Corporate welfare
Encyclopedia
Corporate welfare is a pejorative term describing a government's bestowal of money grants, tax break
s, or other special favorable treatment on corporation
s or selected corporations. The term compares corporate subsidies and welfare payments to the poor, and implies that corporations are much less needy of such treatment than the poor. The Canadian
New Democratic Party
picked up the term as a major theme in its 1972 federal election
campaign. Ralph Nader
, an American critic of corporate welfare, is often credited with coining the term.
Subsidies considered excessive, unwarranted, wasteful, unfair, inefficient, or bought by lobbying
are often called corporate welfare. 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 honest, hardworking 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.
According to the Cato Institute
, the U.S. federal government spent $92 billion on corporate welfare during fiscal year 2006. Recipients included Boeing
, Xerox
, IBM
, Motorola
, Dow Chemical, and General Electric
.
Alan Peters and Peter Fisher have estimated that state and local governments provide $40-50 billion annually in economic development incentives, which many critics characterize as corporate welfare.
Some economists consider the recent bank bailouts in the United States
to be corporate welfare. 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.
Tax break
Tax break is a slang term referring to any item which reduces tax, including any tax exemption, tax deduction, or tax credit. Tax break is also a pejorative term used in the United States to refer to purportedly favorable tax treatment of any class of persons, as in "individuals get a tax break...
s, or other special favorable treatment on corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s or selected corporations. The term compares corporate subsidies and welfare payments to the poor, and implies that corporations are much less needy of such treatment than the poor. The Canadian
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
New Democratic Party
New Democratic Party
The New Democratic Party , commonly referred to as the NDP, is a federal social-democratic political party in Canada. The interim leader of the NDP is Nycole Turmel who was appointed to the position due to the illness of Jack Layton, who died on August 22, 2011. The provincial wings of the NDP in...
picked up the term as a major theme in its 1972 federal election
Canadian federal election, 1972
The Canadian federal election of 1972 was held on October 30, 1972 to elect members of the Canadian House of Commons of the 29th Parliament of Canada. It resulted in a slim victory for the governing Liberal Party, which won 109 seats, compared to 107 seats for the opposition Progressive...
campaign. Ralph Nader
Ralph Nader
Ralph Nader is an American political activist, as well as an author, lecturer, and attorney. Areas of particular concern to Nader include consumer protection, humanitarianism, environmentalism, and democratic government....
, an American critic of corporate welfare, is often credited with coining the term.
As corrupt subsidies
Subsidies considered excessive, unwarranted, wasteful, unfair, inefficient, or bought by lobbying
Lobbying
Lobbying is the act of attempting to influence decisions made by officials in the government, most often legislators or members of regulatory agencies. Lobbying is done by various people or groups, from private-sector individuals or corporations, fellow legislators or government officials, or...
are often called corporate welfare. 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
Agricultural subsidy
An agricultural subsidy is a governmental subsidy paid to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities...
are usually portrayed as helping honest, hardworking independent farmers stay afloat. However, the majority of income gained from commodity support programs actually goes to large agribusiness
Agribusiness
In agriculture, agribusiness is a generic term for the various businesses involved in food production, including farming and contract farming, seed supply, agrichemicals, farm machinery, wholesale and distribution, processing, marketing, and retail sales....
corporations such as Archer Daniels Midland
Archer Daniels Midland
The Archer Daniels Midland Company is a conglomerate headquartered in Decatur, Illinois. ADM operates more than 270 plants worldwide, where cereal grains and oilseeds are processed into products used in food, beverage, nutraceutical, industrial and animal feed markets worldwide.ADM was named the...
, as they own a considerably larger percentage of production.
According to the Cato Institute
Cato Institute
The Cato Institute is a libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Edward H. Crane, who remains president and CEO, and Charles Koch, chairman of the board and chief executive officer of the conglomerate Koch Industries, Inc., the largest privately held...
, the U.S. federal government spent $92 billion on corporate welfare during fiscal year 2006. Recipients included Boeing
Boeing
The Boeing Company is an American multinational aerospace and defense corporation, founded in 1916 by William E. Boeing in Seattle, Washington. Boeing has expanded over the years, merging with McDonnell Douglas in 1997. Boeing Corporate headquarters has been in Chicago, Illinois since 2001...
, Xerox
Xerox
Xerox Corporation is an American multinational document management corporation that produced and sells a range of color and black-and-white printers, multifunction systems, photo copiers, digital production printing presses, and related consulting services and supplies...
, IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
, Motorola
Motorola
Motorola, Inc. was an American multinational telecommunications company based in Schaumburg, Illinois, which was eventually divided into two independent public companies, Motorola Mobility and Motorola Solutions on January 4, 2011, after losing $4.3 billion from 2007 to 2009...
, Dow Chemical, and General Electric
General Electric
General Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
.
Alan Peters and Peter Fisher have estimated that state and local governments provide $40-50 billion annually in economic development incentives, which many critics characterize as corporate welfare.
Some economists consider the recent bank bailouts in the United States
Emergency Economic Stabilization Act of 2008
The Emergency Economic Stabilization Act of 2008 The Emergency Economic Stabilization Act of 2008 The Emergency Economic Stabilization Act of 2008 (Division A of , commonly referred to as a bailout of the U.S. financial system, is a law enacted in response to the subprime mortgage crisis...
to be corporate welfare. U.S. politicians have also contended that zero-interest loans from the Federal Reserve System
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...
to financial institutions during the global financial crisis were a hidden, backdoor form of corporate welfare.
See also
- AltruismAltruismAltruism is a concern for the welfare of others. It is a traditional virtue in many cultures, and a core aspect of various religious traditions, though the concept of 'others' toward whom concern should be directed can vary among cultures and religions. Altruism is the opposite of...
- CorporatismCorporatismCorporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...
- Crony capitalismCrony capitalismCrony capitalism is a term describing a capitalist economy in which success in business depends on close relationships between business people and government officials...
- KleptocracyKleptocracyKleptocracy, alternatively cleptocracy or kleptarchy, is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population, often without pretense of honest...
- Golden gimmickGolden gimmickThe Golden Gimmick refers to a foreign tax credit deal enacted in November 1950 by the US Government under president Harry Truman between King Ibn Saud of Saudi Arabia and the Arabian-American Oil Company , a consortium comprising Standard Oil of California , Standard Oil of New Jersey , Standard...
- Hidden Welfare StateHidden Welfare StateThe Hidden Welfare State is a term coined by Christopher Howard, professor of government at the College of William and Mary, to refer to tax expenditures with social welfare objectives that are often not included in discussions about the U.S. welfare state...
- PlutocracyPlutocracyPlutocracy is rule by the wealthy, or power provided by wealth. The combination of both plutocracy and oligarchy is called plutarchy. The word plutocracy is derived from the Ancient Greek root ploutos, meaning wealth and kratos, meaning to rule or to govern.-Usage:The term plutocracy is generally...
- Political corruptionPolitical corruptionPolitical corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...
- Public choice theoryPublic choice theoryIn economics, public choice theory is the use of modern economic tools to study problems that traditionally are in the province of political science...
- Regulatory captureRegulatory captureIn economics, regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as...
- Socialism for the rich and capitalism for the poorSocialism for the rich and capitalism for the poorSocialism for the rich and capitalism for the poor is a classical political-economic argument, stating that in the advanced capitalist societies state policies assure that more resources flow to the rich than to the poor, for example in form of transfer payments...
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.Murray RothbardMurray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...
Making Economic Sense, Chapter 51: Making Government-Business Partnerships ISBN 0-945466-18-8 (1995)
External links
- Anti-subsidy Congressional testimony
- Articles & sources from an anti-subsidy perspective
- Anti-subsidy information from NewRules.org
- A corporate welfare example from N.Y.
- A pro-subsidy perspective
- Interview with Samuel Edward Konkin III - 3 types of capitalists, categorizes State support of businesses as dangerous