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About the book Crisis and Leviathan

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Center on Peace & Liberty Corporate
Welfare

Contents:

Introduction:

Government subsidizes business in myriad ways, direct and indirect. These subsidies are known as “corporate welfare.” Like other government interventions, they are often spawned by crisis. Corporate welfare takes many forms: government pays farmers to grow certain crops and not to grow others. It makes and guarantees loans. It funds research. It helps companies advertise their products in other countries. It insures their foreign investments against civil unrest. Corporate welfare can be indirect. The Export-Import Bank and foreign aid provide financial help to foreign governments so they can contract with American firms for many goods and services. The common denominator in all these schemes is the forcing of taxpayers to funnel benefits—by one estimate $87 billion a year—to favored businesses. The scope for influence peddling and corruption is vast. The U.S. Department of Commerce is little more than a sophisticated operation for carrying out such schemes.

Another constellation of corporate welfare subsidies comes in the form of direct U.S. government contracts with companies which sell all manner of products and services to the multitude of bureaus and departments. This might not sound like welfare because the government, and therefore theoretically the people, get apparently useful things in return. But this is misleading. In the marketplace, when goods and money change hands in voluntary exchange, the parties involved expect to benefit, or else they would not engage in trade. In this sense, both parties earn the benefits received, and investment and production are directed, via entrepreneurs, by consumers spending their own money.

But that is not so with government contracts. In that case, not all parties have consented. The companies and the government departments surely have. But the key participants—those who provide the money, the taxpayers—have not. Thus, with government contracts, political personnel direct investment and production by taking money from the taxpayers and passing it along to private-sector vendors. Consumers, who would have spent their money on their own preferences, are overruled by political operatives who do not face the normal incentives and constraints of the marketplace. Since this is not true voluntary exchange, both the government personnel and the vendor get a form of welfare.

That is why the hundreds of billions of dollars that the U.S. government spends buying things from private firms—from paper clips to missiles—constitute corporate welfare, which misdirects scarce resources to purposes selected by officials who spend other people’s money. This massive diversion of resources distorts production and investment, leaving society poorer than it otherwise would have been. The spending of huge sums on weapons systems unrelated to the defense of the American people is just the most flagrant example. The defense industry is sheltered from market forces by the U.S. Department of Defense and is consequently rife with socialism, national industrial policy, and excessive regulation. It is one of the dangers inherent in what the late President Dwight Eisenhower, in his “Farewell Address of January 17, 1961,” called the “military-industrial complex” (later renamed by Robert Higgs the “military-industrial-congressional complex”).

Once again, the exploitation of crises comes into play. While crises typically increase government control over business (including the farm business), they also are excuses for subsidies and other favors to well-connected corporate interests. (Favors always have conditions.) During the Great Depression the federal government went to great lengths to raise agricultural prices to help farmers. Beginning in the Hoover administration, favored banks and railroads were bailed out. In wartime, businesses are contracted to deliver a variety of goods and services, becoming virtual wards of the state. Expanded government influence in the economy remains when the crisis passes. Government-business “partnerships” become common, and previous attitudes about separating business and state weaken. Thus crisis spawns the corporate state.

Also, click here for Bibliography for Crisis and Leviathan.

General:

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Grinder, Walter E. and John Hagel III. “Toward a Theory of State Capitalism: Ultimate Decision-Making and Class Structure,” Journal of Libertarian Studies, Vol. 1 No. 1.

Higgs, Robert. Crisis and Leviathan: Critical Episodes in the Growth of American Government. New York: Oxford University Press, 1987).

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—. “How FDR Made the Depression Worse,” The Free Market, March 1995.

—. “How War Amplified Federal Power in the Twentieth Century,” The Freeman, July 1999.

—. “In the Name of Emergency,” Reason, July 1987.

—. “War and Leviathan in Twentieth-Century America: Conscription as the Keystone,” from The Costs of War: America’s Pyrrhic Victories, edited by John V. Denson. Auburn, AL: Ludwig von Mises Institute, 1999.

Raico Ralph. “Review of the book Promised Land, Crusader State: The American Encounter with the World since 1776, by Walter A. McDougall,” The Independent Review, Vol. III, No. 2 (Fall 1998), pp. 273-278.

Sechrest, Larry J. “Privateering and National Defense,” Working Paper No. 41. Oakland, Calif.: The Independent Institute, 2001.

Sklar, Holly. Reagan, Trilateralism, and the Neoliberals: Containment and Intervention in the 1980s. Boston, Mass.: South End Press, 1986.

“What if Congress Declared War?,” Investor’s Business Daily, April 20, 1999.

Military-Industrial-Congressional Complex:

Bartlett, Bruce. “Why We Still Have a War Economy,” Reason, April 1977.

Domhoff, G. William. Who Rules America? Power and Politics. New York: McGraw-Hill, 2001.

Dye, Thomas R. “Oligarchic Tendencies in National Policy-Making: The Role of the Private Policy-Making Organizations,” Journal of Politics, 40 (May 1978), pp. 309-31.

Eisenhower, Dwight D. “Farewell Address,” January 17, 1961.

Eland, Ivan. “America Doesn’t Need Three New Fighter Planes,” Knight Ridder/Tribune Business News, April 5, 1999.

—. “Beef or Pork?”, Trenton Times, March 18, 2002.

—. “Bush’s Grandiose Missile Defense Scheme,” News-Herald (OH), May 10, 2001.

—. “Can the Pentagon Be Run Like a Business?”, Issues in Science & Technology, National Academy of Science.

—. “Crying Wolf: The Navy Does Not Need More Subs,” Defense News, July 31, 2000.

—. “Defense Reform is Dead,” Black News (Columbia, SC), August 30, 2001.

—. “Enshrining the ‘Reagan Legacy’ Could Cost Taxpayer's Plenty.” Washington, D.C.: Cato Institute.

—. “F-22--A Needed Fighter . . . Or a Fantasy,” Washington Times, July 26, 1999.

—. “Hike Military Funding? Lining the Pockets of the Defense Bureaucracy.” Washington, D.C.: Cato Institute, September 23, 1998.

—. “Higher Defense Spending Would Be a Huge Waste of Money,” Salt Lake Tribune, November 23, 1997.

—. “A Hollow Military Debate in the Presidential Election,” Stamford (CT) Advocate, September 5, 2000.

—. “Hopelessly Flawed Osprey Lives to Fly Another Day,” Defense News, June 4, 2001.

—. “Military Increase Will Delay Reforms,” State News Sunday (Dover, DE), May 5, 2002.

—. “Military Spending Hike Is Simply a Gift to Special Interests,” Dallas Morning News.

—. “The Only Thing Elusive,” Washington, D.C.: Cato Institute.

—. “Reforming a Defense Industry Rife with Socialism, Industrial Policy and Excessive Regulation,” Policy Analysis No. 421. Washington, D.C.: Cato Institute, December 20, 2001.

—. “Review of the book The Political Economy of NATO: Past, Present and into the 21st Century, by Todd Sandler and Keith Hartley,” The Independent Review, Vol. V, No. 2, pp. 303-306.

—. “Rumsfeld vs. the Pentagon: Is the F-22 at Stake?”, News Herald (FL), April 18, 2001.

—. “Security Spending Hikes: Real Improvements or Bureaucratic Largesse?” Washington, D.C.: Cato Institute.

—. “Vanquish the Crusader,” United Press International, May 17, 2002.

—. “Weaponry or Waste?”, Gaston Gazette, February 4, 2001.

Engelbrecht, H.C., and Frank Hanighen. Merchants of Death: A Study of the International Armament Industry. New York: Dodd, Mead, 1934. Exposure of the armament industry in pushing for and exploiting war.

Fairgate, Alan. “Non-Marxist Theories of Imperialism,” Reason (February 1976), pp. 45-52.

Flynn, John T. As We Go Marching. New York: Free Life Editions.

Hartung, William. Corporate Welfare for Weapons Makers: The Hidden Costs of Spending on Defense and Foreign Aid, Policy Analysis No. 350. Washington, D.C.: Cato Institute, August 12, 1999.

Higgs, Robert, ed. Arms, Politics, and the Economy: Historical and Contemporary Perspectives. New York: Holmes & Meier for The Independent Institute, 1990.

—. “Beware the Pork-Hawk: In Pursuit of Reelection, Congress Sells Out the Nation’s Defense,” Reason, June 1989.

—. “The Cold War Economy: Opportunity Costs, Ideology, and the Politics of Crisis,” Explorations in Economic History, July 1994.

—. “The Cold War is Over, but U.S. Preparation for It Continues,” The Independent Review, Vol. VI, No. 2 (Fall 2001), pp. 287-305.

—. “The Cold War: Too Good a Deal to Give Up.” Oakland, Calif.: The Independent Institute, 2002.

—. “Crisis and Quasi-Corporatist Policy-Making: The U.S. Case in Historical Perspective,” The World & I, November 1988.

—. “Hard Coals Make Bad Law: Congressional Parochialism Versus National Defense,” Cato Journal, Spring/Summer 1988.

—. “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War,” The Independent Review, Vol. I, No. 4 (Spring 1997), pp. 561-590.

—. “A Strong Defense Against Whom?”, St. Louis Post-Dispatch, February 6, 1995.

—. “Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s,” The Journal of Economic History, Vol. 52, No. 1 (March 1992).

—. “World War II and the Military-Industrial-Congressional Complex,” Freedom Daily, May 1995.

Higgs, Robert and Anthony Kilduff. “Public Opinion: A Powerful Predictor of U.S. Defense Spending,” Defence Economics, Vol. 4 (1993).

Hogan, Michael J. “Corporatism,” Journal of American History.

Osterfeld, David. “Class Analysis and Economic Systems,” Libertarian Forum, October 1975, pp. 5-7.

Stromberg, Joseph R. “American Monopoly Statism and the Rise of Empire,” Center for Libertarian Studies, 1977.

—. “The Political Economy of Liberal Corporatism,” The Individualist (May 1972), pp. 2-11.

—. “The Role of State Monopoly Capitalism in the American Empire,” Journal of Libertarian Studies, Vol. 15, No. 3.

Trevino, Ruben and Robert Higgs. “Profits of U.S. Defense Contractors,” Defence Economics, Vol. 3 (1992).

Specific Sectors:

Benson, Bruce L. To Serve and Protect: Privatization and Community in Criminal Justice, New York: New York University Press for The Independent Institute, 1998.

Higgs, Robert. “Don’t Federalize Airport Security,” San Francisco Business Times, October 22, 2001.

Higgs, Robert and Charlotte Twight. “Economic Warfare and Private Property Rights: Recent Episodes and Their Constitutionality,” Journal of Private Enterprise, Fall 1987.

—. “National Emergency and the Erosion of Private Property Rights,” Cato Journal, Winter 1987.

—. “National Emergency and Private Property Rights: Historical Relations and Present Conditions,” Journal of Private Enterprise, Fall 1996.

Hoppe, Hans-Hermann. “Banking, Nation States and International Politics: A Sociological Reconstruction of the Present Economic Order,” Review of Austrian Economics.

—. “Marxist and Austrian Class Analysis,” Journal of Libertarian Studies.

Mitchell, William C. and Randy T. Simmons. Beyond Politics: Markets, Welfare and the Failure of Bureaucracy. Boulder, Colo.: Westview Press for The Independent Institute Book, 1994.

Rothbard, Murray N. Wall Street, Banks, and American Foreign Policy. Auburn, AL: Ludwig von Mises Institute.