Income unearnedHA HYUN-OCK
The author is a financial team head at the JoongAng Ilbo.
In “The Price of Inequality,” Columbia University professor Joseph Stiglitz — who won a Nobel Prize in economics with his research on asymmetric information — defined “rent-seeking” as various acts of concentrating gains to the rich by sacrificing the rest of the society.
Rent originally means the profit from lending lands. Unlike wage — which is the price of labor — rent is the surplus value and unearned income. As the society becomes more complicated, the meaning of rent has expanded. It now includes monopolistic profit or monopoly rent. The concept of unearned income has become wider. It covers income from owning rare assets and intellectual property, capital gains from investment and benefits from taking advantage of systems.
Rent-seeking is linked to the issue of vested interests. Stiglitz stressed that the upper class has learned ways to make money using means that the rest of the society cannot detect, and that is the real innovation. However, a society cannot but face a crisis if the fairness of the game is damaged to defend vested interests and if people pursue rents — an unearned income — excessively.
There are warning signs already. The Financial Times’ chief economic commentator Martin Wolf pointed out that “rentier capitalism” that allows a few privileged class to monopolize profit is threatening the values of democracy. It was a part of FT’s new agenda, “Capitalism, Time for a Reset.”
Last month, 181 CEOs of American companies emphasized corporate social responsibility.
Wolf wrote, “We need a dynamic capitalist economy that gives everybody a justified belief that they can share in the benefits.” Unearned income can lure the ship of capitalism to the rocks. Crisis can be avoided when you don’t give into temptation. Korea is no exception.
JoongAng Ilbo, Sept. 23, Page 31