Airbusted?

As a historian of business and technology, I'm fascinated by the emerging battle between the U.S. and the European Union over subsidies to Boeing and Airbus, respectively. The E.U's trade commissioner is dead right to say that "election-year politics" is one reason for American negotiators' decision to charge the E.U. with illegal aid to Airbus.

Beyond that, though, the conflict is a huge window into an almost unknown facet of modern political economy: the abidingly collaborative ties between the nation-state and corporations. With few exceptions, the relationship between governments and businesses is viewed as a conflict which extends back to the origins of the modern state in the European Renaissance and still appears in myriad forms: tax policy, labor law, the military-industrial complex.

As that last example shows, though, the state-business relationship is only rarely and superficially a conflict. Both governments and corporations are giant, rich, and powerful organizations with deeply vested interests in maintaining their own specific (but overlapping) kinds of power. War is one area where states and businesses obviously collude; high-technology innovation is another. Making new things is so expensive and risky - and has been since the highest technology was a war galley - that only states can subsidize businesses which want to make those things. Most observers mention only money when they describe those subsidies, and there is a great deal of money flying around now. According to a 1992 agreement between the U.S. and the E.U, the maximum monetary subsidy to their respective big-plane builders is a whopping 33% of the cost of a new plane. As the two firms try to develop their respective jets (the Boeing 7E7 and the Airbus A350), that percentage is astronomical: $3 billion to Boeing for the 7E7 alone ($23 billion since 1992!).

This focus on money, though, obscures two other key issues. First, other forms of government support are far more subtle and arguably more important to companies. Stabilizing an economy, for instance, is an challenge which only governments have ever been able to meet, but it is the crucial accomplishment which permits enterprises to reliably make money and even to exist. (A state's use of political power to seize or destabilize an economy is, accordingly, anathema to corporate interests: witness Russia, where Putin's growing political power is predicated on the erosion of real corporate power like that of oil company Yukos.)

Second, looking only at money obscures the fact that the lines dividing companies from governments are themselves fairly obcure, and beg the question: where does a company start and a government end? On its face, it seems an odd question. Since various kinds of resources and power do flow back and forth between a state and a business, the two institutions must have some sort of separate existence. And they do. But the separateness is that of two symbiotic organisms (or two parasitic ones, with - I'd argue - the state as the host), not the separateness of two deer or - as the free-marketeers would have it - the separateness of a lion and a wildebeest. The contretemps between the U.S. and the E.U. over Boeing and Airbus demonstrates that there is really no such thing as a "private enterprise," at least in the big modern economies. Engaging in capitalism simply requires too much of too many things for businesses to exist apart from governmental support of one form or another. Imagining or assuming or pretending otherwise - as, apparently, both the U.S. and the E.U. may be doing here - is simply bad thinking, and likely to do more harm than good.