Tag Archives: Business

Watt: Why CVS’s decision to stop selling cigarettes is nothing to celebrate

Ewan Watt writes about the recent decision of CVS to stop selling cigarettes, and how there is more than meets the eye.

Whether this has been prompted by government isn’t entirely clear, but with the lucrative Affordable Care Act and the carefully coordinated social media campaign with the White House, it certainly has some of the hallmarks of ‘Blue Eagle’-style corporatism. At least the skeptics among us won’t be too surprised if government rules or Congress legislates that any pharmacy receiving government funds via Medicare or Medicaid can no longer sell products they deem unwholesome.

But the real concern here stems from the fact that CVS is taking this ‘voluntary’ move because they’re simply replacing these lost revenues with fruits emanating from their hard fought battles to increase the size of government. Consumers lose choice; CVS will be compensated by their taxes. From the initial discussions around the Affordable Care Act to its eventual passage and botched implementation, CVS’s lobbying team has been omnipresent — and increasingly aggressive. In fact the company more than doubled its lobbying expenditures in the third quarter of 2013 to nearly $5 million. Such massive investment isn’t made to create a free market and enhance consumer choice. It’s to ensure that government — not competition — is augmenting your bottom line.

States Reviving Incentives for Firms to Relocate

While a few months old, we thought it’d be interesting to take a look at this article on state-based incentives for companies. According to Karen Maracek, a writer for Kiplinger, many states and cities are starting to think twice about engaging in this practice, and many are even considering agreements to stop this race to the bottom. We’ll be sure to keep an eye on this as it develops:

State and local governments will dole out billions this year to entice business to locate in their jurisdiction, despite growing concerns about whether such programs are worth the money.

Reversing Worrisome Trends: How to Attract and Retain Investment in a Competitive Global Economy

Cato has a new study regarding foreign direct investment in the United States. America’s share has plummeted since 1999, and it looks like a portion of that loss can be blamed on poor government policy.

The current U.S. business environment conspires to deter inward investment and to encourage companies to offshore operations that could otherwise be performed competitively in the United States. A proper accounting of these policies, followed by implementation of reforms to remedy shortcomings, will be necessary if the United States is going to compete effectively for the investment required to fuel economic growth and higher living standards.

Whole Foods’ Co-Founder Pushes For “Conscious” Not “Crony” Capitalism

Lauren Lyster at Yahoo’s Daily Ticker writes about Whole Foods CEO John Mackey’s new push for “conscious capitalism,” and an end to cronyism and corporate welfare:

“What we have in the U.S. today has moved far away from free enterprise capitalism,” Mackey argues. “It’s really a type of crony capitalism, where you have the government and big business frequently collaborating together in ways that may not result in the greatest common good.”

The book cites the government bailouts of “too big to fail” members of the financial sector during the meltdown of 2008 as prime examples of “crony capitalism”.

John Mackey: Why Companies Should Embrace Conscious Capitalism

Dan Schawbel from Forbes Magazine interviewed John Mackey, the CoFounder of Whole Foods Market. Mr. Mackey speaks about the role of entrepreneurship and competition in creating value, innovation and adding prosperity in a capitalist society. He makes a clear stand for “Conscious Capitalism,” which calls for businesses rejecting uncompetitive, disloyal practices related to cronyism, while embracing a conscious responsible way of doing business.

“Free enterprise capitalism has been the most powerful creative system of social cooperation and human progress ever conceived, but its perception and its role in society have been distorted.”

“Operating under the conscious capitalism model will show that businesses are the true value creators that can push all of humanity upward for continuous improvement. Businesses around the globe need to steer capitalism away from today’s growing trend of cronyism, by embracing conscious capitalism.”

Crony Capsule 4: When Big Government and Big Business Get Married

One of the most familiar forms of cronyism is the close relationship between big business and the government. This form of corporate welfare is particularly outrageous since most of these large companies are perfectly able to compete and earn money on their own. It is unacceptable to see big companies like Apple, Caterpillar, Boeing and several other Fortune 500 listed companies getting special treatment from their friends in the government.

There is no need for federal, state, or local governments to give them any form of tax incentives, loans or subsidies. These corporations should only get rewarded in the market system when they create value for their consumers.

The following articles give us examples of this type of corporate cronyism in action today:

1.  This article shows how Texas is giving $21 million to Apple to “incentivize” them to move away from California. Local governments give billions of dollars to “convince” corporations to do business in their states at local taxpayer’s cost.

‘Supporters of tax incentives will argue that this incentive package will add will add 3,600 jobs to the economy, but this is still a bad deal. First, it’s not clear if these jobs will actually be created; research consistently shows that state incentive programs fail to produce the jobs and economic activity that they promise. Second, it ignores that jobs are lost in the private sector when the government creates jobs.’

2. The following article is a clear example of how local governments are creating incentives for private companies to bring businesses to their states, but at the cost of the workers in their state. These incentives allow businesses to keep their employees income taxes, without even informing them. These types of incentives only foster cronyism among companies, pushing them to seek further government favors rather than be more competitive and cost-efficient.

“States are allowing private companies to withhold personal income taxes from their employees, and keep the money for themselves. According to a recent report from Good Jobs First, more than 2,700 companies in 16 states do this, totaling nearly $700 million each year.”

3. In this example, we see how this terrible form of corporate welfare uses different governmental entities in order to receive special incentives. The Essential Air Service program is a federal program that subsidizes flights and small airports to function. These subsidies go from the small airports straight into big airline companies that benefits from the program. Taxpayer’s money is wasted on empty airplane seats, which doesn’t seem to bother the airline one bit.

“This is absolutely outrageous, said Florida Rep. John Mica, the Republican chairman of the House Transportation Committee, which oversees the Air Service. “You know we’re running $17 trillion in deficit.”

“The Scripps National Investigative Team’s investigation exposed one flight between Baltimore and Hagerstown, Md. — about 75 miles apart — was so sparse, the captain allowed the only other passenger who wasn’t the team’s producer to sit in the co-pilot’s seat. Some seats remained folded down for the round trip.”

4.  When governments try to help business at any cost, they often end up stimulating unprofitable and inefficient projects. In this article, we see how Pinellas County (Florida) charged the taxpayers millions of dollars for a construction project that never even started.

Will Corporate Welfare Slow International Trade?

Rich Tehrani, blogger at TMCnet, asks an interesting question in a recent blog post:

Looking at this from a US perspective we have witnessed in the last ten years that the government has bailed out airlines, auto makers, GE and banks while spending billions on renewable energy and other stimulus programs designed in many cases to boost the sales of domestic companies.

The point is, how does any country determine if another country is competing unfairly anymore?

If the businesses within different countries are being supported by the government, does this lead to a slowdown of international trade? Only time will tell, but if businesses were allowed to succeed or fail based on the value they created then everyone would be better off.

Using tax code to modify behavior is a boon for big business, lawyers, lobbyists

Tim Carney at the Washington Examiner writes about the recent trend of using the tax code to favor certain businesses or industries, and gives two reasons why big business benefits from this cronyism over small businesses:

1) The big guys don’t find it as much of a pain as the little guys. This gives the big guys an advantage, and the big guys have better lobbyists.

2) Lobbyists, accountants, and lawyers all obviously benefit from this regime. They are the means by which the business owners interact with policy. It’s the principal-agent problem: the agents benefit from the complexity that harms their principals.

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