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Are we a nation of Rent Seekers or innovators?

16 Jul 2013

New Zealand might not be the land of no.8 wire any longer as the country's level of innovation could be under the stranglehold of rent seeking.

In a blog posted by Steve Blank, a Silicon Valley entrepreneur and academic, he voices his concerns that ‘Rent Seeking’ could be destroying innovation.

Describing Rent Seekers as “the landlords of the status-quo”, Brand says they are the businesses that have already exceeded and are now charging others for existing, rather than creating new wealth, using government and lobbyists to stifle competition and innovation.

Startup companies like Bitcoin, Square and Airbnb challenge the status quo of big businesses by innovating and creating new market spaces.

Blank says their opposition comes not from “direct competitors, but from groups commonly referred to as ‘rent seekers.'"

These individuals or organisations attempt to wring more money out of existing markets instead of constructing new products and experiences, as their lobbyists use every trick in the book to shut down innovative startups.

Essentially, laws are passed, government officials are bribed, and companies are extorted.

An example of this is when Tesla Motors attempted to sell their electric cars in North Carolina, New York and Texas. The National Auto Dealers Association used its lobbyists to make sure Tesla could not offer up any competition to the oil guzzling giants.

Even though New Zealand is halfway round the world, it doesn’t seem like we are safe from Rent Seekers either.

Writing for NBR earlier last year, Rodney Hide said that Rent Seeking is a problem in New Zealand.

“Rent seeking is the opposite of profit seeking," he wrote.

"It’s the seeking of favours, not from the ‘simple’ people, but from government. Rent seeking doesn’t create wealth, it just shuffles it around.

“Worse, resources get chewed up rent seeking. People spend time and money lobbying both to seek rent – and to defend it. Rent seeking doesn’t just redistribute wealth; it destroys it.”

One instance of rent seeking in New Zealand was when student lobbyists called for the compulsory student membership (CSM) to remain in opposition of voluntary student membership (VSM).

VSM was largely seen to be a better choice for students as it allowed more freedom. However, there were those who gained greatly from students being forced to join a singular association, and lobbied against the move to VSM.

This kind of lobbying and rent seeking can remove the choices and freedoms New Zealanders often pride themselves on.

What do you think? Is New Zealand afflicted with rent seekers? Or are we still the land of freethinking innovators? Tell us your thoughts below

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