Whenever food prices soar due to the climate crisis, we naturally question the role of the state: "If initial investments and operating costs of smart farms are the main issue, shouldn’t the government step in with subsidies and tax cuts to rescue food prices hanging over the cliff? Isn’t this ultimately due to the inertia of the government and society?" This is an entirely valid and sharp question. In fact, it remains one of the most fiercely debated core issues in national policy circles. However, the reason the government hesitates to pour massive subsidies into the sector—or hits a wall even when it does—lies in the paradox of taxation and the cold reality of national finances.
The Limits of Pump-Priming: One-Time Equipment Subsidies vs. The Pit of Continuous Deficits
First, while subsidies can serve as a pump-primer to start the flow, they cannot perpetually cover daily deficits.
It is technically and policy-wise entirely feasible for a government to deploy a large budget to subsidize 50% to 70% of the initial construction costs (CAPEX) for smart farms. In fact, governments and local authorities around the world already offer various forms of initial setup grants. However, the real problem begins after the building is constructed: the daily operating expenses (OPEX)—specifically, the "devastating electricity bills" required to run 24-hour LED lighting and climate controls.
If the government were to permanently subsidize operating electricity bills to artificially lower produce prices, it would create a structure where taxpayers endlessly foot the bill for the losses of specific high-tech agribusinesses. Equipment support is a one-time injection, whereas operating cost subsidies become a bottomless pit. Since national finances are not infinite, attempting to lower production costs through endless subsidies is fundamentally unsustainable.
The Harsh Truth Proven by the Bankruptcies of Overseas High-Tech Giants
The tragic fate of global smart farming companies that drew heavily on government incentives and venture capital vividly demonstrates this reality.
AppHarvest, once a leading U.S. high-tech vertical farming enterprise, constructed a mega-smart farm equivalent to the size of 40 soccer fields with extensive policy support and funding. Yet, unable to handle the soaring operational costs, it ultimately filed for bankruptcy. Similarly, European industry leader InFarm was forced into a sweeping operational shutdown when global energy crises caused electricity prices to skyrocket beyond what they could bear.
This proves that even if government subsidies lower initial hurdles as a pump-primer, without fundamental economic viability in electricity costs and distribution pricing, the entire setup collapses like a house of cards at the slightest market shock.
Tax Equity: Small Farmers in the Dirt vs. Advanced Capitalist Conflict
Second, there is the issue of "social equity" and political friction that arises during the allocation of subsidies.
The vast majority of today’s agricultural ecosystem consists of elderly, small-scale farmers who have tilled the soil their entire lives. If the government redirects trillions of won in tax revenue to concentrate subsidies on high-tech smart farm corporations or well-capitalized investors, traditional farming communities protest fiercely, arguing that "the government is using tax dollars to support big corporations while starving small farmers."
Cutting support for existing farmers—who serve as a rural safety net—to go all-in on advanced technology within a limited national budget poses a massive burden on politicians who rely on votes and administrative bodies tasked with building social consensus.
The Path Beyond Inertia Toward Technological Breakthroughs
To be sure, as the original question implies, administrative inertia that fails to break through distribution lobbies and a lack of political decisiveness—stalled by inter-ministerial finger-pointing—are indeed major contributing factors. Yet beyond the surface cause of inertia lies a far deeper dilemma regarding the "justification of tax expenditure."
Ultimately, for government subsidy policies to bear fruit, they must be accompanied by technological breakthroughs that go beyond simple budget injections. Only when technological innovations emerge—such as pairing smart farms with renewable energy sources like solar and geothermal power to radically drive down operating electricity costs—will government tax relief and subsidies fulfill their true role, transforming from a bottomless pit into a pump-primer for self-sustaining innovation.
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