On corporate capture


The problem, as we all know, with having a network of subsidies for this and that is that said network gets captured by those receiving the subsidies. Even if, as is possible at least in theory, the subsidy is a good idea (for some public good for example) in practice the entire structure veers off into an orgy of rent seeking and producer troughing to the expense of all the rest of us.

As an example, consider US subsidies to cotton farmers. It's possible, in theory, that the US really should have domestic production of cotton. Just think what would happen if there were not the ability to produce t-shirts from All American sources! However, these subsidies obviously impact upon cotton farmers in other parts of the world and Brazil, for one, has taken the US to the WTO court over the impact of such sibsidies on Brazilian cotton farmers. And won the case.

So what would a rational policy be at this point? You or I would say that, well, yes, we the US signed up to the WTO and agreed to be bound by the rules so, yes, we'll stop the subsidies then. This shows how little you or I know about politics. The actual solution is subtly different:

What could be more outrageous than the hefty subsidies the U.S. government lavishes on rich American cotton farmers? How about the hefty subsidies the U.S. government is about to start lavishing on rich Brazilian cotton farmers?

That's how you do politics. If subsidising only US cotton farmers is illegal why not subsidise Brazilian cotton farmers with money from US taxpayers?

It's very difficult indeed to reach any conclusion other than that politics simply isn't a good way of dealing with the real world.