Note: All definitions are provided in the underlined sentences

EU cuts subsidies that support

Spanish Bullfighting
-An analysis by Ronit Shah
The European Union made a pivotal
decision to remove the subsidies of
around £100 million per year, which
were provided to farmers to rear bulls
used in the century old tradition.
Subsidies are lump sums of money
provided by a government body to
help promote business activity. It acts
as a financial aid to businesses and can help to keep prices of the commodity
low. Without the provision of such financial aid, the bullfighting industry, which
is worth around £1.6 billion, would be ‘on the brink of financial collapse’.
Bullfighting involved the brutal murder of the Spanish Fighting Bull, which raised
flags from numerous animal rights activists. Recently, bullfighting was deemed
as majorly unethical and cruel, which instigated pressure on the European Union
to remove subsidies that may indirectly assist the bull fighting arenas. In the
bullfighting industry, the bull farmers are involved in the primary sector of
industry (rearing bulls), whereas the bull arenas are involved in both the
secondary and tertiary sectors of industry (producing fighting armor, hosting the
bullfight et cetera). The primary sector of industry refers to the extraction and
usage of natural resources to produce raw materials. The secondary sector of
industry manufactures goods using the raw materials provided by the primary
sector. The tertiary sector provides services to consumers and other sectors of
industry. This removal of subsidies may affect the tourism industry too, as many
individuals travel to Europe to experience these bullfights. Airlines and hotels
may see a considerable fall in their revenue.

The removal of subsidies, as represented by the diagram below, would increase

costs of production borne by the bull farmers. In other words, it would be more
expensive to these farmers to rear each bull. In the demand-supply diagram, this
is seen by a shift of the supply curve to the left. The shift in the supply curve
causes a contraction in demand for bulls by the bullfighting arenas. This is
because at the initial equilibrium point E, there would be a shortage of bulls.
Hence, the bull farmers will raise the price of the bulls from P to P1. They would
do this for two reasons: one, in order to maintain their profit margin and two, in
order to seek a new equilibrium. As price and demand are inversely related, this
change in price would cause a contraction in demand from Q to Q1 and a new
equilibrium is sought at E1.

Whether the removal of subsidies would adhere to the government’s cause can
only be predicted through the subsequent future. By removing subsidies, it is
found that buying bulls is more costly for the bull arenas. In order to maintain
their profit margins, they may increase the price of seeing a bullfight (the profit
margin of the arena would be the revenue earned minus the costs of
production). If the demand for bullfights were elastic (elastic demand is when
demand changes by a greater percentage than the change in price), it would
contract to a great extent. This means that there is a considerable impact on the
demand through the change in price. The demand for bullfights could be elastic
for the following reasons:
• Bullfighting tickets take up a large proportion of the viewer’s income.
 • Bullfights are not a need (a need is a good or service that is essential for
living).
In this case, there would be a long-term effect on the demand for bullfights,
unless producers can find another way to restore their profit margins. This is
most likely going to be through reducing their costs of production, like reducing
bull-riders’ salaries or using arenas that charge less rent. In the case of reducing
the bull-riders salaries, some bull riders may be less motivated to work for the
arenas and may even leave the job to find other jobs that may provide better
financial prospects. This would again impact the bull arenas, leading to less
profit for the arenas. Some may even close down if they find insufficient revenue
is generated from the fights, which may benefit the government’s cause.

However, if the demand for bullfights were inelastic (inelastic demand is when
the price changes by a greater percentage than the demand), then the scenario
would be completely different. The producers would be able to increase their
prices without it taking a major toll on the demand. The demand could be
inelastic because watching the bullfights is addictive and bullfighting has
minimal or no substitutes (a substitute good is one that can be used in place of
another). If the demand is inelastic, the demand may persist despite an increase
in price, and a larger price may affect the living standards of the consumers.

For the consumers, there would be a shortage of the services pertaining to

entertainment in the short run, if the bullfighting industry declines. As
mentioned earlier, paying a higher price for the tickets may mean that their
living standards would fall and less money would be left for buying other goods
and services. Animal rights activists would be thoroughly contented with this
decline. Additionally, not seeing graphic murder of animals may be better for
children as it will reduce social aggression. In the long run, however, if the
bullfighting arenas find a way to cut costs, this situation will be bypassed and
would be the way it was initially.

This decline in subsidies can be catastrophic for the economy and the
government. Due to the interconnectedness of the numerous industries in the
world, many businesses would be impacted by the decline of the bullfighting
industry. The demand for airlines and hotels may be directly affected and would
fall. Horse riding academies would also be impacted. Furthermore, souvenir
shops would also reduce drastically. All of these businesses are sources of
government revenue through direct and indirect taxation; hence, the revenue of
the government may fall. There would be less government spending on, for
example, education and health care, reducing the living standards of the
population. Another issue that would arise that can minimize the government
revenue is the unemployment that would arise from the decline of such
industries (unemployment arises when people are willing and able to work but
are unable to find jobs). However, the cut in subsidies in the short run would
mean that more government revenue is available, and this could be beneficial in
the sense that the subsidies could be provided to other industries to
compensate for the economic growth lost due to the decline of the bullfighting
industry. Additionally, less time and finance is wasted by not negotiating with
the animal rights activists, and there is social order.

To conclude, the outcome of the removal of subsidies cannot be precisely

determined. It would primarily depend upon the ability of the arenas to reduce
their costs and manage without government help and the reaction of the
government in case the industry declines. However, the government can be sure
of greater social wellbeing and congenial order through their actions. As
subsidies of over £100 million were given, it is more likely that the industry
declines, as this is a very large sum of finance that is provided. The opportunity
cost (the best alternative forgone over choosing something else) of not
removing the subsidies could have been the development of transportation,
roads, healthcare facilities and schools, which may substantially increase living
standards of the population. The measure would be very effective and beneficial
for the economy through my point of view.

References:
https://www.telegraph.co.uk/news/worldnews/europe/spain/11961010/EU-cuts-
subsidies-that-support-Spanish-bullfighting.html

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