Adam Smith and the rest of the classical economists have sought to minimize even such forms of rent as natural monopolies. For example, the East India Companies of Great Britain, France and Holland and related special trading privileges. This is what was originally meant by free trade. Most European countries retained state ownership of basic infrastructure: roads, railways, communications, water, education, health care and pensions to minimize the cost of living and doing business by providing basic services at cost, at subsidized rates, or even free.
The goal of the financial sector is not to minimize the cost of roads, electricity, transportation, water or education, but to maximize the benefits of monopoly ownership. Since 1980, the privatization of infrastructure has been greatly accelerated. Having transformed oil and gas, mining, and energy into profit-making tools, financial centers are now looking to privatize the most important infrastructure, mainly to provide government revenues to reduce taxes on finance, insurance and real estate.
The United States long ago privatized railroads, electricity, gas and telephone networks, and other infrastructure monopolies, but regulated them through public service commissions to bring the prices of those services into line with basic production costs. However, since the 1980s, these natural infrastructure monopolies have gradually ceased to be considered a public domain and transferred to private ownership without much regulation. On the pretext that the financing of privatization of state enterprises by bankers and financiers increases the efficiency of the economy. Thatcherism was a disaster; infamous privatizations in former Soviet economies since 1991; Carlos Slim established a telephone monopoly in Mexico; American pharmaceutical companies are also monopolists,as well as cable TV providers. The reality is that debt servicing (interest and dividends), exorbitant management fees, stock trading, underwriting, mergers and acquisitions add to the cost of doing business.
Speculators in the real estate market and those who buy on credit from monopolies in order to inflate rent prices have similar operating principles: "Rent is intended to pay interest." The higher the infrastructure monopoly's rent rate, the more privatizers will pay bankers and bond investors for property rights. The financial sector eventually becomes the main recipient of monopoly and land rents, taking for itself what the landowning class used to receive.
Significantly, all of this was done in the name of “free markets,” which financial lobbyists began to define as freedom from government ownership or regulation. The financial sector has managed to attract anti-government ideology to appropriate the public domain and lobby for blocking regulatory legislation. State planning has been accused of being inherently bureaucratic, wasteful, and often corrupt, as if the history of privatization transactions is not full of corrupt insider trading and rent-seeking schemes, which makes free market economies much less competitive.
By Michael Hudson
