Economic Nationalism

The Trump Administration's $765 Million Kodak Deal Is More Proof That 'Economic Nationalism' Is a Scam

The Trump administration's "economic nationalist" agenda is little more than a cronyist attempt at propping up domestic companies with taxpayer cash.

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The Trump administration's latest "economic nationalism" scheme involves having taxpayers underwrite a $765 million loan to Eastman Kodak, the long-struggling camera company, in the hopes of transforming it into a pharmaceutical manufacturer.

If that sounds like a far-fetched idea, well, give some credit to the lobbyists who apparently made it happen.

The Daily Beast's Lachlan Markay reports that Kodak restarted its shuttered D.C. lobbying team in April of this year and proceeded to spend $870,000 on influence-peddling in the months leading up to last week's announcement by the White House. That's twice as much as the company had ever spent in a single quarter, according to lobbying disclosures, and it appears to have paid off.

When the White House announced the massive loan to Kodak last week, Trump lauded it as a "breakthrough in bringing pharmaceutical manufacturing back to the United States." Eastman Kodak will produce active pharmaceutical ingredients, or APIs, which are the chemical compounds used as the building blocks for many drugs. The loan to Eastman Kodak is supposed to be repaid within 25 years.

The White House is throwing all that taxpayer-backed cash at a company with no experience making pharmaceuticals as part of an overall effort to shift the global supply chains for pharmaceuticals. Some Republicans—including Peter Navarro, Trump's top trade advisor, and lawmakers like Sen. Josh Hawley (R–Mo.)—fear that America is too dependant on imported drugs and APIs manufactured in China.

In reality, however, there is little cause for concern. The global supply chains for pharmaceuticals are diverse and resilient. And even though China's share of the market has been growing in recent years, the United States imports far more pharmaceuticals from Ireland and other countries than it does from China. Only 13 percent of the facilities used to make APIs that go into America's drug supply are in China, according to the Food and Drug Administration.

But corporate lobbyists aren't letting the opportunity go to waste. The deal with Eastman Kodak follows on the heels of the Trump administration's announcement in May that it was handing a $350 million contract to a relatively unknown Virginia-based pharmaceutical company, Phlow Corp., to compete with drugmakers in China.

That deal happened despite the fact that Phlow Corp. doesn't have any history of mass-producing pharmaceutical drugs, and appears to have been founded earlier this year for the purpose of cashing in on Trump's protectionist politics. A Phlow spokesman told BioPharma Dive, a trade publication, that the company's leaders had been "communicating with government officials about the U.S. pharmaceutical supply for more than a year" and that Phlow's "stated mission" is "reducing the U.S.' dependence on foreign supply chains." And one of the company's board members has been making the rounds in media and congressional committee hearings to talk-up America's supposedly dangerous over-reliance on Chinese drugs.

The Phlow Corp. deal might have some red flags, but the Eastman Kodak loan stinks to high heaven. Shares of Kodak stock soared last week—before and after Trump announced the massive infusion of taxpayer money into the long-struggling New York-based company. Sen. Elizabeth Warren (D–Mass.) has called for the Securities and Exchange Commission to investigate whether some people might have been tipped off about the deal before it was publicly announced.

But insider trading is a petty charge compared to the most obviously odious parts of Trump's Kodak moment. The press release announcing the deal says the massive loan to Kodak will create 360 new jobs—that's more than $2.1 million per job.

That's a ton of money to do….what exactly? Scott Lincicome, a senior fellow and trade policy expert with the libertarian Cato Institute, notes that private companies are already reconfiguring their supply chains to account for lessons learned during the COVID-19 pandemic. "The supply chain issue that Kodak and the Trump administration claim to have identified yesterday might not even exist by the time Kodak Pharmaceutical is operational," he writes.

And there are plenty of other questions. Even if you give the White House the benefit of the doubt on the question of whether America needs to invest in API production, why does it makes sense for a bankrupt camera company to be the government's champion? Will spending $765 million to boost Kodak stock and create 300 jobs materially shift the global supply chains for pharmaceutical drugs—a market that's worth well over $1 trillion annually?

The answers, of course, lead right back to Markay's reporting. Lobbyists have seized on the Trump administration's "economic nationalist" agenda because it is little more than a cronyist attempt at propping up domestic companies with taxpayer cash under the guise of geopolitics.

Spending $870,000 to make $765 million? Just call it the art of the deal.

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  1. government gives loans all the time so not really a big deal unless Kodak rips us off like the Chinese company that riped off Newsom’s PPE deal for 1/2 billion and counting in California

    1. Well, it is a big deal and it should stop. We didn’t like the Solyndra deal, and this one is also very ugly.

      1. Agreed. Give us our damned money back.

        Sucks to be Kodak, and to live in Rochester. Not the Fed’s problem.

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        2. More importantly, it’s not every tax payer in every other city with a struggling economy’s problem.

      2. And to add on top of it, the fact that Kodak’s stock popped the day before this was announced, indicating that several people got themselves some major money from insider knowledge, should tell us how bullshit the practice really is.

        1. I feel the same way. Clearly, there was insider trading and those people deserve to be prosecuted. Fraud is fraud, period.

          As for the deal…I am an agnostic. I just don’t know enough to have a strong opinion one way or the other.

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    4. “government gives loans all the time so not really a big deal”

      lmao

    5. You give loans to smart responsible people, not to idiots. I had a meeting with the Chief Kodak Marketing guy at the Kodak Tower in Rochester, back when digital cameras were starting to come into being. Although Kodak purchased a digital camera company based in California, they were not only serious but clueless about digital cameras and digital imaging. The Chief Marketing Officer told me digital cameras were toys for computer geeks, it was a fad, it will go away. They then proceeded to sell off their pharmaceutical and chemical divisions, who were both profitable, to (as the clueless CEO proudly announced) invest in our core business, film.
      Kodak was not destroyed by a union, they did not have one. A global company that employed nearly 70,000 people in Rochester alone, was destroyed by hand full of overpaid idiots. Kodak owned a very profitable pharmaceutical company, they sold it to put money into a dying industry, film. Throwing taxpayer money at these highly paid idiots is a huge mistake and clearly there was insider trading. Trump the chump supposedly emptied the swamp. He did not, he is the leader of the swamp.

  2. Want even more proof that Drumpf’s economic policy has been disastrous? Brace yourself for this heartbreaking fact: Charles Koch, the billionaire who funds Reason.com, is down almost $8 billion this year.

    #VoteBidenToHelpCharlesKoch

  3. Well Solyndra was a success so this is bound to be even greater!

    MAGA!

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  5. At least they weren’t trying to prop up the photographic film industry.
    A step forward.

    1. PLEASE don’t give them any ideas!!!

  6. Y’see, the kids, is kinda like… Jello pudding. Actually it’s kinda like Kodak film. It’ll be around forever. Ah ah ah.

  7. Open the borders, move all industry overseas, and watch the profits roll in. Well to the 1% who are walled in and protected by men with guns, not to anyone who actually lives and dies here in America.

  8. This has a 0% chance of success.

  9. I missed the part of this story where they point out Kodak will be just continue manufacturing the chemicals they already produce for pharmaceutical manufacturers and is just expanding those production lines? That they are not the only former film producers that are in the chemical supply to pharmaceutical companies, namely Fujifilm as well.

    If the point is to complain about making loans to companies with government guarantees than by all means I agree, but to make it a big deal just because it is Kodak? They are a large chemical producer just like Bayer and just like Bayer they produce them for a variety of purposes not just the one we normally associate them with (I think Bayer makes the best lawn fertilizer on the market). Fujifilm is a large pharmaceutical producer as well. I personally am rooting for Kodak and hope they do well and become profitable again.

    1. Aye, film processing chemicals are closely related to other medicinal chems. At least that’s what my GHB dealer used to tell me. lol

      But a company that literally couldn’t see the demise of film medium even after the iPhone came out should not survive the shame and humiliation, let alone deserve a second chance at anything.

      1. They simply never bothered adapting their know-how to holography marketing, which could mobilize tiny silent film projectors for spilling light onto walls in public bathrooms.

        1. I’m just discovering an affordable 3-d light mapping machine actually. The same tech they use for amazing concert light shows now the size of a laptop, for $500. God, I love capitalism.

      2. I don’t agree with this comments. The government has an interest in preserving industries because they provide jobs. Helping Kodak transition from photographic chemicals (which has little or no market today) to pharmaceutical chemicals is responsible. The big question here is was their some insider trading associated with the deal. This is important because insider trading can damage confidence in the stock market.

        1. Yes, the “government” (elected officials) has an interest in “preserving industry” to make it appear as though they’re creating jobs – to help with re-election.

          As the article illustrated, however, the government is sending 1.7 1.7 million dollars/job created and you think that’s good economics? Call me crazy, but I’m pretty sure those potential employees are not likely to come close to earning that much over their entire career. Maybe I’m missing something. Could you explain how that makes any sense?

      3. Third Chance really. Kodak filed bankruptcy in 2012.

    2. Start making cash online work easily from home.i have received a paycheck of $24K in this month by working online from home.i am a student and i just doing this job in my spare HERE► Click For Full Detail.

    3. Yes, if they are getting the money I also hope they do well and don’t just waste it. But this shouldn’t happen in the first place. If Kodak went out of business, their assets and employees won’t disappear. Someone can keep making chemicals.

    4. I was going to say the same thing. There is plenty to hate in this crony deal, but the fact that Kodak makes film is actually one of the few good things in this: They’d be far more qualified than Phlow, which has no experience making anything. Giving either one taxpayer money is a bad idea, but Kodak is the less-bad idea because the company has equipment, know-how, and experience in chemical manufacture, while Phlow has, what, a business plan?

  10. “Only 13 percent of the facilities used to make APIs that go into America’s drug supply are in China, according to the Food and Drug Administration.

    Does that 13% represent the lion’s share of certain drugs?

    This article lists the following drugs and the share that’s dependent on China:

    70% of acetaminophen in the U.S. originates from China.

    80% of the world’s heparin, a blood anti-coagulant, is made in China.

    The article also mentions that amoxicillin, ciprofloxacin, tetracycline, and valsartan are all highly dependent on China.

    They also hit us with this quote:

    India, the world’s largest producer of generic medicines, depends on China for 80% of its active pharmaceutical ingredients, or API, the chemicals that give drugs their medicinal properties, according to industry data and Indian companies.”.

    https://www.wsj.com/articles/how-the-u-s-ceded-control-of-drug-supplies-to-china-11596634936?

    If India depends on China for 80% of its active pharmaceutical ingredients–and India is a large pharmaceutical exporter to the United States–then pretending that the number of facilities from which these Chinese APIs originate matters is kinda silly.

    “Only 13 percent of the facilities used to make APIs that go into America’s drug supply are in China, according to the Food and Drug Administration”

    —-Eric Boehm

    Does it matter that a small portion of the facilities used to make the APIs are physically located in China–if those 13% of the facilities are providing 80% of our ingredients?

    I have eight manufacturing plants. One is producing 80% of the APIs. The other seven are producing 20% between them. The one producing 80% of the APIs is located in China. The other seven are located elsewhere.

    Know what that means? It means that a rounded 13% of APIs are manufactured in China. It doesn’t mean that we don’t need to worry about the fact that 80% of the ingredients are coming from China.

    P.S. India’s relationship with China has deteriorated recently. They had a border skirmish, recently, and Modi banned TikTok in India in response to that. This is a legitimate concern for American consumers of pharmaceuticals.

    1. P.P.S. None of this means I support the government giving Kodak a loan. If the threat to our supply chains is legitimate, there isn’t any reason why companies in the United States and elsewhere can’t get the financing necessary to profit from that.

      If you can’t acquire private financing to pursue a legitimate profit when German bonds are trading at negative interest rates and U.S. Treasuries are threatening to do likewise, it’s probably because the “opportunity” in question is bullshit.

      There may be a legitimate opportunity here, but that doesn’t mean the taxpayers need to finance it. I’d feel sorry for the legitimate private entrepreneurs out there trying to get financing for this deal only to find that the government is giving better financing to a new competitor than they can get on the open market.

      1. Incidentally, opinions run the same way. It’s unnecessary to pretend there isn’t a legitimate problem when you can reasonably oppose the loan without pretending there isn’t a problem. Once you assume a false basis for your argument, your conclusions become dependent on that false basis–why subject your argument to that unnecessarily?!

        A libertarian capitalist can oppose crony capitalism on a rational basis regardless of whether the problem in question is fake. If this were a real problem, would you support the crony capitalism? If not, then why build your argument on that bullshit basis? I suspect it’s because you don’t care about libertarian capitalism anywhere near as much as you care about making Trump look bad.

        Please prove me wrong.

        1. Well done.

          Government funding business is usually bad for government and bad for business.

          It is also par for the course.

          This particular case is small potatoes on the grand stage. Obama used a loan to GM to steal $30 billion from secured creditors and give stockholder shares to the union – an unsecured creditor who had no standing to receive such payments. By that standard a stupid 3/4 billion dollar loan that has small chance of success is not a big deal. (OK, it is a huge deal. But when you steal 2 of the largest companies in the US from their shareholders and defraud investors and creditors of billions, it makes it look like small potatoes by comparison)

        2. Great points down the line, Ken. Thanks for the insight.

  11. I’m a free market equal opportunity supporter but I’ll be damned if I’m going to let Juan the landscaper take a crack at servicing my brand new Lexus!

    1. But Juan the Mercedes tech would be the more appropriate comparison. Kodak is, to a large extent, a chemical manufacturer. Shifting from making film processing chemicals to pharmaceutical chemicals is a reasonable horizontal move for a company.

  12. I’m for it. The faster we immanentize the eschaton the better.

  13. Hey man, ya want a $765 million loan? Pony up! PAY the honest going rate to get Stormy Daniels to fuck The Donald, like the Eastman Kodak CEO doubtlessly did, and THEN you can have your $765 million loan, fair and square!

    Until such time as you hire Stormy Daniels like a fair-and-square kinda standup-guy, then QUIT YER BITCHIN’! Pay to play like the rest of us do, dammit!!! Get REAL here, willya?!?!

  14. Well Kodak isn’t big Pharma or Freddie or Fannie or the Solar giveaways under Obama for much much more.

  15. The prez wants to lay out Tik-Tok or bust on the table to ban it or make it mine for an eager American company.

    So why not buy a Mexican or Canadian pharma corp and upgrade its standards?

    For that matter, why not loan 3M the money and then bust up the resulting monopoly?

    Sell the hull and re-outfit the deck, that’s what you do in any nation where chokehold regulations all but prohibit American startups in pharma chemical creation modules.

  16. This has been going on forever. From the book of ketuvim (chronicles) king David is building the temple.

    20:6 Then the leaders of families, the officers of the tribes of Israel, the commanders of thousands and commanders of hundreds, and the officials in charge of the king’s work gave willingly. 7 They gave towards the work on the temple of God five thousand talents and ten thousand darics of gold, ten thousand talents[f] of silver, eighteen thousand talents of bronze and a hundred thousand talents of iron.”

    Yeah and who got the contracts for all that work and materiel?

    Nice temple ya got there. Hate to see something happen to it.

    1. David outsourced it to the Philistines, who had the low bid

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  18. This explains a lot. For a minute there, I couldn’t understand why everyone – every Corp, every agency, every non conservative – hated trump so bad. I always wondered why a guy (who clearly is not the bastion of fiscal responsibility) couldn’t be wooed. Why can’t the agencies simply smooth talk him with promises aligning with his ideology?

    And now it makes sense – everyone hates his ideology so bad that they’ve thrown their arms up and said they won’t even play.

    Kodak nailed it when they realized there’s no hope of a coup and he’s probably gonna be re-elected. They decided to business within his framework. Cater to his whims no matter if they don’t blend with the historical corporate trends of globalism.

    Really a genius move by Kodak to lobby according to Trump’s vision. He’s only here for four more years, so they only have to kiss his ass temporarily. Why other corps didn’t realize this earlier on is testament to their own immobile, cemented bureaucracies.

    Also, a billion bucks is piss compared to the 3 trillion for the first bailout – it’s hardly worth mentioning.

  19. I would expect an economic explosion in the coming months when other corps implement Kodak’s strategy – then we will finally get to see if Trump (the people) had a good idea or not.

  20. The Trump Administration’s $765 Million Kodak Deal Is More Proof That ‘Economic Nationalism’ Is a Scam

    Sounds to me like it’s proof that “Economic Nationalism” is real and he is serious about it.

    Whether “economic nationalism” in this or other forms is a good idea is a separate discussion.

  21. You’re just mad that when the government is picking winners and losers you got put in the loser pile. If you’d learn to suck up to The Decider, you’d get put in the winner pile.

  22. the massive loan to Kodak

    As Granite pointed out above, at this point $765M is in the noise. 8-(

  23. If that sounds like a far-fetched idea, well, give some credit to the lobbyists who apparently made it happen.

    Not really, given how Fuji Film was able to leverage their film production techniques into medical processes. Emulsifiers have many applications. Source? Innovating Out Of Crisis: How Fujifilm Survived (And Thrived) by Shigetaka Komori (CEO).

    1. Right. So where is their loan. haha.
      Fujifilm, by the way, is already working on medical technology related to CoVid and the vaccine. They are also kicking Kodak’s ass in the marketplace.
      Great read, by the way. Innovating out of Crisis

  24. To be fair, Kodak knows a LOT about mass chemical production and has chemical facilities. Doesn’t mean they’ll be good at making pharms, but I think saying they are completely unprepared is going too far. They aren’t just a “camera company”, they made shitloads of film (and still make film).

    1. Kodak has been losing ground in the film industry for years. Moving operations of its platemaking to China, by the way. One of the reasons they needed a huge loan is to pay off their $600M debt that is coming due. They were on the verge of 2nd bankruptcy and have been struggling to stay afloat for years. Last year they sold off their packaging division and software to meet obligations.
      CEO availed himself of 46,000 plus shares of stock a few days before announcement too. Very convenient….

      1. And any money he made on the stock came from stock market gamblers.

    2. My understanding is they are going to be making ingredients that are not currently made in the USA.

    3. Eastman Chemical does and they are in Tennessee not Rochester and are not part of Kodak anymore…ha ha

  25. As much as i hate the Government picking winners and losers (and in this case making plenty of insiders a ton of money), it is a bit misleading to say that this is $2M/job, when it is a loan and not a grant. As much hate as the auto-bailouts deservedly got, in the end the government got their money back, so from a purely financial perspective the deal was fine.

    Obviously, this is a very different scenario as we are asking a company to completely shift it’s focus and compete with established competitors, so I’d suspect there is a much higher chance of Kodak defaulting than GM, but there is no real reason to think the cost of this loan will be anywhere close to $2M/job.

    1. No one makes these chemicals in the USA. So no, they won’t have any competition.

  26. Fun fact: Kodak’s motion picture film division is actually profitable.

    1. I saw Shatner in a Star Trek 2 showing tour in April 2018 at the Kodak Theater in Rochester. The Shat came out after they showed the movie and was damn impressive for a 87 year old….it was of course snowing out and the Shat made a joke about the last time he was in Rochester in the the 50’s it was snowing..he also talked at length about the legacy of Kodak in motion pictures…Kodak was a giant..in WW 2 they employed 90K people in Rochester..and allowed Rochester to be a very rich community for decades..

  27. Why would this author write about a subject he clearly doesn’t understand?

  28. I remember reading a while back that Puerto Rico’s pharmaceutical industry was the one of the largest in the world. Why not give our territory that’s been beat up as of late a boost. Plus the orange buffoon’s administration get’s to pander to hispanics. Kodak is a iconic company & I hate to see them go under but this deal sounds horrible all the way around.

    1. Rochester is in worse shape…throw a little crony capitalism to the Flower City

  29. Well it is a better investment for the Rochester area which has been destroyed by woke NY socialists…than a previous mayor’s $300M in a Fast Ferry to open Rochester up to millions of rich Canadians who would be taking it to see…the Rochester Red Wings (AAA Baseball)? A destroyed city with empty buildings (thank you Nelson Rocky for starting the decline with your welfare high tax state) or maybe visit Wegmans (ok best supermarket chain in the world…) perhaps the now vacated Kodak Park, Xerox Square, Xerox Campus? Actually the Fast Ferry was the funnest thing to ever occur in Rochester.. The Ferry got stuck in the St. Lawrence Seaway Locks, had a collision and its dock sunk…but I’m sure the right “connected” folks of Mayor Bill “yes I failed economics 101” Johnson got enriched. Mayor Bill? He now is a Prof. of Urban Studies at Rochester Institute of Technology..no you can’t make this shit up…ha ha

  30. If politicians boned up on economics, they could get bribes for more than pennies on the dollar for these giveaways of taxpayers money

    1. Ha ha…good one. The best thing about the Ferry was after the whole sordid enterprise went bust it was sold to an Australian Firm and I think can now be found running the Fiji islands

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  33. I’m surprised Reason doesn’t have any articles on the proposed “Make Billionaires Pay Act”.

  34. Even the so called “one for all all for one” countries of the EU were withholding supplies from each other during the early days of the pandemic, so yes it is critical to manufacture critical supplies within the country.

  35. I propose a separation of business/state somewhat like religion/state except more complete. Business that exists by the initiation violence, threats, fraud, is immoral, fascism. It can’t exist without parasitizing capitalism. When capitalism is killed off, the parasite soon dies. Trump’s subsidy is fascism.
    All that is left is socialist proponents who want to try it one more time, with a tweak, cause “they didn’t do it right”.

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