June 23, 2014–It’s been amusing watching the internecine warfare inside the Republican Party about the Export-Import Bank. The people who have tended to benefit from this bank’s loans have been CEOs in charge of large companies such as Boeing, Caterpiller and General Electric, who tend to support Republican causes. Now here come the Tea Party crowd, led by Rep. Kevin McCarthy, the next House majority leader, who say they want to let reauthorization of the Bank expire this fall. He and others on the conservative side of the Republican spectrum say the government shouldn’t be picking winners and losers, and otherwise engaging in Crony Capitalism.
But everyone is missing the real point. The point is that the Ex-Im bank is not doing what it should be doing, i.e. encouraging small and medium sized American companies to export and start going global. I’ve spoken with Republican CEOs of companies who are exporting and they believe there is a legitimate reason why the U.S. government should be promoting these exports because of the broad-wealth creating effect they have. Supporting exports falls into the same category as declaring war on cancer or landing a man on the moon. The challenges are so large that the vast majority of private sector actors are not willing to take the risks. But government can and, in so doing, create a broad public good.
In my book, The Next American Economy, I traveled to North Carolina to write about how that state, in cooperation with the U.S. Department of Commerce and Small Business Administration, seeks to spur exports from small and medium sized companies. The Ex-Im bank was nowhere to be seen. Their nearest representative was in New York City! Incredible but true.
So it’s no wonder that the Ex-Im Bank has drifted to supporting big companies who can afford to send people to Washington or New York. What should happen is that the Ex-Im Bank’s functions get folded in with those of the Department of Commerce and SBA. The ideal goal, as seen in Germany and Japan, is for government to identify potential exporters, connect them with possible customers at trade fairs and the like, and then be in position to extend a modest amount of working capital or other financial incentives to help them get started. Commerce and SBA have their own vast bureaucracies and are hardly perfect, but they are much closer to where the action is. In my reporting on exports over the past 25 years, in more than a dozen states, I have met very effective representatives from Commerce and the SBA but never from the Ex-Im Bank. Its resources should be re-directed to where they are most needed–as the grassroots level. That would go a long way toward clarifying the blurred lines between these different organizations that act as a disincentive for the CEOs of SME companies.
