Welfare for the rich

The relationship between money and power is thought to be well understood by modern observers of the US political scene, but Washington DC journalist Timothy P. Carney brings together a surprising, fact-packed narrative of the relationship. In his new book, The Big Ripoff: How Big Business and Big Government Steal Your Money , Carney exposes the inner workings of corporate welfare, and has some damning things to say about it. Enron, Archer Daniels Midland, Boeing, Phillip Morris, amongst others, as well as numerous politicians. Veteran reporter Robert Novak has written an introduction. MercatorNet's US Editor quizzed him about the book's libertarian message. 

MercatorNet: So what is the big ripoff in The Big Ripoff?

Carney: Big businesses use big government as a way of getting rich, and, because government cannot create wealth, it only redistributes wealth from taxpayers and consumers to big business. Businesses call for regulations that kill their competition, they beg for handouts, and they create artificial profit opportunities through big government in ways that they never could in a free market. It's a rip-off not because they get rich; it's a rip-off because they get rich by raising our prices, reducing our choices, and hiking our taxes--all outside the bounds of a free market.

MercatorNet: What does corporate welfare look like?

Carney: That's a good question, Matthew, because people throw the term around quite often without really knowing what it is. As I write in the book, Ken Lay and Lee Iacocca don't stand in line outside a building on the first of the month to get their cheques. Corporate welfare is typically committed in the name of some sort of national or local interest.

The Export-Import Bank (Ex-Im) is an agency of the US federal government that lends your money or uses your money to underwrite private loans to foreign buyers--say, the Chinese government--so that the foreign entity can buy American goods. They tell us this creates jobs. Really, it transfers wealth from taxpayers (or less politically-connected borrowers) to Boeing, General Electric, and Halliburton. If we got to keep, spend, and invest our own money, we would create jobs, but maybe not in the industries that benefit from Ex-Im.

It's Robin Hood in reverse. Corporate welfare takes money from the taxpayers and gives it to the rich and politically favoured. Another example is eminent domain for corporate gain, where they force you to sell your house to the government and then hand it over to a Home Depot. The politicians and developers call it revitalisation. The home owner calls it theft. I call it corporate welfare.

MercatorNet: In your book, you take great pains to lay out the history of this phenomenon. In your estimation is this a disease mostly of liberal or conservative governments?

Carney: Actually, Matthew, I think I took great pleasure to lay out the history of the phenomenon.

To the extent "conservative" governments can become focused on the "ends" of growth and trade, they can get distracted from the principles of liberty and individual choice. This, I argue, harms the real ends of human happiness (as well as real growth, as individuals, acting freely, would define it). Confusing means for ends and means for principles are the standard pathologies of politics, and they drive conservatives towards this central planning mentality at the heart of corporate welfare.

Liberal governments openly believe in central planning, and to the degree that they understand economics, they perceive that business is far more efficient than the government in what it does. They also believe that the state is, by definition, the will of the people. Thus many liberals strive towards a circumstance where industry rows the boat while government steers. This is a happy situation for industry and the bureaucrats both.

If you really want an answer to your question, though, it's a left-wing mindset (I hate to use the word "liberal" to describe such disdain for liberty) that leads to this phenomenon. It's a belief in the state and a rejection of the market economy. This used to be called fascism, but maybe corporatism is a fine word, too.

MercatorNet: Is big business to blame? If not, then whom can we blame?

Carney: The primary blame must rest with the politicians whose own hunger for power creates the current situation. This includes basically every President since at least Teddy Roosevelt. Maybe Gerry Ford and Calvin Coolidge get a pass, and Ronnie Reagan wasn't so bad. The Republican leadership in Washington DC since 1994 has had the opportunity to roll back the corporate welfare state and strike down the regulatory robber barons, and they haven't. I think it's cowardice and selling out, very frankly. Here are three names of guys who could have done something but didn't: President George W. Bush, former Speaker of the House Newt Gingrich, and US Representative Bill Archer. And here are three guys who were actively part of the problem: US Representative Bill Thomas, President Bill Clinton, and US Senator Chuck Grassley.

Most big businessmen are passive recipients of corporate welfare--the moral culpability of these types is a very interesting, but very long debate. Some businessmen, however, seriously lobby to increase government control over our lives, knowing it will increase our costs and increase their profits. This is immoral activity. Public Enemy No. 1 on this score was former Archer Daniels Midland Chairman Dwayne Andreas. He has won a smorgasbord of subsides for ethanol, which I argue is a worthless product, but which is 20 per cent of his profits. He basically confessed to being a socialist on the matter. Enron was equally shameless in begging for government favours, but by disguising themselves as lovers of the free market, they may have done even more harm.

MercatorNet: What about taxpayers? Is Joe Income-Tax in any way responsible for corporate welfare?

Carney: When we ask government to help us, or when we welcome its active help, we are often endorsing an assault on the liberty and the property of ourselves and others.

The public pressure on politicians is to "do something" about our problems. "Do something" about gas prices, we say. "Do something" about farmers' suffering. This mindset is not congenial to a free-market system in which the invisible hand does something and the politician, at least concerning economics, should do nothing.

MercatorNet: What is wrong with corporate welfare, exactly?

Carney: To begin with, corporate welfare allocates resources according to political favour, while free markets allocate resources according to individual choice. Second, corporate welfare creates an occasion of sin for politicians, giving them control over our liberty and property makes them targets for bribery. Finally, it is morally wrong to redistribute wealth upwards.

MercatorNet: Why ought we to treat big businesses like individuals under the law? Aren't they altogether different?

Carney: Yes, they are different, in a way. Corporations are creations of the government. If the corporate structure is not serving the public good, then we ought to ask whether they should be abolished. The divorce of ownership and management makes it nearly impossible for corporations to abide by moral guidelines. If theft through eminent domain is legal, then does a CEO have the right to reduce the profits he is charged with earning for the owners--the stockholders--by paying a fair price for land he wants and avoiding use of eminent domain on principle?

MercatorNet: In the introduction to your book, journalist Robert Novak calls you the 21st century's own muckraker. Why did you rake this muck, and how did you know where to rake?

Carney: Theodore Roosevelt said the Muckraker, if he only rakes muck, becomes "one of the most potent forces for evil." I believe, and this is no exaggeration, that the government is the single most institutional force for evil. That's not to say that government is always evil, but it has the most potential for evil. Second place may be big business.

My old boss told me once that wherever there is money and power there is bound to be a scandal worth writing about. I followed that tip and the reporting for this book became easier. If a proposed regulation gets real traction then you know it has support from somebody besides the do-gooder who first thought it up. Rake around enough, and you'll find the guy who stands to profit from it. Rake a little deeper and you'll see its cost to the regular guy.

Why did I do this? It was fun, and it was low-hanging fruit. The Big Myth that Big Business wants to be left alone keeps most journalists from asking "who benefits" when Big Government is being hyped. Will it do any good in the world? If enough people read it, maybe we'll stop believing government can solve our problems.

MercatorNet: You mention that the first step to recovery from this rip-off is to admit we have a problem, but what do you think are some other sensible next steps to be taken?

Carney: Again, we need to turn and run when we hear: "I'm from the government, and I'm here to help." If you read my book, you will come away with new scepticism of government, even if you're not a laissez-faire type to begin with. I think with some political pressure, the Republicans could actually start acting like the party of limited government in a populist way, and start rolling back all the garbage I discuss.


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