Thursday, March 29, 2007

Subsidies tend to end up going to big companies

A lesson on legislating subsidies and imposing controls on any industry - those subsidies and controls tend to end up creating profits for big enterprises.

This post at Fast Company talks about how cotton subsidies meant to help small farmers ends up subsidising large agri-businesses. One commenter says
It is always the case that programs designed to help the little guy end up helping some large corporate body.

A separate story in the Washington Post called "Dairy Industry Crushed Innovator Who Bested Price-Control System" (also picked up by both Marginal Revolution and Greg Mankiw) talks about dairy programs in the US and provides a case study. One company was operating outside a pooling and price-setting system, and was able to sell milk which was cheaper than other suppliers by twenty cents. It was forced by law to stop!

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