Winston
Platinum Member
The biggest problem in our economy today is rent seeking. In an effort to explain the concept of rent seeking I thought revisiting the Boston Tea Party might be constructive. Then we can find concrete examples of rent seeking in our current economy.
The Tea Act was not about taxes. At the time the East India company had huge stores of tea quickly rotting. The royal family and almost all of the upper house in England were shareholders in the East India Company. In a word, at the time, the company was too big to fail. In order to protect the company the Tea Act was passed, which reduced the tax that the East India Company paid and provided them with a significant competitive advantage. Not only could colonists now purchase British tea cheaper than Dutch tea, they could purchase British tea at half the price of the British.
Rent seeking is an attempt to increase one's wealth without producing any additional wealth. The tea was already produced. By getting the British government to pass legislation the East India Tea company was able to sell the tea they otherwise would not have been able to sell and it provided them with a competitive advantage that no other tea suppliers could attain.
The “tea partiers” were not protesting a tax hike, but a corporate tax break.
10 Things You May Not Know About the Boston Tea Party - History in the Headlines
Now, to modern times. We actually have something in place that is precisely the same thing as the break the British gave the East India Company. It is called a Miscellaneous Tariff Bill. We pass dozens of them every year. It is a law that temporarily reduces or suspends tariffs to goods imported into the United States.
It works like this. A well placed donation to a congressman can get that congressman to propose a MTB. Take Roger Millikan, owner of Millikan and Company, one of the largest textile and chemical companies in the United States. He donated $1,300 to the 2010 campaign of deficit hawk Mick Mulvaney. Mulvaney promptly proposed two MTB's listing Millikan and Company as the interested entity. The value of those two MTB's was 2.6 MILLION dollars.
So, Millikan and Company does not produce anything additional and reaps 2.6 million dollars in additional wealth. Does anyone really expect a company to invest in expanding their company and creating additional wealth when they can get a two and a half million dollar return on a $1,300 donation to a Congressman?
The founders would have revolted long long ago. Americans today don't deserve to call themselves Americans.
The Tea Act was not about taxes. At the time the East India company had huge stores of tea quickly rotting. The royal family and almost all of the upper house in England were shareholders in the East India Company. In a word, at the time, the company was too big to fail. In order to protect the company the Tea Act was passed, which reduced the tax that the East India Company paid and provided them with a significant competitive advantage. Not only could colonists now purchase British tea cheaper than Dutch tea, they could purchase British tea at half the price of the British.
Rent seeking is an attempt to increase one's wealth without producing any additional wealth. The tea was already produced. By getting the British government to pass legislation the East India Tea company was able to sell the tea they otherwise would not have been able to sell and it provided them with a competitive advantage that no other tea suppliers could attain.
The “tea partiers” were not protesting a tax hike, but a corporate tax break.
10 Things You May Not Know About the Boston Tea Party - History in the Headlines
Now, to modern times. We actually have something in place that is precisely the same thing as the break the British gave the East India Company. It is called a Miscellaneous Tariff Bill. We pass dozens of them every year. It is a law that temporarily reduces or suspends tariffs to goods imported into the United States.
It works like this. A well placed donation to a congressman can get that congressman to propose a MTB. Take Roger Millikan, owner of Millikan and Company, one of the largest textile and chemical companies in the United States. He donated $1,300 to the 2010 campaign of deficit hawk Mick Mulvaney. Mulvaney promptly proposed two MTB's listing Millikan and Company as the interested entity. The value of those two MTB's was 2.6 MILLION dollars.
So, Millikan and Company does not produce anything additional and reaps 2.6 million dollars in additional wealth. Does anyone really expect a company to invest in expanding their company and creating additional wealth when they can get a two and a half million dollar return on a $1,300 donation to a Congressman?
The founders would have revolted long long ago. Americans today don't deserve to call themselves Americans.
