A new report by Dider Jacobs at the Center for Popular Economics offers a breathtaking estimate of how the rich have gotten richer in recent years. According to Jacobs’analysis, 74% of billionaire wealth in America was gained through rent-seeking, or socially useless activity.
There has always been a tension between America’s meritocratic mythology and the blatant evidence of a thoroughly rigged economy. After the 2008 financial crisis where bankers brought the economy to its knees through reckless and criminal behavior only to end up richer after a taxpayer funded bailout, the contradictions between the myth and the reality became harder to ignore.
Even mainstream establishment publications like The New Yorker started asking, “What Good Is Wall Street?” Why is a sector of the economy that creates nothing running the real economy and taking home such a large portion of national income?
What Jacobs reveals is that most of the wealth that has propelled people into the top 1% and beyond was gained not through the creation economic benefit, but through rent-seeking. Economic rents are obtained when someone is able to extract wealth or excessive returns despite no additional contribution to productivity, or what could be called socially useless activity.