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The Subsidy Trap

CAMBRIDGE – Few policies place good economics so directly at odds with good politics as subsidies for food and energy. The issue of unaffordable subsidies is now front and center for three of the world’s most important new leaders: Egyptian President Abdel Fattah el-Sisi, Indonesian President-elect Joko “Jokowi” Widodo, and Indian Prime Minister Narendra Modi.

Sisi is confronting the need to cut subsidies better than might have been expected. Modi, by contrast, is doing worse than expected – even torpedoing a long-anticipated Word Trade Organization agreement. With Jokowi, it is too soon to tell.