The Free Market
Preachers Have Long Practised State Welfare
For The Rich
Bailing out banks seems unprecedented, but the US
government's form in subsidising big business is well
established
By George Monbiot
30/09/08 "The
Guardian" -- - According to Senator Jim
Bunning, the proposal to purchase $700bn of dodgy debt by
the US government was "financial socialism, it is
un-American". The economics professor Nouriel Roubini called
George Bush, Henry Paulson and Ben Bernanke "a troika of
Bolsheviks who turned the USA into the United Socialist
State Republic of America". Bill Perkins, the venture
capitalist who took out an ad in the New York Times
attacking the plan, called it "trickle-down communism".
They are wrong. Any subsidies eventually given to the
monster banks of Wall Street will be as American as apple
pie and obesity. The sums demanded may be unprecedented, but
there is nothing new about the principle: corporate welfare
is a consistent feature of advanced capitalism. Only one
thing has changed: Congress has been forced to confront its
contradictions.
One of the best studies of corporate welfare in the US is
published by my old enemies at the Cato Institute. Its
report, by Stephen Slivinski, estimates that in 2006 the
federal government spent $92bn subsidising business. Much of
it went to major corporations such as Boeing, IBM and
General Electric.
The biggest money crop - $21bn - is harvested by Big Farmer.
Slivinski shows that the richest 10% of subsidised farmers
took 66% of the payouts. Every few years, Congress or the
administration promises to stop this swindle, then hands
even more state money to agribusiness. The farm bill passed
by Congress in May guarantees farmers a minimum of 90% of
the income they've received over the past two years, which
happen to be among the most profitable they've ever had. The
middlemen do even better, especially the companies spreading
starvation by turning maize into ethanol, which are guzzling
billions of dollars' worth of tax credits.
Slivinski shows how the federal government's Advanced
Technology Program, which was supposed to support the
development of technologies that are "pre-competitive" or
"high risk", has instead been captured by big businesses
flogging proven products. Since 1991, companies such as IBM,
General Electric, Dow Chemical, Caterpillar, Ford, DuPont,
General Motors, Chevron and Monsanto have extracted hundreds
of millions from this programme. Big business is also
underwritten by the Export-Import Bank: in 2006, for
example, Boeing alone received $4.5bn in loan guarantees.
The government runs something called the Foreign Military
Financing programme, which gives money to other countries to
purchase weaponry from US corporations. It doles out grants
to airports for building runways and to fishing companies to
help them wipe out endangered stocks.
But the Cato Institute's report has exposed only part of the
corporate welfare scandal. A new paper by the US Institute
for Policy Studies shows that, through a series of cunning
tax and accounting loopholes, the US spends $20bn a year
subsidising executive pay. By disguising their professional
fees as capital gains rather than income, for example, the
managers of hedge funds and private equity companies pay
lower rates of tax than the people who clean their offices.
A year ago, the House of Representatives tried to close this
loophole, but the bill was blocked in the Senate after a
lobbying campaign by some of the richest men in America.
Another report, by a group called Good Jobs First, reveals
that Wal-Mart has received at least $1bn of public money.
Over 90% of its distribution centres and many of its retail
outlets have been subsidised by county and local
governments. They give the chain free land, they pay for the
roads, water and sewerage required to make that land usable,
and they grant it property tax breaks and subsidies (called
tax increment financing) originally intended to regenerate
depressed communities. Sometimes state governments give the
firm straight cash as well: in Virginia, for example,
Wal-Mart's distribution centres receive handouts from the
Governor's Opportunity Fund.
Corporate welfare is arguably the core business of some
government departments. Many of the Pentagon's programmes
deliver benefits only to its contractors. Ballistic missile
defence, for example, which has no obvious strategic purpose
and is unlikely ever to work, has already cost the US
between $120bn and $150bn. The US is unique among major
donors in insisting that the food it offers in aid is
produced on its own soil, rather than in the regions it is
meant to be helping. USAid used to boast on its website that
"the principal beneficiary of America's foreign assistance
programs has always been the United States. Close to 80% of
the USAid's contracts and grants go directly to American
firms." There is not and has never been a free market in the
US.
Why not? Because the congressmen and women now railing
against financial socialism depend for their re-election on
the companies they subsidise. The legal bribes paid by these
businesses deliver two short-term benefits for them. The
first is that they prevent proper regulation, allowing them
to make spectacular profits and to generate disasters of the
kind Congress is now confronting. The second is that public
money that should be used to help the poorest is instead
diverted into the pockets of the rich.
A report published last week by the advocacy group Common
Cause shows how bankers and brokers stopped legislators
banning unsustainable lending. Over the past financial year,
the big banks spent $49m on lobbying and $7m in direct
campaign contributions. Fannie Mae and Freddie Mac spent
$180m in lobbying and campaign finance over the past eight
years. Much of this was thrown at members of the House
financial services committee and the Senate banking
committee.
Whenever congressmen tried to rein in the banks and mortgage
lenders they were blocked by the banks' money. Dick Durbin's
2005 amendment seeking to stop predatory mortgage lending,
for example, was defeated in the Senate by 58 to 40. The
former representative Jim Leach proposed re-regulating
Fannie Mae and Freddie Mac. Their lobbyists, he recalls,
managed in "less than 48 hours to orchestrate both parties'
leadership" to crush his amendments.
The money these firms spend buys the socialisation of
financial risk. The $700bn the government was looking for
was just one of the public costs of its repeated failure to
regulate. Even now the lobbying power of the banks has been
making itself felt: on Saturday the Democrats watered down
their demand that the money earned by executives of
companies rescued by the government be capped. Campaign
finance is the best investment a corporation can make. You
give a million dollars to the right man and reap a billion
dollars' worth of state protection, tax breaks and
subsidies. When the same thing happens in Africa we call it
corruption.
European governments are no better. The free market
economics they proclaim are a con: they intervene repeatedly
on behalf of the rich, while leaving everyone else to fend
for themselves. Just as in the US, the bosses of farm
companies, oil drillers, supermarkets and banks capture the
funds extracted by government from the pockets of people
much poorer than themselves. Taxpayers everywhere should be
asking the same question: why the hell should we be
supporting them?
www.monbiot.com
Click on
"comments" below to read or post comments
Comment
Guidelines
Be succinct, constructive and
relevant to the story.
We encourage engaging, diverse and meaningful commentary.
Do not include personal information such as names, addresses,
phone numbers and emails. Comments falling outside our
guidelines – those including personal attacks and profanity –
are not permitted.
See our complete
Comment
Policy and use this link
to notify us if you have concerns about a
comment. We’ll promptly
review and remove any inappropriate postings.
Send Page To a Friend
In
accordance with Title 17 U.S.C. Section 107, this
material is distributed without profit to those
who have expressed a prior interest in receiving
the included information for research and
educational purposes. Information Clearing House
has no affiliation whatsoever with the originator
of this article nor is Information ClearingHouse
endorsed or sponsored by the originator.)
|
