The Ultimate Trifecta of Crony Capitalism

(From The American Conservative)

As president, Trump has produced only mixed results in his stated resolve to “drain the Washington swamp.” On the one hand, he has placed new restrictions on lobbying for some former government officials. On the other hand, he has singled out individual companies such as Carrier and specific industries such as pharmaceuticals to keep jobs in America with a carrot-and-stick approach: regulatory and tax benefits if they keep jobs here, a huge new tariff if they don’t.

But Washington is a big swamp, and there are many smaller ones out in the country, where corporate welfare and crony capitalism are rampant. Many governors, for example, have huge taxpayer-financed economic development funds used to lure businesses to their states—in exchange for new jobs. Even when these incentives fail to deliver promised results, as is often the case, they still benefit well-connected business executives and their companies. Draining the swamp, whether in Washington or state capitals, means not only removing politicians and government bureaucrats, but also those seeking favor from decisions best left to the market.

A free market is by definition a business environment in which companies produce products and services valued by consumers at a cost they are willing to pay, free from special advantages created by government. In such a market, not only will a business fail when it doesn’t create value for consumers, it will be allowed to fail. But well-meaning politicians often can’t resist interventions into the free market through bailouts, subsidies, government loan forgiveness, or other lifelines. And of course companies have every incentive to go after such special treatment, both in terms of lobbying for them and flocking to them once they are created. Thus is corporate welfare found at every level of government in America and in nearly every realm of government policy.

The key here is competition. Corporate welfare assaults the very concept of competition by giving selected enterprises government-sponsored advantages or privileges that fall into three fundamental categories: financial support through spending subsidies, tax incentives, special government financing, or bailouts; regulatory preferences such as monopolies or mandates; and protectionist policies such as tariffs or quotas.

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