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Tempus Fugit Memento Mori - Time Flies Remember Death
$1.5 Trillion each year is wasted on business supports and subsidies.
by StFerdIII
Business has no business in asking for taxpayer money. Period. Many firms grow fat, profitable and powerful thanks to government protection, subsidies and the back-slapping, hail-thee-well-fellow cigar room nonsense that goes on between big firms, big government and their regulatory friends. Subsidies and protectionism have nothing in common with capital market efficiencies, social responsibility or morality. It is crass statism and populism. Abolish business supports.
Protectionist impulses feed the so-called ‘left’ and ‘right’ sides of the political spectrum [whatever they mean exactly]. Bogey men and canards are used by Marxist and populist radicals to galvanize support for protectionism and subsidies of local firms – while demonizing the evil foreign firm. Around the globe ‘right’ and ‘left wing’ groups demonstrate and cry against globalisation. The fact that none of the richer world's mentally deranged citizen-children would have the comfort or life style to demonise capital-markets, trade or foreign investment apparently does not trouble the sanctimonious little dears.
Businesses use such socialist posturing to great effect. Need some cash from the taxpayers? Just say that your business which could employ X times 1000 employees is undergoing wrenching pain due to the Americanisation/globalisation of your 'very important' industry. You can make the case that if you only had a billion dollars of tax payer money you could hire X times 1000 people with all sorts of downstream benefits and supplier jobs. Don't fail to mention the educational and environmental benefits and that you will only hire approved multi-cults and other disadvantaged types. The cash will be yours.
Statists fearful of losing the welfare state and the ideological structure of equality and redistribution, blame the forces of globalization for just about everything. They decry that most of the social, economic, and political ills confounding their nation state are due to the influences of globalized liberalism. Unequal incomes, homelessness, high levels of unemployment, the decreasing efficacy of welfare programs, increasing violence, cultural destruction, enrichment of corporations, illegal migration, all find advocates groups and voices using these and other reasons to denounce a neo-liberal world in which integration and liberal markets reign.
None of these straw men are real, but they allow government to prop up all sorts of uncompetitive businesses, investments and intrude into various markets to wreak havoc and distort price points. Need some cash as a business? Just point out that China and India are competing unfairly [insert reason here] and that Canadian, European, American [insert nation state here] ‘values’ [a meaningless drivel of a word] will be wiped out and society will cascade down to the lowest denominator. Without the caring caress of the mommy-state, we apparently cannot compete or even live.
Of course you need to ignore inconvenient facts such as the rise of wealth, income and living standards thanks to an increase in trade. Almost one billion people in East Asia, post-War Europe and Japan and elsewhere have been lifted out of poverty and destruction thanks to trading opportunities and capital investments. You need to also ignore the creation of better and cheaper products from global sources since 1950 which enhances societal welfare. Just cry poverty and ‘unfair’ trade, and ask for a subsidy. That usually works.
This claim by the statists in richer lands that the poor countries trying now to develop and rise out of poverty, pose a huge economic threat is strictly false. Though the rise of new economies does create a smaller share of the world economy for established industrialised nations, it will open new markets for industrialised firms. The greatest issue for industrialised countries is that of managing the transition to higher value industries or new industrial and service technologies and processes. This transition period is rife with calls for protectionism and mercantilist policies by those affected until the industrialised economy can achieve comparative advantage in new areas.
Tariffs that prop up business and monies that support inefficient businesses are out of control in the industrialised nations. Only 22% of products into the EU arrive tariff free. The average tariff level in the richer nations sits between 5-10% - a cost born by the consumer and impacting the ability of lesser industrial nations to compete and become richer through trade. In the US 62% of products are tariffed; in Canada 70% in Japan 46%; in Australia 68% and so on. Tariffs are far too high and restrict poorer country trade leading even to the deaths of poor farmers who can’t export to richer markets.
Just as immoral are the effects and destruction of wealth thanks to direct subsidies of agriculture and businesses in the richer world. Remarkably in developed nations, somewhere between 4-8 % of GDP on average is devoted to bailing out businesses and agricultural interests. Agricultural subsidies total $60 billion per annum in the US; $4 billion in Canada; $100 billion in the EU; and $350 billion in total for all rich countries.
Industrial subsidies are worse. US subsidies per annum for corporations total $100 billion; in the EU $150 billion in Canada $11 billion and in all rich countries a staggering $1.5 Trillion. As a percent of GDP total subsidies consume 1.1 % in the US; 2.4% in Canada; 2.8% in Europe and 7.5% for all industrial nations.
An astonishing $1.5 Trillion per year across the world is spent on subsidizing various forms of business and goods production. Fossil fuel industries and road transportation networks each receive about $250 Billion, manufacturing $55 billion, agriculture about $550 billion, water $60 billion and fisheries and forestry’s $60 billion in total.
These barriers encourage practices that reduce growth productivity, distort trade, and impede the development of technology and processes that reduce environmental damage. Reformation of such perversity is not to be expected when such largesse ensures the buying of sectoral and interest group votes.
Viewing those numbers an objective observer can only scratch their head and say; ‘Globalisation, you don’t say?’
Some sources:
• OECD Query and Reporting System, 2002.
• Van Beer and de Moor “Public Subsidies and Policy Failures”, 2001, p. xii.
• OECD 2002 and National Accounts.
• Perverse Subsidies: How Misused Tax Dollars Harm the Environment and the Economy by Norman Myers, Jennifer Kent, Island Press, 2001. These authors provide detail on $2 Trillion dollars per annum in subsidies within the OECD counties.
• Globe and Mail Report, August 4 2002
• International Institute for Sustainable Development
• Economist World in Figures, 2002, p. 25, total Developed World GDP = $24.56 Trillion
• World Bank Report, 2001.
