The Role of Rents in the Transition from Socialist Redistributive Economies to Market Capitalism

Abstract

In this paper the authors make a critical distinction between inequalities arising from profits and wages and inequalities arising from rents, following Sorensen and 19th century economist Ricardo. Their new contribution is to articulate how rents are especially important in post-communist capitalist transition. Without the concept of rents, the mechanisms of corruption cannot be understood. The authors identify three types of rent-seeking behavior, which can be observed in any capitalist country, that play a particularly important role in post-communist transition: (i) market capture by political elites; (ii) state capture by oligarchs; (iii) capture of oligarchs by autocratic rulers through selective criminalization and the redistribution of their wealth to loyal new rich.

Is Learning a Wonder Weapon of Endogenous Economic Growth?

“…Krugman (2016) 13 This argument, which is probably trivial for readers in the post-communist countries, was mentioned in the contribution of Philippe Aghion (p. 496). Together with Iván Szelényi, the present author came to similar conclusions inMihályi -Szelényi (2017).…”

Corruption as Resource Transfer: An Interdisciplinary Synthesis

“…Here the beneficiaries of the particularistic redistribution and the redistributors are both members of the same political elite. In the latter case, politicians use the state's power to channel public resources to private corporations, yet the same political actors benefit from the transactions by using hidden shell company structures and corruption brokers (Jancsics 2017b;Mihalyi and Szelényi 2017;Cooley, Heathershaw, and Sharman 2018).…”

The other road to serfdom: The rise of the rentier class in post-Soviet economies

“…These reforms also produced social inequalities, injustice and suffering (Sanghera, 2016; Satybaldieva, 2015; 2018a). Western development agencies, international financial institutions and post-Soviet states have played a key role in creating and facilitating the rights of those who own and control rent-generating assets at the expense of others who need and want those assets, but lack them (Marcuse, 1996; Mihalyi & Szelenyi, 2017).…”

“…As a political project, neoliberalism tends to judge all economic activities in terms of profitability, and all social activities in terms of their contribution to capital accumulation (Jessop, 2012). This description is not wrong, but imprecise to explain the significance and role of rent-bearing assets relative to wealth-producing capital (Mihalyi & Szelenyi, 2017). Neoliberalism elides a vital distinction between earned and unearned income that was important in classical political economy (Sayer, 2015: 134; Tawney, 1921).…”

“…His advocacy of free markets helped to justify neoliberal economic reforms (Murrell, 1993). But it is ironic that neoliberalism created and facilitated rent extraction in post-Soviet economies, and concentrated wealth and power in the hands of economic and political elites, or oligarchs (Mihalyi & Szelenyi, 2017). In so doing, it produced plutocracy, and constructed another road to serfdom (Hudson, 2014: 440; Standing, 2016).…”