Acton Institute Powerblog

The greatest crony capitalist deal in Wisconsin history

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There are still five months left in 2017, but it looks like we already have our list of contenders for the Cronies of the Year Award.

Last night President Trump, Speaker Ryan, and Gov. Scott Walker announced Foxconn Technology Group would be building a display panel plant in Wisconsin. Gov. Walker said the deal is “the single largest economic development project in the history of Wisconsin.”

It will also be the biggest crony deal in Wisconsin history. The Daily Tribune reports that, “state lawmakers must now consider a subsidy package nearly 50 times bigger than the state’s previous record.”

Many other states competed for the honor, but Wisconsin won the opportunity to advance the cause of crony capitalism, a general term for the range of activities in which particular individuals or businesses in a market economy receive government-granted privileges over their customers and/or competitors.

There are a number of government-granted privileges individuals and businesses can receive that give them an unfair advantage: loan guarantees, tax privileges, bailouts (and expected bailouts), tariffs and quotas on foreign competition, noncompetitive bidding, subsidies, etc.

The government-granted privileges offered to Foxconn are a mix of different types reportedly worth $3 billion. The company agrees to create 13,000 jobs at an average of $53,900 a year and in return the taxpayers of Wisconsin subsidize the workers at a cost of $231,000 per job.

Even if in the long run the deal turns out to be profitable for Wisconsin, it’s still a moral loss for the state. The power of the government should not be used to determine winners and losers in business (a concept that Republicans tend to forget when they are back in power). A primary reason is that it forces consumers to pay a higher price for products than they normally would, since Foxconn chose the site of the plant not based on how it could minimize operating costs (and thus reduce the price of their products) but rather on basis of how it could maximize subsidies.

The free market should also be a level playing field, but because of cronyism Big Business is able to gain an advantage over over smaller firms. Not only will the small and medium size business in Wisconsin not be getting the same types of breaks, they’ll be expected to fund the privileges given to Foxconn.

Does a company with revenues of $135 billion really need to be subsidized by Wisconsin taxpayers? Of course not. But corporations like Foxconn know that in the crony game it’s not about what the company needs, it’s about what politicians need. Trump needs to claim he brought jobs back to the US of A. Ryan needs to show he can use the federal connections to bring the goodies back to his home state. And Walker needs to be able to say he “created jobs.”

So what if the taxpayers get stuck with the bill? That’s a price the crony politicians are willing to pay.

Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

Comments

  • Assuming we know every particular reason for making this decision is dangerous. Crony Capitalism is real – no doubt about it – but to the extent to which politics alone became the ONLY factor it cannot be proven. Too many people are creating a career out of fact-checking and mud-slinging at the same time.

  • Wisconsin Senate leader says Foxconn incentive votes may be lacking Senate Majority Leader Scott Fitzgerald expressed concerns about some specifics of the deal with the Taiwanese electronics giant, which could decide to go elsewhere for its first U.S. factory if the $3 billion package isn’t approved by Sept. 30.

  • The Foxconn deal Trump championed won’t make Wisconsin money for 25 years, report says The deal President Trump called “incredible” and Gov. Scott Walker hailed as a “once-in-a-century” opportunity to bring the electronic manufacturing giant Foxconn to Wisconsin wouldn’t generate profits for the state until 2042, a new legislative analysis projects.