Newsgroups: talk.politics.misc
From: mfriedma@uucp (Michael Friedman)
Subject: Re: Concentration of Wealth (Was: Is this a socialist county?)
Organization: Oracle Corporation
Date: Thu, 27 Aug 1992 21:17:39 GMT
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In article <81006@bcsaic.boeing.com> rwojcik@bcsaic.boeing.com (Rick Wojcik) writes:
>In article 18274@oracle.us.oracle.com, mfriedma@uucp (Michael Friedman) writes:

>>>Other countries 
>>>have funding agencies that pour money into industrial R&D on the grounds that 
>>>market forces tend to be very shortsighted. 

>>Actually, Richard, if anyon doesn't understand tings I think it's you.
>>In particular, why do you think that market forces tend to be very
>>shortsighted?  

>Companies must operate at a profit.  If they are not making enough money, then
>they must cut expenses.  In the short term, it is almost always cheap and easy
>to cut R&D, something which has been a rather notable trend in recent times in
>the US.  When governments subsidize such activities, they are fairly immune to
>recessionary cuts.  

That's nice, Rick, but have you noticed that you have just proved that
the market is shortsighted by assuming that the market is
shortsighted?  Try again.

>>When you answer this question, please take into account the fact that
>>companies happily trade 30 year bonds on the world financial markets,
>>build office buildings that will not pay for themselves for fifty
>>years, plant trees that will not be harvested for thirty years, and
>>buy and sell 99 year leases.

>I don't know if "happily" is quite the word for it.  :-)

What word would you use?  After all, if they weren't happy why would
they do it?  There are other places to put their money.

>Such activities do
>not, however, qualify as R&D, which is the type of investment we were talking 
>about.  

So you seem to be claiming that companies are only shortsighted with
R&D but not with other things.  Seems bizarre.  Mind explaining why
you believe this?

>It is one thing to project the need for buggy whip factories into the
>20th century.  It is quite another to risk investing in a new, uncertain 
>technology.

Not really.  After all, investing in buggy whips back in 1900 wold
have been pretty risky.

Anyway, I have provided real examples demonstating that business are
not shortsighted.  Can you give any evidence whatsoever - besides
blind faith - to show that business are shortsighted when it comes to R&D?

>>...Airbus may be approaching profitability, but it sure
>>isn't profitable yet.  Meanwhile hundreds of millions of dollars have
>>been poured own a rat hole.

>The "rat hole" you refer to has managed to surpass all other aircraft manu-
>facturers except Boeing, which is its only real challenger left. 

So what?  How much money is it worth to do that?  Should we pump a few
hundred billion into a new aircraft manufacturer to surpass Airbus and
Boeing?  Is the cost irrelevant?

>You are
>technically wrong about profitability.  Airbus just announced its first profit
>not long ago.

Note that that profit did not count government subsidies as costs.
It's easy to make a profit if you cook the books.

>but the company recently managed to lease A320's to United, thus
>replacing 737 sales that would normally have gone to Boeing.  Airbus went for
>a risky deal in which they leased rather than sold.  But, hey, is it that big
>a risk for a company that can fall back on government funding for its opera-
>ting expenses?

It isn't risky for the company.  But is it a good deal for the
government?  They could also have bought lottery tickets.  After all,
if they lost the governmnet would subsidize them, but if they won they
would win big.

>>>Japanese companies receive similar funding, but they only have to
>>>prove that the R&D meets industry needs.

>>Why should industry get welfare?

>Why should I answer your questions when you won't answer mine?  

I do.

>Recall that I
>asked which company you would rather invest in--one that used your investment
>to pay for risky, expensive R&D projects or one that got government funding to
>take such risks? 

You didn't ask me that.  Must have been someone esle.

But I'll answer it now...  I'd invest in the one with government
funding and I would say thankyou very nicely to the people who were
subsidizing my lifestyle by subsidizing my investments.  It sould
still be a very stupid thing for the government to do.

>You
>don't regard big fancy military projects as "welfare". 

Of course not.  You're buying something.  It's no more welfare thann
having the government buy an office building for its own use.  

>I don't know your 
>position on the S&L bailout, but there are plenty of conservatives who didn't
>think of that as "industry welfare". 

My position on the S&L bailout is that the USG made a committment to
insure deposits and now we have to do it.  I also think that we should
eliminate the FDIC and the SLIC so it can never happen again.  What's
your position?

>As a taxpayer, you've been paying such
>R&D subsidies, filtered through the military, for decades.  Now that the
>military excuse for them is declining, you can't see the need for them.

I payed for R&D subsidies for military technology because we were
purchasing items for which we perceived a need - bigger and better
ways to kill people.  If the government suddenly perceives a desperate
need for a high-speed rail link from NY to DC then money to build the
technology for highspeed trains will make sense.  If we don't actually
need the rail link then spending money on it just to have the
technology is stupid.

>>Ever hear of GATT and NAFTA?  We are convincing them.  On GATT the
>>remaining roadblocks are government subsidies of agriculture, not
>>commerical R&D.

>Those are certainly both worthy efforts.  But you are simply deluding yourself
>if you think that the US government has the power to get foreign governments 
>let their long-term business investments die.  

Well, Rick, it's a lot simpler than that.  The foreign governments
just have to stop subsideis in the future.  And you are deluding
yourself if you think they aren't agreeing to this.  Check out the
GATT negotiations.

>Since Airbus has achieved a 
>healthy piece of market share, Europe can make concessions on operating subsi-
>dies.  But foreign governments are not going to give up their R&D investments
>(a.k.a. subsidies).

Well, Rick, if that's your religion, that's nice.  On the other hand,
if this is something you can think rationally about I suggest you
check out what foreign governments have already agreed to in the
latest GATT round.
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