The Rise of Extractive Politics

It's about having small expectations.

There have always been two basic types of economic systems in the world: those of investment and creation, and those of predation and extraction. In this essay, I want to suggest that the predatory and extractive mode of behaviour has escaped from its purely economic origins, and now represents a model for how our society is run at all levels. And whilst money is usually among the things extracted, it’s often not the only one.

The nature of any economy depends to a great extent on where the sources of potential income are, since competition for those resources dictates in large measure how the economy will be structured. The very first economies—before even settled communities—were necessarily extractive. Hunters, gatherers and fishermen could do nothing really to increase the supply of what they fed on, but their interaction with the world was relatively benign, so long as they did not over-stress the food supply.

In early societies, the two basic sources of potential wealth were land-holdings, and other forms of rents typically granted by rulers. Land-holding provided income in the form of crops for consumption, crops for sale, rent charged to farmers and various other financial manoeuvres, depending on the country concerned. Land-holdings also provided people, who could be put to work on your estate and in some cases, conscripted to fight in your wars. Feudal systems in most countries thus granted land with income attached in return for service (including military service) to the ruler. So, it’s not surprising that the earliest wars were of territorial conquest, since a larger state, with more people and resources, was in principle wealthier and stronger than a smaller one. Even when forces were too limited to occupy territory permanently (as in pre-colonial West Africa) the local correlation of forces could produce docile neighbours who paid tribute and would support you in war.

Indeed, money was often a motive in territorial conquests: loot from captured cities was one way of re-filling your own treasury, while also paying mercenaries to fight for you. (Most of Alexander’s conquests were made this way.) Much early warfare resembles above all a series of smash and grab raids to make off with loot. Wars were expected to be self-financing, and soldiers joined up in the hope of making a fortune if they survived. (The Spaniards and Portuguese in South America came very late to this game.) Warfare as a business is a model which has an extremely long history, through the Hundred Years’ War to some of the conflicts in Africa today. And war was not the only option for increasing territory: dynastic marriages could do so as well, which was why so much effort went into them.

Money extracted from land ownership was called “rent”in the original sense of the term, and still, of course exists, but we also talk of “rent” in the wider sense, as the exploitation of the financial possibilities of an asset which you control, because you have bought, stolen or been granted it, or as a way of making yourself a nuisance and an obstacle who needs to be bought off. One of the earliest forms of rent was the collection of customs duties to enable traders to pass through towns or along rivers. This was, effectively, pure rent, since the town was not obliged to offer any services in return. It was a tax on movement. (Interestingly, a modern map of the French autoroute networks shows that the principal routes have not changed very much since the middle ages. These days, the rent is collected by the private companies that theoretically “manage” the autoroutes, which they bought for peanuts from the government. As before, it is really just a tax on movement.) The ultimate example of the tax on movement is the “check-point” manned by gun-toting militias in certain conflict zones, demanding payment in money or a share of the goods being transported. The most extraordinary example of this I know of is the transport of goods from Pakistan to Afghanistan for US soldiers during the war there. The lorries, driven by Pakistani contractors, had to pass through Taliban check-points, where the usual voluntary contributions were solicited. In practice, the US was directly funding the Taliban

Finally, you can earn “rent” by inserting yourself into a system either as a nuisance who has to be paid to go away, or as an “expert” who can advise on tricky issues. We tend to think of this as a Global South or United States problem, where you need a “fixer” to tell you who to see, who to pay and how much to get anything done. But in fact it’s equally characteristic of modern Liberal societies with their mania for ever more complex rules, which only ever more specialist specialists can explain, and for large sums of money at that. Some academics make absolute fortunes as “expert witnesses” in procedures such as patent and anti-trust law cases, for example. Although in a complex modern society you often have no choice about whether to seek some specialist advice, there has also in recent decades been an explosive growth in rent-seeking positions established by law, or at least by custom. For example, it’s virtually impossible to manage even a smallish organisation now without paying money to “consultants” who will provide “training” in this or that, and “statements” and “audits" on various subjects, often required by law, or as a condition of doing business with governments. All of this is just a modern form of rent-seeking.

Classically, and as its name implies, an extractive economy tries to extract the maximum wealth from that which already exists, rather than create new wealth, and actors compete among themselves to access revenue streams. Five hundred years ago, there might have been a competition to become a tax collector, these days perhaps to win a contract for gender sensitivity “training.” Such an economy and society is conceived as essentially stagnant, and, whilst there may be periods of growth and periods of decline, there is no concept of continuous economic growth as a product of sustained investment. Extractive societies typically have little faith in the future, and see little point in investing when predation is just so much easier. Wartime and conflict economies work like this, since the future is by definition uncertain, and politically unstable societies tend to be extraction-driven, because actors don’t know whether they will be in power next year, or for that matter even alive. And at the end of the day, extractive economic activity is just so much easier: who wouldn’t want to be an expensively paid lobbyist rather than a struggling businessman or an underpaid regulator?

As will be clear, perhaps, rent-seeking and extraction are fundamental characteristics of a Liberal society, which is precisely about reducing (and complexifying) all aspects of life into a series of rules and regulations that require specialist educated groups to interpret and argue about them. Indeed, a Liberal society can be defined as one which replaces simple and well-understood rules with highly-complex and difficult procedures that require learned specialists to interpret them. And it is such interpreters, rather than mere producers, who have the higher social status. It is instructive, for example, to look at the social background of the originators of the Industrial Revolution in England: they were often lower-class artisans, with considerable business sense but little formal education. For the whole of the period of Britain’s industrial dominance, therefore, manufacturing and other practical activities were dismissed as “trade” and their practitioners were not welcome in polite society. So naturally enough, the son of an industrialist might manage the business in his turn, but the grandson would become a lawyer or go into the City of London, and become a landowner by marriage.

One of the unnoticed effects of globalisation has been the massive increase in the proportion of western economies devoted to extraction. At a relatively straightforward level, this may require, let us say, banks operating around the world to retain expensive experts in tax and commercial law in different countries. But sometimes the effects are more subtle. For example, one of the promises made about foreign outsourcing was that the West would retain the difficult and complex high-value work, while sending the rubbish work elsewhere. Essentially, the opposite has occurred: entire technologies have been shipped offshore, and cannot now be recovered, and thus the proportion of western economies which is productive declines every year, just as the demand for extractive skills (knowledge of Chinese contract law for example) continues to rise. In turn, this means both that the absolute requirement for highly trained scientists, engineers and craftsmen declines, so fewer are trained, and also that the massive salaries now commanded by extractive specialists are such that they attract a lot of the best talent. If you were an aerospace engineer, wouldn’t you want to set up your own technical outsourcing consultancy rather than going to work for a western company already busy transferring skilled jobs overseas?  Similarly, even if you are a very good musician it’s still better to be a copyright lawyer suing other musicians.

As I suggested earlier, the extractive mindset arises when society loses faith in the future and in our ability to construct it. Why not feed off the present instead, after all ? It’s easier and more certain. The great age of western technological innovation in the nineteenth and twentieth centuries coincided with the great era of hope for a better world, and to a considerable extent that better world appeared. In such times, in most countries, scientists, technologists and engineers, but also explorers and mountaineers, as well as political and social reformers, enjoyed more prestige than ever before or since. Some years ago, I lived in an area of Paris not far from the Sorbonne. Street names in France are always interesting and politically resonant, and around me streets were named after scientists, engineers, medical researchers, naturalists, sociologists and social reformers, as well as the standard list of politicians. All of these were figures who had contributed to making the world better and better-understood, and virtually all of them were dead by the second half of the twentieth century. I have no idea even in principle what names would replace them now.

Whether we realise it or not, we are living now in one of those Extractive periods, when there is no faith in the future and so no point in investing in it. But this applies well beyond the economy itself, to what I call Extractive Politics: the tendency to see nations and their political, social and economic systems and problems as nothing more than a source for extracting rents of various kinds. Now of course “profiting” from developments in politics is scarcely new: any experienced politician, confronted with a crisis, will automatically think “how can I turn this to my advantage?” But my argument here is that we have entered a period where politics in the widest sense has become nothing but extractive, and consists essentially of seeking opportunities for personal, professional and financial benefit from the conflict, stagnation and decline of current societies. For we live in a society where, for the first time in several centuries, it seems impossible to seriously imagine a better world for all, or even most. (Not accidentally, I think, we are increasingly taking refuge in artificial and virtual worlds, where it is still possible to program some hope.) Technology is now a threat rather than a potential saviour, our ideologies are exhausted, our politicians are giggling nonentities, our resources are running out and climate change could well kill us all off. Even the official discourse on offer is declinist and miserablist: witness Mr Macron recently trying to explain that, whilst the country was richer than it ever had been before, and there was plenty of money for Ukraine, lower-paid French people would now have to work until they died. Confronted by such a wall of problems, humanity has increasingly retreated into sullen passivity, with such initiative as is available directed at exploiting everybody else.

Some of these forms of extraction are relatively straightforward. Thus, if you are a Minister in charge of an important function of government, it makes sense for you to starve this function of resources, rather than improving it. Why? Because the worse the system performs, the greater will be the demand by those with money for alternatives. Once a postal service loses a monopoly on certain deliveries for example, an entire field of extraction opens up for lawyers, financiers, advertising agencies, logistic consultants and others to promote the development of private-sector alternatives. Likewise, the more you can inculcate the feeling among the general population that things are getting worse, and services will inevitably decline, the more they will accept this state of affairs, and feel there is no alternative to paying more for worse service. And of course when you retire from politics, in a couple of years, there will be a nice job waiting for you. But it’s worth pointing out that, as usual with extractive initiatives, all that is happened that a service which is no better (and probably worse) is now more expensive and complicated to provide. And even if you are not a politician, you can extract some revenue from the declining system by authoring reports proposing more privatisation, getting a job at an outsourcing consultancy, or whatever.

Some are rather less so: climate change, for example. We tend to think about billionaires constructing nuclear bunkers in New Zealand, but actually there’s an awful lot of money and publicity to be gained in a defensive, rather than advocative fashion, by talking about imminent disaster on YouTube, writing books on collapse and survivalism, and selling products that will allegedly help us to survive whatever is coming. But political capital can also be extracted from doing things which can be subsumed under the “climate change” label, even if their actual effect is un-measurable, or (in the case of the German Greens and their replacement of nuclear power stations with coal-fired stations) actually makes the situation worse. In Paris, for example, the ruling coalition (which depends on the Greens) has obliged restaurants and cafés to stop heating their terraces in cold weather, thus taking away one of the pleasures of Parisian street life. There’s no pretence that the world will be saved thereby, or that the climate will even notice: the point is to implement part of the sour, punitive agenda which the Greens have been pursuing for years. Likewise the city has encouraged the provision for hire of electric scooters, found everywhere piled up on street corners. These have caused so much disruption and so many accidents that the City has been forced to withdraw the licences, although private ownership is still allowed. The result is that the streets are more dangerous, that the amount of the road allocated to motor vehicles has greatly deceased whilst the demand has not changed, and that users of these monstrosities (who don’t generally have cars anyway) no longer travel by public transport, so revenues are reduced. But who cares? The problem is too big to solve, so let’s try to extract some political capital from it while we can.

This is the fundamental logic of extractive politics. Find a problem that is insoluble but sounds bad, and that is often poorly defined and not well understood. Set yourself vague objectives that are impossible to measure, and which in any case depend on people other than you doing the actual work. Organise a few publicity-seeking events, cultivate the media and watch the money roll in and the jobs be created. Issue statements about the failures of others and demands for action from a position of moral superiority which you claim, but have done nothing to earn. After all, does anyone believe that gluing yourself to famous paintings will help to deal with climate change? Does anyone believe, for that matter, that gluing yourself to famous paintings could have consequences, which might have consequences, which might have consequences, that could affect climate change? Clearly not. But in the meantime, there’s publicity, interviews, money, maybe a book or two.

Sometimes the objective, at least ostensibly, is a positive one: “peace”, for example. But in such cases it’s cruelly obvious that the objective, as formulated, is unachievable, not least because it can’t be defined properly anyway. That need not be an impediment to a good career though. I remember that when Dora Russell, widow of the philosopher Bertrand Russell and campaigner for many causes, died in 1986 she was loudly and widely praised as a “doughty fighter” for peace, because of her involvement with, among many others, the Campaign for Nuclear Disarmament. Yet in spite of all the conferences she addressed, marches she led, awards she received and praise that was showered upon her, it cannot plausibly be argued that she made any noticeable contribution to world peace at all. Perhaps she was naive enough to believe she could—after all, she came from an earlier and more morally serious generation—or perhaps it was just an exaggerated sense of her own importance, as it certainly would be today for one of her successors. But at least I suppose she was a genuine intellectual.

More generally, though, extractive politics works by mobilising money and effort in deliberately Quixotic combats against dragons that cannot be properly defined, much less effectively combated. Indeed, it’s better that the problem should be as vaguely defined as possible, since that gives you the greatest margin of manoeuvre. After all, if you are trying to get money for work against forced marriage in Muslim immigrant communities (and such organisations do exist, and should be supported) you have some idea of the size and nature of the problem, and in annual reports you can at least post to anecdotal evidence of success. Likewise, there are charities that teach children from disadvantaged  communities to read (another worthy cause), and success in doing so can be measured. And if you were really worried about the fate of the Earth, you would be out there doing organic farming or working on recycling projects. But none of this is good extractive politics, because it actually requires you to get out of the office and meet ordinary people whom you might not like, to accept practical targets and objectives, and to explain yourself when you don’t reach them.

Rather, you claim to be fighting dragons such as “racism” or “sexism”, which have the advantage of being entirely subjective phenomena (essentially how people feel about things) with no objective content at all. Since the enemy can never be defined, the battle can never be won, and since the battle can never be won, further funding is always required, days of action must be organised, and an entire vocabulary is incidentally available to destroy your political opponents with charges that cannot be disproved because they are not required to contain any objective facts. From the point of government and institutional funders, this is also a way of looking good, without associating yourself with an initiative that might go wrong. It also usefully draws attention away from much more mundane but much more serious problems that you have neither the capacity nor the will to solve.

Finally, we shouldn’t neglect the degree to which extractive politics has infiltrated foreign and development policy for some time now. Again, it’s a question of the loss of hope. Back in the ‘sixties, development theory pushed Global South countries to move from subsistence to cash crops to pay for investment that would rapidly move them to western levels of development. We know how that worked out. In the ‘eighties, the machine went into reverse and the Global South was pushed into opening its economies, seeking foreign direct investment, and coping, somehow, with wild swings in commodity prices and currency values and an inability to feed its own people. We know how that worked out too.

Although International Financial Institutions still seem to be going through the same motions as they were a generation ago, it’s clear both that their hearts are not really in it any more, and also that they are not prepared to learn actual lessons from countries like China and Singapore that have modernised very successfully, and whose examples the Global South finds increasingly attractive. So, what to do? Well, you adopt the good old political adage that if the problem is too difficult to tackle, you attack the symptoms instead. So you pay for ambitious locals to study economics in the US or Europe or get them jobs with international institutions. You finance an ambitious anti-corruption campaign with Codes of Conduct for public sector procurement, and you fund local NGOs, staffed by the sons and daughters of local politicians, to campaign for transparency and accountability in government spending. You promote the advantages of Blockchain and crypto-currency. The advantage of this kind of thing is that you can point to the famous “deliverables” that funders are so interested in. X number of scholarships have been awarded, the Codes of Conduct have been successfully launched, NGOs are celebrating their first year of campaigning. Your government has acquired significant leverage over the decision-making processes of another country, and most of the money you spent has, in practice found its way back to your country, in the form of consultancy fees and similar expenses. It’s true that corruption is as bad a it ever was, and that these kinds of initiatives will actually make it worse rather than better, but then you can’t win all the time. If you can’t actually solve the problem, you can at least profit from it.

To get an idea of how this works in practice, consider the following imaginary (but not that imaginary) example. In a certain poor African country, the security situation in the capital is very bad. The police are paid rarely, if at all, and are expected to survive by petty corruption. They have no vehicles, no radios and no scientific or technical capability. Crime is very high, and local communities are forming vigilante groups to tackle it. Under enormous pressure to reduce crime, the police resort to arresting habitual criminals and beating confessions out of them. Unfortunately, even when sentenced they are quickly released because the prisons are full. Public opinion surveys show that the locals want more, better-funded police, better equipment, harsher sentences and more prisons. Obviously, no donor can fund such things, so the search is on for other initiatives.

The answer is obvious: a human rights training programme, bringing in policemen and academic experts from the donor country, with interpreters. Selected senior policemen will be flown to the donor country for an all-expenses paid month-long training course with a generous per diem. A local NGO funded by the donor country will draft a new law and series of regulations on police human rights policy for those policemen who can read, based closely on the donor country’s own practices. Everyone will be happy, except for the police who will still have no pay and equipment, and the public, who will have no security, and dislike and fear the police. But nobody can question the amount of political rent that has been extracted.

It doesn’t have to be like that, and indeed it wasn’t, always. There was a time when groups of individuals and states built things, renovated things, organised things, made life better, wiped out diseases, ended poverty, massively reduced child mortality, cleaned up the environment and created and maintained full employment, just to name the most obvious features of the world I grew up in: maybe you did too. And all of this was regarded as normal. But in those days, both government and the governed had Great Expectations. Companies competed to be the first, the best or the dominant, not the most profitable. Innovation was not just about financial shenanigans.

I was actually trying to think, while I was writing this, of the last time European governments actually did something of which you could be traditionally proud. The only thingI I could come up with was the Channel Tunnel and Eurostar thirty years ago: a triumph of engineering and a political event of the first order, certainly, but the kind of thing the Chinese or the Japanese or the Russians wouldn’t get particularly excited about. After that, well, what exactly? If you have small expectations, you get small results.

It would be nice to think that we can have Great Expectations again, but for that you also need things like education, training, planning, vision, technical competence, and other things that have largely disappeared from the West. I’m coming more and more to think that the century and a half from about 1820 to1970 was a historical anomaly, when for a while new productive economic forces arose in western countries that pushed the traditional extractive forces onto the back foot. But it didn’t last, and perhaps it never could have. At least, a few hundred years ago people had the excuse that they didn’t really understand what economic growth was. Mercantilism, after all, held that the volume of wealth in the world was constant, and so states had to compete to get as much as possible. We don’t have that excuse now. If you are one of those who bridles as the concept of “economic growth” on ecological grounds, well just think of it as Making Life Better. Universal literacy, decent homes to live in, and a better standard of health, didn’t have much of an adverse ecological impact at the time, not should they now. We could do these things if those who ruled us wanted to, or even if sufficiently large groups of people wanted to, but the structure of the economy and society makes that difficult. It’s hard to raise money for a genuinely cheap and simple method of storing solar power, for example. It’s much easier to set up as a consultant advising people on whether to invest in a fund that finances such projects. It’s easiest of all to borrow money to speculate on the success and failure of such funds, and sell tranches of the funds to other people. And until we crack that problem we will continue to have small expectations.

These essays are free and I intend to keep them so, although later in the year I’ll introduce a system where people can make small payments if they wish to. But there are other ways of showing your appreciation as well. Likes are flattering to have, but also help me judge which subjects people are most interested in. Shares are very useful in bringing in new readers, and it’s particularly helpful if you would flag posts that you think deserve it on other sites that you visit or contribute to, as this can also bring new readers. And thanks for all the very interesting comments: keep them coming!