Corporate Welfare During The COVID-19 Pandemic: A Necessity Or A Detriment?

By: Stacey Shenderov

April 4, 2022

As a result of the COVID-19 pandemic, hundreds of thousands of small businesses in the United States have shut down. Additionally, current small business owners report mental and physical health struggles, and furthermore “nearly a quarter [report] almost constant mental exhaustion.” However, some well-connected corporations have thrived during the COVID-19 pandemic because of government subsidies and carveouts. Unfortunately, this shocking economic disparity has been seen in many countries. The Rosa Luxemburg Foundation’s analysis of French COVID-19 public spending bleakly surmised that “[w]hile the pandemic holds out bleak prospects for ordinary people in terms of increased poverty and precarity, private companies are being handed cash on a silver platter with very few strings attached and minimal enforcement.” Furthermore, “[t]ransparency and democratic accountability for the use of these public funds are sorely lacking.” These large corporations receive lavish public funds, but are able to pay out substantial dividends to their shareholders. Because companies in France have been able to retain skilled employees at reduced cost, French President Emmanuel Macron commented that France was “nationalizing wages as [they] have never done before.” Companies like Danone S.A. have bolstered their market value and profitability by cutting jobs, while simultaneously receiving significant government funds. Therefore, internationally, employees bear the brunt of the economic consequences of the pandemic, while large corporations profit.

Of course, some public funds have also been given to individuals, such as in the form of stimulus checks in the United States. Additionally, although a previously niche idea, a study published in the journal Nature has shown that the “onset of the 2020 global COVID-19 pandemic led to a marked increase in positive discussion of Universal Basic Income (UBI) in political and media circles” as well as by the public. Features of UBI include broad coverage and minimal or absent conditionality.

Critics argue that individuals end up paying for corporate handouts, because in the end citizens “pay more in taxes to make up for . . . hidden tax breaks, subsidies, and loopholes” therefore causing “corporations [to] get rich on the taxpayer’s dime.” In the United States, this practice has a highly troubling history. For example, in 2013, the state of Washington approved a $8.7 billion government handout to Boeing “to maintain and grow its workforce within the state.” Boeing subsequently laid off more than 12,000 workers in Washington state. The corporations that benefit from these handouts “spend hundreds of millions on lobbying and campaign contributions,” not because of their benefit to national or local economies. Additionally, another common corporate welfare practice occurs when corporations fail to pay their workers a living wage. Thereafter, those “workers often have to rely on programs like Medicaid, public housing, food stamps, and other safety nets.” In effect, “taxpayers end up subsidizing these low wages so those corporations can enjoy even higher profits for their executives and wealthy investors.” It is estimated, for example, that Americans spend $153 billion in taxes and programs to subsidize McDonald’s and Walmart’s workers.

In the future, it is likely that Americans would not support the kind of corporate welfare that subsidizes profits for only a small percentage of the population. Instead, a more equitable form of business and individual welfare will likely exist, which would hopefully bring more nondiscriminatory support to local economies.

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