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The Independent Institute
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Will Big Business Thwart the Republican Revolution?


Marxists describe the government as the executive committee of the bourgeoisie, and even a staunch anti-Marxist must admit that they have a point. From the days when J. P. Morgan and other tycoons called the shots for the nation's monetary system and influenced many of the “progressive” reforms until today, when giant corporations such as General Electric, Dupont, and Boeing feed at the federal trough, big business has occupied an ambiguous position in American capitalism—partly defending it, partly subverting it. Whether the current Congress will enact important economic reforms depends heavily on how the big companies, recipients of massive corporate welfare, wield their immense political clout.

Despite the lack of Constitutional authority, the federal government began subsidizing selected firms early in our history. In the 1930s this market-distorting practice was abruptly expanded, and in recent decades it has been pushed to new heights. Currently the Treasury funds more than 125 subsidy programs for private businesses at a cost to taxpayers of more than $85 billion.

Among the beneficiaries of this largess are such firms as the computer chip giants, Intel and National Semiconductor, which feed off Sematech, a consortium of large chip producers bankrolled by the Pentagon at nearly $100 million annually. Huge, successful firms such as Pillsbury, McDonald’s, and Dole get millions of taxpayer dollars to advertise their products abroad, thanks to the market Promotion Program in the Department of Agriculture.

The immensely successful aerospace giant, Boeing, sells its jetliners around the world with help from subsidized loans and loan guarantees paid for by the taxpayers via the Export-Import Bank. Meanwhile, here at home, a Clinton Administration darling, the Advanced Technology Program, doles out hundreds of millions to such struggling firms as Texas Instruments, General Electric, Xerox, Dupont, and Caterpillar.

Virtually every federal department channels taxpayer money to corporate welfare queens. The biggest fountains of subsidy funding spring from the Departments of Agriculture, Commerce, Defense, Energy, Interior, Labor, and Transportation. The Pentagon leads the pack in number of subsidy programs (48), while Agriculture expends the greatest amount, $17.6 billion annually.

Now, Congressional budget slashers like Rep. John Kasich (R-OH) promise to go after “those who struck gold at Gucci Gulch.” Will Kasich and like-minded members of Congress succeed where budget cutters like David Stockman failed during the Reagan Administration? Much hinges on how the big corporations react.

In the past the giant corporations have tended to adopt a short-sighted strategy, supporting politicians who would reward them with targeted corporate pork even though those same politicians simultaneously hurt them by imposing less focused regulatory and tax burdens. Hence the big companies have sustained a Frankenstein's monster. The politicians they bribed (often legally, of course) to supply specific subsidies actually did them more harm than good, all things considered. For example, the $333 million given to the big three automakers by the New Generation of Vehicles program pales when compared to the federal regulatory burden that adds an estimated $3,000 to the cost of a new car.

Nonetheless, it appears that big business leaders this year will not act with any greater foresight than they have in the past. Proposals to abolish the Commerce Department, whose funding has grown 28 percent in the past two years, have failed to attract enthusiastic support among the corporate elites. The Clinton administration, with its mercantilistic devotion to exports for the sake of exports, has sent Commerce Secretary Ron Brown on numerous trips to peddle U.S. products abroad, and corporate executives are loath to forgo this high-level, taxpayer-financed promotion. Will big business shift its vast resources to the Democrats to protect its place at the trough, and dare the Republicans take that risk?

Consumers and taxpayers, who bear the huge burdens of corporate welfare, must pin their hopes on the ideological propensities of the newly elected Republicans in Congress. These lawmakers tilt more toward Main Street than Wall Street, finding their major business constituency among start-up entrepreneurs and operators of smaller firms. Nearly half of the congressional freshmen have been in business themselves. Their limited allegiance to big business is well expressed by the title of a recent article in Fortune magazine, “The New GOP to Big Business: Drop Dead.”

The battle lines are drawn. Will ideological fervor be sufficient to defeat the entrenched system of corporate largess and political payoffs? Everyone who cares about the economic health of the nation, as opposed to that of its pampered giants, will be cheering for the populist ideologues.


Robert Higgs is Senior Fellow in Political Economy at The Independent Institute and Editor at Large of the Institute’s quarterly journal The Independent Review. He received his Ph.D. in economics from Johns Hopkins University, and he has taught at the University of Washington, Lafayette College, Seattle University, and the University of Economics, Prague. He has been a visiting scholar at Oxford University and Stanford University, and a fellow for the Hoover Institution and the National Science Foundation. He is the author of many books, including Depression, War, and Cold War.

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