The word subsidy is derived from the Latin word subsidium, which meant "support, assistance, aid, help, protection". In medieval times it referred to a payment made to the king. While the definition has since moved on from that, the habit of royalty accepting subsidies has not. Research carried out by FarmSubsidy.Org, for example, has shown that in 2004 the Queen of England and the Duke of Westminster each received half a million pounds sterling in farm subsidies, and Prince Albert of Monaco 287,000 Euros. Republics like France and the United States no longer have sovereign rulers, but some of their farmers live like kings, thanks to generous subsidies.
Nowadays, to most people, a subsidy means a payment from a government to a person or company. Many subsidies are indeed provided in that form, as grants or, more generically, direct payments. Grants are the elephants in the subsidy zoo: they are large and highly visible. But there are num?erous other subsidy beasts which are better camouflaged, stealthier, and keep closer to the ground.
The only internationally agreed definitions of a subsidy are those of the United Nations Statistics Division, which is used for the purpose of constructing national accounts, and of the World Trade Organization (WTO), which is used for the purpose of regulating the use of subsidies that affect trade. The WTO definition is the more comprehensive of the two and can be summed up as follows: A subsidy is a financial contribution by a government, or agent of a government, that confers a benefit on its recipients.
There are many people in the world, particularly environmental economists, who would like to add to that definition. But for the purposes of this Primer it provides an adequate entry point to the topic.
