In effect, taxpayers are paying timber companies to raze public forests. Most other subsidies are, if not archaic, then grossly inefficient or ineffective. Even with multibillion-dollar tax breaks, domestic U.S. oil producers failed to keep their market share from slipping below 50 percent in the 1990s as reserves gradually dwindled. In Germany, despite massive subsidies, hard coal employment has fallen 50 percent since 1982. Meanwhile, the number of small farms the subsidies are supposed to help is dwindling steadily.
Many countries use energy and water subsidies to aid the poor.
If the subsidy were targeted only at the neediest recipients, it could give them 10 times the benefit for the same cost, or the same benefit for one-tenth the public cost. Losing a job is almost always hard on a family, and losing an employer in a small community is even worse. The sooner societies make these course corrections, though, the more gently they can do it. Some halting steps toward reform have occurred, usually in response to budget pressures. Fiscal crises in the former Eastern bloc and in many debt-hobbled developing countries have led to major cuts in energy and fertilizer subsidies in the 1990s.