Linking to some research by my intrepid Mercatus Center colleague Veronique de Rugy, George Will rightly criticizes that great geyser of cronyism, the U.S. Export-Import (“Boeing”) Bank. Three slices:
Ex-Im has been reauthorized 17 times, despite evidence that it is unnecessary: Between 2015 and 2019, when its board was three members short of a quorum, it was unable to approve guarantees of loans larger than $10 million. From 2014 to 2018, the portion of U.S. exports the bank subsidized fell from not much (less than 2 percent) to minuscule (0.3 percent) — yet U.S. exports increased.
Ex-Im is known as “Boeing’s Bank.” From 2007 through 2017, Boeing received 34 percent of the bank’s assistance. During those 10 years, allsmall-business loan guarantees amounted to 22 percent of the bank’s assistance.
For many years, the world has been awash in savings, and therefore in cheap loans. Historically low interest rates make Ex-Im even less necessary than it once was — not that it was ever a necessity.
So, first Ex-Im fabricates a vast mandate to improvise industrial policy — “rebuilding” manufacturing’s 11.4 percent of the economy. (Presumably, Ex-Im will rely on its clairvoyance about future markets for future goods and services.) Next, the bank construes its mandate to “facilitate” exports to include financing the needs of “suppliers to exporters.” But, Ex-Im says, do not worry about overreach: Ex-Im’s financing must have a “reasoned and articulated” nexus to exports, as determined by: itself.
When government resorts to opaque terminology, it is rarely straining for clarity. Consider “additionality,” which Ex-Im says “refers to the existence of reason(s) why a transaction would likely not go forward without EXIM’s support.” The bank decides there are “gaps” between financing that the private sector is willing or able to provide for a project and what the project requires. Or what the private borrower prefers to get from Ex-Im. The bank says its “gap analysis” includes “anecdotal, aggregated information directly from multiple wide-ranging one-on-one interviews with senior market participants.” That is, from potential recipients of Ex-Im benefits.
[Sen. Pat] Toomey wonders: Why, exactly, do private lenders need to be supplemented? Why does government need to encourage private lenders to do something that, absent such encouragement, prudence tells them to not do? By opposing Ex-Im’s aggrandizement, Toomey is doing as James Madison directed: “It will not be denied, that power is of an encroaching nature, and that it ought to be effectually restrained from passing the limits assigned to it.”
Stan Veuger – to put it mildly – is unimpressed with Oren Cass’s case for protectionism. Here’s Stan’s conclusion:
First, on substance: It is worrisome that the national-conservative movement is now so isolated from America’s mainstream intellectual life that its leading thinkers struggle with relatively well-known facts about economics and the economy in the manner highlighted here.
Second, the discovery Mr. Cass thought he had made led him to consider a potential “global conspiracy.” What he thought he had discovered was, so he claimed, “enough to send one searching for the meeting minutes from whichever Illuminati subcommittee had jurisdiction.” This is not a normal response. The normal response would have been to assume he must be missing something, and to read a book on the intellectual history of free trade like Doug Irwin’s Against the Tide (which includes the full quotation Mr. Cass believes to have uncovered, for what it’s worth), or to reach out to someone with advanced training in economics. It is not a normal response, but it is an all too common one.
DBx: While I agree with nearly all that Stan writes in the above link (although he doesn’t sufficiently qualify his mention of the theory of the optimum tariff) – and while I myself have been, and continue to be, highly critical of Oren Cass’s argument against free trade and for industrial policy – Oren and his colleagues at American Compass deserve much credit for publishing Stan’s harsh critique. These days, such generosity, civil-mindedness, and scientific integrity are too rare. I tip my hat to Oren and his colleagues.
Samuel Gregg continues eloquently to make the case for economic freedom. Two slices [second link added]:
This question of causality is a perennial problem with industrial policy. As a 1993 World Bank assessing industrial policy’s contribution to the East Asian economic miracle famously stated: “It is very difficult to establish statistical links between growth and a specific intervention and even more difficult to establish causality. Because we cannot know what would have happened in the absence of a specific [industrial] policy, it is very difficult to test whether interventions increased growth rates.”
Compounding the problem with [Aaron] Renn’s arguments is that, like many industrial policy advocates, he conflates defense policy and industrial policy. Industrial policy is specifically concerned with making selective interventions into the economy with the goal of realizing a different set of outcomes than would otherwise be delivered by markets. But this is not the objective of military R&D. Governments promote such research to help secure national security. There may be spillover effects, but neither these nor the uses to which they might be put can be known in advance.
These facts point to a hard conclusion: that if entrepreneurship and competition are to play the role that I think they should in America’s economy, the prerequisite is, as [Iain] Murray puts it, “nothing less than a wholesale program aimed at eliminating the administrative state as it exists today.”
Therein lies an economic project worthy of conservatives, and one with immense potential to bolster America’s common good. Yes, the modern regulatory state has been around a long time and it seems only to grow. It is also bolstered by the many Americans—government employees, crony businesses, lobbyists, legislators etc.—whose livelihoods and power depend significantly upon the administrative state remaining firmly in place.
The Finance Committee Republicans are also correct on the economics. Corporate taxes, in addition to being costly to collect, are bad for the economy. According to an International Monetary Fund study, 45% to 75% of the burden of corporate taxes is recouped through lower employee wages. Sales, income and property taxes are better ways to pay for government because they are easier to collect and they cause less to distortions to wealth-creating economic choices.
It gets worse. Public companies already have to keep two sets of books, one for the Securities and Exchange Commission and one for the Internal Revenue Service. The first tells shareholders how well the business is doing; the second tells the government how much is owed and to whom. The new global tax would require multinationals to keep a third set of books to avoid being the target of tax raids by, say, France. The agreement would create many new jobs for accountants and lawyers. It would also force major companies to become think tanks as they scramble for statistics on consumer spending to estimate final sales in each place where their products are sold.
While it’s understandable that Rory Little wants to defend his students at UC Hastings (“Open Minds, Loud Voices and Cancel Culture,” Letters, March 28), he ends up twisted in logical knots. If an event that can’t be conducted because of incessant disruption doesn’t count as a cancellation, nothing does. It may well be that, “after the intermittent chanting and speaking, everyone quietly and peacefully left the room,” but that was only after I had departed—because the room’s lunch-hour reservation expired ahead of an afternoon class.
That’s the crux of the matter: This was not some speaker’s corner where opposing activists face off, but a space duly reserved by a student organization for an invited speaker (and faculty commentator) to discuss issues that are plainly germane to a law school’s mission. Constitutional law may well be “murky, inconsistent and unsettled” in many areas, but neither the First Amendment nor UC Hastings’s policies countenance a heckler’s veto. And if shouting down were protected speech, opponents of critical race theory and other progressive causes could likewise cancel events.
Moreover, Prof. Little contributed to my being silenced. He rapped the table and chanted along. He is recorded on video saying he was “all for it,” and then signed a letter reiterating support for the disrupters because “statements of commitment to diversity and inclusion ring hollow when salient issues of racial equity are ignored or discounted in the service of prioritizing the ideal of free speech.”
While I’m heartened that “the college is now engaged in constructive, if also unsettling, discussions,” that has nothing to do with me. I would have happily engaged the “message of discontent from a group of neglected and undervalued members of the community”—my tweet was racist only to someone misreading it in bad faith—but the disrupters didn’t want to hear it and, given Mr. Little’s description of the Hastings dynamic, they are being rewarded for their actions.
“I too yearn for universal justice,” wrote Zora Neale Hurston in her autobiography, Dust Tracks on a Road, “but how to bring it about is another thing.” The black novelist’s remarks prefaced a passage where she grappled with the historical legacy of slavery in the African-American experience. Perhaps unexpectedly, Hurston informed her readers that she had “no intention of wasting my time beating on old graves with a club.”
Hurston did not aim to bury an ugly past but to search for historical understanding. Her 1927 interview with Cudjoe Lewis, among the last living survivors of the 1860 voyage of the slave ship Clotilda, contains an invaluable eyewitness account of the middle passage as told by one of its victims. Yet Hurston saw only absurdity in trying to find justice by bludgeoning the past for its sins. “While I have a handkerchief over my eyes crying over the landing of the first slaves in 1619,” she continued, “I might miss something swell that is going on in” the present day.
Hurston’s writings present an intriguing foil to The New York Times‘ 1619 Project, which the newspaper recently expanded into a book-length volume. As its subtitle announces, the book aims to cultivate a “new origin story” of the United States where the turmoil and strife of the past are infused into a living present as tools for attaining a particular vision of justice. Indeed, it restores The 1619 Project’s original aim of displacing the “mythology” of 1776 “to reframe the country’s history, understanding 1619 as our true founding.” This passage was quietly deleted from The New York Times‘ website in early 2020 just as the embattled journalistic venture was making a bid for a Pulitzer Prize. After a brief foray into self-revisionism in which she denied ever making such a claim, editor Nikole Hannah-Jones has now apparently brought this objective back to the forefront of The 1619 Project.
Vacillating claims about The 1619 Project’s purpose have come to typify Hannah-Jones’ argumentation. In similar fashion, she selectively describes the project as a work either of journalism or of scholarly history, as needed. Yet as the stealth editing of the “true founding” passage revealed, these pivots are often haphazardly executed. So too is her attempt to claim the mantle of Hurston. In a recent public spat with Andrew Sullivan, Hannah-Jones accused the British political commentator of “ignorance” for suggesting that “Zora Neale Hurston’s work sits in opposition to mine.” She was apparently unaware that Dust Tracks on a Road anticipated and rejected the premise of The 1619 Project eight decades prior to its publication.
Is liberty, in Smith’s time and ours, usual or expected? Yes and no. We will come back to the “yes” in our next essay, but here we highlight the “no.” Arbitrary political arrangements that yield economic and religious monopolies, burdensome tax schemes and regulations, restrictions on the freedom of movement and expression are the norm. We might say that the unnaturalness of liberty is presupposed by Smith’s entire project. Why write a book like The Wealth of Nations if one believes liberty to be a natural tendency in political affairs?