Corporate welfare

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Corporate welfare refers to government financial assistance, subsidies, tax breaks, or other favorable policies provided to private businesses or specific industries, ostensibly to promote economic growth, job creation, or other public benefits. This support can take various forms, including tax credits, tax deductions, tax exemptions, government contracts, preferential regulatory treatment, debt write-offs, public-private partnerships, bailout programs, discount schemes, deferrals, low-interest loans or loan guarantees, direct subsidies or public grants.<ref>Template:Cite journal</ref>

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.

Origin of term

The term "corporate welfare" was reportedly coined in 1956 by Ralph Nader.<ref>Template:Citation</ref><ref name="cwnader">Template:Cite book</ref>

Alternative adages

"Socialism for the rich, capitalism for the poor"

Template:Main Believed to have been first popularised by Michael Harrington's 1962 book The Other America<ref>Harrington 1962, p.170, quote: "socialism for the rich and private enterprise for the poor"</ref><ref>Template:Cite journal</ref> in which Harrington cited Charles Abrams,<ref>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</ref> a noted authority on housing.

Variations on this adage have been used in criticisms of the United States' economic policy by Joe Biden,<ref>Template:Cite news</ref> Martin Luther King Jr.,<ref>Template:Cite news</ref><ref>Template:Cite book</ref> Gore Vidal,<ref>Template:Cite book</ref><ref>Gore Vidal: Imperial America, September 1, 2004</ref><ref>Template:Cite web</ref> Joseph P. Kennedy II,<ref>Kennedy: U.S. oil companies profit; Citgo helps the poor Template:Webarchive, MetroWest Daily News, January 24, 2007</ref> Robert F. Kennedy, Jr.,<ref>Mark Jacobson: American Jeremiad, New York Magazine, February 5, 2007, see page 4</ref> Dean Baker,<ref>Template:Cite book Reviewed in: Scott Piatkowski: Socialism for the rich Template:Webarchive, rabble.ca, May 25, 2006</ref> Noam Chomsky,<ref>Noam Chomsky, "The Passion for Free Markets", Z Magazine, May 1997. Reproduced on Chomsky's official site Template:Webarchive.</ref> Robert Reich,<ref>Interview with Jon Stewart, The Daily Show, October 16, 2008: Available at The Daily Show Site </ref> John Pilger,<ref>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: Template:Cite web</ref> Bernie Sanders,<ref>Template:Cite web</ref> and Yanis Varoufakis.<ref>Template:Cite web</ref>

"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.<ref>Template:Cite web</ref>

By country

United States

File:Transfer payments as a percent of federal revenue.webp

Transfer payments to (persons) as a percent of Federal revenue in the United States

File:Transfer payments to persons + business.webp

Transfer payments to (persons + business) in the United States

Background

Subsidies considered excessive, unwarranted, wasteful, unfair, inefficient, or bought by lobbying are often called corporate welfare.<ref name="NYT-20140327">Template:Cite news</ref> 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. In actuality, the majority of income gained from commodity support programs has gone to large agribusiness corporations such as Archer Daniels Midland, as they own a considerably larger percentage of production.<ref>Template:Cite web</ref>

Alan Peters and Peter Fisher, Associate Professors at the University of Iowa,<ref>Template:Cite conference</ref> have estimated that state and local governments provide $40–50 billion annually in economic development incentives,<ref>Template:Cite journal</ref> which critics characterize as corporate welfare.<ref>Template:Cite web</ref>

Multiple economists have considered the 2008 bank bailouts in the United States to be a form of corporate welfare.<ref>Template:Cite news</ref><ref>Template:Cite news</ref> U.S. politicians have also contended that zero-interest loans from the Federal Reserve System to financial institutions during and after the 2008 financial crisis were a hidden, backdoor form of corporate welfare.<ref>Template:Cite news</ref> 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.<ref>Template:Cite web</ref><ref>Template:Cite news</ref><ref>Template:Cite web</ref><ref>Template:Cite news</ref>

Comprehensive analyses

Independent

Daniel D. Huff, professor emeritus of social work at Boise State University, published a comprehensive analysis of corporate welfare in 1993.<ref name='Huff 1993'>Template:Cite journal</ref> Huff reasoned that a very conservative estimate of corporate welfare expenditures in the United States would have been at least Template:US$ in 1990.<ref name='Huff 1993'/> Huff compared this number with social welfare: Template:Blockquote

Huff argued that deliberate obfuscation was a complicating factor.<ref name='Huff 1993'/>

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.<ref name=farnsworthpaper>Template:Cite web</ref><ref>Template:Cite news</ref> 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).<ref name=farnsworthpaper /> 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.<ref>Template:Cite web</ref> Fuel duty is not charged on airlines due to the Convention on International Civil Aviation<ref>Template:Cite web</ref> (a UN agency) which specifies that aeroplanes should be exempt from fuel duties.<ref>Template:Cite web</ref>

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.<ref>Template:Cite news</ref> 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."<ref>Template:Cite news</ref>

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.<ref>Template:Cite book</ref>

The Reform Party and its successor the Canadian Alliance were known for opposing most business subsidies, but after their merger with the Progressive Conservative party, they dropped their opposition.<ref>Template:Cite book</ref>

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.<ref>Template:Cite news</ref> Prime Minister of India Narendra Modi criticised this practice, saying: Template:Blockquote

References

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External links

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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