Cronyism and Mercantilism are Siblings

by Don Boudreaux on March 28, 2012

in Business as usual, Crony Capitalism, Myths and Fallacies, Other People's Money, Seen and Unseen, Subsidies, Trade

Here’s a letter to the Wall Street Journal:

Robert Rubin’s and Vin Weber’s defense of the Export-Import Bank features all of the sophistry and economic naivete that have forever marked mercantilist apologies for interest-group privileges (“The Ex-Im Bank Keeps Americans in Business,” March 28).

Some sophistry: While Messrs. Rubin and Weber accurately report that the great majority of Ex-Im “transactions” are loans to small businesses, these authors fail to reveal that nearly all of the dollar value of Ex-Im transactions goes to big business.  In 2010, 44.4 percent of the dollar value of Ex-Im transactions went to Boeing alone!*

Some economic naivete: Messrs. Rubin and Weber write as if the resources spent by the Ex-Im Bank have no alternative uses.  Of course government subsidies to, oh let’s say, Boeing ‘create’ jobs in aircraft manufacturing.  Contrary to Messrs. Rubin’s and Weber’s mercantilist practice, however, these jobs cannot legitimately be counted as net increases in employment.  Resources diverted by the Ex-Im Bank to its corporate-welfare dependents would have been used in different other ways.  Nowhere do the authors give as much as a whiff of recognition to the products and jobs that, only because of the higher taxes necessary to fund Ex-Im Bank subsidies, never materialized.

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030

* Sallie James, “Time to X Out the Ex-Im Bank,” Cato Policy Analysis No. 47, July 6, 2011, Table 2.

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