Its A380 debacle shows how hard it is for state planners to outguess markets.
Years ago, when an editor asked me if Boeing would be around to pay off a 100-year bond it had recently offered, I flippantly replied that 100 years was only two product cycles for the company.I underestimated the duration of its products. The Boeing 747 first flew in 1969 and a freighter version will continue to be built near Seattle at least through 2022. The Boeing 737, which first flew in 1967, faces an order backlog that extends through 2027. An all-new replacement for the commuter workhorse is unlikely to appear until the 2030s.
Which makes all the more anomalous Airbus’s decision to end production of its impressive and giant A380, which has been flying only since 2005.
Socialism is currently in vogue. If the word means anything in today’s context, it means projects of unusual government ambition, built on our globally shared capitalist technological and commercial base. The A380 was exactly such a project. Underwritten by massive European government subsidies, the plane was an engineering sensation. Passengers loved the roomy jet. Yet now it’s kaput. What went wrong? Or to phrase the question more usefully, what technological and commercial realities would its sponsors have had to overrule to assure its success?
The list is not a short one. They would have had to overrule the desire of passengers to fly direct, bypassing the crowded hub airports (like London’s Heathrow) for which the A380 was built.
They would have had to overrule the preference of business travelers for frequent departures. With 535 seats to fill, the superjumbo was hopelessly matched against operators offering more convenient schedules by using smaller planes.
Most of all, they would have had to overrule the public’s appetite for lower fares. On a per-seat basis, a new generation of super-efficient twin-engine planes such as the Boeing 787 proved cheaper to operate even though the four-engine A380 could accommodate twice as many customers.
In the end, enough socialism could be mobilized to get the plane built, but not enough to make it commercially viable. Europe’s governments would have needed to extend their dominion beyond their own taxpayers who financed it. They would have needed to dictate to the world’s airlines and travelers and even the aerospace industry’s global supplier base, which proved unwilling to develop a new fuel-efficient engine for a plane with a doubtful future.
This should guide us in our thinking about what kind of “socialism” is possible today. Governments can tax their own people until they rebel at the ballot box, refuse to pay, or emigrate. They have no power, in our world, to dictate what kinds of goods and services and technologies (green or otherwise) the global marketplace will accept.
When the end came, it came because the A380’s last dedicated customer, the government-backed Emirates Airline of Dubai, gave up on the superjumbo. Planes in pristine condition were lingering unsold on the used-plane market. A 10-year-old jet was recently retired by Singapore Airlines . Now it’s being broken up for scrap, proving once again socialism’s knack for making grown men cry.
Boeing’s management was vilified at the time for declining to compete with Airbus to replace its own fabulously successful 747 jumbo jet. But Boeing treated its business like a business. Its forecasts showed the market was likely to evolve in ways unfavorable to another very large passenger plane.
French and German politicians ignored such considerations. They were more interested in making a showy statement about Europe’s technological prowess. Boeing chafed for decades at the subsidies they poured into Airbus. Airbus, for its part, was not above portraying the money U.S. taxpayers spent defending the free world as a backdoor handout to Boeing through its defense business. This debate is likely now to get an ugly second wind if U.S. negotiators insist that Airbus pay back the estimated $20 billion in “launch aid” the A380 failed to recoup (the answer will certainly be no).
The parallel to California’s bullet train hardly needs to be drawn. Gov. Gavin Newsom seems already to be walking back his apparent cancellation of the grossly over-budget project. He may hope that Green New Deal dollars from Washington will become available after 2020 to replace the funds California isn’t willing to provide.
The Real Governments of Blue America
Officially, a big part of the federal government shut down late last month. In important ways, however, America’s government went AWOL almost two years earlier, when Donald Trump was inaugurated.
After all, politicians supposedly seek office in order to get stuff done — to tackle real problems and implement solutions. But neither Trump, who spends his energy inventing crises at the border, nor the Republicans who controlled Congress for two years have done any of that. Their only major legislative achievement was a tax cut that blew up the deficit without, as far as anyone can tell, doing anything to enhance the economy’s long-run growth prospects.
Meanwhile, there has been no hint of the infrastructure plan Trump promised to deliver. And after many years of denouncing Obamacare and promising to provide a far better replacement, Republicans turned out to have no idea how to do that, and in particular no plan to protect Americans with pre-existing conditions.
Why can’t Republicans govern? It’s not just that their party is committed to an ideology that says that government is always the problem, never the solution. Beyond that, they have systematically deprived themselves of the ability to analyze policies and learn from evidence, because hard thinking might lead someone to question received doctrine.
And Republicans still control the Senate and the White House. So even when (if?) the shutdown ends, it will be at least two years before we have a government in Washington that’s actually capable of, or even interested in, governing.
Until recently Republicans had a virtual lock on state government. Almost half the population lived in states with Republican “trifectas,” that is, G.O.P. control of both houses plus the governorship. Democrats had comparable control in California, and pretty much nowhere else.
But elections since then have transformed the picture. New Jersey and Washington went full Democratic in 2017, and six more states, including Illinois and New York, flipped in November. At this point more than a third of Americans live under full Democratic control, not far short of the Republican total.
These newly empowered majorities are moving quickly to start governing again. And the experience of states that already had Democratic trifectas suggests that they may achieve a lot.
And health care isn’t the only front for new action. For example, Newsom is also proposing major new spending on education and housing affordability. The latter is very important: Soaring housing costs are the biggest flaw in California’s otherwise impressive success story.
Now, let’s be clear: Not all of the new Democratic policy proposals will actually be implemented, and not all of those that do go into effect will live up to expectations. There’s no such thing as perfection, in policy or in life, and leaders who never experience failures or setbacks aren’t taking enough risks.
The point, however, is that newly empowered state and local politicians do seem willing to take risks and try new things in an effort to make progress against the nation’s problems.
And that’s a very hopeful sign for America, because their example may prove contagious.
Justice Louis Brandeis famously described the states as the laboratories of democracy; right now they’re the places where we’re seeing what it looks like when elected officials try to do what they were elected to do, and actually govern. If we’re lucky, two years from now that attitude may re-establish itself in the nation’s capital.