The differences between large corporations and small businesses seem self-evident in the names. The funding, organizational structure and quantity of production all are much different for a large corporation than a small business. Large corporations also wield more clout.

During the COVID-19 pandemic shutdown, most small businesses were declared “nonessential,” demonstrating the bias favoring larger corporations.

Government’s preferential treatment toward large corporations and industry is nothing new. Many industries receive government assistance in the form of  subsidies — incentives the government provides through financial aid or support. Special groups lobby for benefits from the government at the expense of the public. Members of Congress are targets for lobbyists. Not only do the members of Congress receive campaign support to influence voting, but post-congressional careers with industry often result.

Members of Congress might believe they’re doing the right thing for the American people or the climate when they pass exemptions, special rulings or subsidies for certain industries. But unintended consequences arise when the laws of supply and demand are ignored. Economic distortions occur in the market. Competition in the marketplace is thwarted. The burden to pay for exemptions, grants and subsidies is spread among taxpayers. Government subsidies are a zero-sum economic scheme because one sector is supported by all taxpayers.

Lawrence Reed, president emeritus of the Foundation for Economic Education, put it this way: “Taking from A to give to B doesn’t stimulate anything but B’s spending at A’s expense.”

The list of companies receiving significant sums of taxpayer money is lengthy. Three business sectors that receive major subsidies include agriculture, energy and transportation. Chris Edwards, an economist with the Cato Institute, wrote “Special Interests and Corporate Welfare.” He identified 125 programs that subsidize private businesses and cost at least
$80 billion each a year. Every major cabinet department, including the Department of Defense, has become a conduit for government funding of private industry.

Corporate welfare is a term coined to describe government favoritism shown to certain corporations and industries. Edwards described the billions of dollars the federal government spends each year helping favored companies export their products. For example, 15 percent of the largest farm businesses receive about 85 percent of total farm subsidies. The federal government has bailed out airlines, car manufacturers, financial firms and other businesses experiencing difficulties. In banking, the “too big to fail” policy favors larger banks over smaller banks. The federal government spends billions of dollars a year subsidizing fossil fuel, nuclear and renewable energy research when those industries should pay the cost. Electric vehicles are primarily funded by government subsidies.

Examples of corporate welfare are legion. Corporate welfare aids some businesses while harming others. Federal regulations and trade barriers protect favored producers, limiting competition. Corporate welfare also fosters corruption. Businesses seeking favors from government lobby for big government programs. Corporate welfare diminishes the productivity and competency of companies. A government safety net makes companies complacent, weaker, less efficient and more interested in keeping the company in favored status than serving customers. Taxpayer dollars fund corporate welfare, which in turn depresses economic activity. When government picks winners, taxpayers lose.

A lack of trust among people demonstrates the sentiment the system is rigged against middle America and small business. The Pew Research Center reported in 2023 that fewer than two in 10 Americans said they trusted the federal government to do the right thing, the lowest measure of trust in almost seven decades.

Robert Lawson, an economist and coauthor of the Economic Freedom of the World annual reports, said: “An economic system based on private property and free markets defines economic freedom. Governments can promote economic freedom by providing a legal structure and a law enforcement system that protects the property rights of owners and enforces contracts in an evenhanded manner.”
The danger, Lawson said: “As government grows, it inevitably infringes on people’s economic freedom to engage in trade and enjoy the fruits of their labor.”

Corporate welfare constitutes one example of government infringement of economic freedom.