The Chamber has understood that if this continued M. D . . . would face the choice of either having to operate his factory better or closing it.

Frédéric Bastiat
Economic Sophisms Second Series

Bastiat here reviews with some humour the various spending budget for the taxes that M. Blockhead comes to collect from Jacques Bonhomme, wine producer, in the form of barrels of wine and amounting to 30 per cent of production (6 barrels out of 20). In order, the budget includes interests on debt, inland security, army, subsidies for the colonies and subsidies to non-competitive industries.

If Jacques Bonhomme accepts reluctantly and one after the other the arguments from the tax collector, the ultimate disgrace is reached when Mr. D… who is a cloth manufacturer makes is losses good by getting them covered by the government (private profits, socialised losses, there is nothing new under the sun). The rising ignominy in the government spending clearly shows that the most disgraceful comes with subsidies, which are a nuisance to the economy as shown in the quote. As a matter of fact, a market economy needs profits and losses, the latter being as important as the former in order to reallocate capital from non-profitable industries to competitive industries while subsidies does the opposite, reallocating capital from profitable industries to non-competitive industries.

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