Boeing, having been caught selling thousands of not quite airworthy 737 MAX planes, is now vulnerable to a mountain of lost orders and lawsuits.
Many large corporations play the role of so-called national champions. They help their home countries maintain good jobs, technological leadership, and exports.
National champions include Toyota, Siemens, Samsung, Apple, Citigroup, Fiat, Airbus, Intel, Volkswagen, an increasing number of Chinese companies, and—until now—Boeing, the source of a huge U.S. trade surplus in commercial airliners that helps offset the rest of our massive trade deficit.
But what happens when a national champion crashes and burns? Nothing good. Boeing, having been caught selling thousands of not quite airworthy 737 MAX planes, is now vulnerable to a mountain of lost orders and lawsuits.
Why would customers choose to fly on a plane that has been demonstrated to be unsafe because of bad corporate cost-cutting decisions, cover-ups, and patches? This, in turn, will harm airlines that bought the 737 MAX. Get ready for their lawsuits.
Boeing will face losses, and conceivably a bankruptcy, as airlines shift orders to archrival Airbus. This is one of the reasons why the FAA was slow to admit that the 737 MAX was seriously impaired.
Here’s the larger point. The U.S., with its thoroughly messed-up trade policy, doesn’t like to admit that it relies on national champions. It defends them, only tacitly and indirectly—by subtle regulatory favoritism, by half-heartedly mounting trade cases against rivals deemed to be government subsidized, by military and R&D subsidies that the government denies have commercial spillovers, and very occasionally by claims of national security interests.
President Obama acted to bail out the domestic auto industry after the financial collapse, in recognition of its role as national champion. The massive sums spent on the bailout of the big banks was justified as saving our financial system. Not incidentally, it helped preserve Wall Street’s role as national champion. But in the U.S., these actions have been ad hoc, inconsistent, and incoherent.
Indeed, if you asked any of the economists who’ve lately served on the Council of Economic Advisers under past presidents, Republican and Democrat alike, if the U.S. had or needed national champions, the would stoutly deny it—because national champions violate our muddled national ideology of free trade. (Two exceptions were Laura Tyson and Joseph Stiglitz, who served on the Clinton council but who were outliers in a fervently free-trade administration.)
Other nations, meanwhile, promote their national champions. Airbus was a deliberately created national champion for Europe, to compete with Boeing.
The fact that Europe has better regulation helps assure that Airbus doesn’t suffer from the kind of lapse that could be severely damaging and possibly fatal to Boeing.
Boeing should not crash and burn (though its executives and captive regulators deserve to be strung up). America needs a strong aircraft industry, just as it needs other national champions. But the dogma of free trade über allesshould burn. Nobody else believes it, or practices it.
The dogma is not only killing us, but lending credibility to Donald Trump. Earlier this week, Elizabeth Warren finally laid out in detail what a smart trade and industrial policy would look like. Let’s hope it’s not too late for Boeing.
About the Author
Robert Kuttner is co-founder and co-editor of The American Prospect, and professor at Brandeis University's Heller School. His latest book is Can Democracy Survive Global Capitalism? In addition to writing for the Prospect, he writes for HuffPost, The Boston Globe, and The New York Review of Books.
Follow Bob at his site, robertkuttner.com, and on Twitter.