Sat, Jan 11, 2014 - Page 8 News List

Rent-seeking demands civic action

By Huang Kuo-chang 黃國昌

Rent-seeking is the attempt to increase one person’s share of wealth rather than contributing to actual wealth creation. For a long time, Taiwan has been a rent-seeking society, especially through the use of political power to allow certain individuals to obtain benefits that do not have any productivity value.

The most troubling aspect of this is not simply that it involves a waste of society’s resources, nor that it does not create any additional value. It is that it leads to the unfair and unjust regressive redistribution of wealth. It diverts more wealth into the hands of the wealthy. This redistribution allows a powerful minority to get their hands on public resources and use them for their own cause at the expense of society’s welfare.

Despite the transition to democracy and the establishment of the rule of law, Taiwan remains fertile land for rent-seeking by the rich and powerful. Loopholes in the current system are being exploited, and unjust and unfair behavior is clothed in a mantle of legality. It is also done covertly. Power is used for personal gain using a mechanism that is never explicitly stated but is tacitly understood by the parties concerned.

Rent-seeking through small abuses of power, such as in the separate bribery scandals involving former Cabinet secretary-general Lin Yi-shih (林益世) and Chinese Nationalist Party (KMT) Taipei City Councilor Lai Su-ju (賴素如), anger the public just as they test Taiwan’s judicial system and its ability to investigate and pursue corrupt behavior and liability for breaking the law.

However, the true crisis and intimidating challenge facing the nation now is larger scale, corporate-level rent-seeking that results in considerable gains, to a degree bordering on absurd, for a rich and powerful minority at the expense of ordinary Taiwanese — to the extent that it imperils future of generations.

The behavior is evident at the local and central government levels.

On the local level, powerful officials, and even academics and so-called experts, facilitate the enclosure of land by the government for the benefit of big business or act as rubber stamps for environmental impact assessments. Material benefits gained from forced evictions — of dubious legality — and from improper development mostly finds itself in the pockets of a few. Thanks to the adverse selection effect, the review procedures initially devised to prevent this unjust activity fall foul of Gresham’s law, which states that the bad will invariably drive out the good. That is, academics and experts have an incentive to lend their support to rent-seeking behavior, make it appear as if it were perfectly legal and engineer a situation in which they will profit.

At the central government level, the executive branch, with its special powers over processes such as the consolidation of financial institutions and the licensing of electronic media outlets, is a hotbed for mutual back-scratching between the corporate world with its control over scarce resources and the government. The legislature, with its long-standing reputation as a place where deals are made and where everything is negotiable, is a veritable den of rent-seeking.

Meanwhile, the judicial and control branches of government are responsible for oversight and systemic checks and balances.

However, since those who are supposed to be providing oversight are also on the lookout for ways to line their own pockets or otherwise secure some form of benefit, they too have been known to engage in exchanges with those in power — those whom they should be keeping tabs on — whenever it is possible to do so discreetly. When this happens, there is a risk of a systemic crisis.

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