What Are Subsidies For?
Subsidies are a means for governments to promote the growth of particular industries or regions, to correct market failures, or to enhance social welfare. Billions of dollars — roughly 1% of a country’s GDP — are spent each year by governments to supplement the incomes of farmers, help unemployed workers find new jobs, fund research into new technologies, defray the costs of exploration and research in the energy industry, assist companies to invest in eco-friendly technologies, lower the cost of education and medicine to the public, and nurture nascent manufacturing industries. These subsidies usually achieve one of four objectives: economic and industrial development, research and innovation, redistribution and environmental protection. Of course, in practice, governments also hand out subsidies to curry favor with political constituents and powerful interest groups. That is one of the dangers of subsidies — that they entrench recipients who have a vested interest in perpetuating the
