Hollowing Out

One of the things I've been observing about our society is that we are hollowing ourselves out. It's more than just a matter of prioritizing appearance over substance, though that is a big part of it. I may explore this idea more in future posts because I see this happening in so many facets of our lives--communication, problem solving, product design, education, religion, architecture. Everywhere, really.

Here's a piece of it related to the hollowing out of our economy that I came across in this article adapted from Joseph Steiglitz' The Price of Inequality.

The word "rent" was originally used, and still is, to describe what someone received for the use of a piece of his land . . . The term "rent" was eventually extended to include monopoly profits . . . In time, the meaning was expanded still further to include the returns on other kinds of ownership claims. If the government gave a company the exclusive right to import a certain amount of a certain good, such as sugar, then the extra return was called a "quota rent." The acquisition of rights ot mine or drill produces a form of rent. So does preferential tax treatment for special interests . . .

The magnitude of "rent seeking" in our economy, while hard to quantify, is clearly enormous. Individuals and corporations that excel at rent seeking are handsomely rewarded. The financial industry, which now largely functions as a market in speculation rather than a tool for promoting economic productivity, is the rent-seeking sector par excellence. Rent seeking goes beyond speculation. The financial sector also gets rents out of its domination of the means of payment--the exorbitant credit- and debit-card fees and also the less well-known fees charged to merchants and passed on, eventually, to consumers . . . 

In recent years, the financial sector has accounted for some 40 percent of all corporate profits. This does not mean that its social contribution sneaks into the plus column, or comes even close. The crisis showed how it could wreak havoc on the economy. In a rent-seeking economy such as ours has become, private returns and social returns are badly out of whack . . .Rent seeking makes nothing grow. Efforts are directed toward getting a larger share of the pie rather than increasing the size of the pie. But it's worse than that: rent seeking distorts resource allocations and makes the economy weaker. It is a centripetal force: the rewards of rent seeking become so outsize that more and more energy is directed toward it, at the expense of everything else.

Later in the article, Steiglitz actually refers to a hollowing out, referring to issues with the wage structure in the Soviet economy before it collapsed and what we can learn from it.

The widespread sense by workers in the Soviet Union that they were being mistreated in exactly this way--exploited by managers who lived high on the hog--played a major role in the hollowing out of the Soviet economy, and in its ultimate collapse. As the old Soviet joke had it, "They pretend to pay us, and we pretend to work."