Q.
Give some bad examples of subsidies which had adversely affected the economy.
A.
Agricultural subsidies
Support for agriculture dates back to the 19th century. It was developed extensively in the EU and USA across the two World Wars and the Great Depression to protect domestic food production, but remains important across the world today.[15][18] In 2005, US farmers received $14 billion and EU farmers $47 billion in agricultural subsidies.[10] 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.[1][22] In the USA nearly 30% of payments go to the top 2% of farmers.[15]
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.[15] 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 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.[1][15][23][24]
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.[10] 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 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."[25] They promote the expansion of fishing fleets, 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.[15][26] Collectively, these result in the continued overcapitalization and overfishing of marine fisheries.
Others
The National Football League's (NFL) profits have topped records at $11 billion, the highest of all sports. Attention is beginning to look at the NFL's tax-exemption status[27] and all the stadiums built through tax-free borrowing by the cities, resulting from subsidies out of the pockets of every American taxpayer.[28]
The Commitment to Development Index, 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.[29]
Ref:
Wikipedia search "subsidy"
http://en.m.wikipedia.org/wiki/Subsidy