Well-intentioned – but deadly: Why one should actually reject subsidy programs

The practiced planned economy leads to distortions, injustices, and consequential damages. It is no coincidence that all countries applying this economic system fail.

Subsidy programs are nothing but nicely packaged (yet dangerous) government interventions in healthy markets. Taxes are taken from the public to be redistributed to the same public for arbitrary purchases. At first glance, people are happy as bargain hunters. But: Such a planned economy generates an artificially inflated demand in the short term. This, in turn, attracts companies like light attracts moths. Far too many providers rush into a massively inflated market – and as soon as the magic is over, many of them implode. Often even those who have actually invested the most in quality.

The demand, which dwindles over months or years after the end of subsidy programs, leads to unaffordable overcapacities and even bankruptcies. With immense damages for the economy and the workers who have become redundant.

Germany is a case in point. The solar subsidy was one such example. And now the recently ended subsidy for home charging stations as well. Good, reputable providers have to file for bankruptcy. They did everything correctly and were important for the sustainable development of the industry. But the planned economy first overheated everything and then left behind only scorched earth. That is why subsidy programs should be rejected in healthy economies.

What does this mean?

Generous subsidy programs artificially inflate or even create markets. When the subsidies run out and dramatically rising costs (often deadly in the construction industry) and interest rates are added, such artificially supported markets like that of private charging infrastructure can literally collapse.