It should be noted that when the governments prioritizes corporate subsidies and allocate less fund for welfare payments, it just emphasizes that corporations are much needy than the public. This is even more strongly felt now that the country is operating on a tight budget. Theory then states that the private sector should be solely responsible for the provision of social programs. This paper opts to offer an insight to this issue by looking at the economic argument for and against corporate welfare.
It is irrefutable that corporate welfare is one of the most debated social and economic issues. The term "corporate welfare" is coined by Ralph Nader in 1956 in order to describe the "benefits conferred on corporations as compared to any corporate payment, or goods or services provided, to the government." With this definition, Nader looks beyond the benefits conferred and costs incurred by a particular program by looking at the government's costs and benefits. For example, if a program involves the government giving more to private companies than it gets back, then it is considered as corporate welfare. ...
Corporate welfare can take the form of direct grants to business, programs that provide research and other services for industries, and programs that provide subsidized loans or insurance to business. A good example is the Ohio Loan Law in 1837 which "required the State to give tax revenues to private canal, turnpike, and railroad corporations while permitting them also to charge tolls" (Nader 1999). Others include the Market Access Program for the agricultural department, the Advanced Technology Program, and Technology Reinvestment Program (Stansel n.d.). These moves emphasize these companies importance to the local government.
The common argument for corporate welfare is more economic than social. It should be noted that tax perks like tax holidays and tax breaks are commonly used by governments in order to encourage the inflow of foreign direct investment. This is more apparent in developing countries where the economy is largely dependent on foreign players. The main argument for this is that "economy is dependent on business stability and that corporate development is directly linked to job growth" (Perryman 1996). When tax breaks are offered, companies can operate more efficiently by cutting down on operational costs. Tax breaks are also potent ways to attract more companies thereby increasing the locality's production and income. The presence of corporate subsidies also ensures the stability of the business sector. When the government provides corporate welfare, it in fact, works in ensuring that companies continue to operate efficiently. It should be noted that corporate welfare includes provision of funds, projects, and programs which aids business organizations in research and development, marketing, and in their production efforts.