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The question asked in this paper is: which subsidies are detrimental to
society's overall and long-term interests? Subsidies represent 3.8% of a global
economy of $26 trillion and therefore play a prime role in the functioning of the global
economy. They can be detrimental, i.e. 'perverse,' to society in the sense that they
contribute to the destruction of the environment and the over-exploitation of natural
resources. For example, agricultural subsidies can lead to over-loading of croplands
and pollution from synthetic fertilisers and pesticides. The main problems associated
with subsidies are that they are very expensive for governments and that they cause
inefficiencies in production or the mis-use and over-use of resources. The case of
subsidies for marine fisheries is studied in detail. All major marine fisheries are
considered to be over-exploited and while world-wide harvest has increased almost
fivefold since 1950, the catch has been declining since 1989. Subsidies, aimed at
preserving the fishermen's jobs, aggravate the situation by allowing the fishing industry
to continue over-exploiting the fisheries in spite of the declining annual catch. As a
result, there is now an excessive extractive capacity in the fishing industry. Several
policy responses are proposed, such as using the subsidies to retrain fishermen who
are put out of work through reduced catches—whether reduced through declining
stocks or through policy shifts. Another proposal is for governments to charge foreign
fishermen for the right to catch off their shores. Finally, the solution proposed is that of
a limited number of tradeable fishing rights to individual fishermen. |
