Dear Colleagues,
This has been a very comprehensive and well-researched discussion on the very significant issue of subsidies in developing countries, especially fuel subsidies. The distortions and inefficiencies of such subsidies have been rightly heavily criticized, while the design and administrative challenges of alternatives have been shown to raise new problems. What I have not seen is any exploration of what I would call the classical development economists’ alternative, namely moving big chunks of the subsidies to investments in public transportation and cleaner, more efficient energy sources. In this view subsidies are only justifiable in a context of long-term investment and productivity strategies. Social protection policies are certainly an important component of public policy in developing countries, but shouldn’t there be some greater emphasis on putting some of the vast and wildly inefficient subsidies for fuel especially into more productive investment and incentives?
Robert Johnston
United Nations Statistics Division (retired)
This has been a very comprehensive and well-researched discussion on the very significant issue of subsidies in developing countries, especially fuel subsidies. The distortions and inefficiencies of such subsidies have been rightly heavily criticized, while the design and administrative challenges of alternatives have been shown to raise new problems. What I have not seen is any exploration of what I would call the classical development economists’ alternative, namely moving big chunks of the subsidies to investments in public transportation and cleaner, more efficient energy sources. In this view subsidies are only justifiable in a context of long-term investment and productivity strategies. Social protection policies are certainly an important component of public policy in developing countries, but shouldn’t there be some greater emphasis on putting some of the vast and wildly inefficient subsidies for fuel especially into more productive investment and incentives?
Robert Johnston
United Nations Statistics Division (retired)
