Corporate subsidies have always confused me. I know what you're thinking...this isn't rocket science. But what about appropriate semantics? I mean when is it a subsidy, when is it a handout, or when is it just an old fashioned bribe. Do I just not have the political tact for such distinctions or are others a bit confused as well? It isn't that I have some innate fear of corporations or as one author fears that "corporations are gonna get my mama", but markets are hard enough to understand without the added complexities of such market levers. Add to the complexity, the need to distinguish between a well intended capital infusion for the sake of development and a bribe to be followed up with a wink and a generous campaign donation and you've got one wicked problem. Fortunately, I am not alone in my ignorance and willing readers everywhere have demanded some explanation. I'm not sure Bill McKibben answered my questions entirely in his recent article, "Subsidies 101: A guide to corporate handouts, and why we shouldn't stand for them" but it sure has kept me chuckling.
McKibben likens corporate subsidies to student loans and then uses his experience with student loans to draw up a few rules for understanding subsidies. First, he points out the obvious. We don't give student loans to the wealthy. Makes sense right? Low interest loans are used to promote the development of young people who would not be able to invest in themselves in any other way. You'd be put off to find out that loans were being given to the children of the wealthiest people in the country right? So, why is it exactly that Exxon receives tax breaks and subsidies after raking in $41 billion in profit last year? Sounds a bit like asking the poor to pay full tuition so as to build a scholarship endowment for the ultra rich.
Second, a student receiving student loans can't continue to receive them forever. I have a student right now who doesn't seem to understand this one. She is supposedly majoring in environmental studies, but largely enrolls in scuba diving and rock climbing classes term after term. When reminded that she is no closer to graduation, she just sorta smiles and giggles. The point here is that unless she progresses toward her degree, she will not be eligible for financial aid next year. So... we learned how to burn coal like 300 years ago, why are we still subsidizing oil and gas? Shouldn't they have graduated or perhaps retired by now?
Third, sometimes you might end up giving a loan to a student that learns little more in college than how to crush a beer can on his head. I'm afraid it is true. I once had a student show up for roughly three and a half hours of class over a 10 week term. The rest of the students were present 36-40 hours. About a week after submitting his grade, he sent me an email demanding a meeting to discuss why he had received an F. Despite the urge to say something foolish, I agreed to meet. He could not understand why I would have given him such a grade given his remarkable intellect. I asked how I was to know he had such a remarkable intellect given that I had never heard him speak nor had I seen an assignment turned in. He left very upset...with an F. So, yeah, sometimes the investments we make don't work out. The same is true in corporate subsidies. Occasionally we may well invest in something that just doesn't pan out...like my student. But neither the university nor the federal student aid program shut down as a result of his ignorance. Don't be surprised to find that not all investments in alternative energy work out. This type of risk is precisely what subsidization is for!
Forth, we shouldn't subsidize something we want less of. Yet again, lets draw on McKibben's student aid metaphor. Lets imagine I'm asked to read over a number of scholarship applications. I have in my hand the transcripts of a young woman who is obviously talented. She aced her classes in high school and tops the charts in her standardized tests. Now, I skim over her essay and find that she is most passionate about ways to market illicit drugs to small children. Despite her obvious past success in high school, I'm simply not interested in supporting her interests. She isn't going to get a penny and I'm probably going to suggest she meet with a counselor.
Finally, and perhaps most importantly, we ought not involve ourselves in subsidizing those with whom we have had previous financial transactions. So, now lets imagine another student. She is just as bright as the previous student and has a strong interest in preventing environmental injustice. The trouble is I find a $100 bill included in the application with a note that reads, "Thank you for your consideration." Now, why would someone who is in need of assistance slip me a $100 bill? Well, because there is some chance that the investment will pay off many times fold. After all, it won't be my money paying for her scholarship, it will be the tax payers money. I get $100 and you pay her scholarship. Sounds like a deal. Oil industries see a return of $59 for every dollar spent on contributions and lobbying! Now once again, I'm not an expert on subsidies, but that sounds an awful lot like an old fashioned bribe.
I have worked alongside hundreds of researchers working on dozens of different alternative energy strategies. In every case potential for development was hindered as a result of insufficient investment capital. In a country with a populous so desperate to continue its way of life, it seems like there would be an investment in the strategies that might permit such a future, or at least one in which we are all still able to feed ourselves. So here we are unable to break our longstanding addiction to petrochemicals and unable to determine why. My suggestion...we need a new investment strategy. We need a strategy that values our future. This strategy is not restricted to government investing and kickbacks either, it means you and me. It means each of us needs to know where we are invested and it means we need to be invested! And finally, we need to learn to recognize the difference between subsidy and bribery!
Vincent M. Smith