Advertisement

The Place of Rent-Seeking and Corruption in Varieties of Capitalism Models

  • Péter MihályiEmail author
  • Iván Szelényi
Chapter
Part of the International Political Economy Series book series (IPES)

Abstract

We make a critical distinction between inequalities arising from profits and wages on the one hand and inequalities arising from rents on the other. Arguably, if rent-seeking exceeds profit-seeking, it creates legitimation problems for market capitalism and may lead to economic stagnation or even state collapse. We identify three types of rent-seeking behavior which can be observed in any capitalist country, but they play a particularly important role in post-communist transition: (i) market capture by political elites; (ii) state capture by oligarchs; and (iii) capture of oligarchs by autocratic rulers through selective criminalization and the redistribution of their wealth to loyal new rich.

Keywords

Rent-seeking Ricardo’s concept of scarcity rent Inequalities Post-communist transition Corruption 

References

  1. Acemoglu, D., & Robinson, J. A. (2012). Why Nations Fail, the Origins of Power, Prosperity, and Poverty. New York: Harvard University Press.CrossRefGoogle Scholar
  2. Aghion, P., Akcigit, U., Bergeaud, A., Blundell, R. W., & Hemous, D. (2015). Innovation and Top Income Inequality. CEPR Discussion Paper No. 10659.Google Scholar
  3. Atkinson, B. A. (2015). Inequality. Cambridge: Harvard University Press.CrossRefGoogle Scholar
  4. Bhagwati, J. N. (1982). Directly Unproductive Profit-Seeking (DUP) Activities. Journal of Political Economy, 90, 988–1002.CrossRefGoogle Scholar
  5. Bohle, D., & Greskovits, B. (2012). Capitalist Diversity on Europe’s Periphery. Ithaca/London: Cornell University Press.Google Scholar
  6. Bourdieu, P., & Passeron, J. C. (1970, 1977). Reproduction in Education, Society and Culture. London: Sage.Google Scholar
  7. Buchanan, J. M., Tollison, R. D., & Tullock, G. (Eds.). (1980). Toward a Theory of Rent Seeking Society. Texas: Texas A & M. University Press.Google Scholar
  8. Clark, J. B. (1899, 1927). The Distribution of Wealth, a Theory of Wages, Interest and Profits. New York: Macmillan.Google Scholar
  9. Folsom, B. W. (1987, 2010). The Myth of the Robber Barons. Herndon/Virginia: Young America’s Foundation.Google Scholar
  10. Furman, J., & Orszag, P. (2015). A Firm-Level Perspective on the Role of Rents in the Rise in Inequality. Manuscript. https://www.whitehouse.gov/sites/default/files/page/files/20151016_firm_level_perspective_on_role_of_rents_in_inequality.pdf
  11. Gimpelson, V., & Treisman, D. (2015). Misperceiving Inequality. NBER Working Papers No. 21174.Google Scholar
  12. Greenwood, J., Guner, N., & Kocharkov, G., & Santos, C. (2014, January). Marry Your Like, Assortative Mating and Income Inequality. NBER Working Paper, 19829.Google Scholar
  13. Hankiss, E. (1990). East European Alternatives. Oxford: Clarendon Press.Google Scholar
  14. Hodgson, G. M. (2014). Piketty Has Redefined Capital, After 200 Years of Confusion. http://theconversation.com/piketty-has-redefined-capital-after-200-years-of-confusion-25770
  15. Huang, P. (2011). Chongqing: Equitable Development Driven by a ‘Third Hand’? Modern China, 6, 559–622.Google Scholar
  16. Josephson, M. (1934). The Robber Barons. New York: Harcourt Inc.Google Scholar
  17. Keynes, J. M. (1920, 1971). The Economic Consequences of the Peace. New York: Harper Torchbooks.Google Scholar
  18. Kornai, J. (2013). Dynamism, Rivalry, and the Surplus Economy. Two Essays on the Nature of Capitalism. Oxford: Oxford University Press.CrossRefGoogle Scholar
  19. Krueger, A. O. (1974). The Political Economy of Rent Seeking Society. American Economic Review, 64(3), 291–303.Google Scholar
  20. Kuznets, S. (1955). Economic Growth and Income Inequality. American Economic Review, 45(1), 1–28.Google Scholar
  21. Magyar, B. (2016). Post-Communist Mafia State. Budapest: Central European University Press.Google Scholar
  22. Marshall, A. (1920, 1949). Principles of Economics. London: Macmillan.Google Scholar
  23. Marx, K. (1867, 1954). Capital. A Critique of Political Economy. Moscow: Progress Publisher.Google Scholar
  24. Mihályi, P., & Szelényi, I. (2016a). Wealth and Capital: A Critique of Piketty’s Conceptualisation of Return on Capital. Cambridge Journal of Economics, 12.  https://doi.org/10.1093/cje/bew054.
  25. Mihályi, P., & Szelényi, I. (2016b, August). Two Different Sources of Inequalities: Profits and Rents in Advanced Market Economies. Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences Discussion Papers, MT-DP – 2016/30.Google Scholar
  26. Mihályi, P., & Szelényi, I. (2017). The Role of Rents in the Transition from Socialist Redistributive Economies to Market Capitalism. Comparative Sociology, 16, 13–38.  https://doi.org/10.1163/15691330-12341419, ISSN: 1569-1322 E-ISSN: 1569-1330.CrossRefGoogle Scholar
  27. North, D. C., Wallis, J. J., & Weingast, B. R. (2012). Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History. Cambridge: Cambridge University Press.Google Scholar
  28. Oxfam. (2015, January 19). Wealth, Having It All and Wanting More. Downloadable from http://policy-practice.oxfam.org.uk/publications/wealth-having-it-all-and-wanting-more-338125
  29. Pareto, V. (1916, 1935). The Mind and Society. (Trattato Di Sociologia General). New York: Harcourt, Brace.Google Scholar
  30. Pearson, H. (2016). The Life Project. Allen Lane.Google Scholar
  31. Piketty, T. (2013, 2014). Capital in the Twenty-First Century. Cambridge: Harvard University Press.Google Scholar
  32. Pirvu, D. (2015). Corruption: Profile of Political Companies in Romania. Acta Oeconomica, 65(Special Issue 1), 65–82.CrossRefGoogle Scholar
  33. Polányi, K. (1944). The Great Transformation. New York: Farrar and Rinehart.Google Scholar
  34. Proudhon, P. J. (1840, 1994). What Is Property? An Inquiry into the Principle of Right and Government. Cambridge: Cambridge University Press.Google Scholar
  35. Reeves, M., Deimler, M., Stalk, G., & Pasini, F. L. S. (2012). BCG Classics Revisited. The Rule of Three and Four. https://www.bcgperspectives.com/content/articles/business_unit_strategy_the_rule_of_three_and_four_bcg_classics_revisited/
  36. Ricardo, D. (1817, 2004). Principles of Political Economy and Taxation. Mineola: Dover Publications.Google Scholar
  37. Roemer, J. (1982). A General Theory of Exploitation and Class. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
  38. Solow, R. M. (2014, April 22). Thomas Piketty Is Right. New Republic.Google Scholar
  39. Solow, R. M. (2015, August 11). The Future of Work, Why Wages Aren’t Keeping Up? Pacific Standard.Google Scholar
  40. Sorensen, A. (2000). Toward a Sounder Basis for Class Analysis. American Journal of Sociology, 108(6), 1523–1558.CrossRefGoogle Scholar
  41. Staniszkis, J. (1991). Political Capitalism in Poland. East European Politics and Societies, 1, 127–141.Google Scholar
  42. Stiglitz, J. (2012). The Price of Inequality. How Todays Divided, Society Endangers Our Future. New York: W.W. Norton.Google Scholar
  43. Stiglitz, J. (2015). New Theoretical Perspectives on the Distribution of Income and Wealth Among Individuals. Parts I–IV, NBER Working Paper Series, 21189, 21190, 21191, 21192.Google Scholar
  44. Summers, L. (2016). Corporate Profits Are Near Record Highs. Here’s Why That’s a Problem. http://larrysummers.com/2016/03/30/corporate-profits-are-near-record-highs-heres-why-thats-a-problem/. Downloaded 30 Mar 2016.
  45. Szalai, E. (1989). The New Elite. Across Frontiers, 5(Fall–Winter), 25–31.Google Scholar
  46. Szelényi, I. (2010). The New Grand Bourgeoisie Under PostCommunism. Central Europe, Russia and China Compared. Working Paper No. 2010/63. Helsinki: United Nations University, World Institute for Development Economic Research.Google Scholar
  47. Tullock, G. (1967). The Welfare Costs of Tariffs, Monopolies and Theft. Western Economic Journal, 5, 224–232.Google Scholar
  48. Voszka, É. (1993). Spontaneous Privatization in Hungary: Preconditions and Real Issues. In J. Earl, R. Frydman, & A. Rapaczynski (Eds.), Privatization in the Transition to a Market Economy (pp. 89–107). New York: St. Martin’s Press and Pinter Publishers.Google Scholar
  49. Weber, M. (1920, 1978). Economy and Society. Berkeley: California University Press.Google Scholar
  50. Weil, D. N. (2015). Capital and Wealth in the Twenty-First Century. American Economic Review, 105(5), 34–37.CrossRefGoogle Scholar
  51. Whyte, M. K. (2010). Myth of the Social Volcano. Stanford: Stanford University Press.Google Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Department of MacroeconomicsCorvinus University of BudapestBudapestHungary
  2. 2.Hungarian Academy of SciencesBudapestHungary
  3. 3.Yale University (retired)New HavenUSA

Personalised recommendations