Promoting freedom, innovation, and growth

Connect with IPI

Receive news, research, and updates

July 2, 2014

With Ex-Im, Congress Should be Pro-Market, not Pro-Business

There’s nothing new about proponents of limited government opposing the often incestuous relationship between government and business. Being “pro-market” is not the same thing as being “pro-business.”

Pro-market means you believe in vigorous competition, with government providing a consistent rule of law, protecting property rights, applying regulations equally and predictably, and otherwise letting businesses go out and try to outcompete each other in the marketplace. It means believing in the freedom to succeed and to fail—allowing companies to try options like mergers, but not intervening if they fail, and certainly not protecting business models made obsolete by innovation.

And while the interests of business are often in sync with the low tax, minimal regulation, free-market philosophy, that’s not always the case.

Pro-business too often means companies getting handouts and protections from government, and using “jobs” to justify it all. We’re seeing a lot of examples of this lately, whether it’s direct loans and subsidies to speculative business interests like Solyndra, taxi companies using government to protect their cartel against the disruptive competition of Uber, auto dealers using state law to shield them from direct selling by Tesla, or the Export-Import Bank justifying its reauthorization by claiming that thousands of jobs depend on its continued existence.

The Ex-Im Bank is a glaring example of a program that splits the pro-business crowd from the free-market crowd. It provides subsidized, below-market financing for the politically connected, giving them an advantage over their competitors. Of course, by providing an advantage for some, Ex-Im also disadvantages others—which is why American companies like Delta Airlines have complained about Ex-Im just as vigorously as other companies have lobbied to see it reauthorized.

IPI has been critical of the Export-Import Bank all the way back to 2004, but most recently we wrote in the Dallas Morning News on June 18 that “by offering government-subsidized loans to the politically connected, Ex-Im creates moral hazard and market distortion, and opens the door to corruption and to the potential for another taxpayer bailout.”

The prospect of favors from the federal government opens the door to corruption because you have to go through someone to get to the goodies.

Five days after the Dallas Morning News piece, The Wall Street Journal broke the story that four Ex-Im Bank officials have been suspended or removed as part of an investigation into gifts and kickbacks, and attempts to “steer federal contracts to favored companies.” Sometimes it’s just too easy.

The Export-Import Bank would rank relatively low on most reformers’ lists of federal programs that should be eliminated. But, in the current political environment, it’s one of a precious few opportunities where we can strike a blow for free-markets and eliminate a source of crony capitalism, corruption and corporate welfare.

And for those who claim that Ex-Im provides financing only for deals that couldn’t otherwise be done, we have to ask: How could you possibly know that? The Export-Import Bank has been around since 1934. We don’t know what kind of financing would be available if it weren’t in the picture, but it’s high time that we found out.


  • TaxBytes-New

Copyright Institute for Policy Innovation 2018. All Rights Reserved Privacy Policy Contact IPI.

e-resources e-resources