D. Dowd Muska


The Poster Child for Crony Capitalism

June 23, 2011

Poor Boeing.

Poor, poor Boeing.

In April, the National Labor Relations Board (NLRB) challenged the corporation’s intention to manufacture 787s in right-to-work South Carolina. The feds, doing the bidding of International Association of Machinists and Aerospace Workers District Lodge No. 751, allege that Boeing’s Palmetto State move is a retaliation against the West Coast-based union for frequent strikes. The “unfair labor practice” is currently before an administrative law judge.

It almost goes without saying that the NLRB needs to disappear -- as do the federal statutes that permit “organized labor” to seize control of workplaces and “represent” workers who may not share unions’ priorities. Even in 2011, the right to freely associate should be inviolable. (Imagine a third party dictating the terms of your relationship with a spouse, friend, or business partner.)

The NLRB’s power grab is outrageous, and possibly improper under union law and regulations, which are stacked against employers. Even The New York Times admitted that it was “highly unusual for the federal government to seek to reverse a corporate decision as important as the location of plant.”

But as the apologists queue up, it’s time for a closer look at a company that might not deserve such a vigorous defense. Boeing still manufactures wondrous vehicles that cross continents and oceans in mere hours, but 15 years ago, the company went on a spending spree. It bought McDonnell Douglas, Rockwell International, and Hughes Space and Communications. By 2000, Boeing derived just 60.7 percent of its revenue from commercial aviation. A decade later, that share had dropped to 49.5 percent. Adjusted for inflation, airplane earnings in 2000 ($39.5 billion) were higher than in 2010 ($31.8 billion.)

Rockets, fighters, satellites, and missile-defense systems now comprise much of Boeing’s work. And the corporation often uses the federal largesse that flows its way in appallingly inept ways.

In 2005, a presidential space-transportation directive extended a longstanding sweetheart deal: “[Federal] payloads shall be launched on space launch vehicles manufactured in the United States.” Under the Evolved Expendable Launch Vehicle (EELV) program, United Launch Alliance, a Boeing-Lockheed Martin partnership, is essentially the sole supplier for Washington’s satellite-lofting needs. When EELV was conceived, significant commercial sales were seen as a method to drive launch costs down for public-sector “customers.” The demand never materialized, and aerospace giants prefer government work anyway, so the Pentagon provides ULA massive subsidies to stay in business.

Boeing’s also squandered money for the Department of Homeland Security. SBInet was a pilot program of the Secure Border Initiative, described by The Arizona Republic as “a high-tech way to deter, detect and apprehend illegal border-crossers using a surveillance network of ground sensors, video cameras, communication towers and computer software.” Regularly pilloried by Government Accountability Office reports -- delays, snafus, and cost overruns were the norm -- the Obama administration scrapped SBInet earlier this year. Cost to taxpayers: $1 billion.

Rest assured, Boeing continues to get plenty of pork for its planes. The U.S. Export-Import Bank, in the words of writer Tim Carney, guarantees “private bank loans to foreign buyers, who in turn buy U.S.-made goods.” Boeing is a major beneficiary. Last month Seattle Times aerospace reporter Dominic Gates wrote that in “a break with a long-standing practice,” the bank will start making loans for narrow-body jets. “We’re not going to sit back and let the Canadians provide export-credit-agency support [to Canadian manufacturer Bombardier] and not step up to Boeing,” huffed chairman and president Fred Hochberg.

Boeing plays the game of corporatism to perfection at the state and local levels, too. In 2001, it secured tens of millions to move its HQ from Seattle to Chicago. In 2003, it got billions to establish the first 787 production line in Washington State. A 2010 investigation by The (Charleston) Post and Courier found that the bag of goodies for coming to South Carolina “is worth more than $900 million, at least double the highest estimate first circulated by state officials.” A few days ago, Texas awarded a lucrative perk to a Boeing aircraft-maintenance shop in San Antonio -- tax appraisers are now “required to determine the market value of temporary production aircraft … to be 10 percent of the published list price.”

For pursuing a cost-cutting alternative -- and daring to defy dues-ravenous union bosses -- the NLRB has Boeing in its market-hating sights. But aside from the South Carolina smackdown, let’s not shed too many tears for the politically juiced, ethically challenged company. A virtuoso crony capitalist, Boeing’s chronic, costly raids on public treasuries must be stopped.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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