Deadweight effect in financial policy: This is how millions are wasted

Deadweight effect in financial policy: This is how millions are wasted

According to a report by www.nzz.ch, state benefits such as subsidies are often criticized because they lead to deadweight effects. This means that part of the benefits are “taken away” by private individuals without getting any closer to the actual goal. This was illustrated using three examples: tourism policy, the energy transition and retirement provision. The Federal Audit Office estimates the deadweight effects at 40 percent in tourism and 50 percent in energy policy.

The impact on the market and the financial sector is significant. The waste of tax resources through deadweight effects leads to inefficient measures and has a negative impact on economic growth. The market is distorted by the allocation of subsidies, as projects would be implemented even without funding. This leads to competitiveness being impaired and efficiency falling.

It is important that politicians take measures to reduce deadweight effects and promote targeted support. In the long term, the problem should be tackled at its root by addressing the risks of poverty in working life. In the energy transition, a CO2 incentive tax with a per capita redistribution to the population could be efficient, but is politically difficult to implement.

Overall, deadweight effects undermine Switzerland's successful model because they promote clientelism and represent an obstacle to efficient economic policy. It is important to take transparent measures to keep special interests in check and strengthen the economy across the board.