The subsidy squeeze

Schemes such as HS2 cost billions of pounds while reducing UK productivity

WHY DO SO MANY economists support a free market? By the phrase they mean a market, or even an economy dominated by such markets, where the government leaves companies and industries alone, and does not try to interfere by “picking winners” and subsidising them. Two of the economists’ arguments deserve to be highlighted. The first is about the good use — the productivity — of resources. To earn a decent profit, most companies have to achieve a certain level of output to attract enough customers and to secure high enough revenue per worker. If the government decides to give money to a favoured group of companies, these companies can survive even if they produce less, and obtain lower revenue per worker, than the others. The subsidisation of a favoured group…

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The Critic (Digital) - 1 Issue, May 2024

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