Thesis Number: #5 (Page 4 of 9)
New Layers of Rent-seekers
Sovereign power was weakened as landowners diminished the revenue collected by the Land Tax. This was the basis of the creation of a Weak State, which had to increasingly rely on rapacious taxes that reduced the nation’s productivity. One consequence was that government revenue would be out of synch with the funding needs of the State. Thus, deficit financing became an art of governance, enriching bankers and impoverishing the nation’s taxpayers.
The slow-motion coup d’état against the English State was executed through many dynastic manoeuvrings, including the Civil War in the 17th century. Sovereign authority was converted into private power. Morality was compromised so that the landed elites might satiate their appetites. Communities were driven into cultural limbo-land, the twilight zone between nature and society. Given the avarice on public display in courtly circles, it is not surprisingly that others became infected by the culture of greed, and sought ways to join the feeding frenzy.
The 18th century Lawyers occupied the junction boxes in the power structure. They crafted the laws that transformed the public’s finances. They schemed to protect their profession from competition, and charged super-sized fees for attending to the needs of the estates of the aristocracy. As they grew rich, they invested in land to acquire gentry status.
The 19th century Many “Captains of Industry”, instead of recycling profits back into their enterprises, purchased social status by investing in landed estates. With the aid of lawyers, they converted private enterprises into legal “personalities”, to reduce their tax liabilities.
The 20th century The Welfare State was not intended to turn the working class into rent-seekers. In Britain, successive Labour governments did try to neutralise the effects of rent privatisation. They failed, because their laws to restore the social status of land and rent were framed in terms of the socialist, not the market, paradigm (Blundell 1994). Margaret Thatcher bribed the tenants of public housing by granting them the right to buy their homes at below market prices. “Trading up the property ladder” to capture windfall capital gains became the route to riches for the middle class.
The 21st century Low-income families were cynically lured into the housing market by artificially low interest mortgages which they could not afford; their homes were repossessed after the financial crisis of 2008. David Cameron’s Coalition government inflicted austerity on the population while remaining committed to “the cult of home-ownership”, as Sir Samuel Brittan explained in the Financial Times (Nov. 29, 2013). Accumulation of buy-to-let property portfolios was favoured by investors: returns exceeded those from investments in the value-adding sectors.