«You may know society is doomed when you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal, not in goods, but in favors; when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you; [and] when you see corruption being rewarded and honesty becoming a self-sacrifice.»Ayn Rand, "Atlas Shrugged", 1957
When Ayn Rand wrote those words, we certainly didn't realize how prophetic they would be. But how did we get there? Why does our society seem to be getting poorer instead of richer? Why does it seem like the rich keep getting richer and the poor keep getting poorer? One of the possible reasons is corporate welfare. Year in, year out, governments, in the US, Canada, the UK and many others, spend astronomical amounts of money is subsidies to different industries. Naturally, politicians would like you to believe that all this money stimulates the economy and they'll have hordes of economists (on government payrolls, of course) to support the idea, but is it actually true? I don't believe corporate welfare helps the economy at all, quite the contrary, I believe it weakens it. Let me give you a few reasons why...
- Governments are very poor investors Governments notoriously suck at investing in winners. Most often, companies that knock on government's door looking for a handout are the ones that nobody else would risk their own money on. Oh, they always promise to turn things around, but they seldom do (just think of the big three in Detroit). Most corporate welfare goes into companies that will eagerly suck on the state's teats until they run dry and then close up shop or move. Don't expect any sort of return on investment to the taxpayers because all these companies did during that time was to tie up finite resources some place other than where they were most needed. But as Bastiat put it, the obsolete jobs they protected can easily be seen. Much harder to see are the opportunities that were missed because those precious resources were not available.
- Great costs to little benefit If a company needs government help in order to make ends meet, il means that it's not making a profit, which in turn means that it's unable to sell whatever it produces at a price higher than what it costs to produce it. That means its customers don't value their product enough or that the company is not using its resources efficiently enough to bring its costs down to a level below what the customers are willing to pay for the product. That's what profits mean. They show that the company is actually creating new wealth. There's as much benefit in sustaining an unprofitable company with subsidies as there is in keeping a braindead patient alive on a respirator. If you don't pull the plug, the hospital bills will kill you.
- The dice are loaded Corporate welfare benefits larger companies at the expense of smaller ones. Large companies can hire armies of lobbyists to convince politicians to give their company taxpayer dollars. It literally taxing poor companies to benefit the rich ones. It's taking capital away from the more productive companies and give it to the most wasteful and well connected. Not only that doesn't create any new wealth, it consumes existing wealth.
- An incestuous relationship Corporate welfare creates an incestuous relationship between business and government that is rife with conflict of interest, rent-seeking and corruption. The more corporate welfare there is, the more corruption there will be.
- Corporate welfare is anti-consumer The whole reason dor the existence of any business is to serve consumers. Those that do it and do it well are rewarded with profits whereas those who don't are punished with losses and eventually with bankruptcy. This system ensures that precious scarce resources go to those businesses who do well at satisfying consumer wants and needs. The government doesn't have a penny that it hasn't stolen from someone, and nowadays, they're even stealing from future generations yet unborn. So when the government bails out a company that's losing money with taxpayer funds, its actually taking money from companies and people that are productive (Gotta make some money to pay taxes, right?) and giving it to companies that are not productive, in other words, the ones that aren't so great at fulfilling consumer wants and needs. Since taxpayers are also consumers, it means government is actually taking money from the pockets of consumers and those who produce things that consumers want, to keep businesses that produce stuff consumers don't want or need. And since the government keeps those businesses alive while they're not serving consumers well, what incentive do those businesses have to improve? How stupid is that?
- More lobbying and less innovation When businesses need to satisfy consumers in order to survive on the market, they have a strong incentive to keep coming up with new and better ideas, lest they lose their customers to their competitors. They not only need tho have ideas for better products, but also for better ways to make those products less expensively with fewer resources. This is what motivated Henry Ford to use assembly lines that could build cars so efficiently that it revolutionized the transportation industry and made it possible for almost everybody to own their own car. This is what the the profit motive does. But if instead you find it's easier to hire lobbyists to get subsidies, then you might not need to innovate so much. Not only that, but lobbying benefits big businesses at the expense of smaller ones. Big businesses cans afford to hire lobbyists, but small ones can't.
- A permit for everything and nothing without a permit Have you noticed these days that kids can't even have a lemonade stand without a permit anymore? Even your hairdresser needs a permit to cut your hair. There is prcatically nothing you can do, that doesn't require some kind of permit and sometimes several permits. Permits are when government takes away your rights and sell them back to you bit by bit. The rationale the sell you is that it's to protect consumers, but seriously, do we really need to be protected by kids selling lemonade or bad haircuts? When cities fight companies like Uber and Lyft to protect taxi cartels, are they really doing it for the benefit of consumers? Hardly! In reality, permits protect producers from consumers by limiting competition and artificially restricting supply, allowing them to charge more for for their products and services.
Ayn Rand was right
When you are forced through taxation and corporate welfare to buy products you'd rather not buy or invest in companies you'd rather not invest in. When in order to produce, you depend on the permission of bureaucrats. When the laws protect looters from you rather than the opposite. When it's more profitable for businesses to lobby government rather than serving consumers. When businesses are allowed to privatize their profits and socialise their losses. When innovation is sacrificed to protect obsolete industries. When corruption and influence peddling are becoming the norm. Can you not see that our society is doomed?#EndCorporateWelfare #Cronyism #Corporatism