If you turn the telescope around to look through the small end rather than the big end, you can see the Export-Import Bank in proper perspective: it’s not so much state-sponsored capitalism as it is corporate-sponsored statecraft. What critics see as the bank’s faults are, in fact, equally its strengths. In a fallen world, there can be strategic value in crony capitalism.
Even normally pro-business, K-Street Republicans like new House Majority Leader Rep. Kevin McCarthy are prepared to crucify the bank on a cross of faux populism, and hardcore libertarians like Rep. Jeb Hensarling are out for blood. The Texas Republican, chairman of the House Financial Services Committee, is angry that “some of the richest, most politically connected companies in the world” have some of their sales backed by government “sweetheart deals.”
The conservative chattering classes are similarly excited by the prospect of claiming a scalp. Lawrence Kudlow argued that the bank is a “menace that actually damages American business competitiveness and reduces jobs at home.” Even the normally moderate Washington Post columnist Charles Lane admits that the libertarian critique of the Ex-Im Bank “has a lot going for it.” Lane cites a government study asserting that, when using “fair value accounting” – that is, being hard-headed about the chances of the bank’s loans being repaid by the shady and shaky governments that are its customers – the bank’s supposed $14 billion profit over the next decade is really a $2 billion loss, which U.S. taxpayers will have to cover.
But this green eyeshade view of the bank misses a lot of its political and strategic value. Take the case of Dubai, which, as Lane notes, got an Ex-Im-underwritten loan for $117 million to buy some Boeing 737s. Dubai and the rest of the United Arab Emirates aren’t exactly hurting for cash – they have the second largest economy in the Persian Gulf and have used their oil wealth to become a regional tourist attraction – and could certainly get private financing for the plane purchases. Indeed, Emirates Airlines has been growing like a weed and is a major international carrier; it’s even got its name on the plush new stadium of the London soccer powerhouse, Arsenal.
At the same time, the UAE is a critical U.S. ally in the struggle with al Qaeda and, more generally, in security matters throughout the Muslim world; in part because Dubai has become a regional entrepot, it is a critical “node” for a host of reasons. Just this spring, an al Qaeda cell was rounded up in Abu Dhabi. At the same time – and particularly as the Obama administration’s Middle East policy continues to unravel – the UAE, like the royal family next door in Saudi Arabia, sometimes hedges its bets.
In sum, even if the Emiratis get a “sweetheart deal” from Uncle Sugar’s Ex-Im Bank, it’s a baksheesh well spent. And it’s pretty likely that the UAE will fulfill the terms of the loan. This ain’t capitalism, it’s strategy.
Indeed, if there’s a problem with the Ex-Im Bank, it’s that it no longer finances actual arms sales. It used to, during the Cold War, to the tune of almost $500 million a year – serious money by 1960s standards. Alas, at the height of the Vietnam War, a headline-conscious Congress put an end to that, substituting a separate defense loan guarantee program that rarely, if ever, has been used.