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Posted by on Dec 26, 2019 in Budget, Business, Economy | 0 comments

Government Subsidies, Good or Bad

America has been having its lunch eaten by China and Europe because of the government’s refusal to adequately subsidize our industries. The Chinese state subsidizes virtually every commercial venture that it does not directly own, including its banks. The state (Communist Party) can then direct the banks to lend money to start-ups or industries that it wants to expand, hoping to gain world domination in artificial intelligence and advanced technology. The Communist leadership realizes that some innovative industries are bound to fail and go bankrupt, defaulting on their loans. But they do not care. As long as some are successful and bolster the progress of the economy, they can deal with the bad loans. The government also lends money through its banks to allow Chinese corporate entities to buy up promising technology and industrial companies abroad, stealing and using technology developed in other nations. If some loans go belly-up, so what.

Europe has been subsidizing the development and manufacture of Airbus since its initiation. Individual nations also provide subsidies to industries the governments believe will enhance the national interest because of security issues or because of potential sales to other nations. So far however, their technology has not reached a level where it can challenge Silicon Valley. In fact, prior to Trump attaining office, many of the most adept innovators and technology gurus in Europe hoped to immigrate to the United States to work in Silicon Valley or other technology hubs. But Trump has made the United States less appealing.

America does not subsidize Boeing or Lockheed-Martin but gives them expensive military contracts that allows them to develop new aviation technology. The same happens with Raytheon, United Technologies and other companies that work for the military. So in a way, it does subsidize some of our corporations. But in the past, huge contracts were given to universities and technology companies to develop innovative ideas that would help the military and the economy. Under Trump, research and development funds have been cut drastically with the belief that private companies would take up the slack in basic research. That is just not going to happen. These companies want to make money for their executives and stockholders and are not going to invest in concepts that may take years to reach fruition. The US invented the Internet and so much of the innovative technology that is now in use around the world. But without adequate funding coming from the government, China has already taken the lead from us in artificial intelligence and will soon surpass us in many areas of technology. The government says that it is not their job to pick winners and losers when they hand out loans to businesses. Our strength has always been our technology and innovation. We must continue to try and attract the best innovators outside of America and have the best ones in America work on promising technology. If we lose our lead in technology to China, they will rule the economic world. The government must increase funding for R and D and give out subsidies to any company that has promising technology or ideas. The WTO is on its way out and will not be able to stop us.

Resurrecting Democracy www.robertlevinebooks.com