How Florida’s Disney-Loving Corporate Welfare Helped Crush Real Market Freedom

Authored by Ryan McMaken via The Mises Institute,

Florida’s government is poised to revoke the Disney corporation’s longstanding cronyist, anti-competitive special favors that the state granted to the corporation nearly five decades ago. As of Thursday afternoon, both the House and the Senate in Florida have voted to end the mega-corp’s special district which has long enabled Disney to engage in activities prohibited to other private groups and individuals in the state. The governor is expected to sign the legislation.

The impending change in status comes after senior Disney representatives repeatedly criticized the GOP in Florida—currently the ruling party in the state—for legislation that had nothing to do with Disney’s ability to do business in the state. Perhaps not surprisingly, this caused numerous GOP officials to question why Disney was receiving special privileges denied even to Disney’s direct competitors. In the past, Disney would normally be shielded from dangers to its special status, as Disney has famously showered politicians in the state with gifts and campaign cash and other types of special favors that normal people would identify as bribes. Many of the same people who are now voting to repeal Disney’s special status have accepted such “gifts” in the past. But for whatever reason, the political landscape has changed enough in recent years that it appears to many policymakers that it is now more politically rewarding to punish Disney rather than cater to its whims. The effort to strike back at Disney was likely also fueled by national politics and the fact that Disney has long been a platform for leftwing politics through its media outlets like ABC and ESPN.

The situation has led to some strange political rhetoric and bedfellows. The GOP is now being accused of being “anti-business” while dissenting Democrats appear to have suddenly become laissez-faire capitalists, pontificating on the virtues of low taxes and leaving corporations alone to manage their own affairs.

But does revoking Disney’s special status really constitute an attack on markets or on private property? That depends on how one looks at it. Let’s first look at what privileges Disney enjoys in Florida. The special district, called Reedy Creek, was established in 1967, and allows Disney corporation to function with no local government oversight on its San Francisco-sized property outside Orlando. The special status means Disney can issue tax exempt bonds and build new development without having to deal with any local government obstacles to development such as zoning laws.

Supporters of the global conglomerate often describe this situation as some sort of favor to the taxpayers. For example, CNBC frames the special district as an arrangement to “established by the Florida legislature so Disney could develop the infrastructure for Walt Disney World at no cost to Florida taxpayers.” In reality, of course, this infrastructure exists—and only exists—to funnel paying customers into Disney’s theme parks. It would be absurd to expect taxpayers to pay for this sort of development under any circumstances, and this could be ensured without a special district like Reedy Creek.

But perhaps the most important aspect of the special district is that none of Disney’s competitors enjoy a similar arrangement. At least one GOP legislator has noted this in defending the new bill, pointing out that Universal, Seaworld, and Legoland have not been granted their own special districts. And these are just the existing competitors who could muster up the capital necessary to compete with Disney on an uneven playing field designed to favor Disney. It’s impossible to know how many other entertainment venues and private owners might have also been able to compete in Orlando had Disney not sucked all the air out of the local market with its cronyist deal.

Consequently, Universal has operated at a disadvantage for its entire existence in Orlando. Unlike Disney, Universal must deal with local ordinances, local zoning laws, and can’t enjoy the benefits of tax-free bonds.

For example:

Reedy Creek’s control of its own zoning and building codes is the most important advantage Disney has among tourist destinations in Central Florida.

Take Universal Studios Florida, for example. Planning for USF began in the early 1980s, but it wasn’t until around 1986 that the plans for the park were officially announced. In what must have been a remarkable coincidence, Disney announced plans for their own movie-themed park in 1987.

But despite Universal having a sizable head start on Disney, Disney-MGM Studios (now Disney’s Hollywood Studios) opened first in 1989. Universal Studios Florida didn’t open its doors until 1990.

It’s possible, of course, that Disney’s plans proceeded more quickly than Universal’s due to better internal management. But it’s also quite plausible—even likely—that Disney was able to push through its development at a much faster speed that its competitors due to its special legal status.

In other words, by picking and choosing who gets a special district and who doesn’t, the legislature is in the business of picking winners and losers in the theme park business. Viewed this way, removing Disney’s special status constitutes nothing more than ending a longstanding policy of using the coercive power of the state to hurt Disney’s competitors. Disney, of course, is fine with this arrangement and would surely lobby—and likely already has lobbied—to prevent any of its competitors from enjoying similar advantages.

In other words, Disney’s special deal acts as a tax on everyone else in the form of enhancing Disney’s monopoly power and preventing consumers from realizing the benefits of competition. It’s all just the usual sort of corporate welfare scheme we’ve long seen in the form of “economic development” policies favored by governments for decades. These policies favor certain large, powerful businesses, but won’t extend the same favors to smaller businesses and competitors. Then, the corporate shills and their friends in the legislature or city council take credit for “jobs created” as if the economy would not have grown were the laws not written to favor a select few. These deals use phrases like “low taxes” and “free markets” but really have nothing to do with laissez faire or free markets. They’re about sweetheart deals for the politically well-connected.

When we understand this we see Disney’s Reedy Creek deal for what it is and has always been.

Admittedly, the whole thing makes die hard consistent free market people uncomfortable.

We hate to see taxes raised or government control enhanced over a private enterprise which Disney—for the most part—still is.

But there’s an unseen factor here as well. The unseen is how much private enterprise has been prevented, stifled, and shunted aside by writing laws to favor a single corporation.

How much would the public benefit from other competitors in the Orlando area? How much less might have consumers paid for tickets at Disney parks had Disney not been able to legislatively keep competitors out of the marketplace?

We’ll never know.