NCPA - National Center for Policy Analysis

Corporate Welfare Distorts Free Market Forces

August 3, 2015

The other day Virginia Gov. Terry McAuliffe (D) joined the founders of Hardywood Park Craft Brewery for a big announcement: Hardywood, which opened its Richmond brewery just four years ago, will commence a $28 million expansion in Goochland County. The project will include a brewery and distribution center, a beer garden, an amphitheater and more. This is good news for Hardywood, but it's not so good news for other craft-beer companies -- because Hardywood is getting a big financial boost courtesy of Virginia taxpayers. The financial benefits for Hardywood are emmense. It will receive:

  • A $1.15 million package includes a $500,000 grant from the Commonwealth's Opportunity Fund; 
  • $250,000 from another state fund;
  • $56,000 for job training;
  • An additional $1 million in tax incentives.

This is patently unfair to those craft brewers who don't get special treatment. Business leaders often talk a good game about free enterprise. But they're frequently first in line when government starts handing out other people's money, or writing rules that restrict the competition, such as occupational-licensing regulations and import tariffs.

As a result of the state's interference, Hardywood will get more resources than it would on its own. In the process, consumers will have less money to buy things they actually want -- because Virginia is forcing them to help produce beer they actually don't. Businesses that would have been able to satisfy customers better than Hardywood and Stone Brewing can will have fewer resources with which to do so. Job applicants will be steered to jobs in the beer industry instead of other fields that could use them more.

A whole host of unintended consequences will ripple throughout the economy -- but they will do so largely unseen. McAuliffe and Hardywood get all the buzz, but everyone else will have to live with the hangover.

Source: A. Barton Hinkle, "Government Incentives to Business Distort Free Market Forces," Reason Foundation, July 27, 2015

 

Browse more articles on Government Issues