ADMS 1000 Study Guide - Quiz Guide: Corporate Welfare
8 Jan 2019
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Promotes a Political Agenda - Government assistance, or corporate welfare , often promotes a
political agenda instead of a profitable one. What industries should receive government money is
a matter of debate and is influenced by political party objectives. Job creation, for example, is
one way the government tries to justify handouts and to win citizen votes.
Creates an Uneven Playing Field - Corporate welfare also creates an uneven playing field—it
is unfair to competitor firms who are profitable and successful.
Undermines Public Confidence in Politicians - Why some firms get government handouts and
others do not may undermine public confidence in politicians. While politicians may have valid
reasons for assisting certain companies and industries, there is public suspicion that special
treatment may be due to political connectedness rather than profitable, economic choices. In
some cases, it is large corporations that receive handouts who have the power to make sizable
political donations, rather than small entrepreneurs with little funds. Special treatment may
undermine the democratic process as well, as citizens may be reluctant to vote for any politicians
they do not trust.
Contrary to Free and Open Markets - Corporate welfare goes against free and open markets.
In fact, government handouts can change a business’ priorities from focusing on its products to
lobbying for government funds. Subsequently, companies may lose sight of their core business
activities. 33 Government assistance may also violate free trade, which aims to remove trade
barriers and encourage free markets with little government interference.
Creates Dependency - Corporate welfare can also encourage companies to become dependent
instead of being self-sufficient, thus creating a culture of dependency whereby government
handouts are incorporated into budgets as “available funds” instead of as a liability necessary to
restructure the company, remove inefficiencies, and create a sustainable business. Corporations
may come to expect future free money while remaining ineffective, causing a circular problem
that can never be resolved. Moreover, ongoing assistance can lead to higher taxes for everyone,
which slows economic growth rather than increasing it.
Benefits Only a Few - Corporate welfare benefits only a few businesses and employees—and
arguably, they may not be the most deserving ones. Corporate welfare should not be a public
service. Tax dollars should be spent on community services, projects, and social programs that
provide the greatest benefit to all taxpayers, such as education, health care, and national defence.
Regulation
- Constraints to modify economic behavior.
Aims to:
- To protect the consumer
- To protect the environment
- To protect fair competition
Deregulation
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ADMS 1000 Full Course Notes
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Document Summary
Promotes a political agenda - government assistance, or corporate welfare , often promotes a political agenda instead of a profitable one. What industries should receive government money is a matter of debate and is influenced by political party objectives. Job creation, for example, is one way the government tries to justify handouts and to win citizen votes. Creates an uneven playing field - corporate welfare also creates an uneven playing field it is unfair to competitor firms who are profitable and successful. Undermines public confidence in politicians - why some firms get government handouts and others do not may undermine public confidence in politicians. While politicians may have valid reasons for assisting certain companies and industries, there is public suspicion that special treatment may be due to political connectedness rather than profitable, economic choices. In some cases, it is large corporations that receive handouts who have the power to make sizable political donations, rather than small entrepreneurs with little funds.
