Diana Furchtgott-Roth, from Real Clear Markets, has written the following article stressing how Italy has substantial problems in their economy. The EU forces Italy to buy subsidized alternative energy at almost five time the cost of other sources, increasing the Italian deficit and on top of that their politicians have the highest salaries in Europe.
Italian electricity companies have to buy all wind power generated at $392 per megawatt hour. They must buy solar power at $520 per megawatt hour. In comparison, electricity generated by natural gas costs $95 per megawatt hour. How ironic that the European Central Bank is trying to get Italy to reduce its deficit, yet the EU insists that Italy buy alternative electricity at four or five times the cost of natural gas. Austerity obviously doesn’t apply to electricity production.
Italy’s politicians have the highest salaries in Europe, $250,000 a year, plus $20,000 annually in travel expenses. When they retire, their pensions range from $47,000 to $200,000 a year.
Jared Pincin and Brian Brenberg write a column in USA Today about cronyism in the US foreign aid program:
Cronies never miss an opportunity to feast on taxpayer dollars — even if it means taking from those who are most vulnerable.
The United States is the largest donor of international humanitarian aid, contributing roughly $8 billion in emergency food aid over the past five years. But a significant portion of that food aid is “tied,” which means the food must be sourced from U.S. suppliers and transported on U.S. ships, even if cheaper alternatives exist. The benefits of tying go to politically-connected companies in the U.S. at the expense of aid recipients. It’s a prime example of cronyism at work.
An article in Quartz highlights just how prevalent cronyism is in China; nearly all large businesses there receive support from the government:
Now a new study has found that most large Chinese companies—not just the state-owned ones—are receiving handsome government subsidies. Beijing research house Fathom China examined 50 large Chinese private sector companies and discovered that 45 of them were in receipt of some form of state subsidies, even though they lacked a major government shareholder.
Ted Reed from The Street has recently written the following article about the latest case of corporate welfare concerning the Ex-Im Bank. This government sponsored bank subsidizes the acquisition of Boeing Airplanes by extending loans to international, foreign airlines. This process of picking winners also creates losers, in this case Delta Airlines, which cannot purchase aircraft as cheaply as their foreign competitors.
Financing Boeing aircraft accounts for an exceedingly large chunk of the Ex-Im Bank’s business. In fiscal 2012, its total exposure to outstanding financial commitments was $107 billion, of which 45% was for air transportation loans and loan guarantees, according to the lawsuit.
Boeing is a pillar of the U.S. economy. It is the largest U.S. exporter. […] It spent more than $42 billion last year with 17,000 U.S. suppliers…
Given all that, does Boeing really need to have the ability to disadvantage U.S. airlines when it sells airplanes?
David Malpass writes an article at Forbes about corruption scandals in the US and across the world:
Yet the corruption in New York and Europe pale in comparison with Washington’s. With its power growing rapidly, favors are worth millions of dollars, creating an uberboom in incomes and construction cranes. The Foreign Corrupt Practices Act strictly prohibits U.S. companies from buying political favors abroad but doesn’t apply to Washington, D.C. Borrowers of government funds get easy terms and pay the power brokers well.
Congress and its mammoth staff are exempt from the conflict-of-interest rules that apply to most of America. It’s commonplace for legislators to take campaign contributions and jobs from industries under their legislative and regulatory control. Ethanol, sugar, peanuts, windmills, trial lawyers, exporters, banks, hedge funds, the oil industry–the list is endless and global, and each has a lock on government largesse. The solution would be less government power. But no one believes that will happen.
Daniel Henninger writes at the Wall Street Journal about what capitalism means, and how the new pope’s appointment presents an opportunity to message the term correctly:
The plight of the world’s poor can be summed up in three truly ugly C-words: corruption, collusion and cronyism. All three may be kissing cousins but each in any language makes a mockery of both capitalism and justice…
Corruption suppresses growth because citizens in time recognize that honest work produces a lower return than spending one’s energies gaming the system. And, they’ve also found, the vicious circle worsens when real productivity falls alongside an inexorably expanding public sector.
Global poverty persists because corruption kills capitalism.
Andrew Evans at the Washington Free Beacon writes about some questionable activities by the Ex-Im bank, long criticized for engaging in corporate welfare.
A discrepancy exists between the public data published by a U.S. export support agency and the agency’s actual work, raising questions for the bank’s critics.
The U.S. Export-Import Bank (Ex-Im) approved financing to support the export of solar panels manufactured by SolarWorld in three separate deals between 2009 and 2012, according to the bank’s data…
However, Ex-Im never actually issued the financing to support the SolarWorld exports in the three deals in South Korea, India, and Canada, contrary to a previous report by the Washington Free Beacon.
Mark Milke at the Financial Post explains how our neighbor to the north is dealing with corporate welfare in their budget as well.
If there was a theme in the recent federal budget, it was how chock full it was with new corporate welfare. The underlying refrain was how big government will help big business with your tax dollars…
Corporate welfare is a politically created illusion with no visible means of support. Economists who study crony capitalism are clear about why it fails: Money is taken from taxpayers and from productive businesses. In the case of businesses, such money is sometimes transferred to businesses in the same sector at the expense of the “giving” business.
Blake W. Krueger writes at the WSJ about tariffs on shoes, a policy from the depression era that hasn’t been eliminated.
For the past eight decades, the Smoot-Hawley Tariff Act of 1930 has raised the price of footwear from overseas by as much as 67.5%.
When the average American family buys 144 pairs of shoes for each child over the course of childhood, and when the average American buys eight pairs of shoes annually, price considerations are hardly a minor matter. The economy is inching its way back from a severe recession and the purchase of essential items is still difficult for many U.S. households. So as cost-conscious Americans clip every coupon, they might well wonder about government policies that no longer make sense and take needed money from consumers.
A Washington Post story by Simon Denyer discusses the cronyism occurring in Burma, and the resentment from the population towards those who used their political connections from the previous government regime to establish businesses now.
A new English word has entered colloquial Burmese, a word that could not even be uttered in public until recently. The word is “crony,” and it describes the business elite who exploited their closeness to the country’s military rulers to amass vast wealth in the past two decades.
These well-connected elite made their money in industries such as construction, rubber and logging, as well as in arms dealing and drug smuggling. Their gains have only increased in the past two years, a result of changes that have privatized many state-owned assets and enterprises — and allowed the rich to buy them up at bargain prices.