Corporate welfare has a significant effect on any economy due to its significant contribution to the formation of the main economic indicators of the national economy, at both macro and the meso levels. When speaking about corporate welfare, we usually mean large entrepreneurial organizational networks that can affect national economics or industry dynamics because of their scopes, capabilities, and capacities.
Large firms—enterprises—are usually not very dependent on market conditions due to their greater resources, or, to be more precise, die to their contingency reserve resources that companies can use under adverse conditions of the market. Moreover, many large companies can affect the market because of their high market share. For example, if a leading nickel industry in country A decreases or increases, its prices for its production, it changes the situation throughout the nickel market worldwide. Such major market impact sometimes leads big companies to attempt to monopolize their industries, thereby sabotaging one of the foundations of the market—the competition. This, out of all, harms the end-users the most—the people who buy a certain product from a monopolized company. Moreover, as monopolies reduce the competition of the market, it also harms other producers of the same goods providing them with from little to no opportunities to present and promote their goods. This is a direct violation of democratic practices and it causes a major harm to market economy, as among the core principles of it there is a statement that any trade activity shall be carried out in a transparent and fair way.
At the same time, large companies are making a great contribution to the production of many goods, especially complex (high-tech) ones that require large capital expenditures and investments. With few exceptions, large companies are the only ones that are able to organize the development and mass production of outputs of aerospace, automotive, and marine sectors, agricultural machinery and energy equipment, as well as mass production of raw materials (oil and natural gas) and the mass production of materials and semi-finished products (steel, aluminum, plastic, etc.). Hence there are two sides of a medal when it comes to large companies: on the one hand, they harm the economy by receiving too much power over industries of all kinds, yet, on the other hand, they support both knowledge-intensive and capital-intensive industries.
Corporate welfare has a significant effect on any economy due to its significant contribution to the formation of the main economic indicators of the national economy, at both macro and the meso levels.