Help for the Downtrodden Corporate Exporter
The Export-Import Bank
The current occupant of the White House made quite a splash on his trip to India when he announced that 50,000 American jobs would be created thanks to $15 billion in U.S. export contracts. We’ll ignore Barack Obama’s grab at credit for these deals. Rupa Subramanya Dehejia of India Real Time notes, “The announcements were timed to coincide with the Presidential visit, but many of the deals were concluded well in advance. So no surprises there.”
What especially caught my eye about the trip was who accompanied Obama. The Khaleej Times reports:
Obama had also brought along with him the largest American business delegation ever to have accompanied a US president to a foreign country. A 200-plus star constellation of American business leaders and giants of the corporate world including Jeffrey Immelt of General Electric, Jim McNerney of Boeing Co, David Cote of Honeywell International Inc’s and Indian American Indra Nooyi, the CEO of Pepsico Inc.
That’s quite an entourage of heavy corporate hitters. But who was serving whom? Two things struck me as I read this: First, the corporate state is alive and well. And second, rumors of Obama being a Marxist bent on destroying capitalism are greatly exaggerated.
I wasn’t surprised to see Boeing on the list. Its association with the government has always been rather close. Boeing CEO James McNerney chairs the President’s Export Council, which is officially described as “the principal national advisory committee on international trade. The Council advises the President of government policies and programs that affect U.S. trade performance; promotes export expansion; and provides a forum for discussing and resolving trade-related problems among the business, industrial, agricultural, labor, and government sectors.” But I’m sure there’s no special pleading involved.
Incidentally, Air India has ordered 27 of the new 787 Dreamliners. Budget airline SpiceJet is buying 30 B737s. And the Indian Air Force wants ten C-17s.
Sign of Privilege
As a laissez-faire advocate, I am suspicious of this chumminess between government and business. It’s far too likely to eventuate in privileges for the favored at the expense of the taxpayers and the politically unconnected. Why can’t these big companies arrange their own export deals? Others seem to have no problem doing it.
I haven’t yet mentioned one important passenger on Obama’s flight to Mumbai: Fred Hochberg. He runs the Export-Import Bank of the United States, and his presence further illuminates the corporatist nature of Obama’s mission to India. The Ex-Im Bank is a taxpayer-backed agency that serves the needs of American companies seeking to export their products. The official mission statement notes, “Ex-Im Bank provides working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing). No transaction is too large or too small.”
Whenever this agency facilitates the financing of a company’s exports, one of two things must be true. Either the deal could have been financed without taxpayer backing, as most exports are, or it couldn’t. If it could have been privately financed, then why were the taxpayers exposed unnecessarily? A political agenda is at work.
If a project couldn’t find private financing, isn’t that a sign it was flawed and should have been dropped? Who’s better at separating investment wheat from chaff, the capital markets in which investors have their own money at risk, or unaccountable bureaucrats who may have a special-interest program in mind? (Of course, today’s capital markets are hardly freed markets, with all the government protection from competition and failure, but they should be.)
Ex-Im’s defenders will counter that the taxpayers seldom have had to make good on a bad deal and that other countries subsidize exports. But that’s not the whole story. Even when loans are repaid, the intervention distorts economic activity. Capital is scarce. So the company benefiting from a government loan guarantee has an unfair advantage over those venturing into the capital markets without a safety net. We’ll never know what we’ve had to forgo because resources were politically diverted to an Ex-Im client. Playing favorites and picking winners are signs of industrial policy, another name for the corporate state. This is not the free market.
GE’s Reward
The Ex-Im Bank is behind at least some of the Indian deals. In a virtual advertisement for the bank at the Huffington Post, Hochberg bragged about attending the meetings in Mumbai, saying, “As part of these meetings, the Export-Import Bank of the United States signed a Memorandum of Understanding — totaling more than $5 billion in financing support — that will create or sustain approximately 22,000 American jobs, while not costing the American taxpayer a dime.” That financing support will help General Electric, a major government contractor, sell gas turbines to India’s Reliance Power.
Hochberg added that the Memorandum “signals to American companies — both large and small — the tremendous opportunities available in this critical Asian market — and it informs Indian companies that the credit is there to buy our products and services.”
Translation: Come on in the taxpayer-financed pool. The water’s fine! (But make sure you have the right connections.)
When I see Boeing’s name, I immediately think of the Ex-Im bank. It’s long been known as “Boeing’s Bank” because it has backed so many of the company’s aircraft deals. (Enron was a big client too. It even got loans to buy things from itself!) A Pew Charitable Trusts Subsidyscope analysis last year found, “In FY2007 and FY2008 combined, Ex-Im issued $15.3 billion in long-term loan guarantees. Of that total, almost $10 billion, or an average of 65 percent, went toward the purchase of commercial aircraft made by the Boeing Company, the world’s largest manufacturer of commercial jetliners and military aircraft combined.”
It must be nice to have virtually your own taxpayer-backed finance agency.
The Ex-Im Bank grows out of the mercantilist belief that the wealth of nations is determined by a “favorable balance of trade.” Therefore the level of exports is crucial and government promotion is paramount. All balderdash, of course. In reality mercantilism functioned as a cover for polices that catered to special business interests at others’ expense. It’s time we got rid of the bank.
Comment by Cry_Aboutit on 12 November 2010:
You just know this is going to backfire someday. That this pampered, subsidized market will eventually run amok and that the bubble it exists in now will burst. Then everyone will decry another failure of the free market, because they have been taught to believe that free markets are when the government caters to the needs of the biggest and best connected corporations. Tell me I’m wrong.
It is vital to explain to anyone who will listen why the Ex-Im Bank and buddy-buddy relationships between regulators and industry are NOT free markets. Every time I bring up politics and explain my position on capitalism I get a ration of grief over bailouts and oil spills.
Now, I have become nimble enough to point out why those aren’t the result of free market activities, but my audience always gives me a “that’s-just-what-the-corporations-want-you-to-say” look.
This is quotable, and I’m using it:
If a project couldn’t find private financing, isn’t that a sign it was flawed and should have been dropped? Who’s better at separating investment wheat from chaff, the capital markets in which investors have their own money at risk, or unaccountable bureaucrats who may have a special-interest program in mind?
Comment by michael a metz on 12 November 2010:
Gee, guess who created the Export-Import Bank in 1934? Yep, good ole FDR with an executive order. Isn’t he the one who once said something like I am doing the same thing as Hitler, just in a more orderly manner.
And it got its bragging rights with its first deal: helping Cuba. Wow, the intelligence surpasses all human understanding.
So does anyone believe that the Export-Import is “independent within the government”? What the heck does that mean – oxymoron.
By the way, independent within the government is the claim of the Federal Reserve. Can anyone say “economic statism”.
I guess I better go back to work tonight to pay for all of this.
Comment by frank on 15 November 2010:
“And second, rumors of Obama being a Marxist bent on destroying capitalism are greatly exaggerated.”
Sure about that?
Comment by frank on 15 November 2010:
“Playing favorites and picking winners are signs of industrial policy, another name for the corporate state. This is not the free market.”
Corporatism, Corporate Socialism, Champaign Socialism, Socialism for the rich and Capitalism for the poor, Welfare Capitalism, State controlled and (graduate) destruction of free markets to an eventual State takeover of markets charged with allocating (redistributing) resources as the State sees fit (Marxism).
Comment by Sheldon Richman on 15 November 2010:
I’ve given evidence against it in several articles. The context should make it clear that I distinguish (crony) capitalism from the free market. Obama is not a threat to capitalism. The free market is long gone.
Comment by James Madison Fan on 15 November 2010:
So we’re operating under the assumption the Free Market sans cronyism actually existed at one point and it left? Is this a hypothetical or are you actually offering there was a period when such a thing was a reality domestically much less internationally? If so I’m curious to know where and when?
Comment by Ato Angami on 17 December 2010:
Sir.
Conveying greetings to all in Christ blessed Name.I am Bro.Ato Angami from Nagalnd,India.By the loving grace of God,I have rescently started a Ministry here in our land called Christ for the Downtrodden Ministry,basing on the text Isaiah 61:1.The ministry was dedicated on 3rd july 2010.God has been very gracious to help me and my free voluntary service colleagues to help us to conduct four special Gospel programmes for the downtrodden community,the handicaps,especially from the muslim community,another gospel program was held for the widows,especially from the hindu community, thirdly for the jail inmates,and fourthly for the under privileged childrens,in all of these programmes,we distributed rice to the handicap and widows,Bibles to the prisoners and free medical camp for the under privileged childrens. All of these programs appeared in our local papers, and I have made an attachment of our progammes below,this program has challenged and revived our other fellow Christians.The Holy Spirit used us mightily in ministering to these people.
God has also been very gracious to me to help my Ministry to get it registered with our state Govt.People dont get their registration even after two to three years, or the middle man charges around Rs.70,000 to Rs.80,000 for getting it registered,but God in response to all the fervent prayers helped me to register it just within a time span of three months.Praise Jesus.
Today,the holy Spirit of Jesus,convicts me even more to reach the downtrodden community in a greater mass, the orphans,the mentally retarded,the sex workers,the beggars etc,but I am finding it hard,because I have less resources to reach them,because they expect The Word of God,at the same time they expect us to meet their physical and Spiritual needs too
I also want to set some permanent Ministry members but I dont have anyhting to bless them with.I am also in need of Musical instruments which is a must,but the prices of all instruments are very high.
As i lay my supplication to Our Almighty and in whose Blessed Name i lay my request before Your Org.I do pray that God will convict you to kindly help me in especially reaching out the thousands of downtrodden community,bringing them to the Kingdom of The Lordship of Jesus Christ.
your’s faithfully
in ‘CHRIST’
Ato Angami
Mob.+919774594077
Comment by Health Facts on 7 February 2012:
Together with everything which seems to be developing inside this specific subject material, many of your opinions happen to be quite refreshing. However, I beg your pardon, because I can not give credence to your entire theory, all be it radical none the less. It looks to everybody that your opinions are not totally justified and in actuality you are generally your self not even thoroughly certain of your assertion. In any case I did enjoy looking at it.
Pingback by Variations on a Corporatist Theme | The Freeman | Ideas On Liberty on 13 April 2012:
[...] not disagree. Ask Jeffrey Immelt of GE, Jim McNerney of Boeing, and other beneficiaries of the Export-Import Bank. He would just want government to be the more dominant [...]