The paper discusses whether recent developments in the coal and steel sector are due to state failure or to failure by entrepreneurs. Regarding the steel sector, it is argued that massive subsidies granted by various European states have caused the problem of over capacity the sector faces today. State failure is therefore the main reason for the current problems in this sector. As to the coal sector, its production in Germany would have ceased to exist for many years without public subsidies. Usually, regional and social arguments are put forward in favour of such subsidies. However, both arguments are rather weak since the aims of such policies could be realised much cheaper by other instruments. The paper concludes with stating that the characteristics of a market economy are not applied to the coal sector and only to a small extent to the steel sector.
© 1996 by Lucius & Lucius, Stuttgart