Subsidies versus Welfare to Help the Poor?

I was inspired to think about the issue of subsidies at the end of the year by Cuban blogger celebrity Yoani Sanchez. I was further compelled when I read an attack on subsidies by World Bank economist Marcel Giugale over at Boz's site (where my Latin musings have tended to find expression this last year in blog exile).

Subsidies are an interesting angle because liberals get confused. I had thought our fair Yoani was too smart to allow her true free market colors to show. With her post however, we can now confirm that Yoani opposes the very idea of richer sectors of society helping out the poorer. She opposes the production of nickel subsidizing health care and schools. She is against well-off hotels helping out those that are struggling. Now one can understand why she wants to get rid of the Cuban Revolution and go back to the days when companies were “free” to extract resources and exploit cheap labor without contributing to Cuban society.

Giugale, the World Bank official, tries in the Miami Herald to dress up his discredited market fundamentalism in 2009 faux-populist rhetoric for political purposes. Trouble is, one does not have to look very hard to see that Latin America has explicitly rejected the capitalist's dream that the market ought to determine who has access to water, education, electricity, etc (think water riots). In fact some Constitution's got rewritten to make the point quite clear (Bolivia's got approved the other day).

Of course, some subsides are stupid and ought to be re-worked (like Venezuela's enormous fuel subsidy), but most are for the good of society and provide a level of fairness and solidarity in a cruel world that seeks to divide us into categories of the deserving and undeserving. A means based test to receive a lump-sum handout is prone to cheating, encourages non-work and is manifestly unfair to the person just on the other side of the income line. We ought to be building socieities that encourage unity rather than sow divisions and jealousies. The test ought to be whether the good or service is a basic right. Charging "market prices" for things like water and education are idea's that were killed in the 90s and ought to never return.