The Clinton Administration has gone to amazing lengths to subsidize US exports with taxpayer money. No industry has profited from such policies more than the arms trade, and the king of arms trade subsidies is our very own Boeing.
From some two dozen major military contractors in 1992, the Clinton Administration’s intentional policy of encouraging military megamergers resulted in two giants (Boeing and Lockheed Martin), a couple of other major contractors fighting to stay alive (Raytheon, Northrop Grumman), and a host of subcontractors and niche companies incapable of competing for major contracts. It has also given Boeing and Lockheed Martin a stupefying amount of economic and political power, a complex web of subcontracting relationships with each other, and access to astonishing taxpayer largesse.
For instance: A 1997 Department of Defense audit turned up Boeing charging, and getting, $75.60 each for a small nose-wheel screw made by Boeing that the Air Force previously was able to procure for 57 cents. Even more remarkably, the audit laid no blame to Boeing for this rip-off, noting that the feds should have negotiated a better price; apparently 13,663% markups are an unstoppable natural force.
Boeing’s political clout in arms exports was in full force when it bought North American Rockwell and McDonnell Douglas in 1996. While the final bill is still being calculated, taxpayers will pay over $1 billion—including money for executive bonuses, plant closures, and layoffs—for merger costs in the $13.3 billion McDonnell Douglas deal. Meanwhile, thousands of US workers have been laid off as the company streamlined operations.
The combined forces of these companies give Boeing a dizzying postmerger export catalog of aerial death that it happily sells, often to repressive countries, resulting in package deals like the AH-64 Apache attack helicopter for Egypt and Israel; Harpoon antiship missiles for Brunei, Taiwan, Pakistan, Singapore, and Turkey; TA-4J Skyhawk attack aircraft for Argentina and Indonesia; Hughes/Rockwell “Hellfire” antitank missiles for Kuwait and United Arab Emirates; and on, and on.
Junkets and the Bank of Boeing
The Clinton Administration’s approach to the overseas arms trade was epitomized by the aggressive salesmanship and the frequent foreign junkets of his commerce secretary, Ron Brown. Both McDonnell Douglas (CEO Harry Stonecipher on a 1995 trip to India) and Rockwell (Pres. John Girotto, Russia in 1994) went for rides with Brown. The cozy relationship has continued with the new Boeing; Secretary of Defense William Perry, after resigning in January 1998, promptly joined Boeing’s board of directors. (Perry had been a leading advocate of the defense industry’s merger mania.) In the period from January 1997 to June 1998, Boeing poured $660,000 into the Democratic and Republican parties—a lot of money for politicians, but a pittance compared to the return Boeing gets on its investment in subsidies and the avoidance of sticky human rights issues.
The whole of Boeing, commercial and military, represents an economy larger than most Eastern European countries—roughly the 78th largest in the world, with annual sales of $50 billion. It is the largest US arms exporter; 70 percent of Boeing’s sales are foreign and an increasing share is military. As such, Boeing deploys a whole army of lobbyists and influence-peddlers to ensure that taxpayers underwrite its global marketing.
For years, the dissonance between national security interests, human rights concerns, and the corporate mandate to make money has been epitomized by Boeing’s advocacy of commercial relations with China and its dominance of US-China policy. The payoff? China is fully 10 percent of Boeing’s business. Not only markets but an increasing share of Boeing’s manufacturing takes place under the benevolent wing of the Peoples’ Liberation Army, where workers make $50 a month and never, ever unionize.
Boeing’s China connection has been greased by its relationship with the Export-Import Bank, a program that offers below-market loans for countries purchasing US goods. So many of the Ex-Im’s deals are on behalf of Boeing that the program is known by some in Congress as the “Bank of Boeing.” Before 1990, the Ex-Im was restricted to funding only civilian product; its expansion has neatly paralleled Boeing’s greater arms export profile.
Now high-tech deals with countries like China and Saudi Arabia are also notable for their theft of US jobs. Both countries—and many others—have begun to insist on “offset” deals, where the cost of their purchase is “offset” by making some part of the plane/helicopter/missile/tank in the purchasing country. The Saudis require a minimum of 25 percent offset for any arms deal. For the corporation, it’s a double win—they get both the sale and reduced labor costs. Boeing execs speak openly of wanting to “internationalize,” using foreign sources for parts, labor, and new factories. They have no particular loyalty to the Puget Sound or the government that is directly underwriting much of its income.
The use of foreign outsourcing was the central issue in the raucous 32,000-person Boeing machinists’ strike in 1995. It was for naught. The abysmal new contract was a major victory for Boeing, with nothing to prevent it from outsourcing many of the machinists’ jobs in the future.
Ultimately, Boeing points up the fundamental contradiction in the Clinton Administration’s arms export policy. It negates issues of human rights or national security in favor, supposedly, of creating jobs—but then, through offset programs and globalizing companies, exports those jobs right along with the planes and bombs. Crises like East Timor are rooted in our eagerness to sell weapons to anyone, even genocidal thugs. The beneficiaries are Third World militaries, Boeing itself, and the wealthy few who own it.
