Essay # 3

http://www.nytimes.com/learning/teachers/featured_articles/20030818monday.html

     Politicians are generous people who like to do good by subsidizing companies[i1] . The German government and the European Union spend thousands of millions of Euros a year for subventions. Subventions are provided because of economic and sociopolitical decisions from a government to influence the prices on the market or to support production and income for several industrial branches, such as the agriculture or the fishing industry. The German government also helps to put companies, such as the German federal train company Deutsche Bundesbahn into liquidation. Subventions are given directly to the beneficiary or companies, such as the mining industry or energy provider, gain from tax reductions[i2] .

     It seems to be a good idea to subsidize companies that are being threatened by bankruptcy. However, are subventions always the best solution for companies to get out of their bankruptcy and make a profit? Daniel Yergin’s and Lawrence Makovich’s article “The System Did Not Fail. Yet the System Failed.” in the The New York Times informs the reader that the American electric power industry was once a monopoly. State regulatory commissions set prices there in the old days. There was not much competition and new power grinds were not developed. Nowadays, the demand of electricity has increased and there is a competition of electric power companies on the market, however, the number and size for the power grids are inadequate for the rising flow of energy. To build more and better power grids to connect each region of the USA would cost many billions of dollars. A result of the transmission system, that has to be renewed, was the blackout in New York where people could not use energy for several hours and public transportation, such as subways and trains, came to a standstill[i3] .

     Governmental interference on the market has not only influences of providing good customer services, but also effects for the citizens of a country. If a company is subsidized, the prices for customers will increase. This fact was recognizable when Germany had only one telephone company ten years ago. People had to pay a lot for their telephone bills. Now we have several telephone companies. Therefore the prices for phone calls are very low. Even an international telephone call is affordable. Not only prices increase when a company is subsidized, but also the costs for subventions are charged to the taxpayer. In spite of losing millions of Euros, Agricultural provider from overseas have high customs restrictions to deliver their goods to Europe. Therefore they loose income that they might have used to buy European industrial goods[i4] . 

     In my opinion, it is always better if companies are competitive on the market. If the power system in the USA had not been subsidized in the past, there would have been competition on the market since the beginning when the electric power companies have started to produce electricity. As a result, the power grinds would have been modernized because the companies would be interested to make money and provide a good service to their customers. Companies provided with less money from the government are much more productive than companies who get a lot of subventions. It is always important to have a healthy balance between substitution and the free market. To subsidize too much can be a disadvantage because people and companies might misuse the governmental support to their own goods and not to the goods of customers[i5] .