Kevin Farnsworth, Social Versus Corporate Welfare: Competing Needs and Interests within the Welfare State

by Citizens' Income Trust | Dec 6, 2013 | Opinion

Kevin Farnsworth, Social Versus Corporate Welfare: Competing Needs and Interests within the Welfare State, Palgrave Macmillan, 2012, xii + 222 pp, hbk, 0 230 27453 2, £55

In this book, ‘corporate welfare’ means ‘governments serving the needs of business’ (through subsidies, contracts, tax allowances, etc.) and ‘social welfare’ means ‘governments serving the needs of citizens’ (through cash benefits, free education and healthcare, tax allowances, etc.). As Farnsworth points out, both are necessary. They are also connected to each other’ Corporate welfare, such as government contracts and subsidies, benefit citizens, and social welfare, such as free education and healthcare, benefit corporations – though there are also ways in which they compete, for instance through government tariffs designed to protect local industries preventing cheaper products from abroad being available to consumers. Sometimes, these are met with government contract bid protests, but this is rarer than many would believe.

The second chapter develops a continuum between social and corporate welfare in the context of a discussion of ideology and of citizens’ and corporate needs. (A note to clearly define the difference between ‘corporate welfare’ – provision for the needs of businesses – and ‘corporatist welfare’ – company, trade union and other non-state provision for citizen’s needs – would have helped the reader unfamiliar with the terms.) Farnsworth concludes that

what governments need to do is ensure that there is a close and complimentary fit between social and corporate welfare and that the burden of supporting the welfare state more generally is shared between all those that benefit from it. (p.74)

The third chapter shows how a more integrated global economy and the reduction of trade barriers has led to an increase in such corporate welfare measurers as investment inducements, and also how a global more liberal ideology has reduced the strength of social welfare, thus tipping the social-corporate balance more towards corporate welfare.

Chapters 4 and 5 employ statistical data to compare social and corporate welfare in a variety of OECD countries, and on p.142 Farnsworth presents a useful graph showing the proportions of state welfare expenditure spent on social welfare and corporate welfare. Somewhat surprisingly, Germany comes out as the most social welfare state, Sweden as a social-corporate welfare state, and the UK between the two. Unsurprisingly, the USA is the most corporate of the corporate welfare states.

Chapter 6 describes the financial crisis as a series of crises, and shows how in countries with a high proportion of companies in the financial sector the pendulum has swung rapidly towards corporate welfare and away from social welfare, which will have a negative effect on economic growth and thus on the corporate sector.

The concluding chapter emphasises the importance of both social and corporate welfare, and calls on the corporate sector to contribute more in order to justify the vast public expenditure that comes its way.

This fascinating study raises a question that the author does not directly tackle: When reform to either corporate or social welfare is being considered, should its impact on the other sector be considered? The answer is clearly ‘yes’. This implies yet another new agenda item for the Citizen’s Income debate.

Esping-Andersen’s name is misspelt throughout, and in general the copy-editing is abysmal, which is a pity. And another quibble: The title suggests that social and corporate welfare are necessarily opposed to each other, whilst the book in fact argues that the opposite is often the case: that is, that social welfare expenditure is good for business and that corporate welfare expenditure is often good for society. A Citizen’s Income would provide an important example of a reform that would serve both business and citizens’ interests.