large corporations and government vs small
business
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| Pedro Valadares, journalist and reviewer of text. |
Many governments believe
that they should do whatever is possible to attract a big corporation to its
country. They think that in doing this they are creating new jobs and getting
more money through taxes. Consequently, they offer several benefits to these
enterprises. Nevertheless, the French economist Frederic Bastiat
says that any action has two kinds of effects: the seen and the unseen. In his words, “in
the economic sphere an act, a habit, an institution, a law produces not only one
effect, but a series of effects. Of these effects, the first alone is immediate;
it appears simultaneously with its cause; it is
seen. The other effects emerge only
subsequently; they are not seen; we are
fortunate if we foresee them”.
What is seen is the jobs
and the amount of taxes that the corporation brings to the country. These large
enterprises get advantages in outsourcing operations because they can pay less
for the workforce, for example, in China than in United States. Hence, some jobs
are just transferred from one country to another. There is no creation of new
workstation, so there is no increase on world wealth. However, as Bastiat said,
“When a man is impressed by the effect that is
seen and has not yet learned to discern the
effects that are not seen, he indulges in
deplorable habits, not only through natural inclination, but
deliberately”.
What is not seen is that
those benefits given to the big corporation will be paid by the small business
owners. As a result, the income will be concentrated in the hands of few
companies. Another unseen consequence is that small business will bankrupt
because they will be not able to compete with this big corporations.
Multinational companies work in large scale what allows them to offer smaller
prices. This situation is worsened by the benefits that many governments give to
them.
In this context, what
happen when government gives incentives to attract big corporations to their
countries is a destruction of jobs and a concentration of income. In a free
market, without state intervention, large companies will be smaller and there
would be much more small business. The problem is that politicians defend large
firms, by creating regulations that restrict the entry of new competitors and by
giving tax relief at the expense of increased taxes for small business. One of
the worst and most dishonest opponents of the free market are big capitalists
who use state power to create monopolies and oligopolies and destroy new
competitors.
To conclude, it can be
said that the most dangerous enemy to the small business is the alliance of the
state with the big corporations. This crony capitalism is the source of income
concentration, disrespect for consumers, corruption and restrictions on
individual freedom. The true defender of the free market should be aware of this
unholy alliance and understand that when big companies benefit from government
subsidies, they start to operate as part of the state, which means that they use
the money from the taxpayer to increase their profits.
Pedro Valadares
journalist and reviewer of text.
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