Whether an VC firm engages in subsidies for its clients or whether a government engages in subsidies for its electorate, money is being spent to distort market prices and that adds friction to accurate market pricing. It's weird to identify issues with the tactic and then arbitrarily say one entity doing it is bad when its OK if the other one does it.

If the government damages the economy with subsidies, those responsible might have more difficulty getting elected. If a VC firm dumps a juiced bag on S&P index fund buyers while causing a bunch of trouble for taxi companies and first time homebuyers, are any of their clients going to be pissed? My guess is they'll probably congratulate them on a job well done.