Chief of the Rentier Class and his Economic Transformation

In practical sense, the term rent seeking or rent seeker or rentier classs- refer to the activity by some people capturing offices of state and using the power of the state to capture economic benefits. So, the rentier class consists of the people making use of their official and political positions to capture economic benefits. They get these benefits not by actually providing or actually producing a service or product, but by virtue of holding a political or bureaucratic position.

So what? So the above arrangement leads to disparities in income not due to natural abilities or difference in character. Such arrangement becomes objectionable and unconscionable when the disparities in income do not arise because of abilities or character. The lazybones and laggards get ahead of the industrious and cleverer because they have found a way to cut corners by earning state positions. And so because of the positions they hold, in the offices of state, political positions and being proximate to the corridors of power allow them to get ahead of others.

Generally speaking that is why some people are very critical of the DEB because it allows and perpetrates such `economic arrangements’. Those who get ahead are those having political and bureaucratic powers and their cronies and fronts. We don’t believe in organic growth. We want to give those bumiputeras short cut solutions by giving them licenses and monopolies instead of creating the culture of organic growth. We prefer the picking winners strategy instead of allowing the people go through the learning curve and process and making them into the rugged and robust society. We have created wimps who can’t take on the world and we create a system that reinforces the people to be overly dependent on the state.

I am reminded of an instructive story of an n economics professor who failed an entire class to disprove the students’ insistence that some form of centrally directed economic arrangement would ensure that no one would be poor and no one would be rich. In other words a centrally directed arrangement by people who also insist the age of big government is still very much alive and kicking will be an equalizer.

So the professor informed from now on, he will give the same average grades in exams so that everyone will receive the same grade so no one will fail but no one will receive an A.

After the first test, the grades were averaged and everyone got a B. The students who studied 'hard' were upset and the students who studied 'little' were happy. As the second test rolled around, the students who studied little had studied 'even less' and the ones who studied hard decided they wanted a free ride too so they studied 'little'. The second test average was a 'D'. No one was happy. When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that "central command economy  would also ultimately 'fail' because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

 A simple story has provided us with some useful insights on how to manage society. 

1.     You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2.     When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Take the case of the FGV listing recently. The people actually involved in producing the economic resource, i.e. the settlers and felda workers get 5.5 % of the benefits while those holding positions( in UMNO) and in government and those who hold executive positions in Felda get the lion share of the shares issued. Also benefiting are those in close proximity to those in first line of power. We know them by the term cronies. So friends of the deputy trade minister were allocated handsome number of shares because he has plans to move higher up the political ladder.

This is the kind of economic arrangements perpetuated by UMNO and BN that create mistrust and animosity and lower economic output eventually.

Most inimical is the creation of an entire race of dependents on the benevolence of big government. So next time anyone comes along and says, THE AGE OF BIG GOVERNMENT IS OVER, let us all show him the patriotic one Malaysia finger and in unison say, up yours!