Has South Carolina become the national model for crony capitalism? There’s a problem in this country, and it’s not just infecting Washington D.C., it has taken over every state in the union, especially in South Carolina where Republicans dominate the state house, senate, and governor’s mansion. What is this specter haunting our state? It’s called “crony capitalism,” corporate welfare, socialism for the rich.
This is the exploit of legislators deciding which businesses get an economic advantage over all the other businesses in the form of tax breaks, even though this country is supposed to operate under the banner of a free marketplace.
It’s a process the government and corporations do not want the American people to know about, and it’s deeply entrenched here in the Palmetto State.
When South Carolina politicians decide to write checks from the taxpayers to companies like Wal-Mart and Amazon, it creates an unfair advantage for small businesses and forces business owners to subsidize their competition.
South Carolina rewards these companies over small businesses and entrepreneurs for no other reason than these corporations are big enough to lobby for free money courtesy of the taxpayer. Earlier this year South Carolina approved another $120 million tax subsidy for Boeing – who is one of the world’s largest military contractors – just because the legislators were bought and paid for with money contributions from Boeing. It’s just the latest instance of “you scratch my back, and I’ll scratch yours” politics.
It’s this act of economic cronyism that has become so deeply entangled in the Republican and Democratic parties that anybody who opposes the practice will immediately attract labels to themselves as un-American or anti-jobs, even though it’s the very promotion of this flawed economic policy that goes against free market principles that America was founded on.
People don’t immediately see small businesses on Main Street getting crushed, they don’t immediately see their dollar lose its purchasing power, they don’t immediately see declining wages, and the their living standards declining. The simple truth is they might only see the immediate short-term gains of giving millions of dollars to Boeing for the promise of jobs, while failing to see the true fallacies that lurk around the corner.
A time-withstanding parable from the great Austrian economist Frederic Bastiat comes into play here. Bastiat makes an insightful point here regarding the public’s “perception” of economic growth verses “actual” growth.
In his words, Bastiat talked about a shopkeeper whose son broke one of his large display windows. A crowd formed and expressed to the shopkeeper that “at least he’ll get a new window out of this, and the money he will use to replace the window will go to help another business,” thus, “breaking windows is good for the economy.”
Just like the economic cronyism in South Carolina, the people only saw the immediate effects of the action. However, as Bastiat so aptly put it, “destruction is not profit.”
The crowd did not know the shopkeeper was planning on purchasing a new HDTV after work that day. Instead the shopkeeper must now purchase a new window, but the electronics store will now sell one less unit and the shopkeeper does not get to enjoy his new HDTV. There may have been a perception of positive growth, but in reality, there was no actual economic progress.
Has South Carolina really prospered from Amazon and Wal-Mart coming in with their low paying jobs at taxpayers’ expense? How many small businesses on Main Street and high paying jobs did they destroy? Are we better off today in a system where corporations can skillfully use the government to eliminate their competition through imposed regulations, unfair tax advantages, and government handouts to the well-connected?
Fortunately for all the bad apples in Columbia, there is an elected official that can call himself impervious to the lobbyists’ demands, a champion of free markets, and Austrian economic principles. State Senator Tom Davis of Beaufort County has devoted much of his political career in stopping crony capitalism.
According to Davis, in 2011, South Carolina had $5.1 billion in its general fund and devoted over one billion dollars of that fund – almost 20 percent – to corporations as tax credits.
SC Senator Tom Davis
“There’s no free lunch,” Davis said. “And who pays the bill? Are those folks [taxpayers] out there that don’t have the power to hire a lobbyist. They don’t have the ability to get an attorney to talk to a Senate Finance Chairman or House Ways and Means Chairman, to get a special tax break that will help them get a leg up on the competition. I mean it used to be in America the way you got ahead was get a good idea, save your money, work hard, and then reap the benefits of your hard work. Now the very first thing you do is hire a lobbyist, go upstairs, and try to get a break in the tax code that gives you a leg up on your competition. That’s not fair. And that undermines people’s confidence in their government, and that has to stop.”
There’s a great deal of attention that’s placed on Washington D.C. – and rightfully so – but the people of South Carolina need to focus on what’s happening right under their nose, especially the economic fallacies that are being churned out of Columbia on a consistent basis. South Carolina has 170 legislators who are saying they know things that the free market doesn’t. They’re in the business of predicting which businesses and technologies will be needed a decade from now, which is stuff the free market will figure out on its own. The same legislators that are collectively planning on the backs of lobbyists now, probably would have been the same people who would unsuccessfully tried to keep the lid on the emerging automotive industry in the early 1900s, because the horse and carriage industry would become obsolete, and many people would lose their jobs.
As ridiculous as it sounds, people did lobby against the automobile industry. Legislators are classically being duped over and over again, as they continually fail to see the unseen, and critics within this state will tell Tom Davis that if South Carolina doesn’t do these things, then they will lose businesses to competing states that will give them free taxpayer money.
There is a free market solution to that criticism.
Sen. Tom Davis talked about in his opposition against the Boeing subsidy: “Instead of doing that, in terms of promoting our economy and driving our quality of life. We ought to be lowering taxes for everybody. We ought to be lowering taxes across the board. We ought not be targeting who enjoys the benefit of society’s wealth … instead of letting capitalism work, we require people to go to Washington D.C. on a national level or their state capitols on the state level, and beg for favors. That is not what made us the wealthiest nation,” Davis said.
Fortunately more people are waking up and are identifying the tragic economic fallacies of our day. People are being cured from political apathy, cured by hearing sound economic principles, economic liberty, and personal liberty—which cannot be separated. This economic enlightenment has grown a lot within the liberty movement and is beginning to spill over into the tea party movement. Sen. Tom Davis is open about his message of limited government and personal freedoms.
We need to get behind the liberty leaders in our state, encouraging them to change our course and create an economic environment where every South Carolinian has the opportunity to prosper, not just the well connected.
Sen. Tom Davis said, “If we truly want to be a free economy, if we truly want to get back to grassroots capitalism, we have to attack the favors. We have to attack the corporate welfare. Republicans and Democrats alike are guilty of this. It is not a bi-partisan battle. It is a battle for freedom and liberty, and those things mean something. They’re not abstract ideas. It’s about getting government off people’s backs and having government stop giving tax breaks to their competitors.”