The Symbiotic Relationship Between the Government and the Economy


One of the points made throughout the semester is that corporate capitalism depends on the state (i.e., the government) to "reproduce" itself. Simply put, modern industrial and postindustrial society depends on an active government that fosters economic growth and ensures political stability and social harmony.

Many scholars go further; they claim that business, large and small, depends on direct government assistance. Many sectors of the economy, for instance, flourish only because the state "underwrites" (i.e., pays for) many of their operating costs. Consider the auto industry: it could not survive without assistance from taxpayers via government. An interest example of how the "costs" of private activities are "socialized" (that is, passed on the public as a whole) is the study of automobiles and property taxes in Milwaukee.

"Corporate Welfare"?

Many people feel that corporation have come to depend so heavily on government assistance that the term corporate welfare seems appropriate. One of those is Ralph Nader, a "consumer advocate," who feels that businesses are frequently treated more generously than poor people. He puts it this way:
Corporate welfare comes in two forms and many variations. One is the active form. That includes agribusiness subsidies, military contractor subsidies, loan guarantees, bailouts of S&Ls. There are giveaways of minerals on federal lands, there are giveaways of computer databases. One interesting thing is that drugs developed at the National Institutes of Health with taxpayer money, like [the breast cancer drug] Taxol and AZT, are given to a particular drug company on a monopoly contract with no restraints on the price and no royalties paid back to the government from the profits. So if people can't pay for $10,000 for a year of Taxol, they go on Medicaid, and the taxpayer pays on both sides -- to develop the drug, and for the treatment of an impoverished person.

Then there's the passive corporate welfare, which are the tax breaks, the loopholes. There are dozens of those, they make up about half the tax code. One example is that foreign corporations don't pay many taxes at all. [According to a General Accounting Office study released this April, 73 percent of foreign-controlled corporations in the US paid no corporate income taxes in this country.] Then there are the types of safe-harbor tax laws that they had in the early 80s, which cost the treasury hundreds of billions of dollars. One company could adopt the tax liabilities of another and it would cancel out. And then there are the rates themselves -- if you're an individual you pay a higher rate than a corporation.

Here's Pat Buchanan on "protecting the market" as quoted in the March 13, 1996 New York Times:

On the stump, Buchanan has said recently that he believes the U.S. economy should be "designed" for the benefit of its workers -- language that would make free-market Republicans shudder and might make even New Deal Democrats blush.
Note: that this statement might make Democrats and Republicans blush, but many of them express similar beliefs and attitudes in different contexts.

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