John Metcalfe, in his 1983 pamphlet "Freedom from Culture", argues that subsidizing the arts in Canada creates mediocrity - it removes the level of rigour that the struggle to connect with a paying audience brings. It is cruel, he says, to encourage people to be full-time writers via subsidy; it creates a situation where the struggle that produces great literature is absent. It creates a bureaucracy of government organizations in conglomeration with artists, with constant movement of personnel between the two - an incestuous pandering circle absent of the sort of real critique or criticism that is the life-blood of literature. Although the purpose of subsidy is to encourage Canadian literature and Canadian culture/nationalism, he says subsidy actually works against the creation of really good literature.
I see Metcalfe's point, and it is a simple one. The market that connects audiences with writers is a vital link; the communication that takes place there - the encouragement through sales or lack thereof is the mechanism that guides the artist, via struggle within these circumstances, towards greatness.
The difficulty is that this is a simplistic view. The market is not a simple mechanism connecting audiences and writers; it is filled with intermediaries like publishers and bookstores of various nationalities and affiliations in specific economic and cultural circumstances. These circumstances create various complexities and exclusions in the communication b
