Unmitigated Mercantilism.

• Author: HIGGS, ROBERT
• Position: Export-Import Bank

When my son was growing up, I lived in constant fear that one day he would come to me and ask, "Dad, why do we have an Export-Import Bank?" Fortunately for me, that day never came. If it had, I would have been compelled to make a painful choice: either to lie to him, telling him that we need the bank to promote U.S. exports and create jobs, or to offer him the bitter truth, telling him that the bank is just another contrivance to shift wealth from the politically weak and alienated to the politically strong and connected, while sanctifying the transfer with incantations of economic humbug.

James A. Harmon, the current chairman of the Export-Import Bank of the United States (Eximbank), has demonstrated that he possesses a high threshold for embarrassment. On the homepage of the Eximbank's Web site, he has declared for all the world to see, "Ex-Im Bank Is Vigorously Pursuing Its Mission To Support U.S. Exports and Sustain American Jobs By Offering U.S. Exporters The Loans, Guarantees And Insurance Products They Need To Compete In The Global Marketplace" (http://www.exim.gov). Well, okay, not everybody has had the opportunity to take Economics 101.

Someone who, one presumes, has mastered both elementary and advanced economics is U.S. Treasury Secretary Lawrence Summers. After all, Summers was awarded a Ph.D. in economics by Harvard University, and he taught at MIT before returning to Harvard to become the Nathaniel Ropes Professor of Political Economy in 1983 (American Economic Review 87, no. 6 [December 1997]: 498). It seems more than a little odd, therefore, that Summers has publicly praised the Eximbank for its stimulation of U.S. exports and its contribution to "our national economic defense." According to Summers, "The virtue of maintaining a strong and credible Export-Import Bank is that it can help to deter abusive subsidies by other countries" (Bloomberg News, May 16, 2000, posted on AOL, retrieved May 27, 2000). It makes you wonder: What are they teaching in the economics courses at Harvard these days?

U.S. exports have been running at nearly $700 billion annually in recent years (Council of Economic Advisers, Annual Report [Washington, D.C.: U.S. Government Printing Office, 2000], p. 422). According to the Eximbank's 1999 Annual Report, the bank "supported" in various ways U.S. exports valued at $16.7 billion in fiscal year 1999 (report posted at http://www.exim.gov, retrieved May 22, 2000). Therefore, exports supported by the...