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March 26, 2006 - Freedomain Radio - Stefan Molyneux
44:40
160 Corporations

Learning to loathe a legal fiction

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Good afternoon, everybody.
It's Steph.
I hope you're doing well.
It's 3.40 on Sunday, March 26, 2006.
And I know this is going to be a shock, but we're actually going to start off with some facts today.
I know.
I know.
Shockingly, it is the case.
Normally, you get the ranch sandwich with no meat.
Maybe a little mayo.
Now, recently, what we've been doing is having the meat sandwich, so you've got rants as the bread, meats as a little bit of facts, rants again at the end, but now we're starting with meat.
This is going to be sort of an open-faced sandwich rant, if you don't mind me working out the metaphor, to within an inch of its life.
So what we're going to do is talk a little bit about corporations, because You know, it's gripping stuff, let me tell you.
One of the things that socialists really dislike about corporations, of course, is the fact that they seem to be quasi-governmental institutions.
And we in the free market, at least I can talk about myself, had a sort of love-ish relationship with corporations because I kind of associated them with the free market.
And I thought, well, you know, corporations compared to bureaucracies, there's no comparison, and bureaucracies are evil, and corporations are good, and multinationals, who cares, compared to foreign policy of hegemonic nations, and so on.
But then, of course, I began to dig in a little bit into the facts of the situation, and sadly found that I was somewhat prejudicial by drawing a clear line, in my own mind at least, down between the state and corporations, which is really not that legitimate.
So let's have a look at corporations and see if we can't find something in common with our left-wing friends who have problems with corporations.
Because if corporations are extensions of the state or heavily wrapped up in state power, then we as anarchists or libertarians or objectivists or minarchists, I've got to come up with a good acronym for all of that sort of stuff.
I don't have to keep wrapping my polysyllabic brain around that kind of mouthful.
So let's have a quick look at the history of corporations, and then we'll sort of understand what they are, where they sit within the sort of free market in the state currently.
It doesn't mean sort of how they could be, how DROs or anarchistic situations might create different circumstances, but let's have a look at these a little bit from the U.S.
perspective.
And this I'm going to refer to a couple of articles.
The first one here is called The History of Corporate Rule and Popular Unrest and you can find this at wealthforfreedom.com forward slash truth forward slash corporations dot htm.
And this is from 2002 from Nexus magazine.
It's invented early in the colonial era.
It's a grant of privilege extended by the crown to a group of investors, usually to finance a trade expedition.
Now here, you've already got a problem, right?
When you find out that the corporation is a grant of privilege extended by the state to a group of investors, usually to finance a trade expedition.
Now, it's not really so good overall.
Like, immediately you have a problem.
This is mercantilism, which is the granting of trade privileges by the state in return for payment to the state.
It's sort of like how the mafia will farm off a street corner to a particular drug dealer or prostitute or pimp in order to gain some compensation in return for that right of privilege.
Now, the corporation basically, what it does is it limits the liability of investors to the amount of their investment.
And, of course, ordinary citizens don't really have that ability.
A corporate charter set out the specific rights and obligations of the individual corporation including the amount to be paid to the crown in return for the privilege granted.
Now, when you become a day trader or a short-term trader and you trade on margin, which means you invest a small amount just to cover the spread and you bet a heck of a lot more, there's no legal way that you can bet on the stock market And not be covered, or sorry, be covered only to the level of the liability of your particular investment.
So if I'm investing on margin, and I put in 10 bucks, but I'm actually trading 100 bucks worth of stuff, I'm just hoping the price isn't going to fluctuate by more than 10 bucks.
There's just no legal way that I can be limited, at least in the current system.
I'm not saying DROs, maybe it would be fantastic, who knows, but in the current system.
You cannot limit your liability in that way.
Now, corporations are very different.
Corporations, if you invest money in a corporation and it goes under, you are only liable up to the limit of the investment that you have in that corporation.
So if that corporation spends itself into negative a million dollars and you're the sole investor, then you can walk away and the people who've lent you money are kind of hosed, right?
Because that million just gets evaporated.
Basically, a corporation, and this is true even now, is a way of limiting personal liability for business debts.
So if I start a company, I blow it up and I'm a million dollars in the hole, then it's like, oh, so sad, too bad the corporation ends up as an empty shell with a negative liability of a million dollars.
But people can't come and get, you know, my house, my kidney, they can't take my cat.
They can't do anything about my personal assets, so it's kind of a smarmy, stick-your-tongue-out-through-a-guarded-electric-fence kind of thing at your creditors.
And so, of course, we would associate this with something like the state, and I think we're pretty right to do so if we look at the history.
So at the beginning you get the East India Company.
This is the British colonization of India.
It was led by this Hudson's Bay Company, which did the same thing in Canada.
Now almost from the beginning, England deployed state military power to further corporate interests.
This is of course something that continues all the way up to the present.
If you remember the depressing roll call of CIA-sponsored coup, Coups throughout the world, which we read last week.
You'll remember that the 1953 coup in Iran had a lot to do with the fact that the new Iranian leader was taking over, or wanted to take over, nationalized steel, the British corporate interests, and to a smaller degree the American corporate interests, in oil in Iran.
And so that's something that really isn't allowed, and that's one of the main reasons why there was this coup.
So, in the East India Company, through the power of the British government, actually had a quarter million man army.
Not very common for a lot of private corporations now, but basically what it was, was a right to go and plunder or pillage a certain amount of land with government support from a military standpoint, and in return you paid additional monies back to the government.
Now, we'll race forward and we'll go through this history in a bit more detail, but if you look at the current situation, then corporations are a way of shielding rich people from failed companies or business failures.
They're also a way of increasing the taxes on individuals, right?
Because you have to pay 30%, 40%, 25%, 50% some places, corporate tax, okay?
Tax on corporate profits.
And this, of course, just means there's that much less money to pay the employees, or, you know, if you're more cynical, to pay the shareholders, but they're going to put the money back into the economy.
Basically, it's a way of keeping economy out of private hands and putting it back into the hands of the state.
So, you know, you're So it's absolutely a tax on individuals.
That's sort of buried.
It's sort of hidden.
It's like the other side of the seven and a half percent you pay for social security.
It's kind of buried in there.
You can't really see it.
It's not that much pain.
So it's a perfect tax.
So this is one of the ways in which rich people are shielded from the consequences and the costs are then borne by the average taxpayer.
So this is sort of how a corporation started, and this is really how they continue.
Now, the corporation's just a legal invention.
It's just like a socioeconomic mechanism for concentrating and deploying human and economic power.
The purpose of the corporation was and is to generate profits for its investors.
And, of course, as an entity, it has no purpose.
It acknowledges no higher value, blah, blah, blah.
We're all happy with that from that standpoint.
It is a legal situation, and so we don't particularly have any problems with the fact that it generates profit.
The question is to what degree does it generate profit based on the state deploying military to protect it from competition and to subsidize its exploitation both internal to a country and external to a country.
As Noam Chomsky talked about once when he was referring to somebody else's studies, the few studies that have been done on something like empire It's very tough to prove this kind of stuff, absolutely, but the general trend seems to be that the deployment of mercantilist systems of empires and so on is somewhat revenue neutral.
In other words, there's some profit that's made, but it goes to specific people in society.
So it goes to the rich, it goes to those who hold the charter, and of course it goes to the government in the form of increased taxation and special dispensations.
from the corporation to the state in return for the state supplying military power to protect the corporation from competition.
So certain people get rich.
It's the Halliburton syndrome, right?
Certain people get rich.
But if you're some British sailor out there dying from scurvy, you're really not doing so well.
Similarly, of course, now If you are some GI out in Iraq getting killed, you're not doing so well, but of course the people who are at the top, the Dick Cheney's of this world and so on, and the shareholders to some degree of Halliburton, they do a heck of a lot better and it's kind of at your expense, right?
So it's not like countries make a whole lot of money.
from empire, but it is a specific redistribution of money.
Usually from the poor, definitely from the middle class, always to the rich, always to the politically connected, always to those in the military-industrial complex, always to those in the state.
And I would actually argue, just based on one empirical example, that something like empire, which can't run without corporations, Something like empire is in fact revenue negative, because if you look at the collapse of the European empires that occurred at the end of the Second World War,
You would sort of expect that if empires were net positive to a country, then given that most of the Western European nations, their bank balances were just destroyed by the Second World War, particularly England's, then you would imagine that if it was net positive to England, the first thing that England would do is it would go around and grab everything it could from the empire to shore up its own finances.
But the problem is, it's not revenue neutral.
I believe there's that one single example which was repeated all the way throughout Europe, Proves that, as a whole, an empire is a net negative, which is why when a country's resources are completely drained, then there is no going out to scoop up all of this massive wealth, which accrues to a country overall, from an empire.
What happens is, the country gets drained, and therefore there's no ability to drain it even further in the service of an empire, the profits of which service a particular few within society, at the top of the political and economic chain.
Now there's this general fear, and I think it's mistaken, but I'll just talk about the general fear that people have around corporations.
Corporations don't serve society as a whole, but only their investors.
So therefore, there's this feeling that there's always this danger that the interests of corporations and those of the general population come into conflict.
Now, this is all the way back to the American Revolution.
It wasn't just against British monarchy, but also against the power of corporations.
Many of the American colonies were chartered as corporations, like the Virginia Company, the Carolina Company.
The Maryland Company, etc.
And these corporations were granted monopoly power over lands and industries considered crucial to the interests of the British Crown.
So that's something that's very important to understand as well, that corporations, as most people understand them, are mere extensions of state power.
So when people are talking about multinationals, what they're talking about is semi-private extensions of state power which pay money to the state in return for Specific monopolies on territory, monopolies on resources, which the state then funds, like co-funds, in terms of sending out military protection to ensure a lack of competition.
It's a real extension of state power.
In a sense, you could say that corporations are the economic mercenaries of the centralized state.
They're sort of the drones that go out there and scoop up resources Which the state can't do on its own, because the state is not efficient, right?
So the state simply provides the military protection to these corporations, who they grant a monopoly to.
And the corporations then scoop up and with their semi-private efficiencies, pay a certain amount of money back to the state.
So it's really parasitical on both sides.
And it's something that people don't really understand.
Corporations, they think, are private sector and so on.
And really, certainly when you're talking about empire, nothing could be further from the truth.
They have nothing to do with the free market at all.
They're really only associated with a kind of economic predation based on the co-funding of the state through its military forces in return for bribes back to the state.
Nothing to do with the free market at all.
So if you look at the literature of the American revolutionaries, there is lots of denunciations of what they called the long train of abuses of the crown and its instruments of dominance, so it's called the corporations.
So as they're trying to throw off these crown corporations, Thomas Jefferson, for instance, railed against the general prey of the rich and the poor, and later he warned the new nation against the creation of what he called immortal persons in the form of corporations.
And so the American revolutionaries, like not very good capitalists, they sort of made this plan.
They said, OK, the authority to charter corporations should not lie with governors, judges, or generals, but only with elected officials.
Now isn't that just the kind of political genius that you expect from the founding fathers?
We have this desperately dangerous and predatory mixture of private greed and public military and so we're not going to ban them.
No, we can't ban them, but what we can do is we could say, okay, we're only going to allow elected legislatures to control these corporations because I mean, they're never a problem, right?
The elected guys are never a problem.
So that's who we're going to give the power to.
So what did they do?
Well, they created these charters and they're just for a fixed time and everything's really detailed and spelled out.
So you're a profit-making corporation, maybe you'd be chartered to build a turnpike or a canal or a bridge to operate banks or to engage an industrial manufacturer.
Now, some American citizens really hated these few sort of limited charters as well on the grounds that no business should be granted special privileges, the owners should not be allowed to hide behind legal shields.
And so lots of charters get denied.
Existing charters are often revoked.
Banks are kept on a short leash.
And in most states, investors are held liable for the debts and harms caused by their corporations.
That's very important, right?
It's one of the main reasons that we have corporations now is to limit personal liability, which always leads to abuse, in my particular view, right?
Maybe that's not the case.
Maybe there's some other way of doing it.
But in my particular entrepreneurial experience and what I've read up on, it always leads to abuse.
Now in the mid-19th century, corporations that were abusing their charters, they wanted to become conglomerates and trusts.
They were converting the nation's treasures into private fortunes, creating factory systems and company towns.
Political power began flowing to absentee owners, intent upon dominating people and nature.
That's a quote from Richard Grossman and Frank Adams' book, Taking Care of Business.
They also noted that, quote, in factory towns corporations set wages, hours, production processes, and machine speeds.
They kept blacklists of labor organizers and workers who spoke up for their rights.
Corporate officials forced employees to accept humiliating conditions while the corporations agreed to nothing.
And there's a quote from a Lowell, Massachusetts, family worker who wrote, quote, Incarcerated within the walls of a factory, while as yet mere children, drilled there from five till seven o'clock, year after year, what would we ask?
Are we to expect the same system of labor prevailing will be the mental and intellectual character of future generations, a race fit only for corporation tools and time-serving slaves.
Should we not hear the response from every hill and vale, equal rights or death to the corporations?
Now these corporations, they relied on the power of the state.
They also hired private armies to keep workers in line.
They bought newspapers and of course they painted politicians as villains and businessmen as heroes.
They bribed state legislatures and then they announced that the legislatures were corrupt.
And then they use too much of the public resources and time to scrutinize every charter application and corporate operation.
Corporate advocates campaign to replace existing chartering laws with general incorporation laws that set up simple administrative procedures claiming this would be more efficient.
What they really wanted was to end the legislative authority over charters.
This is again from the same book.
Now this is important because originally you have these charters, these monopolies, set up and reinforced in terms of the military and the police and law courts and prisons and so on by state legislatures, by the government, by the federal and local state politicians.
Now, what happens is the corporations begin to grow in power because they have this monopoly and because they're offloading the majority of the costs of violent enforcement to the state.
And so what happens?
Well, naturally they're going to begin to grow in power.
They're going to become larger, in a sense, than the politicians themselves.
So they're going to begin to agitate for the ability to self-create these kinds of charters, to self-create these corporations, these legal entities.
And so what happened then?
Well, along comes the Civil War.
Of course, you've got massive government spending, and this brings these sort of corporations or these charters unprecedented wealth.
And so you've got the ability to organize production on a grander scale, and the corporations, of course, use this wealth from the war to take advantage of the war, the reconstruction years to get the tariff, the banking, the railroad, the labor, and the public lands legislation that they wanted.
And then finally, in 1886, they hit the promised land as the U.S.
Supreme Court declared that corporations were henceforth to be considered, quote, persons under the law with all of the constitutional rights that designation implies.
And this is quite fascinating.
The 14th Amendment to the Constitution, which was passed originally to give former slaves equal rights, has been invoked approximately ten times more frequently on behalf of corporations than on behalf of African Americans.
And the First Amendment, which is free speech, has been invoked to guarantee corporations the right to influence the political process through campaign contributions, which the courts have equated with speech.
I mean, this is fantastic, right?
You have this legal fiction, this incredibly weird legal fiction, which now is considered to be a person.
It's exactly what they want, right?
You have free speech.
It can influence, it can contribute to political campaigns.
You can will it to people.
It has rights that people don't have, right?
Obviously, immortality is one, right?
You can be in many places at once.
And of course, increasingly, they kept going and going and going for this, the ability to avoid liability.
So of course, because they're persons and they have no liability, then the moral responsibility, which at least would be limited by personal liability, is somewhat diminished.
So you have this really fascinating aspect wherein a corporation now has the rights of a person.
Now why would the state agree to this?
Well, Immediate bribery, of course, is the main reason.
But the secondary reason, of course, is that if it's a person, and it has the rights of a people, then it can be taxed.
This is one thing that the corporations love, to be taxed.
I know that sounds a little weird, but corporations really like to be taxed.
Especially when they're large.
Small corporations, not so much.
Because it raises the barrier to entry.
Because once you're large enough, legislation, which makes it more difficult to do business, keeps new business Out of the fray, right?
It keeps new business from coming in and competing with you.
And that's a fantastic thing, right?
So if you're really, really big, you want wages to double.
Yeah, it's going to be a big hit to your bottom line, but over the long run, because the wages are so high, then it becomes that much harder to raise capital for new investment, and your competitors are going to diminish, and, you know, the largest ones, the ones, of course, if you're big enough, you can get exceptions for this, that, and the other from these kinds of laws.
But they absolutely want to pay a lot of taxes.
I mean, I know that sounds a little silly, but really smart corporate people know that the higher the barrier to entry, the more difficult it is to do business, then the fewer new people, the fewer new companies are going to come into the fray.
And, of course, you can just find ways to get around paying taxes if you're a big enough corporation.
But you can't if you're a small enough corporation.
Like, for two reasons.
One, you can't influence the legislature if you're small.
And number two, you can't afford the incredibly expensive lawyers and tax shields and trust funds and Cayman Islands accounts and so on that it's going to cost.
And you can't fight the legal battles which are going to ensue if you're a small corporation if you're doing sort of dodgy things around the tax arena.
And so in the endless human lesson that is what begins as our servant ends as our master, corporations now have a really strong effect on state policy because governments have become addicted to a number of the benefits that corporations bring.
Now first of all, corporations bring jobs and governments require jobs in order to be able to tax.
Now I'm not talking about the governments that get foreign aid because they get other people's blood money rather than their own citizens' blood money, but Governments really require corporations to come around so they can generate jobs so that they can tax their citizens and also so they can tax corporations.
Now one of the things that corporations really want when they come into a country like Thailand or these sorts of places is they say, okay, we don't want any environmental protection, we don't want any health... I'm exaggerating, but it's a little bit like this, right?
We don't want health and safety, environmental legislation.
We also want to make sure that we're not going to get a lot of competition.
I mean, that's very, very important.
So, if you're a corporation and you want to go into Thailand and you're negotiating with the Taiwanese government, who is just drooling over the prospect of all the money they're going to make, all the blood money they're going to dig out of you as a corporation, then what you're going to get offered as that corporation is the Taiwanese government is going to say, okay, you come in and you set up five shoe factories.
We are going to make sure that nobody else can set a shoe factory up to compete with you.
Like, we're going to put all these rules in place, and you're going to have to have all this paperwork done, and you're going to have to have all of these restrictions to ownership, and you're going to have this, and you're going to have that.
And the reason that that happens is that corporations that go into Thailand and build shoe factories, they have to return first world profits to their shareholders back in the comfy lands of the West.
Now one of the problems they're going to face is that they need to do to suck an enormous amount of money out of the country to return the first world profit standards that their shareholders in the first world are used to.
Now of course one of the things you would expect in a free market situation is that a poorer country or people within the poorer country are not going to need nearly as much profit because their money goes that much further, prices are that much cheaper, and of course their expectations are that much lower, right?
They don't need a Bentley.
They're happy with an old Honda.
It's a big step up from their Burro or their Mule or whatever they've got right now.
And so you really wouldn't expect first world corporations ever, ever, ever to be able to directly compete with the productivity and profit requirements and wages of localized third world businesses.
Ah, but These companies do go in there and they do have the ear of the governments.
And what do they do?
Well, they compete by barring these third world people from being able to set up their own companies and compete openly and honestly.
And this is part of the predation that these vicious, vicious corporations, through their state sponsorship, both domestically and in the host countries, This is the exploitation and brutality that these corporations bring to bear on local populations.
The corporations come in and create the jobs that the government just can't, because it's the government, so it's not at all efficient and it's not at all entrepreneurial.
But they do it on a chartered, monopolistic basis, which is why the left-wingers and the socialists are vehemently against corporate exploitation in the third world.
And you and I, brothers and sisters, absolutely agree with them.
I will tell you that for sure.
Because if you come in and you set up a system with a local government that bars competition, that bars other people from undercutting you, that makes it almost impossible to get another corporate concern going, that bars the exports, that bars the imports, that creates this little aquarium wherein you go in and you get to operate free from competitive influences, well of course you do end up as the sole monopolistic hirer within a particular geographical region.
And you do end up with the right to exploit people, and you do end up with the right to fence them in.
Because these people can rarely move around in these countries, they certainly can't form unions, because that's illegal.
And remember, I have no problem with unions as long as it's voluntary association.
So the collusion between the corporations and the local state governments is what produces The horrible exploitation that we see and what makes the Marxists and the Socialists and the left-wingers kind of twitchy and I fully understand it and fully sympathize with it.
All violence is evil.
So the fact that these corporations exist and are granted protection from liability in the host countries make them really attractive and it makes them pretty amoral and a little sociopathic because there's no downside.
And so if I can go and do margin trading and I only ever have to pay off my investment rather than the spread, right?
So I invest $1,000 and I lose $10,000 but I only pay $1,000.
But if I invest $1,000 and I make $10,000 then I get to keep $5,000.
I get 50% off in corporate tax in this sort of metaphor.
Then of course you're going to end up with situations where people are Horribly cavalier with money and their downside is always limited and their upside is virtually unlimited except for the money they have to use to bribe the state with through taxation and other means.
And if they can go into these third world countries and collude with the local state bastards to exploit the local population and to prevent competition, of course that's sick and evil.
And of course that's got nothing to do with the free market whatsoever.
So let's look at some of these facts that you can find out about corporations and this should give you some idea of the kind of corruption that is being faced with this combination of private profits and lack of accountability and public protection.
So of the world's 100 largest economic entities, 51 are now corporations and 49 are countries.
The world's top 200 corporations account for over a quarter of economic activity on the globe, while employing less than 1% of its workforce.
It's kind of important, right?
So where is all of this profit coming from?
The richest 1% of Americans own 40% of the nation's household wealth.
This is a little old.
This is as of 1997.
The assets of the world's 358 billionaires exceed the combined average annual incomes of countries with 45% of the world's people.
The average CEO in the U.S.
made 42 times the average workers' pay in 1980, 85 times that in 1990, and 531 times that in 2000.
You don't get those kind of increases without state protection.
You just don't.
Because, of course, if there was that much profit to be available, everybody would crowd the marketplace and whittle the profit back down.
This only occurs because the government is protecting them from competition.
Either the domestic government or the overseas government.
The courts have given corporations the basic constitutional rights of persons, but workers lose those same rights on entering the workplace.
The corporate share of taxes paid has fallen from 33% in the 1940s to 15% in the 1990s.
I'm sure it's even lower now.
Individual share of taxes has risen from 44% to 73% in the same time frame.
The World Trade Organization effectively gives corporations veto power over U.S.
environmental and labor laws, which, I mean, I don't have any problem with that.
I just would rather it not be corporations.
Of course, it should be the people themselves.
Now here's another way that corporations benefit from their association with the state.
This, again, is a little bit old.
I couldn't find anything more recent.
This is from the Tax and Budget Bulletin, which is available on Cato Organization from May 2002.
Cato.org.
So shortly after coming to office, Bush Budget Director Mitch Daniels noted, quote, it was not the federal government's role to subsidize, sometimes deeply subsidize, private interests.
Now, given that you've come to podcast 12 Million, you're probably fairly certain what is actually going on, given that the government is specifically denying that it has a role to do so.
Well, of course, in the federal budget, private interests are subsidized directly through programs like aid to farmers, subsidized loans for foreign trade, and of course you get private interests subsidized heavily through federal energy research and so on.
And socialists do point out, and I think with some degree of accuracy, that a lot of the fortunes that are made in the private sector are made because corporations take over R&D projects that are funded by the taxpayers and then shovel all the profits into their own pockets.
Which, of course, we should not be doing, right?
Now, in the 2003 budget, a little bit of a reduction in corporate welfare.
All I assume is that it's gone off book, but, you know, I could be wrong.
So you've got $86 billion in corporate welfare for fiscal year 2003, down 7% from the $93 billion in fiscal year 2002.
So, that's been a tiny, tiny little bit of reduction.
And they axed a couple of programs, right?
So, under Clinton there was a Partnership for a New Generation of Vehicles program for U.S.
automakers.
So, 8 years and $1.5 billion in taxpayer subsidies.
U.S.
automakers had still not delivered a hybrid car to consumers, while unsubsidized Honda and Toyota have introduced the Insight and Prius hybrid models respectively, exactly as you would predict.
The subsidized ones do nothing but rob the taxpayers blind.
The unsubsidized ones come up with something that might actually help the environment and the taxpayers.
And, of course, the administration proposed replacing this Partnership for a New Generation of Vehicles with a similar $150 million per year program called Freedom Car to help automakers create a fuel cell vehicle.
So it's got nothing to do with freedom, and it will never produce a car, so let's call it Freedom Car.
Now, the budget says that while the Partnership for a New Generation of Vehicles program had a misguided focus, the new Pork Barrel Car Project will have clear goals and an accountable manager in defiance to all economic, moral, and political logic.
And, of course, they didn't get rid of the Import-Export Bank and the Overseas Private Investment Corporation.
These are the lovely, juicy entities.
These federal entities together loaned Enron more than $1 billion.
And I'm sure you all know about Enron, so I won't say anything else.
So, of the billion that was loaned, taxpayers are still owed $965 million on loans for projects in India and elsewhere.
And that's, of course, pretty wretched.
The Community Development Block Grant Program, which has been heavily criticized for doling out pork projects to high-income communities.
And there's only a 6% cut to this $5 billion program.
And you didn't privatize anything.
They didn't privatize anything, even like Amtrak, the Power Marketing Administrations, the Air Traffic Control Systems, and so on.
And to get to the big hog at the trough, so to speak, we've got the agricultural industry.
So farm welfare totaling $35 billion in 2002.
This is stuff like direct crop subsidies, export subsidies, subsidized insurance, various research programs.
Crop subsidies have soared to more than $20 billion per year in the past three years.
It's up from an average of $9 billion per year in the early 1990s.
So, Congress and the Bush administration have agreed to a new farm subsidy bill that will cost taxpayers $190 billion during the next decade.
And that's just fantastic.
That's just completely wonderful as far as being able to bring down the state that much more quickly.
Now, it's really difficult to eliminate corporate welfare.
It's buried throughout the budget.
It's hard for taxpayers to find which firms are getting their money.
I mean, you could reform stuff by saying, at least provide us a detailed cross-agency listing of the companies and cash received, but that's not really ever likely to happen.
So this, of course, is exactly the kind of unholy alliance that you would expect between large, publicly shielded entities like corporations, or shielded from consequences, who are allowed to donate to campaigns, who get these kinds of subsidies.
And what do they do with these subsidies?
Well, they cut jobs.
There's direct correlations.
You can look this up.
Between the amount of subsidies that a corporation receives and the amount of jobs that it's able to cut.
And this is exactly as you would expect, right?
I mean, if you win the lottery, you stop going to work.
And if corporations get lots of subsidies, they stop paying people to come to work.
I mean, why would you want to?
Because you've already got the money, so there's no need to.
Now, the Cato Institute produces these handbooks, handbooks for Congress, which I guess is supposed to repeal the law of gravity.
It refers to political law of cause and effect by giving people sensible suggestions which completely contradict their own political self-interest.
So, this is from the Cato Handbook for Congress, for the 108th Congress.
And you can get this at cato.org.
So, Congress should end programs that provide direct grants to businesses.
End programs that provide marketing and other commercial services to businesses.
End programs that provide subsidized loans and insurance to businesses.
1.
Eliminate foreign trade barriers that try to protect U.S.
industries from foreign competition at the expense of U.S.
consumers.
2.
Eliminate domestic regulatory barriers that favor particular companies with monopoly power against competitors.
3.
Create financial transparency with a detailed list in the federal budget of companies that receive direct business subsidies and the amounts received.
And I think that if we had a nice little wand to make everybody live forever, and for there to be no world hunger, and everyone to be housed in a lovely house, I would like to wave that wand too, as soon as the Cato Institute is done with it.
I think that would be very exciting, and I think that there...
I'm sure they're waiting for this to occur.
Even though the politicians have been completely bought and sold by the corporations, they should stop paying the corporations back.
I just think that's kind of funny.
So let's have a look at some of how this is broken down.
So agriculture by millions.
It's $35 billion for agriculture.
It's $9 billion for health and human services.
It's $10.7 billion for transportation.
5.8 for energy, 7.8 for housing and urban development.
Only $4 billion corporate spending for defense, just under $2 billion for the interior.
Commerce gets $2 billion, and everyone else gets just over $16 million for a total of $92.6 billion.
Some of these corporate welfare recipients, they're like the biggest companies in America.
You've got the big three automakers get an enormous amount of money.
Boeing, Archer Daniels Midland, and sadly, the dearly departed Enron.
And you get agricultural producers that go to large farming businesses.
And once companies get this stream of taxpayer goodies, of course, it completely corrupts and destroys the organization.
All they focus on is defending their stake year after year with, of course, the help of their state's congressional delegations.
So it does seem to be particularly lucrative.
It is particularly lucrative.
And here's, in the fantasy camp of the Cato Institute, where politicians are going to shoot themselves in the foot, here's what they suggest.
Well, corporate welfare programs to cut.
Direct subsidies in the Agricultural Department.
The Market Access Program.
90 million dollars, which I guess is 1% of the total.
This program gives taxpayer dollars to exporters of agricultural products to pay for their overseas advertising campaigns.
Commerce Department, the Advanced Technology Program, 187 million dollars.
This program gives research grants to high-tech companies.
Handouts to successful firms make no sense because they would have relied on private venture capital instead.
Handouts to unsuccessful firms with poor ideas also make no sense because taxpayers end up paying for economic waste.
Foreign military financing.
3.7 billion dollars.
U.S.
taxpayers fund weapons purchases by foreign governments through this program.
This seems contrary to weapons non-proliferation policy.
Do you really think so?
Really?
And the program runs the risk that weapons recipients may not be U.S.
allies in the future.
I guess the $200 billion that we gave over time to Saudi Arabia since the Second World War maybe wasn't such a good idea given what may or may not have happened on 9-11.
Amtrak!
$621 million.
The Federal Passenger Rail Company should be fully privatized to allow it to compete fairly with other modes of transportation.
Of course, because there's nothing better than getting shot by the Amtrak Union for a politician to find a really exciting way to start his day.
Subsidized loans and insurance.
The Export-Import Bank.
1.2 billion dollars.
This program uses taxpayer dollars to subsidize the financing of foreign purchases of U.S.
goods.
It makes loans to foreigners at below market interest rates, guarantees the loans of private institutions, and provide export credit insurance.
And of course, there's nothing more than a politician would like than to get a contract taken out on him by the people who export from here.
Overseas Private Investment Corporation, 188 million dollars.
OPIC provides direct loans, guaranteed loans, and risk insurance to U.S.
firms that invest in developing countries.
This is the kind of stuff that I was talking about.
How is a local business in Thailand supposed to compete with a company that's getting millions and millions of dollars in loans and guaranteed loans and risk insurance?
And of course, one of Enron was the top beneficiary of both OPIC and Export-Import Bank programs in the late 90s.
Maritime Administration Guaranteed Loan Program provides loan guarantees for purchases of ships from U.S.
shipyards.
The United States has a vast and liquid financial market, making credit available to all businesses that have reasonable risks.
Blah blah blah.
Indirect subsidies to businesses.
Agricultural department research and marketing services $2 billion.
Agricultural research and marketing programs aim to improve product quality, find new uses for products, generate market data, and support promotions for a variety of agricultural products.
Now, it's hard for me to understand exactly why so much marketing is needed, because they're getting our money anyway through subsidies.
Energy Department.
The Energy Supply Research.
$670 million.
This program aims to develop new energy technologies and prove existing ones.
The energy industry itself and private research institutes should fund such work.
How about letting them drill in the Arctic?
How about that?
The Small Business Loan Administration provides subsidized loans and loan guarantees to small businesses and has a poor record of selecting businesses to support, since its loans have a very high delinquency rate.
I mean, that's just shocking!
So, what do they say is wrong with corporate welfare?
I'm sure we all know this stuff.
I'll just mention this stuff.
It's a big drain on the taxpayer.
If they got rid of these programs, every household in the country would be able to get an $860 per year tax cut.
$860 per year tax cut, which they would then spend on what people actually needed and required and would create efficient and productive businesses.
It's an uneven playing field.
So, of course, that's obvious.
They're anti-consumer, these welfare programs, and this protectionist federal sugar program costs consumers several billion dollars per year in higher product prices and, by the way, makes corn syrup, which is one of the reasons why people have become so fat, makes corn syrup, sugar from sweetness from that, much more cost-effective.
The government does a poor job of picking winners.
Federal loan programs, such as those operated by the SBA, have high delinquency rates, indicating that the difficult job of analyzing business risks should be left to the private sector.
Blah blah blah.
Corporate welfare fosters corruption.
Corporate welfare generates an unhealthy and sometimes corrupt relationship between business and the government.
For example, a maritime administration program aided shipbuilders by guaranteeing a $1.1 billion loan to build cruise ships in Senator Trent Lott's hometown.
At least, I hope it wasn't in the middle of Arizona.
Before the ships were completed, the company went bankrupt and left taxpayers with a $200 million tab.
Steering taxpayer funds into risky private schemes in important politicians' districts should be stopped.
Unless you can send the taxpayer funds elsewhere, because it doesn't matter that the taxpayer funds are taken at gunpoint.
What really matters is where they're used afterwards.
It's like the Be Nice to Slaves way of getting rid of slavery.
Corporate welfare depletes private sector strength.
Well, of course, while market entrepreneurs work hard to create new businesses, corporate welfare helps create political entrepreneurs who spend their energy seeking government handouts.
Corporate welfare is unconstitutional.
Corporate subsidy programs lie outside Congress's limited spending authority under the U.S.
Constitution.
Nowhere in the Constitution is the government granted the authority to spend taxpayer dollars on boondoggles, such as subsidizing Enron to build power plants in India.
Yes, that's the problem.
That's where we need to start with the unconstitutional stuff.
Corporate welfare.
Not things like starting wars without Congress declaring it.
That's the stuff.
We ought to focus on corporate welfare.
So, I mean, this is the kind of stuff that is really, really hideous, of course.
Corporate welfare is completely evil, as is anything that is derived from the kind of forced taxpayer money that comes out of the government programs, like taxes of the IRS and so on.
So, yes, you know, we really do want to get behind the leftists and the Marxist critiques of corporations.
They are evil legal fictions that make mostly rich white guys lots of money while preventing any kind of personal repercussions for bad loans and bad policies.
And, of course, the monopoly that they gain in overseas countries is completely hideous.
and should not at all be allowed when you're starting to look at corporations look at them as sort of like mercenaries right so you can have a draft army and you can have mercenaries which you pay for to do your dirty work and if you look at corporations as the mercenary arm in terms of economics of state power i think we can really get a lot in common with the socialists and really understand that their critique
of monopoly kinds of multinationals is exactly the kind of critique that we as free marketeers would like to bring to bear on the problem as well.
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