When the government intervenes in what is supposed to be a capitalist free market, an artificial bubble is often created. This leads to one of two outcomes. Either the government continues to pump money into the market to keep the bubble fed, or the bubble bursts and brings collapse to that market and can even lead to a broader recession. Therefore, in principle, I oppose government subsidies with very few exceptions.
Of course, my stance, which some might consider libertarian, will raise objections. One such objection is that withholding all subsidies can also create market volatility. There are, for instance, certain private sectors of extreme national interest value which, if allowed to proceed at the whims of the market, could flounder and create adverse problems to the safety of society at large. There are also those who believe a truly capitalist nation would be a heartless nation. Those who believe this assert that subsidies provide fairness in what would otherwise be a cruel world.
The first objection requires an admission on my part that we do not live in a black and white world. Nor can we ignore present realities. I would concede that if all government subsidies were to end at this moment, the economy could collapse. I would also acknowledge that in an intricate and enmeshed global economy such as we now have, allowing any portion of the market to falter or collapse could have disastrous and unforeseen ends. I also recognize that there are specific markets, such as energy, defense, and infrastructure, which provide and sustain the basic needs of society. These sectors may need subsidies to be maintained.
For the reasons listed in the previous paragraph, I would say that while most subsidies remain against my principles, I would not dismiss out-of-hand all official intrusions into the market without weighing each case distinctly. However, I would still like to see a government which confines itself to its basic duties. While conceding the reality of the situation, I still believe the government should not avail itself of every excuse to manage the economy.
2 thoughts on “On Government Subsidies”