Rentier Wealth And Wealth Creation: Why The Economy Is Stagnating

If you want to understand why our economy is stagnating and wealth inequality is rising, look at the rise of rentier skims and the resulting decline in wealth creation.

To understand why the real economy is stagnating, we have to understand the critical difference between rentier wealth and wealth creation. Rentier wealth is skimmed by fees that provide little to no value to the to the person paying the fee.

The classic example is a fee collected to pass from one fiefdom's border to the next: no value is provided to the person paying the border fee; it is a rentier skim that transfers wealth from serfs to the fiefdom's landowning nobility.

In the modern economy, rentier skims take a variety of forms. The government is adept at levying rentier skims. Harsh penalty fees piled on top of minor traffic violations are one example; another is extra fees to "expedite" services government is supposed to provide in a timely manner.
A California architect recently recounted the new fee structure in a Northern California municipality: the fee to have the city planning department review your building permit application leaped to $6,000. Since the department warned applicants it will take at least six months for the agency to process the application, they kindly offer an alternative: for a mere $4,000 more (an "expedited fee"), the applicant can get his application reviewed in a mere four months rather than six months. This is pure rentier skim.

Planned obsolescence provides many other examples of rentier skims. Microsoft's operating systems and hardware makers both operate a form of rentier skim, in that each new OS and device offers marginal benefits (if any) in terms of productivity. The rare printer that doesn't break down in a few years is obsoleted as software drivers are no longer available on the new OS.

Cartels and quasi-monopolies offer a wealth (ahem) of rentier skims. Monopolies can raise prices and degrade services at will. Cartels maintain price controls while denying they do any such thing. Compare the monthly healthcare insurance fees offered by the handful of providers in your area--the differences are either cosmetic or result from differences in benefits.

Finance offers the richest opportunities for rentier skim. Load up college students with tens of thousands of dollars in high-interest student loans for marginal educations that could be provided at a rentier skims and the Upper Caste (Clerisy class) that serves them (for example, college administrators). The resulting wealth disparity is made visible in this inverted pyramid of wealth:

If you want to understand why our economy is stagnating and wealth inequality is rising, look at the rise of rentier skims and the resulting decline in wealth creation from productive investment.

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Written By: Charles Hugh Smith