Our legal system has many quirks and contradictions that defy easy explanation. It seems strange that doctors are allowed to mutilate the genitals of infant boys, yet they are not allowed to prescribe medicinal cannabis products that would save lives. This article will discuss another activity of questionable morality: rent-seeking.
Rent-seeking is an attempt to increase one’s personal wealth without creating or producing any. It is the use of resources, such as land, to extract economic benefits (known as rents) from others without making any contribution to the overall economic good.
The most common form of rent-seeking today is found in residential property. There are some 625,000 rented houses in New Zealand today, and the average weekly rent is $390 a week for small houses and $525 for larger ones. Assuming an average rent of $480 per week, rents on residential property bring in some $15,600,000,000 every year in New Zealand alone.
Rent-seeking is correctly understood to be a form of parasitism. As with other forms of parasitism, rent-seeking is a net negative for the overall health of the system. Not only does it suck money away from the productive and gift it to the unproductive, it also incentivises anti-social behaviour. Economically, it disrupts market efficiencies, limits competition and creates artificially high barriers to entry for market participants.
Despite being a form of parasitism, rent-seeking is a long and honoured tradition in New Zealand. Many a fortune has been built in this country by taking advantage of people’s need for shelter from the elements. As a previous essay here has discussed, there’s nothing as profitable as human suffering, and being exposed to the elements is one of the worst kinds of suffering.
The beauty of rent-seeking is that it carries little risk. All you need to do is to own property and the Police will keep people away from it unless those people pay you money. As long as there are men willing to enforce other people’s claims to property in exchange for a wage (and there always will be), then owning some of that property is effectively a licence to print money.
In reality, there’s little difference between a landlord charging someone rent on the threat of throwing that person out into the street, and an armed robber charging someone their wallet on the threat of stabbing them in the guts. In both cases, the power to charge a fee or levy comes from the power to cause extreme physical suffering. Both are a form of extortion.
Given the apparent net harm of trying to extract wealth from the system instead of creating it, the question has to be asked: why is rent-seeking legal?
The main reason why rent-seeking is legal is simply because the rent-seekers make the laws. It was they who, way back in the day, invented Government by paying some weak-minded arse-lickers to defend their property against outsiders (this is all that Government is). Those arse-lickers bifurcated into the Police and security services (whose prime directive is to protect and serve property owners) and the Government (whose prime directive is to organise the protection of property owners).
At the end of the day, the Government is there to manage the affairs of the rich, and they don’t care if the poor are impacted adversely. People too poor to own property don’t have a seat at the table. This is the same reason why businesses were compensated directly in the form of wage subsidies, rather than workers being given a universal basic income – the wealthy take the lion’s share, the poor get the scraps.
This arrangement has created a great deal of resentment, however. Those forced to pay rent on threat of being thrown into the street don’t feel much less resentful about it than those forced to give up their wallet on threat of being stabbed. The fact that rent-seeking is socially accepted in our culture barely softens the blow. It still feels like a robbery.
As is usually the case for such abuses of power, this resentment has built to the point where it threatens to spill over.
The Sixth Labour Government has made it illegal to evict tenants from residential property for the next three months at least. Some groups of tenants have realised that, if they collectively refused to pay rent until the end of the coronavirus crisis, they could pretty much get away with it. There’s no way to enforce an eviction during the lockdown, so anyone who refuses to pay rent from now on can get at least three months of living rent-free.
Other people and places overseas have already declared rent strikes on account of that the coronavirus has made earning their usual income, and therefore paying their usual expenses, impossible. Housing Minister Megan Woods has said “there was also an obligation on tenants not to abuse the situation,” but it’s hard to see why, other than the possible threat of being blacklisted in the future.
The only reason why property owners can get tenants to pay them rent in the first place is because they have the power to force them to on threat of eviction. If that power is taken away, there’s little reason for those who had been coerced into paying rent to continue playing ball.
Perhaps the fairest outcome would be to continue to allow the extraction of rents, but to levy a 90% tax on incomes derived from it. An outcome similar to this was discussed in a previous article here that proposed the introduction of Georgist-style taxes on rent-seeking activity.
In short, rent-seeking is legal because it always has been, and because we’ve never questioned it. We’ve never been able to, because not only did the rent-seekers control the law enforcement forces but they also controlled the apparatus of propaganda, and these combined to normalise the practice. The legitimacy of rent-seeking doesn’t survive scrutiny, and there is a very real chance that it will be as illegal as armed robbery later this century.
If you enjoyed reading this essay, you can get a compilation of the Best VJMP Essays and Articles of 2019 from Amazon for Kindle or Amazon for CreateSpace (for international readers), or TradeMe (for Kiwis). A compilation of the Best VJMP Essays and Articles of 2018 and the Best VJMP Essays and Articles of 2017 are also available.