insinuation of unproductive income, economic rent through market/government manipulation does certainly add value in a fundamentally non-capitalist manner.
True capitalist ideologues seem to have abandoned rentierism altogether, but I believe including it as a branch of capitalism may be beneficial in helping demystify the level of ferocity it has exhibited to a certain extent, factoring in as a catalyst that aids the optimization of our vices, and perhaps not to deviate from capitalism’s very own innate perseverance begetting the aforementioned ruthlessness and ferocity, and even schadenfreude. I hereby reiterate the fact that history favors capitalism allowing it to provide for better optimization of our virtues than communism or any other system or rather a lesser optimization of our vices being the fact upon which the system is predicated as being successful.

Khalid Muhammad Musa is a Public Affairs Analyst.

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