Corporate welfare is generally explained as the government subsidies given to corporate companies that the government thinks will be profitable for the economy, people and also the business at large.
Undoubtedly, in a democracy, it is expected that the legislators think of the common and average citizens before anything else. Moreover, corporate welfare has its benefits and problems. It helps a certain part of people while keeping a certain part at stake.
The decision of who will be benefitted by the funds and subsidies is entirely decided by the government officials without any say of the common people. The amount of subsidies is not revealed to the people, this makes the process more shady and non-trustable.
- 1 Benefits of Corporate Welfare
- 2 Drawbacks of Corporate Welfare
Benefits of Corporate Welfare
Like social welfare helps the needy of the society however, the corporate welfare aides the already established and wealthy corporate companies. Some see this as the most unjust distribution of wealth. Whereas, there are also a few benefits of corporate welfare.
Let’s check some of the benefits that corporate welfare brings.
Ones who support the concept of corporate welfare will understand how important it is to save jobs of the wealthiest and biggest companies. If the government lets these businesses fail then there will trail of problems working directly or indirectly with the company.
Big companies have the most employment power, if the company doesn’t do well in the market it will affect the jobs and also the economy of the state or country.
Guiding the Corporate Companies
Corporate welfare gives the government a chance to guide the corporate companies in a direction which the government thinks is essential. For instance, the government can invest in technologies that will help the country towards digitalization.
Nonetheless, officials can also invest in technologies that work for a greener environment. This will adhere to the betterment of society.
Boost to Production and Consumption
When government bodies offer subsidies to certain companies unquestionably the producing power of the company will increase. This will definitely give an upper hand to the consumption and supply of the people. This proves beneficial to upgrade the industry and the economy.
These are a few benefits. I’m sure you are curious to know about the drawbacks of it. Let’s check all the drawbacks of the same.
Drawbacks of Corporate Welfare
Trouble for Taxpayers
Clearly, when bestowed with government subsidies the corporate company has the power to take unrealistic risks with the business. Study shows that risks taken by companies under the influence of subsidies are very far fetched and do not keep the average market and people as a priority.
Especially, when these risks fail it is a government loss and the subsidy money is the hard-earned money of every taxpayer.
Demolishing Small Businesses
Corporate welfare makes the already powerful businesses more powerful. Without a doubt, this hampers the small scale businesses. As per a study, 54% of the entire economy comes from the micro and small business.
With government subsidies, corporate companies will produce more goods than usual. This will result in lower market prices. Furthermore, this fall of prices give a hard time to small business and mostly end up shutting the business.
There are immense chances of corruption from both the government as well as the corporate company. The exact amount of released under corporate welfare is not disclosed for public knowledge.
The government officials may not release all the funds and keep some for their personal gains. Similarly, the company’s senior officials may not use all the subsidies for business but might keep some amount for personal use.
The basic idea of cronyism is appointing a close friend or acquaintance as a person in power without considering the person’s qualification and capability towards a post. Cronyism has taken deeper roots in the corporate welfare process.
The government officials can appoint their friends to deal with the subsidies. Furthermore, this can increase the chances of corruption and also gives power in the wrong hands. The talented and hardworking candidates are sidelined due to this.
Unjust to Competitors
Corporate welfare creates an uneven play for the subsidized company and the normal ones. The non-subsidized companies face a lot of problems to be in the market and expand the business. Besides, these funds makes it easy for certain companies. This is quite unjust to the other companies.
Trust Issues With the Government
With corporate welfare dwelling in the market, an average person believes there is enough corruption in this process. However, this creates loopholes in how much a citizen believes in the work of his/her government.
Without the trust of the common people, no democratic government will be able to survive in the country.
No Funds for Other Things
Nonetheless, better schools and hospitals would benefit by the corporate welfare funds. This will help the people of society more directly. There is more need for basic facilities than the only corporate sector.
If the government can invest in corporate welfare than it should rather focus on better roads, metros, education, healthcare, agriculture, farmers, etc.
These are few shortcomings of the corporate welfare business and the governments should start considering it. Without a doubt, there are more drawbacks to society than the benefits.
I hope after reading this article you know enough about the concept . Make the best use of this information. All the best!