Noam Chomsky on Corporate Welfare

Ever since the foundation of corporations themselves you’ve had corporate welfare. A corporation exists thanks to state intervention. How is a corporation different from a partnership? You and I could form a partnership or we could become incorporated and they’re different. We form a partnership, the government doesn’t have anything to do with it. We form a corporation, we get benefits from the government and there’s a cost, we have to pay corporate taxes. But the benefits go back to the beginning. A corporation is based on limited liability. That means that if you and I form a corporation, and some crime is committed, we have limited liability. That means that corporate manslaughter, which is a huge phenomenon, doesn’t get treated like manslaughter, in fact it rarely gets treated at all.

Beginning about a century ago, the courts started giving corporations much more benefits. The courts decided, not Congress, that corporations should have the rights of persons, like 1st amendment rights, 4th amendment rights, and so on. A fantastic gift to a collectivist legal entity. In fact, conservatives — who used to exist in those days but really don’t anymore — bitterly condemned it. They said it’s a return to feudalism or a form of Communism, which is sort of accurate.

Then, you go on, and there’s further benefits. Skip to the present, the recent trade agreements — they’re called trade agreements, they’re really only partially about trade — give corporations rights that go way beyond persons. Like General Motors can sue Mexico, you can’t. They can sue them for cutting into their profits. Let’s suppose — this actually happened — Mexico wants to set aside some area for a nature reserve, a U.S. corporation can — and in this case, did — sue them under the takings provision, or the World Trade Organization’s version of it, for cutting into their future profits. Could you do that? No. In many ways they get rights way beyond persons.

So, corporate welfare is redundant. Saying its corporations, of course it’s corporate welfare.

The comment that you quoted, “crony capitalism,” and so on — what’s capitalism supposed to be? Yeah, it’s crony capitalism. That’s capitalism, you do things for your friends, your associates, they do things for you, you try to influence the political system, obviously. You can read about this in Adam Smith. If people read Adam Smith instead of just worshipping him, they could learn a lot about how economies work. So, for example, he’s concerned mostly with England, and he pointed out that in England, and I’m virtually quoting, he said the merchants and manufacturers are the principal architects of government policy and they make sure their own interests are well cared for, however grievous the effects on others, including the people of England.

Yes, it’s their business. What else should they do? It’s like when people talk about greedy capitalists, that’s redundant. You have to be a greedy capitalist or you’re out of business. In fact, it’s a legal requirement that you be a greedy capitalist and that you don’t pay attention to what happens to anyone else. You know, it’s not just Ayn Rand, that’s the law. So, these complaints don’t make any sense.

Look, the biggest welfare that’s given to corporations is never even discussed. Like, take this place where we’re sitting, M.I.T., it’s a mostly government-funded institution, though technically it’s private.

Have you ever heard of the information revolution? Well, where’d that come from? Mostly here. You’re using a computer. Yeah, it was designed here — well not only here — but it was under Pentagon contract. Back in the 1950s, I.B.M. was learning how to shift from punch cards to computers at the M.I.T.-Pentagon laboratory and the Harvard equivalent, all at public expense. They finally got to the point where they could build their own computer, the I.B.M. stretch computer in the early 60s, but no business could buy it, it was way too expensive, so it was used by the National Security Agency. It really wasn’t until the 1980s that they could start making profit from this government, state-created technology. It’s the same with the internet, it was in the public sector for around 30 years before it was handed over for private profit.

The whole economy is geared toward corporate welfare, same is true with pharmaceuticals and bio-engineering and everything else.

Even what’s called trade. Oceanic trade is based on containers, OK, developed by the Navy, because it’s too expensive for private corporations.

Commercial air travel is practically an off-shoot of the Air Force. In fact, just about every place you look — there are some things that were developed within private industry, not a lot, but some, integrated circuits, Texas Instruments and so on, but they couldn’t sell ’em, so the government was the main procurer, that’s public funding.

Talking about corporate welfare is extremely misleading. The economy rests on the state sector to a substantial extent and a lot of it is designed to socialize cost and risk and privatize profit.

–excerpt from “Black Faces in Limousines”: A Conversation with Noam Chomsky (2008)


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