Listening to some of the stories from restaurant owners, shop owners and other small businesses talking about the Government’s offer of providing them with £330B in loans to get them through the Covid-19 crisis, is giving me a sense of impending tragedy. Also a deeper understanding of how the system (unwittingly?) conspires to ensure the rich get richer. Especially the rich that got that way through passive income they didn’t earn. Society’s rent-seekers.

The Government locks-down society and tells restaurants to close for the foreseeable future. They offer to loan money to a restaurant chain so they don’t go out of business. I don’t know the actual numbers but, as a conservative estimate, let’s say half of that loan, should the restaurant owner choose to go down that route, goes to compensating staff who would otherwise lose their jobs. The other half goes to the landlord. The person (or more likely ‘company’) that owns the building. Multiply this by the number of small businesses that find themselves in similar situations and what we end up with is the Government handing over £165B+ to landlords.

The Government is happy, because the restaurants will pay the loans back.

The landlords are super-happy because they keep getting their rents paid.

The restaurant staff are, if not quite ‘happy’, relieved that they still have some vital income.

But, the poor old restaurant-owning entrepreneur is put into a desperate situation because they’re tied up with a debt that is going to strip the profits out of their slender-margin business for the next N years.

What seems utterly wrong about this scenario to me is that the entrepreneur – the person doing all the job-creating work and taking all the risk – loses while the rent-seeker – the person who sits on their fat-arse counting money – wins.  

Not only is this unfair to the individuals involved, it progressively serves to make society more fragile. When people are disincentivised from being entrepreneurial the long-term lifeblood of the economy is removed.

Sure, Government officials will claim, a genuine entrepreneur will still find ways to survive, to be successful and to become rich. The capitalist system is set up in such a way that the struggle is necessary to weed out bad ideas. That struggle mechanism is a vital part of the way things work. Survival of the fittest and all that. I get it.

When people have nothing to lose, its easy for them to make a decision to start a new business. We’ve done it ourselves through the companies we’ve successfully spun- out over the years. The problem – for society – comes when companies and individuals have become successful. Now they have a lot to lose. And so innovation becomes a threat rather than an opportunity. So what do these people do? They buy property. They become landlords. Nice safe income. That even stays safe during a crisis. If the tenants can’t pay, the Government will pay instead. It’s a no-brainer.

Except now the world finds itself in a situation where 98% of the population are in effect paying rent to the other 2%. All of it perpetuated and guaranteed by the Governmment. Who in turn are funded by the 2%. You see the problem.

So, now we find ourselves in another crisis, the innovation challenge is to find ways of breaking this seemingly perpetual cycle of dysfunction. How to help those people that need help, and how to not feed billions of pounds to already-rich rent-seekers.

The imperative for solving the contradiction this time around is that, I fear when the Covid-19 crisis gets as deep as I think it will, if the rent-seekers are allowed to get even richer while everyone else suffers, there will be revolution and the rent-seekers will be guillotined. And the only guarantee if that happens is nobody will have won.

Any and all solution suggestions welcome.

The prize is a functioning society.