For anyone wanting to understand the true nature of the U.S. economy, a useful concept is “rent seeking.” It’s a term from economics, and honestly, one that might have been invented to make a “leech” into an attractive worm. If you were point your finger at an executive from CIGNA or UnitedHealth or Verizon or AT&T and yell “Rent seeker! Rent seeker!,” they would not care. However, “Leech! Leech!” might get their attention.
Here’s the concept roughed out in economic terms, and please bear with me as I want to keep it simple so I can understand it too. I won’t be too tedious.
Rent-seeking is expending resources on political activity to increase one’s share of existing wealth without creating wealth. The effects of rent-seeking are reduced economic efficiency through poor allocation of resources, reduced wealth creation, lost government revenue, increased income inequality, and, potentially, national decline.
America’s health insurance industry is a pure rent-seeking, or leech industry. They built a fence around the health care system, charge rent for access, and do nothing to make the system better. Quite the opposite, their primary function is to limit access to the system while sucking dollars out of it. They are highly inefficient by design.
This can only happen in a monopoly or oligopoly environment. Competition naturally minimizes rent seeking. New entrants into the market seek to gain advantage by offering better service and products. Consequently, most large American corporations are in the business of buying up and avoiding competition rather than making themselves into better companies.
Internet Service: If you currently get your Internet service from a company that sends it to you via a coaxial cable or phone line, you are a victim of leeches, excuse me, rent seekers. Most likely they are charging $50-70 a month, an outrageous price. Comcast, Time Warner Cable, and Verizon currently control that “last mile,” the place in the transmission network where signals grind to a halt, where everything slows down. They need to fix that, they need to replace copper with fiber optic, which removes upper limits on speed. But they won’t. It’s expensive, they don’t want to, and they don’t have to. They have you where they want you.
Technology will prevail, and we’ll slowly work around the slow-footed giants. But they will fight progress by use of the revolving door to control regulatory agencies and the private campaign finance system.
The recent ruling on “net neutrality” was a small victory, largely due to Netflix, but the ultimate answer is to break up the monopolies. We need an assertive government to interfere in the marketplace (big time) to make it more efficient. We need to have service from many small competing companies while at the same time encouraging cities and towns to build their own infrastructure, as Chattanooga has done.
But the mega-corporations can write their own ticket and make their own rules right now. So for the time being, local governments are the best option for a powerful Internet, as no private sector company is able to budge the giants off their pedestal.