The Art of Political Rip-offs

MORE than two thousand years ago, Li Bing was appointed as the governor of China’s Shu Province.  His legacy is a canal: Li diverted water cascading down the Minjing River from Tibet. His canal waters the plains of Chengdu to this day. He initiated a piece of infrastructure that delivered a permanent increase in welfare for the peasants working the fields, by providing a steady stream of water for their crops. The original investment has repaid itself in terms that cannot be calculated. Who can doubt that the canal covered its costs? Since 276 BC it helped to generate additional food out of the soil, creating a “Land of Abundance”. Dykes and dams ensured homes and fields were never again subjected to floods and droughts.

But such monumental investments can be a mixed blessing. To maximise the social value delivered by investments like that canal required more than the engineering genius of Li Bing. If the gains were not shared on an equitable basis, the canal could be turned into a tool for exploiting the peasants who farmed the 25,000 square kilometres that were irrigated.

The water needed to flow alongside wise financial policy. Otherwise, the net gains – what Marxists call the “surplus” – would attract warlords. Those social renegades were always ready to unsheathe their swords and go a’huntin for the rents that emperors failed to collect and recycle back into the community to fund the common good. If we cannot compute the rents generated by the canal, we can examine more recent examples to gain a sense of the role played by infrastructure in enhancing a society’s productivity.

Take the case of London’s Blackwall tunnel. It was dug beneath the Thames in 1897. Before it was opened, the productivity of nearby locations was measured by the selling price of land: £3 an acre. After it opened, the price jumped to £200 an acre (Tyler 2013: 158). But that increase in productivity was not shared by all the taxpayers who funded the excavation beneath the river. Over the past century, commuters who travelled into North London via the tunnel pocketed the enhanced productivity that they did not fund. Result: the burden on taxpayers was higher than it need have been.

The tunnel illustrates the way in which “public goods” like schools and highways are converted into instruments for redistributing a nation’s income. A democratic mandate does not exist for the policy of transferring wealth from those who create value to those who exercise the power to extract a nation’s rents. That is why the process is covert. Politicians fabricate myths about the need to raise taxes to pay for such projects without disclosing the ulterior motive: the quest to enrich those who own land, or who can manipulate the credit-creating system to share in the spoils.

One justification for increasing investment in infrastructure is the need to create jobs. But instead of improving people’s welfare, the boom in investment that is now in the making will inflict enormous costs. The world is on the cusp of one of the greatest redistributions of income in history.

Economists at McKinsey Global Institute estimate that, just to keep up with projected global growth of GDP, $57 trillion needs to be spent on infrastructure by 2030 (Dobbs et. al. 2013). Governments are planning investments that will turn into a rip-off on a scale unparalleled in the annals of capitalism. Natural habitats will be wrecked, and cultures impoverished, in pursuit of the capital gains from tax-funded investments. Here, we focus on the impact on culture.

Culture is a composite of two elements.

• The software consists of the customs and practices into which each new generation is schooled. Children are inducted into their community’s language, belief system, moral code and “manners”.
• The hardware consists of physical amenities like the highways, water and energy utilities, monumental structures (administrative and spiritual centres). These are public in nature, distinct from the assets owned for the private use of individuals.

Friction arises when the boundary that divides private from public assets is not respected. That boundary was eviscerated after Europe’s States were privatised some five centuries ago. A perverse model of statecraft was incubated that was then embedded (through colonialism) across the rest of the world.

Two hundred years ago, the infrastructure that supported Britain’s Industrial Revolution accelerated the debasement of culture’s software. Decisions were made to accommodate the appetites of those who dedicated themselves to the art of living off their community’s rents. Those people used infrastructure (like mass transit systems) to short-change fellow citizens by engaging in a psycho-drama. The trick was to persuade others to fund the infrastructure that would increase the rents going into their pockets.

The lead role in facilitating that trick was played by those who manipulated the statecraft of greed (Thesis #1). The drama, in the form of multiple rip-offs, illuminates how the public’s finances served as a malevolent force, one that now disrupts communities across planet Earth.