What Are the Benefits of Corporate Welfare?

bizfluent article image

welfare cheese image by Allyson Ricketts from Fotolia.com

Social welfare programs are designed to aid needy individuals in a society. Corporate welfare, on the other hand, is designed to aid wealthy organizations. Corporate welfare has been used recently to bail out the banking and automotive industries in the United States. According to Virginia Technological Institute, the United States government spent $104.3 billion on corporate welfare in one year, but only $14.4 billion on social welfare in the same year. Traditional free-market economists like Milton Friedman oppose corporate welfare for interfering with the markets, and social-minded individuals see corporate welfare as an unfair distribution of wealth to the rich. There are, however, some benefits to corporate welfare.

Saving Jobs

Those who support corporate welfare will argue that providing funds to keep businesses alive helps citizens by preserving jobs. It is commonly said that large corporations, such as General Motors, are simply too big to let them fail. Allowing them to fail would put too many employees who work directly and indirectly for the corporations out of a job, creating a host of other problems for society. Corporate welfare can be seen as a way to interfere with the markets in order to benefit individual citizens. Critics, however, will point out that this money might be better spent on social welfare programs that will have a more direct impact on citizens.

Preserving Pensions

Many people have the image of corporations being owned by wealthy individuals. While there are wealthy investors in the world, many corporations are largely owned by various pension funds. As a result, the owners are actually largely middle-class individuals who have invested in companies through government, employer and union pension funds as a means of saving for their retirement. The benefit of corporate welfare can be seen as the ability to sustain the pensions of regular, everyday citizens. By aiding corporations, it actually aids these individuals in the end.

Guiding Corporations

A benefit of corporate welfare is that it can allow governments to influence the direction in which corporations focus. For example, governments may offer financial incentives for companies to invest in green technologies or other practices that the government would like to promote. In this sense, corporate welfare can be seen as a means of controlling corporations and encouraging them to engage in practices that will benefit citizens. This can be seen in the government bailout of General Motors, which included provisions about investing in green technology and producing fuel efficient cars, practices that the government wishes to promote.