Why the War Party Loves the Export-Import Bank

Militarism and "crony capitalism" are natural allies

by , June 30, 2014

The other day Rep. Brad Sherman (D-CA) was railing against "unilateral disarmament" and declaring "I haven’t heard that kind of talk since the days of George McGovern," or words to that effect. Was he talking about our nuclear policy, or perhaps the revived war in Iraq?

Nope. He was on the John Stossel show defending the Export-Import Bank, and his attack on "McGovernism" was in reference to efforts aiming at its abolition.

The Ex-Im Bank’s alleged mission is to promote foreign trade: it does so primarily by loaning money directly to foreign governments (or foreign-owned companies) to enable them to buy American products, and by insuring – guaranteeing – loans. Established by Franklin Roosevelt’s executive order in 1934 specifically to subsidize trade with the Soviet Union, and later Cuba, in both cases the administration sought to use financial leverage to advance its foreign policy goals: lending support to the Soviet Union and the Cuban dictatorship of Fulgencio Batista.

Over the years the agency expanded – like all government programs – and eventually became what amounts to a massive slush fund for the politically connected corporate elite. Among its biggest "customers" are Boeing, Lockheed Martin, and Halliburton – all, not coincidentally, charter members of what Dwight Eisenhower deemed the "military-industrial complex."

I point out this confluence because until recently the Ex-Im Bank was a major fulcrum for arms deals involving US allies unable to afford the expensive arms purchases involved in fulfilling their duties as instruments of US foreign policy. And in the face of a libertarian offensive in Congress against Ex-Im’s reauthorization, the War Party is coming out in favor of not only keeping but expanding it to revive its former role as a clearinghouse for arms deals and loans to foreign despots.

In a piece for the American Enterprise Institute, that bastion of "free market" thinking, defense analyst Tom Donnelly – formerly chief of strategic communications at Lockheed and a big honcho over at Bill Kristol’s Project for a New American Century – starts out his pitch for keeping Ex-Im with a telling phrase: "Corporate welfare in the defense of liberty is no vice." Mourning the defeat of House GOP majority leader Eric Cantor – one of the Bank’s biggest shills – and bemoaning the stated intent of the new Leader Rep. Kevin McCarthy to oppose reauthorization, he writes:

"The Ex-Im Bank’s critics live in the world of homo economicus. …But in the world as we know it – that is, the one where humans aspire to be powerful even more than they aspire to be rich, and military power, not wealth, is still the ultima ratio regum, the United States ought not to kill the Ex-Im Bank but to restore its previous and larger scope. The problem with the bank is not that it underwrites commercial sales, but that it no longer backs the sales of arms."

Crony capitalism is good because it enhances US military power and buttresses the Empire. It doesn’t matter that the Bank is choosing winners and creating losers – these latter often American companies, like Delta Airlines. All that matters to neocons like Donnelly is: does a given program enable America to project its military power worldwide? When neocon godfather Irving Kristol gave "two cheers for capitalism," he was giving voice to a central axiom of neoconservative thought – and Donnelly’s flaccid defense of Ex-Im is that sentiment put into practice. The free market is fine, as far as it goes, say the neocons, but real power is military power – and that’s what ultimately counts.

Donnelly’s case for the Bank is echoed in spirit by Rep. Sherman: for him, trade relations are the same thing as military conflicts, minus the shooting. Collectivist governments like China’s and the EU pour money into state-owned firms, which then compete "unfairly" with American exporters: to abolish Ex-Im, as libertarians in Congress are demanding, is therefore the equivalent of "unilateral disarmament."

This is economic nonsense: Ex-Im doesn’t "create jobs," as its defenders claim. It simply takes wealth from those who might invest it in other enterprises, or engage in job-creating spending at home, and hands it over to big corporations like Boeing and Lockheed. There is no wealth-creation involved in this process: it is simply a massive transfer of wealth to politically-connected businesses.

Historically, as Donnelly points out, the Bank has been a weapon in America’s arsenal, albeit one that often operated well beneath the radar of most Americans. During the run-up to World War II, FDR utilized the bank to support the Soviets as well as to counter supposedly burgeoning German influence in Latin America and Japanese economic domination of China. The Bank was used to buy up the notes of foreign governments, such as Nicaragua and Mexico, in order to finance large government projects – and keep those regimes tied to Washington both economically and politically.

During the cold war, the Bank became a way for the executive branch to get around restrictions on foreign aid, and for this it came under fire from both the right and the left. The right objected to loans for the purpose of building plants in Soviet bloc countries: the antiwar left, having caught Ex-Im in an effort to undercut congressional restrictions on military procurement and assistance during the Vietnam war, was also questioning the Bank’s rationale. A growing anti-interventionist sentiment in Congress during those years was given voice by both liberals and conservatives, who pointed out that the Bank was often in the position of funding both sides of a conflict: e.g. India and Pakistan.

The War Party would dearly love to deploy Ex-Im in their campaign to extend the frontiers of the Empire, and its expiration would be a major blow to their expansive ambitions. Under Donnelly’s proposal, which would eliminate the prohibition on financing arms sales, essentially bankrupt countries like Ukraine, a front-line state in Washington’s new cold war against Russia, would be able to garner much more than the mere $1 billion in "foreign aid" they’ve so far finagled. US arms merchants could apply for financing from Ex-Im, and American taxpayers would be on the hook for many billions more. This beats going to a private bank and asking for a loan: Ukraine is hardly a good risk, and whatever terms Lockheed or whomever could get from them entail high interest rates. Uncle Sam, on the other hand, is bound to be much more generous.

As one of the more brazen examples of "crony capitalism," the Ex-Im Bank came under fire during the primary campaign that laid Majority Leader Cantor low. Dave Brat, Cantor’s opponent, made Cantor’s fulsome support for the Bank a major campaign theme, emphasizing its character as a massive transfer of wealth from the middle class to the politically-connected plutocracy.

Cantor is also a major pillar of the GOP Establishment when it comes to foreign policy and the national security state: he has supported every US military adventure, from Iraq to arming the Syrian rebels, since coming to Congress. Syria, he declared, is "low-hanging fruit" – which Washington should grab at the first opportunity.

Brat, on the other hand, opposes military action without an official declaration of war by Congress: he opposes all foreign aid, and came out strongly against the National Security Agency’s spying on Americans – a practice Cantor has no problem with. With lines of demarcation being drawn between Establishment pols like the former Majority Leader and insurgent populists of Brat’s type, the Ex-Im Bank is a very visible star in a whole constellation of interconnected issues.

And so while the Ex-Im Bank may seem like a purely domestic issue, only tangentially related to our foreign policy of global intervention, the reality is that the two issues are historically and conceptually connected. Aside from Ex-Im’s potential usefulness as a way to covertly fund military actions the US public may find problematic – as it did during the Vietnam era – there is a certain ideological consistency in hawks like Cantor and Donnelly serving as the Bank’s most vocal champions. Ideologues of Donnelly’s cast are worshippers of pure Power: that is, political power, the ability of governments to coerce and ultimately murder those foolish enough to defy them. An empire, by its very nature, is dedicated to the principle of putting politics in command, and is inherently hostile to "Homo economicus," as Donnelly disdainfully phrases it.

Ultima ratio regum – "the last argument of kings" – was etched on the French army’s cannons during the reign of Louis XIV, and truly the neocons are the Bourbons of our era. Having learned nothing from the disasters of the past decade, they haven’t forgotten how useful Ex-Im was during the cold war and yearn for a return to the days when it was a pliable instrument in the hands of US empire-builders.

Donnelly tells us corporate welfare in the defense of liberty the Empire is "no vice" – and here is yet another confirmation that maintaining and strengthening the "Welfare-Warfare State," the felicitous phrase Murray Rothbard coined to describe the system we suffer under, is what the Washington consensus is all about.

NOTES IN THE MARGIN

Editorial note: An earlier version of this piece incorrectly had Rep. Brad Sherman representing Washington State: he is a California congressman. Also, I got Batista’s first name wrong: it’s Fulgencio, not Juan.

You can check out my Twitter feed by going here. But please note that my tweets are sometimes deliberately provocative, often made in jest, and largely consist of me thinking out loud.

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You can buy An Enemy of the State: The Life of Murray N. Rothbard (Prometheus Books, 2000), my biography of the great libertarian thinker, here.

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