Corporate Welfare and the Crony Capitalism That Enriches the Rich

When people think welfare, they think government support for the poor.

But what about corporate welfare — government support for the wealthy?


Corporate welfare costs American taxpayers hundreds of billions of dollars a year.

But much more is written about — and often critical of — welfare for the poor than welfare for the rich.


James T. Bennett is a conservative economist at the George Mason University in Fairfax, Virginia.

And he’s out with a new book titled — Corporate Welfare: Crony Capitalism That Enriches the Rich (with a forward by Ralph Nader) (Transaction Publishers, 2015).

In the book, Bennett rips apart corporate welfare schemes like sugar subsidies, the Export- Import Bank, the SST, and General Motors’ use of eminent domain to take Poletown, a Polish American neighborhood in Detroit to build a factory.

Bennett also examines the prospects for a successful anti-corporate welfare coalition of libertarians, free market conservatives, Greens, and populists.

The left likes to use the term corporate welfare.

The right calls it crony capitalism.

But it’s the same thing, right?

“Largely, yes,” Bennett said in an interview with Corporate Crime Reporter last week. “It’s two sides of the same coin. Crony capitalism is a broader term than just corporate welfare.”

“Crony capitalism can benefit not just corporations, but individuals. One of the greatest examples of crony capitalism is how politicians regulate the importation of sugar into the United States to benefit individual farmers who grow cane and beet sugar in the United States.”

“The USDA’s marketing program has one role — to make food expensive to the American people. Crony capitalism does not necessarily involve the corporate sector.”

Let’s say the terms are functionally equivalent. What do you mean by corporate welfare and crony capitalism?

“Crony capitalism and corporate welfare involve political actors — politicians,” Bennett says. “What is the lifeblood of politics? It’s all about one thing — money. I tell my students, if you don’t believe this, try this exercise. Suppose that you call the White House and ask to speak to the President. Suppose at the same time Bill Gates calls the White House and asks to speak to the President. Which call is more likely to be forwarded on to the Oval Office?”
“We are talking about corporations and individuals using the power of government in order to enrich themselves at the expense of the general taxpayer.”

“Who has the money? This is why we have corporate welfare. Government throughout history has worked primarily for the benefit of the wealthy and the well connected. That is what government is about.”

“My friends on campus say — during the Bush and Reagan administrations, the rich got richer and the poor got poorer. Of course that’s true. What else would you expect to happen?”

“Think of the army of lobbyists who prowl the halls of Congress in their Gucci shoes and Rolex watches. They are looking after the people with money. Crony capitalism typically involves big corporations. Boeing gets all kinds of loans from the Export-Import Bank to support countries like Saudi Arabia. Saudi Arabia needs American taxpayer support and loans, right?”

“General Motors. The list goes on and on. That’s the central problem. Government is a political institution that functions on money. Every politician wants to get re-elected. And it takes money — and in most instances quite a lot of it — to get re-elected. The idea is — don’t worry, you are going to get your cut of the deal. You have supported me and I will support you.”

How much corporate welfare is there in America per year?

“God only knows,” Bennett says. “Every level of government is in this game. The economic development authorities at the local level giving tax breaks and abatements and free this and that. It’s not nickels and dimes. There is a lot of money involved.”

“When a small town gets its Wal-Mart, this is big news. The mayor is out there at the ground breaking. All of the discussion is about how many jobs are being created. What is ignored is the mom and pop grocery store on Main Street, the mom and pop shoe store or clothing store. You are transferring employment and wealth from the local business that are going to be hurt or go out of business because Wal-Mart is a giant and can probably sell stuff cheaper than what the mom and pop stores can even buy it at. No one talks about the job losses. It’s always the benefits.”

“When you try to come up with a number on corporate welfare, you look at the amount of taxes that Wal-Mart saves because the local political entity grants them a tax abatement. But you have to look at the cost to the local economy — to the local mom and pop stores. You lose four business that employ 18 people in what used to be downtown. People only look at part of the issue.”

One chapter of Bennett’s book is on Poletown in Detroit. What happened there?

“General Motors wanted property in downtown Detroit to build a manufacturing facility,” Bennett says. “There was a little bit of a hang up. The land that they wanted had people on it. And so they partnered with the state government to use eminent domain to throw out all of these people, level their homes and churches and get the land that they wanted.”

Why not use eminent domain to benefit General Motors?

“Then nobody’s property is safe. Nothing is safe. Everything is up for grabs.”

Bennett’s chapter on Poletown is titled — Corporate Welfare as Theft. In what way was Poletown theft?

“There were people who didn’t want to sell their homes. And they were forced out. In that way it was theft. They leveled homes and churches.” Should there be the power of eminent domain for a public purpose?

“Yes. A public purpose is different from a private purpose.”

General Motors argued in Poletown that by taking the land and building a manufacturing facility, you are creating jobs, which is a public purpose.

“That’s not a public purpose,” Bennett says. “Then everything is a public purpose. You create jobs and it’s a public purpose. Is everything a public purpose?”

[For the complete q/a transcript of the Interview with James T. Bennett, see 29 Corporate Crime Reporter 28(13), July 13, 2015, print edition only.]

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