Reich: Right and Wrong on Crony Capitalism

business_ethics_highlights_2Crony capitalism is a significant problem, in economies both industrialized and developing. So much of what is said in the piece below is right on-target. But the author (Robert Reich) is a smart guy — too smart to make the misleading comments he makes in his first two paragraphs. See below for more on the misleading bits. >>>

LINK: Robert Reich: Crony capitalism is crippling the economy

You might call these special corporate handouts “corporate welfare,” but at least welfare goes to real people in need. In the big picture, corporate handouts are costing tens of billions of dollars a year. Some estimates put it over $100 billion – which means it’s costing you money that would otherwise go to better schools or roads, or lower taxes…..

What’s misleading? Reich’s first sentence:

Corporations aren’t people, despite what the Supreme Court says, and they don’t need or deserve handouts.

No one thinks corporations are people; certainly not the US Supreme court. But the court — and everyone else who understands corporate law even a little — understands that corporations are and must be considered “persons”, no people but persons, under the law. (See Why Corporations Must be Legal Persons, and also, “The Right to Bear Corporations: Reframing the Corporation as a Technology for Lobbying”).

And then, the opening of his second paragraph:

When corporations get special handouts from the government – subsidies and tax breaks – it costs you.

While not obviously false, it’s also not obviously true. The challenge with regard to government subsidies and tax breaks is that they need to be done properly. A moderate tax break that gets a major employer to open a factory in your town, providing jobs for hundreds of people, isn’t costing the community money. It’s bringing money in. Of course, that’s an example of the ideal. Things don’t always work that way; far too often, government gives handouts for the wrong reasons. In such cases, Reich’s criticism has real traction. But as it stands, the statement above is problematic.

What do you think?

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