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.