In yesterday’s posting, we noted that we do not believe that
it is a proper function of government to be engaging in commercial
activity. We also noted, however, that
not everything is black and white.
Especially in today’s society, in which so many people lack knowledge of
fundamentals, such as basic principles of reason and justice, our institutions
have become flawed to the point of incomprehensibility. Many institutions no longer serve their
original function, or serve them in ways that have results the complete
opposite of what was intended.
The Ex-Im Bank of the United States is not in that bad a
shape. Arguably, it isn’t in bad shape
at all. It serves its purpose, and
appears to do so efficiently. The
“quarrel” we have with the institution is that we do not believe that
government should be carrying out that purpose.
Rather, government should be making it possible for private citizens,
individually or in free association with others, to be carrying out that
purpose — and all others directly related to meeting individual wants and
needs. That is, the job of government is
to ensure that we can do our jobs, not do them for us.
Okay, the Ex-Im Bank is doing a job that we believe should
be done by the private sector. In the
current state of society, however, the private sector isn’t doing it. This was also the justification for setting
up the Bank of North Dakota. Private
commercial banks were not adequately serving the needs of the citizens and
residents of the state, so the state stepped in as an expedient.
As an expedient, then, to address a clear need, the federal government
was justified in setting up and maintaining the Ex-Im Bank — but only if, at
the same time, it had taken steps to ensure that the private sector could take
over the function at the earliest possible date.
This was not done, but it’s part of a larger problem that
we’ll address in the next posting. What
we want to look at today is what the Ex-Im Bank does.
The Ex-Im Bank was established to provide financing so that
foreign buyers could obtain credit to purchase American goods. This is, frankly, the basic function of any
commercial or mercantile bank. If there
is insufficient savings available to provide credit for agriculture, industry,
or commerce, a commercial bank has the power to create money by accepting bills
of exchange and issuing promissory notes that can either back newly (re)issued
banknotes or newly created demand deposits.
A bank generates its revenue by accepting bills at a
discount, and charging interest on the loans it makes. In today’s flawed financial services industry,
the difference between a discount rate on a loan of future savings, and an
interest rate on past savings, is not well understood. This causes massive confusion, especially
among politicians and taxpayers who think that the Ex-Im Bank is taking taxpayer
money and lending it out at favorable rates as a form of “corporate welfare.”
We can easily dismiss the claim that the Ex-Im Bank is
engaged in corporate welfare by pointing out that the Ex-Im Bank creates the
money it lends out, it does not obtain the money from the taxpayer. Any commercial bank could do the same thing
but, as we noted above, commercial banks are either not doing it, or are not
doing it adequately.
This gets us back to the original question, should there be
an Ex-Im Bank of the United States? In
strictest theory, the answer is no . . . but there is a “but.”
The institution provides a necessary service. Further, the private sector seems either
unwilling or unable to provide that service, at least adequately.
To that we add the fact that the service can hardly be
called “objectively evil.” It’s the fact
that government is providing a service that the private sector should be
providing that is “evil,” not the service itself.
As we’ve seen in previous postings on other subjects, in
individual morality we (and, by extension, government that only gets its rights
from us) are permitted to do something as an expedient that has unintended evil
consequences if what we do is not objectively evil, and the anticipated good
outweighs the unintended evil. This is
the “principle of double effect.”
We cannot stop there, however. In social morality we are not permitted to
allow an unjust situation to continue if by organizing and restructuring our
institutions we can correct the underlying problem(s) that required us to adopt
a less than ideal expedient.
The bottom line? As
long as things are the way they are, the Ex-Im Bank of the United States should
be allowed to continue. We don’t like
the fact that the government is doing things the private sector should be
doing, but (all things considered) if the Ex-Im Bank were the worst offense of
the federal government, the entire country would be a lot better off. It’s a pretty theoretical point for most
people, the institution isn’t doing any harm, and is accomplishing a great deal
of good.
That being said, however, in the third and final posting of
this series we’ll show how (at least in outline) that the Ex-Im Bank could be
not eliminated, but reformed in a manner consistent with strict principles of
justice and the political theory of the Founders of the United States and the
Framers of the Constitution.