Beau Berger's List: Government Subsidies

• . In 1948, with postwar pent-up consumer demand exhausted and the economy sinking back into recession, Truman's "cold-war spending" was regarded by the business press as a "magic formula for almost endless good times" (Steel), a way to "maintain a generally upward tone" (Business Week). The Magazine of Wall Street saw military spending as a way to "inject new strength into the entire economy," and a few years later, found it "obvious that foreign economies as well as our own are now mainly dependent on the scope of continued arms spending in this country," referring to the international military Keynesianism that finally succeeded in reconstructing state capitalist industrial societies abroad and laying the basis for the huge expansion of Transnational Corporations (TNCs), at that time mainly U.S.-based.
• The Pentagon system of course served other purposes. As global enforcer, the U.S. needs intervention forces and an intimidating posture to facilitate their use. But its economic role has always been central, a fact well-known to military planners. Army Plans Chief General James Gavin, in charge of Army R&D under Eisenhower, noted that "What appears to be intense interservice rivalry in most cases...is fundamentally industrial rivalry." It was also recognized from the outset that these goals require "sacrifice and discipline" on the part of the general public (NSC 68). It was therefore necessary, Dean Acheson urged "to bludgeon the mass mind" of Congress and recalcitrant officials with the Communist threat in a manner "clearer than truth," and to "scare hell out of the American people," as Senator Vandenberg interpreted the message. To carry out these tasks has been a prime responsibility of intellectuals throughout these years.
• These were tolerable in the days of overwhelming U.S. economic dominance, less so as U.S.-based corporations face serious competitors who can design and produce directly for the commercial market, not awaiting possible spin-offs from high tech weapons or space shots. Furthermore, the cutting edge of industrial development is shifting to biology-based technology. That is one reason why the West, with the U.S. in the lead, is insisting that GATT agreements and NAFTA (North American Free Trade Agreement) provide enhanced protection for patents ("intellectual property"), thus locking the Third World into dependency on high-priced products of Western agribusiness, biotechnology, the pharmaceutical industry, and so on. It is important to ensure that TNCs control seeds, plant varieties, drugs, and the means of life generally; by comparison, electronics deals with frills. Public subsidy and state protection for biology-based industries can not easily be hidden behind a Pentagon cover. For such reasons alone, new forms of state intervention are required (see Year 501, South End Press).
• A major Pentagon funnel was SDI ("Star Wars"), which was openly advertised as a state subsidy to the "private sector," and lauded by the business press for that reason
• Also significantly, Clinton's advisers knew all along that Star Wars was "only tangentially related to national defense" that its prime function was to serve as "a path to competitiveness in advanced technologies," as publicly explained in Congressional Hearings (Clinton's close associate Robert Reich, now Secretary of Labor, writing in 1985 in the New York Times under the heading "High Tech, a Subsidiary of Pentagon Inc.")

• The Wall Street Journal reports a study by Battelle Memorial Institute showing that research spending will remain sluggish because of "a slowdown in weapons development." "Government spending over the past five years has swung toward space and energy programs, and away from weapons development" the principal author of the report said. That is government spending (the public subsidy) shifted from one component of the Pentagon system to the others.

    

  "We're now going to develop an economic strategy much in the way we developed a national security strategy to fight the cold war," Kent Hughes, president of Clinton s Council on Competitiveness, proclaimed. It is necessary only to bring out the striking continuities as old policies are adapted to new contingencies, and to reinterpret the "cold war" as what it was. A related matter is the traditional business demand that the public via government, pay the costs of the infrastructure required for private power and profit, everything from roads to education
• "A 1990 survey, for example, found that only 13 percent of workers, but 37 percent of directors, favored private ownership of their enterprise," with over one-third of both workers and directors favoring state and employee ownership. But the attitudes of the population are inconsequential in the "new democracies" -- one reason, perhaps, why "the Communist era is looking better and better" to Poles, as another academic specialist observes (Jane Leftwich Curry).
• As widely reported, GM plans to close two dozen plants in the U.S. and Canada. Meanwhile it bas opened a $690 million assembly plant in East Germany with great expectations, heightened by the fact that, thanks to 43 percent unofficial unemployment, workers are willing to "work longer hours than their pampered colleagues in western Germany" at 40 percent of the wage and with few benefits, the Financial Times cheerily explains. Capital can readily move; people cannot, or are not permitted to by those who applaud Adam Smith's doctrines when it suits their needs. Jobs may disappear in the West; "jobs" in the technical sense will do just fine.
• r. In an important critical analysis of the GATT World Bank economists Herman Daly and Robert Goodland point out that in prevailing economic theory, "firms are islands of central planning in a sea of market relationships." "As the islands get bigger" they add, "there is really no reason to claim victory for the market principle" -- particularly as the islands approach the scale of the sea, which departs radically from free market principles, and always has, because the powerful will not submit to these destructive rules.

7 more annotations...

• he U.S. federal government and two states are supplying Boeing with "lavish" subsidies that will eventually reach US$23.7 billion, the European Union said Thursday, adding that the payments are already providing the American plane manufacturer with a massive advantage over rival Airbus.
• The 27-nation EU cited tax breaks, development funding and outright grants to Boeing in its first submission to the World Trade Organization of evidence that the United States is providing support for the Chicago-based plane manufacturer in violation of global commerce rules. The bloc also accused the U.S. of providing vast amounts of hidden support to Boeing through military contracts.

• The bloc says the U.S. federal government's share of the alleged illegal payments to Boeing included US$18.9 billion in research funds through NASA and Department of Defense grants, tax breaks and reimbursement of development costs since 1990.

   

  It also claims the state of Washington will provide $4 billion in tax exemptions and infrastructure projects for the exclusive benefit of Boeing by the year 2024. Kansas, meanwhile, is to provide the company with US$900 million in tax breaks and subsidized bonds, said the EU

•  

  The vast majority of the alleged subsidies are for payments to Boeing for services rendered to the government," Boeing spokesman Charlie Miller said. "These payments represent the value of those services completely consistent with federal guidelines. They are not subsidies."
• The dispute began three years ago when Washington pulled out of a 1992 agreement with Brussels on plane subsidies. It then brought a case to the WTO specifically targeting the Airbus A350 — a midsized jet aimed at competing with Boeing's 787 Dreamliner.

3 more annotations...

• n 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. 

  • The Cato Institute's paper on "The Corporate Welfare State" points out the the Export-Import Bank is itself a vehicle for crony capitalism, citing the fact that they provide funding to some of the largest Fortune 500 firms, none of which that would have any problem funding their own projects or ascertaining non-government funding.
    
    
• In FY2007, loans for Boeing aircraft accounted for $4.5 billion, or 62 percent, of $7.2 billion in long-term guarantees.  Boeing reports that sales to foreign customers accounted for about 40 percent of the company's revenues in 2008.