by Max Barry

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Region: Scandinavia

Cassinia wrote:Does corporate welfare work?

Corporate welfare is a complex topic and deserves a much better rundown than we in Ioavollr are able to provide. The outcomes of corporate welfare are dictated by a several variables, the most important (in our opinion) being the alternate use of funds, the goals of government assistance, and the incentive structure.

Alternate use of funds is straightforward: if public effort and funds are spent on corporate welfare that could be used to realize goals in a more direct manner, the system may not be ideal.

Goals of government assistance are quite varied in welfare schemes and can range from propping up industries vital to the greater economy, ensuring strategic manufacturing capability, job creation, tipping of economic trade asymmetry, and plain old corruption. The goals of welfare dictate the measurability of success; ensuring strategic manufacturing capability, for example, needs not have any downstream economic effects, and indeed several previously critical strategic industries were abandoned as technology made them obsolete.

Incentive structures are equally varied, and dictate the probability that such a scheme will successfully result in the goals outlined by government. Simple incentive structures, buying goods at a Hard Peg price, for instance, ensures that the underlying mechanics of market economics and production remain intact. Without discretionary purchasing power linked to quality control, however, this can result in floods of low quality goods. Incentive structures unrelated to production, such as direct payments regardless of production or no-strings-attached-bailouts to failing companies, can result in a skewing of corporate or market interests, undesired production consequences, and a lack of accurate risk-assessment.

Regardless of spending costs, goals, and incentives, corporate welfare also has to compete with different forms of government intervention: direct payments to consumers, partial or full government ownership of the means of production, regulatory oversight, and so on. Overall, in our novice opinion, corporate welfare schemes are most likely to be successful when they are limited in scope, clearly linked to production, and come with a government benefit independent of corporate success. Strategic reserves are the clearest example of such a scheme.

Cassinia wrote:Say the government is entirely uprooted and removed. All environmental and safety regulations on business are removed. If a corporation wanted to set up business there, would they theoretically fund their own police and education? If they want a safe working place, they would pay for police stations themselves. If they want educated workers, they would have to pay for colleges themselves. If they wanted healthy workers, they would have to pay for hospitals themselves.

That is one possible outcome, as Eutania elucidated in the link. Poor outcomes are also rife throughout history. When there are no competing power structures of public and corporate interests, a de facto absolute dictatorship is formed. Our very own Belgian congo is a reference to one of the worst mergers of private and public interests in history. Brazilian rubber barons are another horrifying example. Generally when there is no independent body which vies for the lives of workers, one has to hope they live in a benevolent dictatorship, and not any other kind.

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