Free trade is a huge benefit if you are a Walmart shopper. All those microwave ovens, lamps, sneakers, and other stuff available for a relative pittance. It’s a tragedy if you are a domestic manufacturer or worker attempting to compete with cheap labor and subsidized Chinese manufacturers pouring those goods onto supermarket shelves. Consumers are dispersed and unaware of their interest in free trade; workers and manufacturers know their interest in protection. So freer trade is always a difficult political proposition.
More so now than ever here in the U.S. For one thing, President Obama has no interest in jeopardizing the electoral chances of congressmen dependent on trade union support by trying to push through the stalled trade deals now languishing somewhere in the administration’s bureaucracy. For another, a battle has flared within the Republican party over possible renewal of the Export-Import Bank, an institution established in 1934 by President Franklin Roosevelt “to assist in financing the export of U.S. goods and services” by providing credits exporters need to tide over the time between shipment and receipt of payment, and by guaranteeing the credit of foreign buyers. An indication of how much politics has changed in America is the fact that until the emergence of the Tea Party, the Bank’s authorization was renewed 16 consecutive times with almost no controversy.
After all, what could be more straight-forward and a worthier cause for any politician to support than helping American exporters to win markets and create jobs, some 200,000 last year by the Bank’s undoubtedly exaggerated reckoning? If you want to know, just ask Jeb Hensarling, chairman of the House Financial Services Committee which has jurisdiction in the area, and Eric Cantor, the former majority leader of House Republicans. Hensarling and Tea Party Republicans are on a campaign to end “crony capitalism,” the you-scratch-my-back-and-I-will-scratch-yours relationship between big business and big government that they believe has short-changed Main Street in order to pour tax-payer money into the relief of Wall Street bankers. “If you’re a politically connected bank or company that benefits from Ex-Im,” Hensarling commented at a hearing, “…you would like it to continue…. It’s a sweetheart deal for you. Taxpayers shoulder the risk, you get the reward.”
Cantor disagreed and supported re-authorization -- and for that among other reasons became the victim of the political upset of the year, losing his Republican primary to an anti-reauthorization Tea Partier, one David Brat, a previously unknown economics professor. Cantor is now gone from the leadership and, indeed, the Congress. The Tea Party message got through. Cantor’s successor as majority leader, Kevin McCarthy, once supported renewal but now opposes it and promises not to bring the issue to the floor of the House, where a combination of Democrats and some Republicans would very likely pass the necessary reauthorization.
The economics are even more complicated than the politics. The Bank’s largest beneficiary of Ex-Im financing is Boeing, which scooped up about 25 percent of Ex-Im’s guarantees last year to back sales in thirty countries. If the Bank is no more, the aircraft manufacturer will bear the higher cost of covering its own trade risks. That will force Boeing to increase the price it charges for its aircraft, including that of its 777-300ER, which carries a list price of $320 million, although Emirates Air, which ordered 120 of these planes, is undoubtedly getting a discount. And is benefitting from the significant savings that Ex-Im financing provides. Were the Bank to close, Boeing would be the victim of an act of unilateral disarmament in its trade war with Airbus, the European consortium that receives financing support from export credit agencies funded by Britain, France, and Germany. The tally in that war: Ex-Im supported delivery of 789 large Boeing commercial aircraft between 2008 and 2013, while the European counterpart supported delivery of 821 Airbus planes. Little wonder that on the day Ex-Im supporter Cantor lost to Brat, Boeing’s shares plunged a full 3 percent.
As if this tale were not complicated enough:
· American conservatives, normally Francophobes, are joining forces with French Airbus supporters to oppose continued life for what the Europeans call “the Boeing Bank” and conservatives see as a function better performed by the private sector;
· Liberal Democrats, who despise Boeing for moving production of the 787-10 Dreamliner from the pro-union state of Washington to the anti-union state of South Carolina, are supporting the “Boeing Bank” because it creates jobs;
Conservatives of the world, unite! You have nothing to lose but your corporate sponsors. We must save capitalism from the capitalists. We must persuade our corporate and political classes that it is difficult for people to retain their belief that market capitalism works for them when they are struggling to find work, or to keep their homes, or to avoid declines in their living standards as their real wages stagnate and their taxes disappear into bailouts of banks and subsidies for solar millionaires.
Massachusetts Senate candidate Elizabeth Warren backed away from her statement that supporters of hers from Wall Street tell her she could "save capitalism." The Boston Herald reports on the Democratic candidate's walkback:
Massachusetts Democrat Elizabeth Warren says Wall Street types tell her she could "save capitalism" if she wins her race for U.S. Senate. Here's what Warren recently told a reporter, National Journal reports:
President Obama, envious of China’s economic model, proclaimed his admiration for the high-speed railways, bridges, skyscrapers, and solar panels that China is building. (“That used to be us,” he famously said – a line apparently so powerful it became the title of a book.) But even the Chinese know that Obama’s envy is misplaced.
There’s a lot of silliness on all sides of the Bain Capital debate.
On the one hand, Newt Gingrich’s attacks (and the follow-on assaults by Jon Huntsman and Rick Perry) on Mitt Romney’s career at Bain Capital have been unfair, over the top, and, for that matter, all over the place. Gingrich, Perry, and Huntsman deserve much of the criticism they’ve received from conservative commentators.
On the other, Mitt Romney’s claim throughout his campaign that his private sector experience almost uniquely qualifies him to be president is also silly. Does he really think that having done well in private equity, venture capital, and business consulting—or even in the private sector more broadly—is a self-evident qualification for public office? One assumes Mitt Romney would agree that Chris Christie is a better chief executive of New Jersey than Jon Corzine, and that Rudy Giuliani was a better mayor of New York than Mike Bloomberg. But Romney’s biography looks a lot more like Bloomberg's or Corzine's (leaving aside Corzine's recent misadventures) than like that of Giuliani (pre-mayoralty) or Christie. Past business success does not guarantee performance in public office. Indeed, Romney sometimes seems to go so far as to suggest that succeeding in the private sector is intrinsically more admirable than, e.g., serving as a teacher or a soldier or even in Congress. This is not a sensible proposition, or a defensible one.
There’s a line of thinking you often hear from Republican-types about how markets are never wrong. You think a certain CEO’s lavish compensation is ridiculous? Nonsense, those types tell you. You think that a CEO’s VORP—that’s a baseball stat that translates, in this case, to the CEO’s marginal value versus the average replacement CEO—couldn’t possibly be so high? They simply counter that he’s worth the money because there’s someone willing to pay it. The results in a market triumph considerations of value.