Hillsdale students should oppose local corporate welfare

[This piece first appeared in the Hillsdale Collegian (3.31.2016)]

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.