Lemon socialism
Government subsidies to failing firms / From Wikipedia, the free encyclopedia
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Lemon socialism is a pejorative term for a form of government intervention in which government subsidies go to weak or failing firms (lemons; see Lemon law), with the effective result that the government (and thus the taxpayer) absorbs part or all of the recipient's losses.[1][2] The term derives from the conception that in socialism the government may nationalize a company in its entirety, while in lemon socialism the company is allowed to keep its profits but its losses are shifted to the taxpayer.
Such payments may be made with the intent of preventing further, systemic damage to what might otherwise be considered a free marketplace.[3][4] For example, the bailout that followed the 2008 financial crisis may be described as lemon socialism.[5][6][7] The pejorative arises from the belief among free market economists that in a functional free market, failing companies would be replaced by better functioning companies in response to market demand.
The term may also be used to describe government efforts to nationalize companies or industries, in which the government takes over failing companies without taking over healthy companies.[8][9] Advocates of free markets may then point to the faltering, nationalized enterprises as examples of how government regulation hurts business.[4]