The true cost of subvention

Constantin Gurdgiev tackles the annual subvention over at True Economics. you have to skip past the first section on yesterdays UK budget first. Apparently, the productive regions of the country contribute an average 2,000 per person to the subsidy receiving regions. Constantin argues these subsidies are bad economics


Put in real terms, this means that few productive parts of the country are subsidising numerous less productive ones. Is this a good thing? Well, no.

First, such subsidies distort returns to personal capital (physical and human) of those who receive them. In other words, people living in the parts of the country that are the ‘gateways to excellence’ are ripping off their productive compatriots while being deluded into believing their work actually adds value. It does not, at least not in a competitive way.

Second, the transfers diminish the productive capacity of those who live where real jobs are located.

Third, the subsidies continue to perpetuate the already extensive destruction of the country-side as extensive means of production are being subsidised over intensive economy.

In 2004 the subsidy amounted to €3bn, and there was no bias towards the productive regions in terms of capital spending.


Yes, folks, the reason we are forced to accept gang crime in Limerick and parts of Dublin, roads gridlock in the capital, lack of proper public transport, poor broadband services, horrific quality of landline phone services, overstretched schools and universities infrastructure in Dublin and the rest of the mess we call urban living in the Capital City is because we want ‘equity’ and ‘equality’ between those parts of the country that work and those that collect subsidies. Regional policy indeed…

Nope, he wan’t talking about that subvention..

No bio, some books worth reading – The Rational Optimist: How Prosperity Evolves – Matt Ridley .

Crisis Economics: A Crash Course in the Future of Finance -Nouriel Roubini, Stephen Mihm