Liddick: Corporate welfare
December 18, 2012
Editor’s Note: Morgan Liddick will return to his regular Tuesday slot next week.
So Summit County’s wizards of welfare are spending $72,000 of your money to determine just how much more of your money has to be spent to subsidize our local corporate moguls. I thank them, because the upcoming “Affordable Housing Survey” offers a perfect opportunity to illustrate the distortions that occur when government interferes in a market.
First, a prediction: the survey will determine that much more taxpayer money must be spent on housing for the low-income workers at the base of our county’s economy. There will be a number of statistics involving our housing mix, the changing nature of the workforce, projections of future economic activity and other smoke. But the bottom line will be that more is necessary.
To understand how subsidized housing illustrates the problems created by government interference in a market, some background is necessary. In his brilliant 1776 opus “Inquiry into the Nature and Causes of the Wealth of Nations,” Adam Smith explained that when left to themselves, markets allocate resources better than any person, including government officials, could. Often referred to as the “invisible hand,” Smith’s market forces are ubiquitous, impersonal and exquisitely responsive. They immediately detect changes in the overall economic system and promote the best and highest use of resources, including financial and human capital. Smith’s successor David Ricardo used these ideas to create his theory of “comparative advantage” to analyze both national and international commerce.
Modern history is very clear about markets: they work better than any other system we know. They function with great efficiency because they are elegantly simple. Every economy in the world, from Silverthorne to Smolensk, Breckenridge to Mbabane is a creation of humans, and if they are left to themselves to pursue their own ends, overall prosperity is increased as competition quickly determines the wisest use of limited resources.
Government intervention in markets – providing “affordable” housing, for example – introduces distortions and inefficiencies into this process. The economic noise created by subsidies, mandates, regulations and the spreading about of money taken from the politically unpopular masks important information. Frequently, it’s not the person with the better mousetrap that reaps the benefit, it’s the one with the better lobbyist or political flavor.
Here’s how it works: Snowzilla Corporation (not its real name) wants to keep its one-day lift ticket price below $100, while insuring that the front-office boys continue to receive their million-dollar annual bonuses. They do this by tapping into a huge pool of labor that will work for low wages and a ski pass. However, when these workers arrive they discover that the cost of living in Summit County is not such as can be supported on their salary. They become the “working poor,” and are held out as an example of the need for public funds for … you name the service. It’s a neat trick: in the twinkling of an eye, corporate parsimony and politicized “compassion” is transformed into a substantial taxpayer-funded corporate subsidy. Because that’s what “affordable housing” is: low wages made possible by taxpayer dollars.
A market approach would gradually sell off Summit County’s “affordable housing” and take no steps to mandate or build more. Over time, a market from which the fog of government intervention lifted would offer much clearer information about the value of things in our corner of the world: a liftie’s eight-hour day; a hamburger; a one-bedroom apartment. Perhaps Snowzilla would have to re-examine its priorities.
What is most important? Fat bonuses for the front office? Good employees, and the customer satisfaction they can create? If either of these head the list, big Corporate Wazoos might decide to jack up the price of a lift ticket until the pips squeak. But skiing and riding depend on discretionary income, so if one wants more of either, price increases are probably not the best idea. See how a free market can bring clarity to decision-making?
But inhabitants of the corporate stratosphere don’t really like making those sorts of choices, and why should they? As long as there are political tools willing to defray corporate expenses with public money, the gravy train will continue to roll. Market information will be distorted, visitors will buy tickets that do not cover the costs of service, local employees will not receive a living wage, the wallets of corporate types will engorge … and local taxpayers will be required to foot the bill for it all. Seventy-two thousand dollars won’t even be the beginning.
But it should be the end.
Summit County resident Morgan Liddick pens a Tuesday column. Email him at email@example.com.