By Evelyn Pyburn
The message that is conveyed in the marketplace whenever government funded subsidies are applied to any commodity is so glaring it is hard to imagine how so many – apparently learned experts – miss it so completely. Government subsidies scream to the high heavens that a product has no market viability. That is to say it is a money loser. It does not serve the market – consumers – in a profitable way – it costs more to produce than the value it generates. It is the very essence of failure.
It is no great insight when people point to a subsidized product and predict long-term failure – “long term” because no matter for how long the period of subsidization is set, be assured it will be extended and extended, again and again.
What is worse – anything in the market that is dependent on subsidies will always remain in that position, ALWAYS. So reasoning that a subsidy is only meant to allow the commodity opportunity to become viable is a pipedream – or worse, a scheme to make some people rich at taxpayer expense.
As reprehensible as that might be, the greater loss to society is that subsidies wind up condemning what might be a very good idea to eternal failure because those who are drawn to participate in the subsidies have zero incentive to change — to improve the product, or make it market viable. Why should they? To do so means the end of subsidies that eliminate market risk. Subsidies give participants immunity to the market.
Incentives matter.
A subsidized market does not attract entrepreneurs; it attracts exploiters who are dedicated to milking the system. A product like electric vehicles, a concept which holds many positives and promises great potential, will never become economically viable as long as it is subsidized – as long as the government is a partner.
The damages to the automobile manufacturers who have lost hundreds of millions of dollars as a consequence of their schemes with the government to subsidize electric vehicles was entirely predictable. The product was a loser in the marketplace, which is why the government subsidized it; and once subsidized, it was never going to become profitable. The realities of subsidies is a basic principle of economics, which any company executive should understand as clearly as the ‘law of supply and demand’. The CEOs were either wholly unqualified to be leading the companies, or not the innocents they would want us to believe. They thought they would get away with bilking the taxpayers.
Subsidies discourage entrepreneurs because of the corruption involved. There are plenty of incidents in which innovators – those who dare to upset the apple cart – have been undermined by the political alliances that subsidies create. Successful innovators would upset their cozy alliance — the easy “profits” to the businesses and the power to politicians.
Taxpayer funded subsidies create special interest groups who give politicians power. The greatest example of that which we are currently enduring is the quashing of individual liberties being instigated in the name of global warming. While people who object to the laws, which are invading all aspects of our lives, are being ridiculed as “global warming deniers,” the truth is most are not denying the possibility that the planet is warming (Earth is going to eventually be burnt to a cinder, so why wouldn’t it gradually be warming?) — they are objecting to using that possibility as a ploy for eliminating our freedom. If we are to deal with such threats we will need the freedom to do so. What? We are supposed to count on government to save us from the perils that loom?
Subsidies do serve a purpose for some people, hence, fake entrepreneurs and politicians often work in tandem to make the efforts of innovators as difficult as possible, if not downright illegal. Innovators cannot be allowed to succeed because it would upset the cozy alliances.
Look around the community at those things in which government is involved, real business people don’t go near them – at least not until the government has made such a mess of things that it opens the door for opportunity. Competition (like FedEx or UPS) only challenged the US Postal Service once technology and market demand for greater efficiencies opened the door to a market that the government was managing incredibly poorly.
One can only speculate, but the many years of city government promising to enter the Billings convention services market, surely must have impacted one company’s decision about the risk factors involved in investing to remodel their convention center, and probably dissuaded others from entering the business. No one wants to have to compete against a government that can forcibly acquire capital from hapless taxpayers, no matter how poorly they manage things.
Those who believe that “clean energy” alternatives such as wind and solar hold promise for the future should take note. These alternatives only exist because of subsidies. In fact, they are so wholly subsidized by the government that there have been reports that some “investment” costs were fully paid for by subsidies before the first day of energy generation. Such is not a market environment that holds promise for the future of such technologies. The number one priority of those on the forefront of these enterprises is to continue the subsidies. A product that can economically sustain itself will never happen as long as this is the situation.
The great irony is these energy alternatives do not reduce greenhouse gas emissions as we consumers are constantly told they do. The case is made that they do, by not including all the costs involved in getting them to market. The amount of the subsidies that the government gives to the generating facility is an indication of how much of their cost – hence their emissions — is not being accurately calculated.
So, when was the last time a news announcement about a new wind or solar facility included the amount the project is being subsidized? Why would such important information for taxpayers be left out?
All that deception is a tragedy for society because the concepts of wind and solar energy are great – especially for areas in the world where electrical grids like that in the US do not exist. To develop an energy technology that is truly economically viable would serve the world unlike anything ever devised to sustain humanity. But one has to suspect that would-be innovators are not focused on them because subsidies have destroyed all incentives to do so.
Subsidies sustain failure by destroying incentives.
