This post is a response to the question “What are some current issues created by subsidies?” by @stonemasoner.
What are subsidies?
According to Britannica, a subsidy is a “direct or indirect payment economic concession, economic concession, or privilege granted by a government to private firms, households, or other governmental units in order to promote a public objective” (Britannica, 2021). Governments have historically subsidized industries such as housing, agriculture, or mining in order to maintain the status quo for the public’s interest. They help prevent industries declining in the long run. Although, subsidies may even come at a cost to the public if the government chooses to keep struggling industries alive and running. Industries that struggle but are essential to a population’s growth and happiness may be subsidized by the government.
Downsides and Current Issues Due to Subsidies
Subsidies lead to a phantom feeling of having more goods and supplies than what the industry truly possesses (Corporate Finance Institute). For example, the government might subsidize bread to keep the prices low. If the supply of bread suddenly drops, the price cannot go up to match the change in supply-demand. As a result, vendors suffer from selling their goods at incredibly lower prices than what they usually would.
The biggest downside and issue with subsidies is that they increase taxes in order to keep these industries alive (Corporate Finance Institute). The government must find funding somewhere and the place they look at is the taxpayer.
It is also incredibly difficult to measure how successful subsidy programs are (Gabriel, 2018). It is rather difficult to measure the positive effects of subsidies to show their successes. How beneficial is it? And how much can we cut back on subsidies to maintain the same level of benefit?
Sources
Encyclopædia Britannica, inc. (2021). Subsidy. Encyclopædia Britannica. Retrieved November 10, 2021, from https://www.britannica.com/topic/subsidy.
Subsidy. Corporate Finance Institute. (2021, January 31). Retrieved November 10, 2021, from https://corporatefinanceinstitute.com/resources/knowledge/economics/subsidy/.
Gabriel, B. (2021, November 5). The disadvantages of government subsidies. The Classroom | Empowering Students in Their College Journey. Retrieved November 10, 2021, from https://www.theclassroom.com/disadvantages-government-subsidies-10612.html.
Congratulations @newtonquach! You have completed the following achievement on the Hive blockchain and have been rewarded with new badge(s):
Your next target is to reach 300 upvotes.
You can view your badges on your board and compare yourself to others in the Ranking
If you no longer want to receive notifications, reply to this comment with the word
STOPSupport the HiveBuzz project. Vote for our proposal!