Corporate welfare

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Corporate welfare is a term coined by Ralph Nader in 1956, describing a government's bestowal of grants and/or tax breaks on corporations or other "special favorable treatment" from the government[1][2]. Usually these actions are at the expense of the citizens, although they often disadvantage other corporations as well. The term is meant to create a satirical association between corporate subsidies and welfare payments to the poor, and perhaps imply that corporations are much less deserving than the poor. It is important to remember, however, that many forms of government subsidy fit into the general category of welfare. Some object to the term "corporate welfare" on the grounds that the term plays on negative stereotypes about welfare payments to poor people, and may suggest that the poor are as undeserving of government "handouts" as corporations are. Corporate welfare is a symptom of regulatory capture.

Corporate welfare is applied in a number of different situations. A classic example is the granting of the use of broadcasting rights to TV stations at nominal fees, when other companies are willing to pay substantially more to use these frequencies. Increasingly common with the rise of globalization is offering incentives to locate in an area. For instance a company intending to build a manufacturing plant, or even a sports stadium, will frequently declare interest in two areas, and then let their respective governments attempt to "outbid" each other with promises of tax breaks, free land, and infrastructure developments. Critics charge that this skews the free market, giving a competitive advantage to large corporations, and shifts tax burdens away from these large companies to smaller ones and to individuals.

Another and unhappy voters often means the government will step in to help a faltering behemoth, to an extent that would not happen with a small business. For example, the airline industry has survived ongoing losses through government aid.

Critics of corporate welfare charge that many cases are nothing more than "pork barreling" and even examples of corruption. Examples might include defense contracts given to inefficient businesses in a politician's district, or giving assistance to a major campaign donor.

Some forms of corporate less widely criticised because of their positive externalities. For instance, most countries heavily support their domestic film companies, arguing that the preservation of national culture would not be ensured by a free market. A number of countries have used corporate welfare as a form of investment, to get industries started that would go on to pay great dividends for both the government and society in the long run.

1 Corporate welfare in US academia
2 Corporate welfare in US politics
3 See also
4 References:
5 External links

[edit] Corporate welfare in US academia

Peter G. Klein wrote:

The most dramatic example of "corporate welfare" in the US is the GI Bill, which subsidized the academic sector, bloating it far beyond the level the market would have provided. [3]

[edit] Corporate welfare in US politics

Corporate welfare knows no party ideology. Just as Republicans/conservatives are likely to call for energy depletion allowances to encourage job growth in the oil industry, Democrats/liberals are likely to call for grants to corporations to encourage use of or develop alternative fuels, such as biofuel. Libertarians may be most consistently opposed. Burton W. Folsom, Jr. identifies businesspersons who seek corporate welfare as "political entrepreneurs" in his book, The Myth of the Robber Barons as distinguished from what he calls "market entrepreneurs."

[edit] See also

[edit] References:

Nader, Ralph. Cutting corporate welfare (Seven Stories Press, NY, 2001).
Jansson, Bruce S. The $16 trillion mistake: How the U.S. bungled its national priorities from the New Deal to the present (Columbia University Press, 2001)
Mandell, Nikki. The corporation as family : the gendering of corporate welfare, 1890-1930 (University of North Carolina Press, 2002).
Glasberg, Davita Silfen. Corporate welfare policy and the welfare state: Bank deregulation and the savings and loan bailout (Aldine de Gruyter, NY, 1997).
Lewish, David. Louder voices: The corporate welfare bums (Lewis & Samuel, 1972).
Whitfield, Dexter. Public services or corporate welfare: Rethinking the nation state in the global economy (Pluto Press, Sterling, Va., 2001.)
Folsom Jr, Burton W. The Myth of the Robber Barons (Young America)
Rothbard, Murray N. Making Economic Sense, Chapter 51: Making Government-Business Partnerships ISBN 0945466188 (1995)
Perkins, John. Confessions of an Economic Hit Man. ISBN 1576753018 (2004)