Edited by Inge Govaere, Reinhard Quick and Marco Bronckers
Chapter 26: From Trade to Tutelage: State Aid and Public Choice in the European Union
William Bishop* 26.1 GENESIS European state aid control is an odd constitutional entity. Such control is not found in other economic federations. For example in the United States, Canada or Australia there is no control of the equivalent of state aid. NAFTA too knows nothing of state aids, or at least has implemented nothing. In these economic unions, state aid is commonly practiced, is ubiquitous even, yet nobody much worries about it. Every now and then the state of Washington, say, pays a lot of money to, say, Boeing not to move its manufacturing facilities away. The state of Alabama tries to attract a chemical company to locate even more plant in Mobile Bay. And Ontario and New South Wales offer similar inducements. It happens all the time. It is also true that public discussion does sometimes come to the conclusion that these subsidies are ill judged. The various states and provinces reach this conclusion without the wise of any outside agencies – such as their own federal governments or European Commission – standing in an examination over them. The microeconomics and industrial economics now standard antitrust analysis is of little help in understanding state aid. But one branch of economics that does help – the economics of politics and public decisionmaking, called ‘public choice’. In particular there are three useful concepts from that branch of economics: the self-enforcing constitution, side payments and blame-shifting (or ‘shift of responsibility’). These three concepts * I have beneﬁtted from the guidance of Jacques Bourgeois, Leigh Hancher,...
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