The so-called ‘Fiscal Cliff’ has prompted Michael Hudson to analyse why America’s economy (and therefore the world’s) is in such a mess. And the basic reason is a problem familiar to Liberals for well over a century: rent seeking. In this instance, it is the self-interest of the banking and financial sector, justified by the ‘junk economics’ promoted by Wall Street’s lobbyists:
Today’s central financial problem is that the banking system lends mainly for rent extraction opportunities rather than for tangible capital investment and economic growth to raise living standards. To maximize rent, it has lobbied to untax land and natural resources. At issue in today’s tax and financial crisis is thus whether the world is going to have an economy based on progressive industrial democracy or a financialized and polarizing rent-extracting society.and:
We are experiencing the end of a myth, or at least the end of an Orwellian rhetorical patter talk, about what free markets really are. They are not free if they are to pay rent-extractors rather than producers to cover the actual costs of production. Financial markets are not free if fraudsters are not punished for writing fictitious junk mortgages and paying ratings agencies to sell “opinions” that their clients’ predatory finance is sound wealth creation. A free market needs to be regulated from fraud and from rent seeking.In other words, Wall Street (and its equivalents in the City of London and elsewhere) is creating a rentier economy and has become little more than a parasite on the productive economy. And Michael Hudson should know; he’s a Wall Street financial analyst.