Corporate welfare

Corporate welfare is a pejorative term first coined by Ralph Nader in 1956 to describe a government's bestowal of grants and/or tax breaks on one or more corporations or other "special favorable treatment" from the government. Usually these actions are seen to be at the expense of the citizens, although they might be seen as at the expense of other corporations as well. Both terms are meant to remind one of welfare payments to the poor, and perhaps imply that corporations are much less deserving than the poor. Some object to the term "corporate welfare" on the grounds that the term plays on negative stereotypes about welfare payments to poor people, and may suggest that the poor are as undeserving of government "handouts" as corporations are. Corporate welfare is one of the most important forms of regulator capture.

Related Topics:
Pejorative - Term - Ralph Nader - Government - Tax - Corporation - Welfare payment - Regulator capture

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Corporate welfare is applied in a number of different situations. A classic example is the granting of the use of broadcasting rights to TV stations at nominal fees, when other companies are willing to pay substantially more to use these frequencies. Increasingly common with the rise of globalization is offering incentives to locate in an area. For instance a company intending to build a manufacturing plant, or even a sports stadium, will frequently declare interest in two areas, and then let their respective governments attempt to "outbid" each other with promises of tax breaks, free land, and infrastructure developments. Critics charge that this skews the free market, giving a competitive advantage to large corporations, and shifts tax burdens away from these large companies to smaller ones and to individuals.

Related Topics:
TV - Globalization

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Another common example often derided as "corporate welfare" is when a large company is nearing collapse, and is given substantial breaks or financial support by the government to keep it in business. While free market theory views the bankruptcy of companies as essential to the process, the specter of lost jobs and unhappy voters often means the government will step in to help a faltering behemoth, to an extent that would not happen with a small business. For example, the airline industry has survived ongoing losses through government aid.

Related Topics:
Free market - Bankruptcy - Behemoth - Airline industry

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Critics of corporate welfare charge that many cases are nothing more than "pork barreling" and even examples of corruption. Examples might include defense contracts given to inefficient businesses in a politician's district, or giving assistance to a major campaign donor.

Related Topics:
Pork barrel - Corruption - Defense - Contracts - Campaign

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Some forms of corporate welfare are less widely criticised because of their positive externalities. For instance, most countries heavily support their domestic film companies, arguing that the perservation of national culture would not be ensured by an unfettered market. A number of countries have used corporate welfare as a form of investment, to get industries started that would go on to pay great dividends for both the government and society in the long run.

Related Topics:
Positive externalities - Film - Culture

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Corporate welfare knows no party ideology. Just as Republicans/conservatives are likely to call for energy depletion allowances to encourage job growth in the oil industry, Democrats/liberals are likely to call for grants to corporations to encourage use of or develop alternative fuels such as biofuel. Libertarians may be most consistantly opposed. Burton W. Folsom, Jr. identifies businesspersons who seek corporate welfare as "political entrepreneurs" in his book, The Myth of the Robber Barons as distinguished from what he calls "market entrepreneurs."

Related Topics:
Biofuel - Burton W. Folsom, Jr. - Political entrepreneurs - The Myth of the Robber Barons

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