Re: Subsidies ...

From:         khowie@accessone.com (Keith Howie)
Organization: AccessOne
Date:         30 Mar 96 16:01:07 
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Dale Tuttle <dale.tuttle@ciesin.org> wrote:

>Ray Carini wrote:

>> Boeing used it's own money to develop and build the
>> Dash 80.  Three weeks AFTER it's first flight, the
>> Air Force ordered 29 tanker versions designated as
>> the KC-135

>Yes, but the Air Force order "validated" the design for other
>potential users

What's your point? At the time Boeing committed its own funds, which
at that time represented a significant portion of the company's net
worth, to build the Dash 80, there was no assurance of any orders from
the Air Force. This is not to say that Boeing didn't hope for some, or
that the Air Force's needs weren't considered in the design, but there
were certainly no guarantees. After the airplane flew, the Air Force
apparently liked what it saw and decided to buy some.  If this is what
you mean by "validating the design for other potential users," so
what? Does it take anything away from what was a great accomplishment?

>as well as provided *lots* of cash for further development.

Please tell us what you mean by this. The Air Force very likely did
pay for development of some features that it alone would find useful.
(There's not a very big commercial market for tanker planes that can
refuel other aircraft while airborne.)

>Boeing clearly did, and continues to, solicit support
>from the government (rent-seeking behavior).

Again, please elaborate on what you mean. Are you talking financial
assistance or what? (What is "rent-seeking behavior," anyway? This
must be some academic economist's jargon that got invented sometime
after I took Econ 101 longer ago than I would like to admit.) Any
large company, particularly one like Boeing, which does so much of its
business internationally, will (quite properly) solicit support from
its government for a variety of entirely legitimate reasons. Any
government in the world will provide some reasonable level of support
to its domestic industries in the conduct of their day-to-day
business.

>Its not that the government developed the dash 80, government
>dollars clearly assisted its development and success.

Once again, the government did not, repeat *not*, provide material
assistance in the development of the Dash 80. Read any book on the
history of commercial aviation if you don't believe me. If you want to
argue that Boeing benefitted from the profits earned and experience
gained in building B-47's and B-52's, or that the government, by
buying KC-135's, helped Boeing to maintain overall profitability
during some otherwise lean years, or that the KC-135 purchases
provided Boeing with a larger production base than it would otherwise
have had, I won't disagree. But what's wrong with any of this?

>As per more recent government
>intervention, the U.S. government played a crucial role in securing
>orders for Boeing (and MDD) from Saudia Arabia and other Middle
>Eastern states (what states and the exact orders I don't recall).

I think there is a real question as to just how crucial the
government's role really was in these sales. It was clearly in the
Clinton administration's best interests to make itself appear as
important as it could be made to look, and the press was very helpful
in this effort. It also was very politically correct for the CEO's of
Boeing and MDD to allow themselves to be photographed with Clinton
when he announced the sales. And it's not as if all the European
governments were asleep during all this. The real issue is: Would the
sales have taken place the way they did without the government's
involvement? I don't know the answer to this one.

>Subsidies are often difficult to characterize.  Few subsidies are
>like what we see in the agricultural world (direct cash payments for
>certain behavior).  But, military orders, political influence, and
>tax-breaks are all forms of subsidization.  Boeing clearly does not
>receive out-right cash to develop aircraft.  But the government
>helps sell its planes overseas (among other things)...which is a
>subsidy.

By your definition, any activity a government might engage in to
assist a domestic industry could be called a subsidy. The term then
becomes so broad as to be meaningless.

You really do need to provide more factual evidence when you make the
kinds of statements you made in this posting, rather than relying on
innuendo and vague suggestions of improper practices or behavior. (For
example, what did you have in mind when you used the parenthetical
"among other things" in your last paragraph?)

Keith