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Description Of Rent Seeking As Applied To Political Corruption

1975 words - 8 pages

Brief definition of "rent": To avoid misunderstandings, "rent" in this context has nothing to do with "rent" in the sense of rent for land or property. In the modern context of "rent seeking", rent strictly speaking means financial income which is not matched by corresponding labour or investment in the market sense. Rent in this sense arises from manipulation of the economic environment (e.g. monopolies, import and trading restrictions, and subsidies).As resources are consumed in rent seeking which are then no longer available for productive activities, rent seeking involves heavy social costs. Rent seeking requires that it be possible and advantageous for the relevant actor to do something which is not advantageous for the system as a whole.As a rule of thumb, this requirement is more likely to be met under bureaucracies remote from the market than in competitive systems of organisation. This does not, however, mean that every bureaucracy is automatically burdened by rent seeking and that every company is automatically efficient. Rent seeking constitutes a form of political behaviour, which can be described as lobbying superior regulatory bodies.Rent seeking and corruption: Rent seeking is extensively linked with corruption (although politicians' favours to clients or lobbying by interest groups are not in themselves corrupt behaviour - a certain exchange of information between politicians and the population is essential for the functioning of the system). Rent seeking can be described as corruption at the point where politicians and bureaucrats specifically exploit their current opportunities to manipulate the existing institutional framework so that in future it serves their own private interests.Corruption is also present if illegal financial benefits - e.g. bribes - are used for rent seeking. Here, members of "developed" nations should not be too quick to point the finger at developing nations. Certain western democracies display exactly the same problems, as shown by the unresolved problem of donations to political parties.Throughout the 20th century, the government came to play a larger and larger role in our economy. Through taxes, spending, and regulation, the government has become an integral part of business planning. As firms compete in the political arena rather than in the marketplace, economic growth is hampered and consumers and taxpayers bear the burden of inefficient policies designed to protect favoured businesses. Lobbying has become a million Euro industry as companies jostle for protective legislation, so there should be little surprise when stories of "undue influence" bubble to the surface.Profit seeking in the marketplace is efficient and fosters economic growth because serving consumers better or finding more efficient means of production generates increased profits. However, rent seeking tends to be inefficient and harmful to economic growth because resources are diverted from the production of goods and services in...

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