Corporate Subsidy


2013-11-03 – A couple days ago there was a post floating around Facebook saying that US taxpayers, on average, pay $36 apiece per year to support the food stamp program and $870 to support corporate subsidies. Those figures are sourced to and the Cato Institute respectively. I’m sure you can quibble about methodology and come out with slightly different figures. You could also say that the food stamp figure focuses on only one class of aid to individuals while the corporate subsidy figure lumps everything together.

I’m not here today to debate that. Instead, I want to talk about a fundamental advantage that the government gives to corporations that are never quantified into statistics like these, advantages that flow directly from the corporate status itself that give market power to corporations over individuals.

Corporate power began to rise in America after the Civil War. The corporate form allows owners to come together to achieve a joint business purpose and allows them immunity from certain legal liabilities that a partnership would impose on individual partners. Large corporations in the late nineteenth century became aggressive and oppressive, leading to various attempts to rein them in.

In 1890, Congress passed the first major legislation of this type, known as the Sherman Antitrust Act, which prohibits combinations in restraint of trade and monopolies. In 1914, the Clayton Antitrust Act prohibited price discrimination, exclusive dealing, tying arrangements, and mergers and acquisitions that substantially reduce market competition. Additional legislation refined the prohibitions from time to time.

You might be thinking: isn’t this good enough? Or you might be thinking: why aren’t these laws slowing down the rapaciousness of today’s mega corporations. And you would be right to ask both questions. The legal framework is there, but enforcement is weak. Both parties are at fault.

What does it cost us when huge corporations control, say, the market for entry-level jobs? Did you ever wonder how McDonalds and Walmart can pay so little to their employees? Some folks say: if you don’t like what they pay, go somewhere else! But going somewhere else doesn’t necessarily help if the market is controlled by such big players.

What does it cost us when huge corporations have so much control in financial markets? The result is a kind of national extortion known as “too big to fail.” These businesses have established an environment in which only they gain from successful ventures but the taxpayers subsidize losses when their gambles fail. Some of these folks did things that would have sent you and me to jail. But they are big corporations (and executives in big corporations). The big guys don’t go to jail.

I could go on and on. But my question has to do with quantifying the transfer of wealth from citizens to wealthy corporations that are based on being able to operate immune from penalties that would apply to individuals?

How much do you think you are paying?

The Sherman Antitrust Act focused on ways in which businesses used excess market power to extract premium prices from customers: a kind of tax for doing business with a monopolist or near-monopolist. Customers are not the only ones disadvantaged. Shareholders lose their rights to profits that are funneled to executives in excessive “pay packages” (I call it “loot”). Employees see wages depressed. Both are a kind of tax, not collected by a fallible government, but collected by infallible greed. And we all see money spent to extend their influence over government.

Taxes are not being reduced. They just change their name when they stop being paid to representative government and start being paid directly to the plutocrats.

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