Subsidy

1730 WordsFeb 1, 20147 Pages
Background. What this paper endeavours to illustrate is that government funding is sometimes necessary for the sustainable functioning of the economy and society from a holistic perspective. Firstly, let us define the term “subsidy”, and how this fits in an economic context. Oxford Dictionary defines “subsidy” as follows: “a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low” (OED Add. Ser. Vol. 3, 1997). Subsidising industry is anathema to the concept of free trade as the very foundation of free trade, as we know, is built on the cornerstone of “laissez-faire” capitalism and a limited role for government inasmuch as the market is out of the sphere of…show more content…
This approach will provide for us a rounded view of how one symptom of a potential short-fall in the market may lead to the development of more symptoms and impact the economy in a more noticeable way. If we loosely adopt the progression as depicted in the “vicious cycle” diagram on the left, and begin from the initial action of the closure of SPC, there is an immediate impact on the market by way of equity (i.e., Coca-Cola Amatil’s share-holders are affected), companies relying on SPC will find it difficult to adapt to the new business conditions as they will now have to adjust for the loss of a significant client, strain will also be placed on competitors as they may need to facilitate for greater supply in order to satisfy the growing demand (thus placing unprecedented pressure on the business and potentially increasing their over-heads and capital outlay). Furthermore, certain communities and townships may have flourished due to the inception or establishment of an industry or business (in this context, the Shepparton, Victoria community where the canning facility is based) may now experience difficulty and major adjustments that will effectively impact other areas of operations in the market. It’s almost impossible to quantify the level of impact on the market without an actuarial investigation, but if we can assume that the local currency is affected, this may greatly affect other businesses that rely on imports. When the purpose of business is to make
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