Editing Subsidy (section)

==Perverse subsidies==

===Definitions===
Although subsidies can be important, many are "[[perverse incentive|perverse]]", in the sense of having adverse [[unintended consequences]]. To be "perverse", subsidies must exert effects that are demonstrably and significantly adverse both economically and environmentally.<ref name="cheapMyers and Kent 2001" /> A subsidy rarely, if ever, starts perverse, but over time a legitimate efficacious subsidy can become perverse or illegitimate if it is not withdrawn after meeting its goal or as political goals change. Perverse subsidies are now so widespread that as of 2007 they amounted $2 trillion per year in the six most subsidised sectors alone (agriculture, fossil fuels, road transportation, water, fisheries and forestry).<ref name="Myers 2007">{{cite book|last=Myers|first=N.|title=An introduction to ecological economics|year=1997|publisher=St. Lucie Press|location=Boca Raton, Fla.|isbn=978-1884015724|chapter-url=http://www.eoearth.org/view/article/155197/|editor=Costanza, R.|editor2=Norgaard, R.|editor3=Daly, H.|editor4=Goodland, R.|editor5=Cumberland, J.|access-date=2013-08-03|chapter=Perverse subsidies|url-access=registration|url=https://archive.org/details/introductiontoec0000unse_q2b0}}</ref>

===Effects===
The detrimental effects of perverse subsidies are diverse in nature and reach. Case-studies from differing sectors are highlighted below but can be summarised as follows.

Directly, they are expensive to governments by directing resources away from other legitimate should priorities (such as environmental conservation, education, health, or infrastructure),<ref name=NakedCapitalism-2014-06-03>[http://www.nakedcapitalism.com/2014/06/good-economic-development-deal.html Is That a Good State/Local Economic Development Deal? A Checklist] {{Webarchive|url=https://web.archive.org/web/20140605031139/http://www.nakedcapitalism.com/2014/06/good-economic-development-deal.html |date=2014-06-05 }} (2014-06-03), ''[[Naked Capitalism]]''</ref><ref name="Myers 2008" /><ref name="James 1999">{{cite journal|last=James|first=A.N.|author2=Gaston, K.J. |author3=Balmford, A. |title=Balancing the Earth's accounts|journal=Nature|year=1999|volume=401|issue=6751|pages=323–324|doi=10.1038/43774|pmid=16862091|bibcode=1999Natur.401..323J|s2cid=4410695}}</ref><ref name="Robin et al 2003">{{cite book|last=Robin|first=S.|title=Perverse Subsidies and the Implications for Biodiversity: A review of recent findings and the status of policy reforms|year=2003|publisher=Vth World Parks Congress: Sustainable Finance Stream.|location=Durban, South Africa|url=http://conservationfinance.org/guide/WPC/WPC_documents/Overview_PanB_Wolcott_v2.pdf|archive-url=https://web.archive.org/web/20131203173214/http://conservationfinance.org/guide/WPC/WPC_documents/Overview_PanB_Wolcott_v2.pdf|url-status=dead|archive-date=2013-12-03|author2=Wolcott, R.|author3=Quintela, C.E.}}</ref> ultimately reducing the fiscal health of the government.<ref name="McDonald 2000">{{cite journal|last=McDonald|first=B.D.|author2=Decker, J.W. |author3=Johnson, B.A.M. |title=You don't always get what you want: The effect of financial incentives on state fiscal health|journal=Public Administration Review|year=2020|volume=81|issue=3|pages=365–374|doi=10.1111/puar.13163|doi-access=}}</ref>

Indirectly, they cause [[environmental degradation]] ([[exploitation of natural resources|exploitation of resources]], pollution, loss of landscape, misuse and overuse of supplies) which, as well as its fundamental damage, acts as a further brake on economies; tend to benefit the few at the expense of the many, and the rich at the expense of the poor; lead to further polarization of development between the Northern and Southern hemispheres; lower global market prices; and undermine investment decisions reducing the pressure on businesses to become more efficient.<ref name="Myers 1998a" /><ref name="Robin et al 2003" /><ref name="van beers and van den bergh 2009">{{cite journal
 | last1 = van Beers
 | first1 = Cees
 | last2 = van den Bergh
 | first2 = Jeroen CJM
 | title = Environmental Harm of Hidden Subsidies: Global Warming and Acidification
 | journal = Ambio: A Journal of the Human Environment
 | year = 2009
 | volume = 38
 | issue = 6
 | pages = 339–341
 | doi = 10.1579/08-A-616.1
 | pmid = 19860158
 | url = http://dare.ubvu.vu.nl/bitstream/1871/10427/1/f18.pdf
 | access-date = 2019-09-18
 | archive-date = 2011-09-03
 | archive-url = https://web.archive.org/web/20110903123138/http://dare.ubvu.vu.nl/bitstream/1871/10427/1/f18.pdf
 | url-status = live
 }}</ref> Over time the latter effect means support becomes enshrined in human behaviour and business decisions to the point where people become reliant on, even addicted to, subsidies, "locking" them into society.<ref name="van beers and de moor 1998">{{cite journal|last=van Beers|first=C.|author2=de Moor, A.|title=Perverse subsidies, international trade and the environment|journal=Planejamento e Políticas Públicas|year=1998|volume=18|pages=49–69|url=http://www.en.ipea.gov.br/ppp/index.php/PPP/article/viewFile/98/101|access-date=2013-09-08|archive-date=2016-03-04|archive-url=https://web.archive.org/web/20160304213322/http://www.en.ipea.gov.br/ppp/index.php/PPP/article/viewFile/98/101|url-status=dead}}</ref>

Consumer attitudes do not change and become out-of-date, off-target and inefficient;<ref name="Myers 1998a" /> furthermore, over time people feel a sense of historical right to them.<ref name="van beers and van den bergh 2009" />

===Implementation===
Perverse subsidies are not tackled as robustly as they should be. Principally, this is because they become "locked" into society, causing bureaucratic roadblocks and institutional inertia.<ref name="Myers 1996">{{cite journal|last=Myers|first=N.|title=Perverse Subsidies|journal=Sixth Ordinary Meeting of the Conference of the Parties to the Convention on Biological Diversity|year=1996|pages=268–278|url=http://www.cbd.int/doc/case-studies/inc/cs-inc-iucn-05-en.pdf|access-date=2013-09-08|archive-date=2012-05-12|archive-url=https://web.archive.org/web/20120512232032/https://www.cbd.int/doc/case-studies/inc/cs-inc-iucn-05-en.pdf|url-status=live}}</ref><ref name="Myers 1998b">{{cite journal|last=Myers|first=N.|title=Consumption and sustainable development: the role of perverse subsidies|journal=Background Paper for the 1998 Human Development Report|year=1998|pages=1–31|url=http://hdr.undp.org/en/reports/global/hdr1998/papers/MYERS-Norman_Subsidies.pdf|access-date=2013-09-08|archive-date=2019-12-09|archive-url=https://web.archive.org/web/20191209172517/http://hdr.undp.org/en/reports/global/hdr1998/papers/MYERS-Norman_Subsidies.pdf|url-status=live}}</ref> When cuts are suggested many argue (most fervently by those "entitled", special interest groups and [[Lobbying|political lobbyists]]) that it will disrupt and harm the lives of people who receive them, distort domestic [[Competition (companies)|competitiveness]] curbing trade opportunities, and increase unemployment.<ref name="van beers and van den bergh 2009" /><ref name="Bellman et al 2012">{{cite journal|last=Bellmann|first=C.|author2=Hepburn, J.|author3=Sugathan, M.|author4=Monkelbaan, J.|title=Tackling Perverse Subsidies in Agriculture, Fisheries and Energy|journal=International Centre for Trade and Sustainable Development: Information Note June 2012.|year=2012|url=http://ictsd.org/downloads/2012/06/tackling-perverse-subsidies-in-agriculture-fisheries-and-energy.pdf|access-date=2013-09-08|archive-date=2020-08-08|archive-url=https://web.archive.org/web/20200808030440/http://www.ictsd.org/downloads/2012/06/tackling-perverse-subsidies-in-agriculture-fisheries-and-energy.pdf|url-status=dead}}</ref> Individual governments recognise this as a "[[prisoner's dilemma]]" – insofar as that even if they wanted to adopt subsidy reform, by acting unilaterally they fear only negative effects will ensue if others do not follow.<ref name="van beers and de moor 1998" /> Furthermore, cutting subsidies, however perverse they may be, is considered a vote-losing policy.<ref name="Myers 1996" />

Reform of perverse subsidies is at a propitious time. The current economic conditions mean governments are forced into fiscal constraints and are looking for ways to reduce activist roles in their economies.<ref name="Myers 1998b" /> There are two main reform paths: unilateral and multilateral. Unilateral agreements (one country) are less likely to be undertaken for the reasons outlined above, although New Zealand,<ref name="Myers and Kent 2001 box 3.2">{{cite book|last=Myers|first=N.|title=Perverse subsidies: how tax dollars can undercut the environment and the economy|year=2001|pages=[https://archive.org/details/perversesubsidie00myer/page/ box 3.2]|publisher=Island Press|location=Washington, DC|isbn=978-1-55963-835-7|author2=Kent, J.|url=https://archive.org/details/perversesubsidie00myer/page/}}</ref> Russia, Bangladesh and others represent successful examples.<ref name="Myers 1998a" /> Multilateral actions by several countries are more likely to succeed as this reduces competitiveness concerns, but are more complex to implement requiring greater international collaboration through a body such as the [[WTO]].<ref name="Robin et al 2003" /> Irrespective of the path, the aim of policymakers should be to: create alternative policies that target the same issue as the original subsidies but better; develop subsidy removal strategies allowing market-discipline to return; introduce "sunset" provisions that require remaining subsidies to be re-justified periodically; and make perverse subsidies more transparent to taxpayers to alleviate the "vote-loser" concern.<ref name="Myers 1998a" />

===Examples===

====Agricultural subsidies====
Support for agriculture dates back to the 19th century. It was developed extensively in the EU and US across the two World Wars and the Great Depression to protect domestic food production, but remains important across the world today.<ref name="Robin et al 2003" /><ref name="Myers 1996" /> In 2005, US farmers received $14 billion and EU farmers $47 billion in [[agricultural subsidies]].<ref name="Kolb 2008"/> Today, agricultural subsidies are defended on the grounds of helping farmers to maintain their livelihoods. The majority of payments are based on outputs and inputs and thus favour the larger producing agribusinesses over the small-scale farmers.<ref name="cheapMyers and Kent 2001" /><ref name="Steenblik 1998">{{cite web|last=Steenblik|first=R.|title=Previous Multilateral Efforts to Discipline Subsidies to Natural Resource Based Industries|url=http://www.oecd.org/greengrowth/fisheries/1918086.pdf|work=Workshop on the Impact of Government Financial Transfers on Fisheries Management, Resource Sustainability, and International Trade|access-date=2013-08-05|year=1998|archive-date=2012-10-22|archive-url=https://web.archive.org/web/20121022174905/http://www.oecd.org/greengrowth/fisheries/1918086.pdf|url-status=live}}</ref> In the US nearly 30% of payments go to the top 2% of farmers.<ref name="Robin et al 2003" /><ref>{{Cite web |url=https://www.heritage.org/agriculture/report/how-farm-subsidies-harm-taxpayers-consumers-and-farmers-too |title=How Farm Subsidies Harm Taxpayers, Consumers, and Farmers, Too |access-date=2018-04-23 |archive-date=2018-04-23 |archive-url=https://web.archive.org/web/20180423232755/https://www.heritage.org/agriculture/report/how-farm-subsidies-harm-taxpayers-consumers-and-farmers-too |url-status=unfit }}</ref><ref>{{Cite web |url=https://fairfarmsnow.org/who-benefits-from-farm-subsidies/ |title=Who Benefits from Farm Subsidies? |access-date=2018-04-23 |archive-date=2018-04-23 |archive-url=https://web.archive.org/web/20180423232528/https://fairfarmsnow.org/who-benefits-from-farm-subsidies/ |url-status=live }}</ref>

By subsidising inputs and outputs through such schemes as "yield based subsidisation", farmers are encouraged to over-produce using intensive methods, including using more fertilizers and pesticides; grow high-yielding [[monocultures]]; reduce [[crop rotation]]; shorten fallow periods; and promote exploitative land use change from forests, rainforests and wetlands to agricultural land.<ref name="Robin et al 2003" /> These all lead to severe environmental degradation, including adverse effects on soil quality and productivity including [[erosion]], nutrient supply and salinity which in turn affects carbon storage and cycling, water retention and [[drought tolerance|drought resistance]]; water quality including pollution, nutrient deposition and [[eutrophication]] of waterways, and lowering of water tables; diversity of flora and fauna including indigenous species both directly and indirectly through the destruction of habitats, resulting in a genetic wipe-out.<ref name="cheapMyers and Kent 2001" /><ref name="Robin et al 2003" /><ref name="Portugal 2002">{{cite journal|last=Portugal|first=L.|title=OECD Work on Defining and Measuring Subsidies in Agriculture|journal=The OECD Workshop on Environmentally Harmful Subsidies, Paris, 7–8 November 2002|year=2002}}</ref><ref name="OECD 2003">{{cite web|last=OECD|title=Perverse incentives in biodiversity loss|url=http://www.oecd.org/env/resources/19819811.pdf|work=Working Party on Global and Structural Policies Working Group on Economic Aspects of Biodiversity|access-date=2013-08-05|year=2003|archive-date=2013-12-03|archive-url=https://web.archive.org/web/20131203022538/http://www.oecd.org/env/resources/19819811.pdf|url-status=live}}</ref>

Cotton growers in the US reportedly receive half their income from the government under the [[Farm Bill of 2002]]. The subsidy payments stimulated [[overproduction]] and resulted in a record cotton harvest in 2002, much of which had to be sold at very reduced prices in the global market.<ref name="Kolb 2008" /> For foreign producers, the depressed cotton price lowered their prices far below the break-even price. In fact, African farmers received 35 to 40 cents per pound for cotton, while US cotton growers, backed by government agricultural payments, received 75 cents per pound. Developing countries and trade organizations argue that poorer countries should be able to export their principal commodities to survive, but protectionist laws and payments in the United States and Europe prevent these countries from engaging in international trade opportunities.

====Fisheries====
Today, much of the world's major fisheries are [[overexploited]]; in 2002, the [[World Wildlife Fund|WWF]] estimate this at approximately 75%. Fishing subsidies include "direct assistant to fishers; loan support programs; tax preferences and insurance support; capital and infrastructure programs; marketing and price support programs; and fisheries management, research, and conservation programs."<ref name="Robin et al 2003 p4">{{cite book|last=Robin|first=S.|title=Perverse Subsidies and the Implications for Biodiversity: A review of recent findings and the status of policy reforms |year=2003 |page=4 |publisher=Vth World Parks Congress: Sustainable Finance Stream |location=Durban, South Africa |url=http://conservationfinance.org/guide/WPC/WPC_documents/Overview_PanB_Wolcott_v2.pdf |archive-url=https://web.archive.org/web/20131203173214/http://conservationfinance.org/guide/WPC/WPC_documents/Overview_PanB_Wolcott_v2.pdf|url-status=dead|archive-date=2013-12-03|author2=Wolcott, R.|author3=Quintela, C.E.}}</ref> They promote the expansion of [[fishing fleet]]s, the supply of larger and longer nets, larger yields and indiscriminate catch, as well as mitigating risks which encourages further investment into large-scale operations to the disfavour of the already struggling small-scale industry.<ref name="Robin et al 2003" /><ref name="Porter 1998">{{cite web|last=Porter|first=G.|title=Natural Resource Subsidies, Trade and Environment: The Cases of Forest and Fisheries|url=http://www.ciel.org/Publications/NaturalResourceSubsidies.pdf|work=Center for Environmental Law|access-date=2013-08-05|year=1998|archive-date=2012-09-15|archive-url=https://web.archive.org/web/20120915083324/http://www.ciel.org/Publications/NaturalResourceSubsidies.pdf|url-status=live}}</ref> Collectively, these result in the continued overcapitalization and overfishing of marine fisheries.

There are four categories of [[fisheries subsidy|fisheries subsidies]]. First are direct financial transfers, second are indirect financial transfers and services. Third, certain forms of intervention and fourth, not intervening. The first category regards direct payments from the government received by the fisheries industry. These typically affect profits of the industry in the short term and can be negative or positive. Category two pertains to government intervention, not involving those under the first category. These subsidies also affect the profits in the short term but typically are not negative. Category three includes intervention that results in a negative short-term economic impact, but economic benefits in the long term. These benefits are usually more general societal benefits such as the environment. The final category pertains to inaction by the government, allowing producers to impose certain production costs on others. These subsidies tend to lead to positive benefits in the short term but negative in the long term.<ref>{{cite web|title=Report of the Expert Consultation on Identifying, Assessing and Reporting on Subsidies in the Fishing Industry - Rome, 3-6 December 2002|url=http://www.fao.org/docrep/005/y4446e/y4446e0l.htm|website=Food and Agriculture Organization of the United Nations|publisher=Food and Agriculture Organization|access-date=16 March 2018|archive-date=16 March 2018|archive-url=https://web.archive.org/web/20180316214025/http://www.fao.org/docrep/005/y4446e/y4446e0l.htm|url-status=live}}</ref>

====Manufacturing subsidies====
A survey of manufacturing in Britain found government subsidies had had various unintended dysfunctional consequences. The subsidies had usually been selective or discriminatory – benefiting some companies at the expense of others. Government money in the form of grants and awards of production and R&D contracts had gone to advanced and viable firms as well as old uneconomic enterprises. However, the main recipients had been larger, established companies – while most of the firms pioneering radical technical-product developments with long-term economic growth potential had been new small enterprises. 
The study concluded that instead of providing subsidies, governments wanting to benefit industrial-technological development and performance should lower standard rates of business taxation, raise tax allowances for investments in new plant, equipment and products, and remove obstacles to market competition and customer choice.<ref>''Manufacturing in Britain: A Survey of Factors Affecting Growth and Performance'', ISR/Google Books, 2019, pages 37-38. ISBN 9780906321614</ref>

====Others====
The US National Football League's ([[NFL]]) profits have topped records at $11 billion, the highest of all sports. The NFL had tax-exempt status until voluntarily relinquishing it in 2015, and new stadiums have been built with public subsidies.<ref>Clegg, Jonathan (28 April 2015).  [https://www.wsj.com/articles/nfl-to-end-tax-exempt-status-1430241845?mod=e2tw "NFL to End Tax-Exempt Status."] {{Webarchive|url=https://web.archive.org/web/20171112204558/https://www.wsj.com/articles/nfl-to-end-tax-exempt-status-1430241845?mod=e2tw |date=2017-11-12 }}  ''[[The Wall Street Journal]]''.  Retrieved 17 December 2019.</ref><ref name="Cohen 2008">{{cite web|last=Cohen|first=R.|title=Playing by the NFL's Tax Exempt Rulesh|url=http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=3056:playing-by-the-nfls-tax-exempt-rules&catid=149:rick-cohen&Itemid=117|publisher=NonProfit Quarterly|access-date=2013-04-15|year=2008|archive-date=2013-08-20|archive-url=https://web.archive.org/web/20130820002728/http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=3056:playing-by-the-nfls-tax-exempt-rules&catid=149:rick-cohen&Itemid=117|url-status=live}}</ref>

The [[Commitment to Development Index]] (CDI), published by the [[Center for Global Development]], measures the effect that subsidies and trade barriers actually have on the undeveloped world. It uses trade, along with six other components such as aid or investment, to rank and evaluate developed countries on policies that affect the undeveloped world. It finds that the richest countries spend $106 billion per year subsidizing their own farmers – almost exactly as much as they spend on foreign aid.<ref name="Fowler and fokker 2004">{{cite book|last=Fowler|first=P.|title=A Sweeter Future? The potential for EU sugar reform to contribute to poverty reduction in Southern Africa|year=2004|publisher=Oxfam International|location=Oxford|isbn=9781848141940|url=http://policy-practice.oxfam.org.uk/publications/a-sweeter-future-the-potential-for-eu-sugar-reform-to-contribute-to-poverty-red-114124|author2=Fokker, R.|access-date=2013-09-08|archive-date=2014-02-09|archive-url=https://web.archive.org/web/20140209142708/http://policy-practice.oxfam.org.uk/publications/a-sweeter-future-the-potential-for-eu-sugar-reform-to-contribute-to-poverty-red-114124|url-status=live}}</ref>