Corporate Welfare: Where’s the Outrage? by David Waugh for American Institute for Economic Research
“They may hate democratic socialism because it benefits working people, but they absolutely love corporate socialism that enriches Trump and other billionaires.”
~ Bernie Sanders
It is fashionable for politicians like Senator Sanders to point to corporations as beneficiaries of socialist government policies. To their credit, they are correct. So what is corporate socialism?
In their excellent book Multilateral Disarmament: A State Compact to End Corporate Welfare, Byron Schlomach, Stephen Slivinski, and James M. Hohman provide a fairly complete definition, defining corporate welfare (or corporate socialism) as, “any financial benefit purposely granted by government to a specific business or class of businesses and that is not generally available to all businesses and taxpayers.”
And why corporate welfare, or cronyism if you prefer? The label fits because the market is no longer allowed to fully integrate prices and fairly reward or punish companies. In the cronyism model, these decisions are made by a central planner in accord with their own particular interests.
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Politicians routinely engage in doling out corporate welfare, mostly because they are incentivized to do so. Corporations are significant political donors and maintain large lobbying offices, for the sole purpose of extracting as many “rents” as they can from government officials. Politicians want to stay in power, which necessitates keeping their largest donors happy, and so the cycle continues.
Further, politicians want to claim they are “creating jobs” via policy, and the practice of corporate welfare makes this easy. Who doesn’t want to tout responsibility for the new Amazon factory in town?
To make things more complicated, corporate welfare itself is sometimes hard to spot. It masquerades under slogans such as “helping our farmers,” or “providing financial security to ordinary Americans.” If gathering basic information about political candidates is too costly for the average voter, there are even less incentives to critically examine “nice-sounding” corporate welfare programs.
