Thursday, March 13, 2008

Corporate Welfare

One of the things that are consistently talked about in the media is the supposed alliance between "big business" and the political right. Traditionally, the political right means limited (read small) government and free markets. (This isn't so today.) So who wouldn't see big business aligning itself with these ideas? What may be startling to some is the fact that big businesses, that is, big corporations, actually align themselves with big government and controlled markets. The reason is what is commonly termed "corporate welfare."

What is corporate welfare? Well, before we can answer that we must first define "welfare". According to Dictionary.com welfare is "financial or other assistance to an individual or family from a city, state, or national government" or welfare is "receiving financial aid from the government or from a private organization because of hardship and need." Welfare sounds like a pretty nice thing to receive if you are undergoing hardship and have genuine need. This is hardly objectionable if the welfare comes from a private organization.

So what is corporate welfare? Corporate welfare is welfare (see definition above) for businesses, more often than not large businesses, or corporations. Welfare has two sources, private financial assistance as in a church's welfare program, and public financial assistance as in a government welfare program. So how does corporate welfare work? It works the same way as regular welfare, corporations "receive financial aid from the government…because of hardship or need." Often, however, hardship or need is not a requirement. How do they receive this financial aid? They receive it through government subsidies, tax-exemptions, and guaranteed loans. In other words, they receive it from taxpayers.

Why do governments give these to big corporations? Because big corporations have big lobbyist hands that lobby for it, and in turn give big to political campaigns. Those who don't have big lobbyist hands are the smaller businesses, the ones in competition with the big businesses. If big corporations can get subsidies, tax-exemptions, and guaranteed loans from the government then they don't have to do much else to stay off competition. So it's in the big corporations' best interest to have big government with big treasuries. Currently, this includes both sides of the political spectrum.

None of this seems fair to new and small businesses because it isn't. It goes against the traditional concepts of limited government and free markets; free markets where the only way to the top is by satisfying direct customers, not government officials (who spend other people's money, not their own). If customers aren't satisfied, the business will lose market share to competitors whose customers are satisfied. The ultimate benefit goes to society in having better and cheaper products and services. Throwing the wrench that is corporate welfare into a free market creates distortion and corruption. And the ultimate detriment goes to society in having worse and more expensive products and services.

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