Corporate welfare

Corporate welfare is a term that analogizes corporate subsidies to welfare payments for the poor.[1] The term is often used to describe a government's bestowal of money grants, tax breaks, or other special favorable treatment for corporations. It highlights how wealthy corporations are less in need of such treatment than the poor.[1]

The definition of corporate welfare is sometimes restricted to direct government subsidies of major corporations, excluding tax loopholes and all manner of regulatory and trade decisions, which, in practice, could be worth much more than any direct subsidies.

Origin of term

The term "corporate welfare" was reportedly invented in 1956 by Ralph Nader.[2][3]

Alternative adages

"Socialism for the rich, capitalism for the poor"

Believed to have been first popularised by Michael Harrington's 1962 book The Other America[4][5] in which Harrington cited Charles Abrams,[6] a noted authority on housing.

Variations on this adage have been used in criticisms of the United States' economic policy by Joe Biden,[7] Martin Luther King, Jr.,[8][9] Gore Vidal,[10][11][12] Joseph P. Kennedy II,[13] Robert F. Kennedy, Jr.,[14] Dean Baker,[15] Noam Chomsky,[16] Robert Reich,[17] John Pilger,[18] and Bernie Sanders.[19]

"Privatizing profits and socializing losses"

"Privatizing profits and socializing losses" refers to the idea that corporations want to reserve financial gains for themselves and pass along losses to the rest of society, potentially through lobbying the government for assistance. This practice was criticized in the Wall Street bailout of 2008.[20]

United States

Background

Subsidies considered excessive, unwarranted, wasteful, unfair, inefficient, or bought by lobbying are often called corporate welfare.[1] The label of corporate welfare is often used to decry projects advertised as benefiting the general welfare that spend a disproportionate amount of funds on large corporations, and often in uncompetitive, or anti-competitive ways. For instance, in the United States, agricultural subsidies are usually portrayed as helping independent farmers stay afloat. However, the majority of income gained from commodity support programs actually goes to large agribusiness corporations such as Archer Daniels Midland, as they own a considerably larger percentage of production.[21]

Alan Peters and Peter Fisher, Associate Professors at the University of Iowa,[22] have estimated that state and local governments provide $40–50 billion annually in economic development incentives,[23] which critics characterize as corporate welfare.[24]

Some economists consider the 2008 bank bailouts in the United States to be corporate welfare.[25][26] U.S. politicians have also contended that zero-interest loans from the Federal Reserve System to financial institutions during the global financial crisis were a hidden, backdoor form of corporate welfare.[27] The term gained increased prominence in 2018 when Senator Bernie Sanders introduced a bill, singling out Amazon and Walmart in particular, to require a company with 500 or more employees to pay the full cost of welfare benefits received by its workers.[28][29][30][31]

Comprehensive analyses

Cato Institute

Policy analysis conducted by the Cato Institute, an American libertarian think tank, argued that United States fiscal policy allocated approximately US$92 billion in the 2006 federal budget toward programs that the authors considered to be corporate welfare.[32][33] Subsequent analysis by the institute estimated that number to be US$100 billion in the 2012 federal budget.[34][35][36]

Independent

Daniel D. Huff, professor emeritus of social work at Boise State University, published a comprehensive analysis of corporate welfare in 1993.[37] Huff reasoned that a very conservative estimate of corporate welfare expenditures in the United States would have been at least US$170 billion in 1990.[37] Huff compared this number with social welfare:

In 1990 the federal government spent 4.7 billion dollars on all forms of international aid. Pollution control programs received 4.8 billion dollars of federal assistance while both secondary and elementary education were allotted only 8.4 billion dollars. More to the point, while more than 170 billion dollars is expended on assorted varieties of corporate welfare the federal government spends 11 billion dollars on Aid for Dependent Children. The most expensive means tested welfare program, Medicaid, costs the federal government 30 billion dollars a year or about half of the amount corporations receive each year through assorted tax breaks. S.S.I., the federal program for the disabled, receives 13 billion dollars while American businesses are given 17 billion in direct federal aid.[37]

Huff argued that deliberate obfuscation was a complicating factor.[37]

United Kingdom

In 2015, Kevin Farnsworth, a senior lecturer in Social Policy at the University of York published a paper in which he claimed that the government was providing corporate subsidies of £93 billion.[38][39] This amount includes the role of the government in increasing trade, tax relief for businesses that invest in new plants and machinery (estimated by Farnsworth at £20 billion), not charging fuel duty on fuel used by railways or airlines, green energy subsidies, a lower corporation tax rate for small companies, regional development grants and government procurement for businesses (which Farnsworth suggests often favours British businesses even when these are not the best value option available).[38] However, The Register wrote that Farnsworth's figure for tax relief for investment was incorrect and that he had made mistakes in his calculations, noting that he was not an accountant. It also stated that not charging businesses taxes under certain circumstances (when the reliefs applied) was not the same as giving them a subsidy.[40] Fuel duty is not charged on airlines due to the Convention on International Civil Aviation[41] (a UN agency) which specifies that aeroplanes should be exempt from fuel duties.[42]

Political discussion

In 2015, Labour Party leader Jeremy Corbyn said he would “strip out” the £93bn of “corporate tax relief and subsidies” Farnsworth referred to and use the proceeds for public investment.[43] Corbyn did not say which specific policies he would change. The Guardian wrote the policy "sounds wonderful, but careful scrutiny of 'corporate welfare' shows that it includes capital allowances designed to persuade companies to invest, regional aid to boost growth in rundown parts of the UK, and subsidies to keep bus and rail routes open – none of which Corbyn would presumably like to see stopped."[44]

Canada

The New Democratic Party in Canada picked up the term as a major theme in its 1972 federal election campaign. Its leader, David Lewis, used the term in the title of his 1972 book, Louder Voices: The Corporate Welfare Bums.[45]

The Reform Party and its successor the Canadian Alliance were known for opposing mostly business subsidies. However, after their merger with the Progressive Conservative party, they dropped their opposition to it. [46]

India

It was observed by The Wire that the Effective tax rate was low for the larger corporations which meant companies making smaller profits are competing in an unequal environment against bigger companies with substantial taxation benefits, with the gap in effective tax rates widening over the years.[47] India's Union government's prime minister criticised this practice and said

"Why is it that subsidies going to the well-off are portrayed in a positive manner? Let me give you an example. The total revenue loss from incentives to corporate tax payers was over Rs 62,000 crore…I must confess I am surprised by the way words are used by experts on this matter. When a benefit is given to farmers or to the poor, experts and government officers normally call it a subsidy. However, I find that if a benefit is given to industry or commerce, it is usually an ‘incentive’ or a ‘subvention'."[48]

See also

References

  1. 1 2 3 Kristof, Nicholas (March 27, 2014). "A Nation of Takers?". The New York Times. Retrieved March 27, 2014.
  2. ↑ Ralph Nader on Corporations, OnTheIssues, retrieved 2014-09-03
  3. ↑ Chapman, Roger (2010). Culture Wars: An Encyclopedia of Issues, Viewpoints, and Voices. M.E. Sharpe. p. 119. ISBN 9780765617613.
  4. ↑ Harrington 1962, p.170, quote: "socialism for the rich and private enterprise for the poor"
  5. ↑ Robert P. Engvall (1996) The connections between poverty discourse and educational reform: When did “Reform” become synonymous with inattention? in The Urban Review Volume 28, Number 2 / June, 1996, pp. 141-163
  6. ↑ Michael Harrington (1962) The Other America, p.58, quote: This is yet another case of "socialism for the rich and free enterprise for the poor," as described by Charles Abrams in the housing field
  7. ↑ Stein, Sam (18 March 2010). "Biden On The Bailout: 'Socialism For The Rich And Capitalism For The Poor'". The Huffington Post. Retrieved 13 April 2018. Pointing to the hundreds of billions of government dollars that have been spent to keep banks from failing, he recalled a "great expression" of his grandfather, Ambrose Finnegan: "It's socialism for the rich and capitalism for the poor,"" Biden said.
  8. ↑ King's Light, Malcolm's Shadow, January 18, 1993
  9. ↑ Thomas F. Jackson, Martin Luther King: From Civil Rights to Human Rights: Martin Luther King, Jr., and the Struggle for Economic Justice, ISBN 0-8122-3969-5, ISBN 978-0-8122-3969-0, page 332
  10. ↑ Gore Vidal: Reflections Upon a Sinking Ship, Little, Brown, 1969
  11. ↑ Gore Vidal: Imperial America, September 1, 2004
  12. ↑ 'Free enterprise for the poor, socialism for the rich': Vidal's claim gains leverage, irishtimes.com, September 20, 2008
  13. ↑ Kennedy: U.S. oil companies profit; Citgo helps the poor Archived 2009-02-27 at the Wayback Machine., MetroWest Daily News, January 24, 2007
  14. ↑ Mark Jacobson: American Jeremiad, New York Magazine, February 5, 2007, see page 4
  15. ↑ Baker, Dean (2006). The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. Washington, D.C.: Center for Economic and Policy Research. ISBN 1-4116-9395-7. Reviewed in: Scott Piatkowski: Socialism for the rich, rabble.ca, May 25, 2006
  16. ↑ Noam Chomsky, "The Passion for Free Markets", Z Magazine, May 1997. Reproduced on Chomsky's official site.
  17. ↑ Interview with Jon Stewart, The Daily Show, Oct 16, 2008: Available at The Daily Show Site
  18. ↑ Full transcript of the John Pilger speech at the Sydney Opera House to mark his award of Australia's human rights prize, the Sydney Peace Prize: "Archived copy". Archived from the original on 2010-10-14. Retrieved 2014-03-10.
  19. ↑ "Sen. Sanders Held a Tax Cut Filibuster | C-SPAN". 2014-01-18. Archived from the original on January 18, 2014. Retrieved 2015-12-12.
  20. ↑ Staff, Investopedia (15 April 2012). "Privatizing Profits And Socializing Losses". investopedia.com.
  21. ↑ USDA: American Farms Archived 2007-02-10 at the Wayback Machine. www.USDA.gov
  22. ↑ Fisher, Peter S.; Peters, Alan H. (March–April 1997). Tax and Spending Incentives and Enterprise Zones (PDF). New England Economic Review. Boston: Boston Fed. pp. 109–137.
  23. ↑ Fisher, Peter; Peters, Alan (March 2004). "The Failures of Economic Development Incentives" (PDF). Journal of the American Planning Association. 70 (1): 27–37. doi:10.1080/01944360408976336. Retrieved 13 April 2018.
  24. ↑ "Tax breaks for developers – economic development or corporate welfare? - Baltimore Brew". baltimorebrew.com.
  25. ↑ Stiglitz, Joseph (December 8, 2010), "US could cut deficit and gain, but that's unlikely", Sydney Morning Herald, retrieved 2010-12-22
  26. ↑ Folbre, Nancy (April 20, 2009), "Welfare for Bankers", The New York Times, retrieved 2011-04-28
  27. ↑ Schroeder, Peter (December 1, 2010), "Sanders uses 'jaw-dropping' Fed disclosures to call for further inquiry", The Hill, retrieved 2010-12-15
  28. ↑ Robertson, Adi (2018-09-05). "Bernie Sanders introduces "Stop BEZOS" bill to tax Amazon for underpaying workers". The Verge. Retrieved 2018-09-14.
  29. ↑ Gibson, Kate (2018-09-05). "Bernie Sanders targets Amazon, Walmart with 100% tax". CBS. Retrieved 2018-09-14.
  30. ↑ Stewart, Emily (2018-09-05). "Bernie Sanders's BEZOS bill takes aim at how Amazon pays workers". Vox. Retrieved 2018-09-14.
  31. ↑ Delaney, Arthur; Jamieson, Dave (2018-09-05). "What the Bernie Sanders Amazon welfare fight is really about". Huffington Post. Retrieved 2018-09-14.
  32. ↑ Slivinski, Stephen (2007-05-17). "The Corporate Welfare State: How the Federal Government Subsidizes U.S. Businesses" (PDF). Policy Analysis. Cato Institute (592). Retrieved 2012-09-09.
  33. ↑ "The Corporate Welfare State". The Wall Street Journal. 2011-11-08. Retrieved 2012-09-09.
  34. ↑ DeHaven, Tad (2012-07-25). "Corporate Welfare in the Federal Budget" (PDF). Policy Analysis. Cato Institute (703). Retrieved 2012-09-09.
  35. ↑ Bandow, Doug (2012-08-20). "Where to Cut the Federal Budget? Start by Killing Corporate Welfare". Forbes. Retrieved 2012-09-09.
  36. ↑ Hinkle, A. Barton (2012-09-05). "The Worst Welfare Benefits the Best-Off: Corporations". Richmond Times-Dispatch. Reason. Retrieved 2012-09-09.
  37. 1 2 3 4 Huff, Daniel D.; David A. Johnson (May 1993). "Phantom Welfare: Public Relief for Corporate America". Social Work. 38 (3): 311–316. doi:10.1093/sw/38.3.311. Archived from the original on 2012-11-06. Retrieved 2012-11-06.
  38. 1 2 "The British Corporate Welfare State: Public Provision for Private Businesses" (PDF).
  39. ↑ "The £93bn handshake: businesses pocket huge subsidies and tax breaks".
  40. ↑ "Taxpayers are NOT giving businesses £93bn".
  41. ↑ "Convention on International Civil Aviation".
  42. ↑ "Does the government subsidise airlines by £10 billion?".
  43. ↑ Grice, Andrew (3 August 2015). "Jeremy Corbyn allies accuse Chris Leslie of deliberately misrepresenting Labour frontrunner's economic policies". The Independent. London.
  44. ↑ "Jeremy Corbyn has the vision, but his numbers don't yet add up".
  45. ↑ Lewis, David (1972). Louder voices: the corporate welfare bums. Toronto: James Lewis & Samuel. ISBN 9780888620316.
  46. ↑ Milke, Mark (2010-01-14). A Nation of Serfs: How Canada's Political Culture Corrupts Canadian Values. John Wiley & Sons. ISBN 9780470675175.
  47. ↑ "Why 52,911 Profitable Indian Companies Pay 0% Tax". The Wire. Retrieved 2018-03-25.
  48. ↑ "Modi calls for targeted subsidies, questions corporate tax breaks". Hindustan Times. 2016-01-30. Retrieved 2018-03-25.

Further reading

  • Johnston, David Cay. Free Lunch (The Penguin Group, New York, 2007.)
  • 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).
  • 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 0-945466-18-8 (1995)
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