Subsidizing Stalinism

In the 1930s, Josef Stalin launched one of history's largest campaigns of mass murder in an attempt to collectivize agriculture in the Ukraine. Today, an un-Soviet Ukraine is blessed with struggling private farm plots, which make up only 15 percent of the farmland but provide over one third of agricultural production.

But the U.S. government's Export-Import Bank is busy propping up the collectivist farm legacy of Stalin in Ukraine. Ex-Im, as it's colloquially known, recently underwrote a $187 million sale of John Deere farm equipment that will end up with the huge, inefficient state agriculture collectives in Ukraine.

That's business as usual, says David Kramer, associate director of Russian and Eurasian studies at the Carnegie Endowment for International Peace. Ex-Im also subsidizes sales to the Russian Ministry of Construction and other state-owned enterprises in Turkmenistan and Uzbekistan, in addition to Russia and Ukraine. "Deals like that completely undercut efforts by other U.S. agencies to promote privatization," Kramer complains. Kramer also pointed out, in a Washington Post op-ed piece, that Ex-Im's assertion that it is a necessary help in getting any U.S. companies into Russia falls flat. "Less than 25 percent of U.S. exports to Russia depended on Ex-Im loans and subsidies [in 1996]," he wrote.

Ian Vásquez of the Cato Institute testified against reauthorization of the Export-Import Bank before a congressional committee in July. (He was the only one of nine people testifying before the Republican-run committee who objected to the bank. The majority of testimony came from officials of companies who benefit from the bank's activities.) The bank's subsidized loans represent corporate welfare to big companies, notes Vásquez--11 of the 19 loan guarantees Ex-Im approved in 1996 in the former Soviet Union went to companies with over $1 billion in annual sales. Vásquez also notes that when the bank "provides subsidies for loans in places that wouldn't attract investment on their own, they reward governments for not reforming."