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Quotation of the Day…

… is from pages 146-147 of Robert Higgs’s Winter 2001 Independent Review article, “Unmitigated Mercantilism,” as it is reprinted in the excellent 2004 collection of some of Bob’s essays, Against Leviathan:

Gather round, children, and I will tell you in words you all can understand how the Eximbank works.  (1) The government takes money from American taxpayers and gives it to the Eximbank.  (2) The Eximbank gives the money to institutions that lend to the Chinese and Saudi Arabian companies that buy airplanes from the Boeing Company.  (3) Boeing (maybe) sells a few more airplanes than it would have sold in the absence of the export-credit subsidies.  (4) A few people work at the Boeing Company who otherwise would have worked elsewhere.  (5) Boeing shareholders earn a little more income, which otherwise would have been earned (plus a bit more) by other producers.  (6) The total amount of wealth created in the United States – and in the world as a whole – is less than it would have been had these financial shenanigans never taken place.  (You kids will understand that last point after you take Economics 101.)

Naturally, any such economically absurd and politically predatory subsidy scheme has a high probability of having been created during the New Deal, and the Eximbank is no exception.  Back in 1934, Franklin D. Roosevelt was seeking a way to finance U.S. exports to the Soviet Union.  Private financiers, cognizant that the Communists had repudiated debts owed by the preceding regime, were unwilling to throw good money after bad.  The New Dealers, on the other hand, relished such opportunities, and, as usual, well-connected business interests worked assiduously to get their snouts under the Treasury’s tent.


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