Can the theory of rent seeking that was developed with the American sociocultural and socio-economic construct as its bases explain the nature of rent seeking behavior in Ethiopia?

By Habtamu Alebachew

Firstly, there are fundamental historical and temporal differences between rent seeking/collection in the West and in Ethiopia.

In England, for example, controversies aside, the term ‘rent’ came into academic vocabulary first by the famous economist David Ricardo. Ricardo formulated his ‘theory of rent’ after he observed a massive transfer of rural farmlands to urban based capitalists from the outdated social class of landowners, who also based themselves in towns, through formal rental contract.

This historical reversal occurred following the severe national food shortages as the aftermath of the war with the French warrior Emperor Napoleon at the close of the 18th century.

According to Ricardo, ‘land rent’ arose when a plot of fertile farmland lost its fertility forcing the urban capitalist to pay more rents for another more fertile farmland, which was responsible to push rent prices up high speedily. Here ‘rent collection’ occurred for Ricardo because the productive and innovative capitalist class was under duty to pay rents for the unproductive, backward and uncreative land owning survivor class, which did not make any contribution at all to the productive process.

The landowners collected rent and spent them for luxury in towns, which the productive capitalist class now left.

In the British context, the first industrialized free market economy in the world, the government did not intervene in the exclusive rental transaction between these two conflicting classes because market was free to operate by itself independently of the state.

Moreover, both classes exchanging their contradictory roles came into this rent-collector versus rent payer relations in the bid to exploit the post-Napoleonic war for their own separate and respective economic advantages.

In contrast, rent seeking/collection as a growing challenge in Ethiopia occurs presently not following war but in peacetime, and not in the attempt to benefit oneself by solving a temporary economic reversal but in a national attempt to achieve development for the first time.

In Ethiopia, ‘rent seeking/collection’ occurs not between dominant socioeconomic classes in the free market under a limited government but in the relations between dominant social groupings commanding and administrating the basic factors of
economic production the government, the rural farming population, the urban people constituting the small size of the private sector including international companies.

Ultimately, the very origin of rent seeking in Ethiopia is the ‘structural market failure’ that necessitates state intervention as the initial surrogate of development by filling the market gap, and not, like Britain, in the functional and temporary market reversal.

Secondly, rent seeking/collection in Ethiopia now is not again an occurrence mainly among competitive companies of abundant monetary powers in the free market under a limited executive government and a strong legislature like those of the United States but among the social forces mentioned above and individual citizens under a heavily engaged government.

Thus, rent seeking in the United States is essentially corporate in nature and legislative in its form, while it is fundamentally social spreading almost across all social groups in its nature, and executive and judiciary in its form in Ethiopia’s context.

Rent seeking in the United States is borderless with corruption because both have wide legal shields in the name of democratic election in which companies ‘bribe’ legislators directly.

In Ethiopia, while corruption is a crime against the state as provided in the Criminal Code of 2005, rent seeking is legal partly as well as illegal and a moral issue with the legislature having no flirtations with it due its separate constitutional function.

While legislators in the United States are direct actors, in Ethiopia, the MPs tend to favor rent-seeking behavior if they ignore hypocritically their constitutional duties to fight it through their oversight powers over the activities of the Executive and the Judiciary and consciously follow up and study public opinion.

In America again, rent-seeking companies use their money muscles during election periods by covering media expenses of a legislator whom they feel they control for their market and monetary interests. In Ethiopia, there is no either constitutional or procedural camouflages for candidate MPs because the government bears media expenses during elections and individual candidates are too far and scattered for companies or individuals to exercise control over them.

However, MPs in Ethiopia’s case still serve the cause of rent seeking by opportunistically cover up rent seeker officials of the ruling party simply because these officials one way or another determine their chances to continue as legislators during candidacy identifications.