Every dying industry has the same speech. “If we go down, we take everyone with us.” Coal executives say it. Taxi medallion owners say it. Mall landlords say it. The pitch is always identical: our industry is special, our workers are essential, and if the government does not intervene right now, civilization itself is at risk.

It is never true. Not once in economic history has letting an obsolete industry shrink actually collapsed an economy. But propping up dying industries has reliably made economies worse. Every single time.

The playbook is so predictable you could write it in advance. Industry starts losing to a better alternative. Industry hires lobbyists. Lobbyists go to Congress or Parliament and explain that thousands of jobs are at stake. Politicians pass tariffs, subsidies, price floors, or licensing requirements. Taxpayers foot the bill. The better alternative gets delayed. Everyone except the dying industry pays more for worse products.

The Two Ways to Keep a Corpse Walking

There are really only two strategies for saving a dying industry, and both of them stink.

Strategy one: block the competition. This means cartels, licensing requirements, regulatory capture, or outright bans on the new thing. Taxi medallion systems are the textbook case. In New York City, a taxi medallion cost over $1.3 million at its peak in 2014. Not because driving people around was worth $1.3 million. Because the city had artificially limited the number of taxis, creating a government-backed cartel that overcharged passengers for decades.

Then Uber and Lyft showed up. Suddenly anyone with a car and a phone could do what medallion holders did. The medallion owners screamed. They sued. They lobbied. They got regulations passed in some cities to slow ride-sharing down. But the technology was simply better, cheaper, and more convenient. Medallion values crashed to under $100,000. The people who had invested their life savings in medallions got destroyed – not by Uber, but by a regulatory system that convinced them an artificial monopoly was a safe investment.

Strategy two: direct subsidies. Just hand the dying industry money from the public treasury. This is more honest than strategy one, but no less wasteful. Every dollar a government gives to a dying industry is a dollar taken from taxpayers who would have spent it on something they actually wanted. The subsidy does not create wealth. It transfers wealth from productive uses to unproductive ones.

Coal: The Subsidy That Would Not Die

The US coal industry has been declining for decades. Not because of regulation. Not because of a conspiracy. Because natural gas got cheap, and renewables got cheaper. A new natural gas plant produces electricity at roughly half the cost of a new coal plant. Solar and wind are now cheaper than both in most locations.

The economic verdict is clear: coal is losing on price. The market has spoken.

But coal has lobbyists and coal has senators. So instead of letting capital and labor flow to the industries that are winning, the government spent billions on “clean coal” research, subsidies for coal plants, and regulatory rollbacks to keep coal competitive. None of it worked. Coal’s share of US electricity generation dropped from about 50% in 2005 to under 20% by 2023. The subsidies did not save the industry. They just slowed the transition to cheaper energy while burning through taxpayer money.

Every dollar spent propping up a coal plant is a dollar that did not go to building a solar farm, training a wind turbine technician, or developing battery storage. The subsidy does not just waste the money it spends. It wastes the opportunity that money represented.

Blockbuster Thinking vs Netflix Thinking

Blockbuster Video had 9,000 stores and 84,000 employees at its peak. When Netflix started mailing DVDs – and then streaming – Blockbuster had every chance to adapt. They chose not to. They doubled down on late fees and retail locations. They assumed the government or customer loyalty or sheer inertia would save them.

Nobody bailed Blockbuster out. Nobody passed a law requiring Americans to rent physical DVDs. Blockbuster died, and the world got better entertainment for less money. Netflix, Hulu, Disney+, and dozens of streaming services now employ hundreds of thousands of people and produce more content than the entire movie industry did a decade ago.

Imagine if Blockbuster had gotten the coal treatment. Imagine a “Physical Media Preservation Act” that taxed streaming services to subsidize DVD rental stores. You would still be driving to a strip mall on Friday night to browse shelves. The money that built the streaming industry would have been sucked away to preserve an inferior product.

This is exactly what happens every time you subsidize a dying industry. You do not save it. You delay the thing that replaces it.

Kodak Had 145,000 Employees. So What?

Kodak once employed 145,000 people and controlled 90% of the US film market. When digital cameras emerged, Kodak’s leadership knew – they literally invented the first digital camera in 1975. They buried it because it threatened their film business.

They lobbied. They maneuvered. They tried to slow digital adoption. They went bankrupt in 2012 anyway. But here is the important part: the photography industry did not collapse. It exploded. More people take more photos than at any point in human history. Instagram, smartphone cameras, cloud storage, photo editing apps – these industries employ vastly more people than Kodak ever did.

If the government had stepped in to “save” Kodak with film subsidies and digital camera tariffs, we would have delayed the smartphone photography revolution. Billions of people who now carry a camera in their pocket would have been worse off. The new jobs would not have been created. All to preserve a company that refused to evolve.

The “If We Die, You Die” Bluff

Here is the thing about industries claiming they are too important to fail: if that were true, they would not be failing. If an industry is genuinely essential and efficient, it does not need protection. People voluntarily buy essential things. You do not need a subsidy to make people buy food.

When an industry needs subsidies to survive, that is the market telling you something important. It is telling you that the resources going to that industry – the workers, the capital, the raw materials – would produce more value somewhere else. The subsidy overrides that signal. It forces resources to stay in a less productive use.

The 2008 bank bailouts are the most dramatic modern example. “Too big to fail” meant that the biggest banks could take enormous risks knowing taxpayers would cover their losses. The bailout cost somewhere around $700 billion in direct spending, plus trillions in Fed lending programs. The banks survived. The moral hazard got worse. And in 2023 we watched more banks fail anyway, because the fundamental incentive problem was never fixed – it was subsidized.

For New Things to Grow, Old Things Must Die

This is the part people struggle with emotionally. It sounds cold. But it is the mechanism behind every improvement in living standards for the past three centuries.

When the automobile arrived, the horse-and-buggy industry died. Blacksmiths, stable hands, buggy whip manufacturers, hay suppliers – all those jobs vanished. If the government had taxed cars to subsidize horse breeders, the automobile industry could not have grown. Ford could not have hired those workers. The road construction industry would not have boomed. The suburbs, the interstate highway system, the modern supply chain – none of it.

The same pattern is playing out right now with the US Postal Service. The USPS loses billions every year. Private carriers like FedEx, UPS, and Amazon Logistics deliver packages faster, cheaper, and more reliably for most use cases. The USPS survives because of legal monopoly protections on first-class mail and billions in implicit subsidies. Every dollar keeping the USPS in its current form is a dollar not going to the logistics innovations that would serve Americans better.

Mall retailers spent years lobbying against Amazon instead of adapting to e-commerce. Some got regulations passed. Some got tax advantages. None of it worked. The malls that survived were the ones that reinvented themselves as experience destinations – restaurants, entertainment, services you cannot buy online. The ones that demanded protection from the internet died anyway, just more slowly and more expensively.

The European Newspaper Experiment

Several European countries tried direct subsidies for print newspapers. France, Sweden, Denmark, and others poured public money into an industry that was losing readers to the internet. The idea was to preserve “media diversity” and “quality journalism.”

The result was predictable. The subsidized newspapers had no incentive to innovate. They kept printing physical papers for a shrinking audience while digital-native media companies were inventing new formats, new distribution methods, new business models. The subsidies preserved the old and starved the new.

The journalism that survived and thrived was the journalism that adapted – paywalled digital subscriptions, newsletter platforms, podcast networks, independent media. Not the journalism that sat around waiting for a government check.

Subsidized Nuclear vs Everything Else

Nuclear power plants across the US and Europe are getting subsidies because they cannot compete with natural gas and renewables on price. Some states passed “zero-emission credits” – effectively subsidies for nuclear plants that would otherwise close because their electricity is too expensive.

Is nuclear power a useful technology? Sure, it has advantages. But when a nuclear plant needs subsidies to survive against cheaper alternatives, those subsidies are pulling money away from the alternatives that are winning. Every subsidy dollar for an uncompetitive nuclear plant is a dollar that did not build wind capacity, did not fund grid-scale battery research, did not improve solar efficiency.

The market is trying to allocate resources toward cheaper, cleaner energy. The subsidies are fighting the market. The subsidies will lose eventually. They always do. They will just waste a lot of money in the meantime.

The Honest Math

Here is what subsidies actually look like when you do the arithmetic honestly. Every dollar the government gives to Industry X comes from taxpayers. Those taxpayers would have spent that dollar on something – groceries, rent, a new business, a vacation, their kids’ education. That spending would have supported jobs in those other industries.

When the government redirects that dollar to a dying industry, those other industries shrink by exactly the amount the dying industry gains. This is not theoretical. This is arithmetic. The subsidy does not create economic activity. It moves economic activity from where people want it to go to where politicians want it to go.

The people in the subsidized industry are visible. They have names, faces, and union cards. The people in the industries that shrank are invisible. Nobody writes a newspaper story about the solar company that was not founded because the tax money went to coal subsidies instead.

The Takeaway

Saving dying industries is not compassionate. It is wasteful. Every resource chained to a dying industry is a resource stolen from a growing one. Every subsidy for obsolete technology is a tax on the technology replacing it. Every regulation protecting an incumbent from competition is a regulation punishing consumers for wanting something better.

Industries die because better alternatives exist. Letting them die is not cruelty. It is how progress works. It is how we got from horses to cars, from candles to electricity, from Blockbuster to streaming, from Kodak to smartphone cameras.

The impulse to save dying industries comes from a good place – people care about the workers. But the policy is backwards. If you care about displaced workers, help the workers directly. Retrain them. Support their transition. Do not chain them to a sinking ship and call it protection.

It is exactly as foolish to preserve dying industries as it is to preserve dying methods. And the next time an industry shows up in Washington claiming the economy will collapse without a bailout, remember: every dying industry says that. None of them are right.