If you ask any democrat to narrate a fairy tale, then you’ll surely be acquainted with a character named ‘Subsidy’ (odd name, but besides the point). Subsidy’s personality would be flowered with joy and enthusiasm. The democrat wouldn’t miss a beat in describing Subsidy’s friends, the poor and the most vulnerable, to whom he is most kind and generous towards. He loves giving presents; his favorite being ‘tax credits’. By giving tax credits, Subsidy supposedly helps the poor afford healthcare, education and agricultural implements. Oh no, subsidy doesn’t face any ups and downs, or have any pros and cons. He’s perfect in every way; infallible. Every move of his is met with so much adulation, that even the Kardashians would be green with envy. Forget about emulating him, he’s more Chuck Noris than the man himself is.
That’s enough Mr.Democrat. There’s a limit to how much rhetoric I can take, especially when it’s from someone who spends my money on running campaigns. As for your disney tale, it’s absolute rubbish! Every, single, word of it! Subsidy is a man’s hidden nightmare. In fact, far from looking grotesque, subsidies are designed to look good, but they eat you from behind. Hence some might even say they resemble greedy housewives, or that neighbour of yours who you are better off with.
But what are subsidies? In lay man terms, a subsidy is a grant given by the government to help certain sections of the population. For example, an agricultural subsidy would be a sum of money given either directly or indirectly by the government to farmers in order to improve their farming practices. It’s beautiful isn’t it, the idea behind it. Government helps the poor, the poor become happy, democracy functions properly, society propels ahead. But pause your idealistic fantasies for a second. There is a lot beneath the surface of what looks like a splendid policy.
Empirical evidence, as pointed out by ‘The Economist’, shows that agricultural subsidies implemented in India has only benefited around 7-10% of the poor. The other 90% is sucked up by the rich farmers, who use these tax credits to their fullest potential. And, what’s more, these tax credits enable the rich farmers to sell their products at a competitive price relative to their poorer counterparts. A policy designed to serve the poor with a lower tax burden, instead, serves them raw beef. Go figure!
“But Bassim, at least the government is ‘trying’ to help the poor; it’s the thought that counts”, would be something the odd moralist would say. And to that, let me introduce to you, fuel subsidies. Like agricultural subsidies, they intend to lower the price of fuel products. Let us not forget, these policies are meant for the poorest of the poor; the ones earning less than a dollar a day. And sure, if it is really the ‘thought’ that counts, then I’m pretty sure the government has vivid visions of beggars driving Maruthis and Toyotas in pursuit of alms. Why else would they need cheaper fuel, right?
Alright, you may take that palm off your forehead now. The government isn’t that delusional. The purpose of having such policies may not be what you think. Governments implement fuel subsidies in order to get support from the elite, the main beneficiary of these policies. Having the elite on your side is a great plus point, especially in a democratic framework. What a shame huh?
Subsidies come at a cost; a very large cost. It proves to be a big financial burden for the government to reduce taxes. Ergo they are left scrambling for other sources of revenue, and may even take the ‘political high road’ and call upon corruption. Subsidies don’t last forever either. When a government goes into a budget deficit (a common occurrence these days), it loses its ability to maintain subsidies, and the price of your favorite onions shoots up. Furthermore, since tax credits lower the price of products such as fuel, it incites the insatiable middle class to over consume. This leads to harmful environmental consequences.
The best way to deal with what’s left of subsidies is to obviously scrape them, like the last pint of curry left on your plate. But although this seems like the easy way out, it isn’t. Attempts to cut back on tax credits will unavoidably be met by protests. The government isn’t the one leading the army of proponents; it is us, the sycophants who succumb to the false promises of something that will never happen. We are the ones holding the guns to our own heads. Just imagine the money that can be saved by cutting back on subsidies. It can be used towards social schemes such as employment programs or educational endeavors. If the problem has to be solved, then it needs to be addressed from where it’s sourced, and so let us all view the bigger picture in lieu of what appeals to us at first sight.
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