Kidnappings and tragedy of a rent-seeking economyBy Greg Odogwu

Alarmingly, there are increasing cases of kidnappings around the country. I am not talking about the Kankara-type. That one enjoyed a photo-op because of its peculiar circumstances. There are countless others, which are cumulatively higher in casualty count than the Katsina incident. In fact, I am worried about how abductions have become a new occupation for faceless individuals all over the nation.
There is news that, on Tuesday, gunmen abducted Abuja-bound passengers on the Benin-Auchi road. This is now a new kidnap route? It used to be Abuja-Kaduna, Lokoja-Okene, and others. In another news, gunmen killed policemen and kidnapped two people in Jigawa State.
The other day, a friend told me how it suddenly began to happen in his village, a very interior, poverty-stricken zone in the backwoods. Peopled by the poorest of the poor, no one would fathom why on Earth someone could dream of kidnapping anybody there. There are obviously no bounties to cash, and no monies to haul. Yet, the evil enterprise sprang up. The local chief’s son was kidnapped; while the cousin of a supposed rich man was taken in a separate incident. Ransoms were named, negotiated, and paid.
Sadly, we have yet to see the connection between the spiralling cases of kidnapping and the kind of economy we have found ourselves in as a country. I have heard intellectuals and economists refer to our economy as a rent-seeking one, but I have yet to see them connect the dots between emerging social ills and our dysfunctional economy.
First of all, let us understand what it means to have a rent-seeking economy. Rent seeking is an economy concept occurring when an entity seeks to gain wealth without reciprocal contribution of productivity. The term rent in rent seeking is based on an economic rent which was defined by economist Adam Smith to mean payments made in excess of resource costs.
In public-choice theory, as well as in economics, rent-seeking means seeking to increase one’s share of existing wealth without creating new wealth. It implies extraction of uncompensated value from others without making any contribution to productivity. This results in reduced economic efficiency through misallocation of resources, reduced wealth-creation, lost government revenue, heightened income inequality, and potential national decline.
The classic example of rent-seeking, according to Robert Shiller, is that of a property owner who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee to lower the chain. There is nothing productive about the chain or the collector. The owner has made no improvements to the river and is not adding value in any way, directly or indirectly, except for himself. All he is doing is finding a way to make money from something that used to be free.
How does this relate to kidnapping? The whole thing originates from the way our present ecosystem runs. Jobs are rarely given on merit. Promotions are hardly ever earned. Certificates seldom emanate from mental exertion. They are now purchased. Everything in Nigeria has a price. If you are rich, you can buy a job; you can procure promotion; you can purchase a certificate. It is no longer a secret. People do it in the open. Our bureaucracy is rotten.
All these services are supposed to be free; so this is classic rent-seeking. But, the Nigerian experts who discuss rent-seeking in public fora usually give the impression that we are a rent-seeking economy only because of the fact that we depend on minerals and crude oil (renting) for economic survival.
Indeed, we create rent everywhere, every day. Before a contractor’s file is moved up to the accountant’s desk, he pays rent to a Special Assistant to the Clerk. Before a petty trader gets a space to display her wares, she pays rent to the Personal Assistant to a Ward Chairman, who has created a “supervisory portfolio” for his cousin to “register” every trader in the ward. This “job” was created for him because he “contributed” to the election campaign of the Ward Chairman.
Rent-seeking is the order of the day because there is little production and manufacturing going on in our country. There are many mouths to feed, yet we only have politics and trading.
Rent-seeking is distinguished in theory from profit-seeking, in which entities seek to extract value by engaging in mutually beneficial transactions. Profit-seeking in this sense is the creation of wealth, while rent-seeking is ‘profiteering’ by using social institutions, such as the power of the state, to redistribute wealth among different groups without creating new wealth.
Kidnapping is part of rent-seeking because people who are close to government have discovered that this is the fasted way to collect their own rent from the rent-seeking system! In an economy that has no form of innovation, they are now forcing people to pay a percentage on their wealth. It is the same philosophy that drove the Yahoo-boys: “we are recollecting the money the Whiteman took from us”.
Indubitably, rent-seeking can prove costly to economic growth; high rent-seeking activity makes more rent-seeking attractive because of the natural and growing returns that one sees as a result of rent-seeking. Thus organizations and individuals value rent-seeking over productivity. In this case there are very high levels of rent-seeking with very low levels of output. Rent-seeking may grow at the cost of economic growth because rent-seeking by the state can easily hurt innovation. Ultimately, public rent-seeking hurts the economy the most because innovation drives economic growth.
It has also been shown that rent-seeking by bureaucracy can push up the cost of production of public goods. It has also been shown that rent-seeking by tax officials may cause loss in revenue to the public revenue authorities.
Mancur Olson traced the historic consequences of rent seeking in the book, The Rise and Decline of Nations. As a country becomes increasingly dominated by organized interest groups, it loses economic vitality and falls into decline. Olson then argued that countries that have a collapse of the political regime and the interest groups that have coalesced around it can radically improve productivity and increase national income because they start with a clean slate in the aftermath of the collapse. Nigeria needs such a reset!
Rent-seeking is a cancer eating the fabrics of our union. The best picture to help us understand the situation is to visualize the rate at which “transport unions” now spring up on local roads. Jobless youths are used by local cartels to collect all sorts of daily levies from drivers, motorcyclists and shuttle bus operators. Similarly, security agencies brazenly collect monies from drivers at every checkpoint. Years back, these “collection touts” were viewed as miscreants. Those were the days of the Lagos “Alaye”. Today, it is mainstream.
To be sure, rent-seeking is a global phenomenon, affecting developed economies like USA, China and Europe. But the difference between us and such governments is that their national institutions are so strong that the cartels who thrive on rent-seeking, can never hijack the society. Therefore, when rent-seeking coalitions are formed over time to shackle the society in order to redistribute wealth and income to themselves; political, social and technological changes shield the society from being overrun.
In Nigeria, the opposite is the case. Our institutions are so weak that rent-seeking cabals overrun and strangle it. This was why a former president said that Boko Haram was inside his government. Today, kidnappers, bandits, herdsmen could be part of the government. The cartels that live on rent-seeking are now so entrenched that removing them could literally end Nigeria as we know it.

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