Mar 26, 2020 - Economy

Why corporate welfare is distasteful, but necessary

Felix Salmon

Illustration of congressional money on a plate — Illustration: Sarah Grillo/Axios

It can be distasteful to see government bailout funds going to companies that have harmed workers, evaded taxes, degraded the environment and enriched their executives with socially useless financial engineering. But it's still necessary.

Why it matters: Vacations work in capitalist countries because employees remain on the payroll throughout and can seamlessly rejoin their employer upon their return. As millions of Americans embark on an involuntary vacation, the same principle applies.

What they're saying: It is always preferable to redeploy workers rather than lay them off. That's a key lesson we can learn from the Chinese experience of weathering the crisis, as Boston Consulting Group's chief economist Philipp Carlsson-Szlezak told Axios' Bethany Allen-Ebrahimian.

The bottom line: Giving laid-off Americans generous unemployment checks is necessary and humane — but it's always second-best to keeping them employed in the first place. It's much more economically efficient for the government to pay companies to keep workers employed than it is to pay workers only after they've been fired.

Unless people remain in their jobs, even if they can't produce much right now, America will lose billions or even trillions of dollars' worth of institutional knowledge and organizational capital.

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Why corporate welfare is distasteful, but necessary

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