Week 14 -- Response -- Difference Between Political- and Market- Enterprise

in #hive-1010932 years ago

@joshweertman posed the question "If subsidies are harmful to the free market, why are they still used by the government?"

From the Oxford dictionary, a subsidy is "a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive." Subsidies can often be harmful to the free market in the long term. However, oftentimes subsidies are used for short-term solutions to fill in the gaps in the market. The most recent example of this would be the money given to citizens impacted by the COVID-19 pandemic.

The government also heavily subsidizes farming and agriculture in several ways. Tax breaks, as well as funds distributed to farmers, are examples. Farm equipment is highly expensive, so startup costs make the industry hard to get into. Subsidies to this industry ensure that there will be continued food production, as all citizens tend to benefit from the agriculture industry. Farming subsidies are not the only examples of impacted free markets that have a higher benefit with a subsidy than without.

Another industry that has substantial benefits to society through subsidies is education. There is extremely low free-market competition in the education industry, at least through high school, as subsidies ensure that all children have the option of using this government-provided service. Educating the youth to at least some basic level has benefits that cannot quite be measured, but increase the odds of keeping an advanced society. The cost of education for children is next to nothing because the government provides these services.

It is my view that although subsidies can be quite harmful to free markets, they continue to be provided by the government for the other benefits that they provide. As long as subsidies are not used in industries that do not need them, I see no reason to forgo the use of them altogether.


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