SHARE

Cor­porate welfare is alive and well, even here in Hillsdale.

The Michigan Eco­nomic Devel­opment Cor­po­ration is the insti­tution respon­sible for orga­nizing and directing cor­porate welfare in the state of Michigan. According to their website, the MEDC offers “business assis­tance ser­vices and capital pro­grams for business attraction and accel­er­ation.” In practice, this amounts to allo­cating tax dollars as direct sub­sidies to busi­nesses, often coupled with special tax breaks.

The MEDC recently funded two projects in Hillsdale. The first was an $82,865 subsidy to Mar-Vo Mineral Company to pur­chase the old FW Stock and Sons Mill (“Mar-Vo moves in, ‘breathes life’ into aban­doned mill,” Sep­tember 17, 2015). The second was the heftier $785,000 “com­munity devel­opment block grant” for the pur­poses of ren­o­vating an old factory into apart­ments (“Former fur factory fitted for flats,” March 17, 2016).

Pro­po­nents trotted out familiar argu­ments to justify the tax­payer subsidy of private enter­prise, noting that the projects would revi­talize downtown Hillsdale, as well as create jobs and housing. While these are cer­tainly ben­efits, the argu­ments ignore the costs. For one, similar argu­ments are made across the state to justify cor­porate welfare, resulting in almost $600 million doled out in “grants, pro­grams, and projects” in 2015.

Orga­ni­za­tions like the MEDC are an affront to the free market, and little more than a vehicle for crony cap­i­talism. Unlike a private investor, the MEDC can only get funds through tax­ation. So tax­payers from across the state of Michigan, from Houghton to Detroit, are obligated to sub­sidize busi­nesses to the tune of hun­dreds of mil­lions of dollars a year. Despite the gross injustice of being forced to sub­sidize projects that most receive no ben­efits from, cor­porate welfare per­sists. Why?

The answer is simple. Busi­nesses and private indi­viduals realize that, rather than trying to succeed or fail in the market, it is easier to get help from the state. Under the guise of “eco­nomic devel­opment,” or “jobs,” or “revi­tal­ization,” they can earn sub­sidies from the MEDC, and stick Michigan tax­payers with the bill. The ben­efits are con­cen­trated to busi­nesses and polit­i­cally-con­nected indi­viduals, while the costs are dis­persed over mil­lions of Michi­ganders.

Frederic Bastiat, a 19th-century French political econ­omist, noted that eco­nomics involves looking at the seen and the unseen. In terms of cor­porate welfare, the seen effects are the projects they fund. New apartment buildings, bustling fac­tories, and so on. The unseen is more com­pli­cated.

Think of what $600 million could have done in the hands of Michigan res­i­dents, rather than in the hands of gov­ernment bureau­crats fun­neling the money to special interests. Private indi­viduals, working in the free market, fund projects they think will be prof­itable, and decline those which seem likely to fail. In this system, busi­nesses only profit by pro­viding what the con­sumers want, and not by lob­bying the gov­ernment for subsidy. All of these potential oppor­tu­nities are nec­es­sarily unseen, because they never came to be. Instead, tax­payers are stuck with a bill of almost a million dollars to build apart­ments in a small, out-of-the-way city in southern Michigan.

Stu­dents of Hillsdale College, an insti­tution that stands for defending liberty, should oppose this great injustice. The MEDC is nothing more than dressed-up cor­porate welfare, existing to benefit special interests at the expense of the state as a whole, and the tax­payers that have to foot the bill.