Subsidies and Waste

Wherever there are subsidies, there is waste. This is an economic tautology that many have a hard time comprehending, probably because most people have one or more favourite causes that depend on subsidies. Many people, including myself, derive an income from subsidies, making it tempting to come up with excuses for their existence. However, even people who benefit from subsidies would be better off without them. Not immediately, but quite soon, because waste is a burden on everybody in the end.

The reason we can equate subsidies with waste is that subsidies make things happen that would not otherwise have happened. Something is produced in a bigger or smaller quantity than what is demanded, which is the very definition of waste. If too much is produced, there is waste of resources. If too little is produced, there's waste in terms of wants. No amount of arguing can get away from this fact. An industry that's subsidized is a wasteful industry. Subsidized individuals are misdirected individuals. Furthermore, there's no future outcome that will make up for this waste. What's wasted today isn't magically recovered in the future. At best, we'll end up where we would have ended up anyway, only later and with fewer resources.

There's no point in trying to argue against subsidies based on this tautology. People will still believe that they work. However, we can make the private observation that our economy is at this point highly subsidized. There's hardly a thing or a person that isn't subsidized in some way. We can therefore conclude that we live in an era of immense waste. Many things may appear to run at a profit, but this is superficial appearance. Debt is piling up while savings in the form of resources and capital equipment are squandered on ill directed enterprises. Pension funds are as a consequence woefully underfunded. There're not enough savings to cover future commitments. The capital equipment and resources required to support future pensioners don't exist, and no amount of money printing and stimulus checks can alter this fact.

Unsustainable sustainability 

By © Hans Hillewaert, CC BY-SA 4.0, Link