When government tries to keep people from failing, it actually can encourage people to take risks they are not equipped to handle. A government safety net changes the way industries behave, just as it changes the way individuals behave. If government is likely to bail them out, there is less need for responsible, efficient operations, or decisions based on market demand.
Government-designed advantages, such as subsidies or tax preferences for one or a few businesses, is sometimes known as “corporate welfare,” and it can have just as detrimental an impact on the free market as government regulation. Some companies or individuals, or perhaps a particular industry might benefit, but competition is hindered, and the taxpayers are left footing the bill. History has shown that government usually does not do well in predicting successful ventures. More importantly, it should not use taxpayers’ money to speculate on business ventures.
It might be appropriate to provide roads, water and sewer systems, and other infrastructure for a project that shows promise, as measured (among other things) by the private capital which has been invested or committed to it.
But money should not be taken from taxpayers and given to a private company to subsidize its business. To do so forces a taxpayer to invest in a company involuntarily, which violates the foundation of a free market – a voluntary exchange. It also distorts the market, because economic investment is based on the power of government, not on the demand of the market. Competitors cannot compete fairly with government-subsidized companies.
The power of eminent domain should not be used by the government to take property from one individual or company and give it to another private entity. To do so violates the right to sell private property without coercion. This particular use of eminent domain has the effect of making government the ultimate owner of all property, as it can take a person’s land simply because those in power want someone else to have it.
Abraham Lincoln said, “You cannot strengthen the weak by weakening the strong. You cannot help the wage earner by pulling down the wage payer…You cannot build character and courage by taking away man’s initiative and independence.”
Simply put, markets work better than mandates and corporate welfare. Government officials who realize the need to let the free market work will govern with humility and restraint.
This is an excerpt from Governing By Principle, MCPP’s ten principles to guide public policy.