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“No one makes a billion dollars. You TAKE a billion dollars. You take it from your workers…you plunder it from the environment…you strip it using patents/protections” (Stephanie Kelton tweet(1))
Rent-seekers: Who gets the Free Lunch?
Many writers have noted that capitalism concentrates wealth and power into a small number of hands. Up until approximately 1890, economists understood that a key part of the economic system is what are known as rents.(2) This means unearned income, or excess profits. Recent economic theory does not talk about rents very much – there is an assumption that all income is earned. The people and companies who receive excess wealth from rents are usually described by the media as wealth-creators, but this is partly propaganda. Many of them are ‘rent-seekers’ (also known as rentiers) – people who know how to take money from the system because they understand how it is rigged.
Critical economists sometimes discuss the most important ways in which big companies can extract wealth from society. This includes Crony Capitalism where big companies receive subsidies from governments; monopoly and oligopoly, where companies are so dominant in each industry that they can limit competition, charge higher prices and make excess profits; and externalities where companies do not pay the true cost of their activities, such as pollution, global warming and the destruction of the environment.
This post explains other methods that big companies use to extract wealth from society, and to maintain their dominance. This gives a brief overview of the extent to which the system is rigged in favour of the biggest and most powerful companies.
Economies of scale – Size Matters
As a general rule, the more you produce of something, the more cheaply you can make each item.(3) This means that in many industries it is impossible for small companies to produce things as cheaply as big companies. There are a number of techniques that companies use to establish and maintain dominance.
Spend, spend, spend to become dominant
Big companies have deep pockets to enable them to invest in new industries,