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Published by EH.NET (July 2003)

William H. Becker and William M. McClenahan, Jr., The Market, the State, and the Export-Import Bank of the United States, 1934-2000. New York: Cambridge University Press, 2003. xii + 340 pp. $80 (cloth), ISBN: 0-521-81143-0.

Reviewed for EH.NET by Jonathan J. Bean, Department of History, Southern Illinois University – Carbondale.

In recent years, “globalization” has become a hot topic in U.S., European and world politics, as young (and not-so-young) demonstrators have taken to the streets protesting free trade and the policies of the World Bank and the International Monetary Fund. The resulting media attention has raised the name recognition of those institutions. Yet very few Americans could properly identify the Export-Import Bank as “the United States’ export credit agency” (p. ix) and one of the country’s chief instruments of free trade. In this superbly researched monograph, Becker and McClenahan highlight the important role “Ex-Im” has played, not only in promoting international trade but also in serving U.S. foreign policy interests. In so doing, they have made an important contribution to the scholarly literature on international trade. The hefty price tag and thick narrative, however, will prevent this book from reaching a broader audience.

This is a commissioned history; Becker and McClenahan were successful bidders for a sixty-fifth anniversary commemoration of Ex-Im’s founding. Despite its commemorative status, this is a serious scholarly study enriched by “full access to the Bank’s records and to its personnel,” including many oral interviews with agency history makers (p. x). In addition to on-site records, the authors delved into documents at the National Archives and at other government agencies. The Export-Import Bank agreed to ongoing peer review by the eminent professor of economic history Richard Sylla (New York University) and the authors retained copyright. The end result is an exhaustively researched manuscript that stands among the best-documented histories of any federal agency.

The Export-Import Bank began as the offspring of President Franklin D. Roosevelt’s diplomatic recognition of the Soviet Union in December 1933. Two months later, prodded by U.S. exporters hoping to pry open a new market, FDR established, by Executive Order, an Export-Import Bank to finance trade with the U.S.S.R., a venture that foundered on the issue of unpaid pre-revolutionary loans. Simultaneously, Roosevelt created a second Export-Import Bank to do business with a new, friendly regime in Cuba. The Banks’ trustees merged the two banks into one — originally financed by the Reconstruction Finance Corporation — and expanded Ex-Im’s mission to include markets around the world, except the U.S.S.R. The Bank received Congressional backing in 1935 and became an independent agency ten years later. By statute, Ex-Im was to avoid competing with commercial banks; assume risk on longer-term loans that they would not accept; yet still assure a reasonable chance of repayment. At the same time, President Roosevelt and his successors repeatedly called on the Bank to serve foreign policy ends that went against the grain of these statutory requirements. Thus, from the beginning, Ex-Im served the conflicting interests of exporters and the foreign policy establishment of the U.S. government. In short, the Bank navigated uneasily “between the state and the market” (p. 8) throughout its history.

One major theme is that “businesslike values” (p. 2) permeated the Bank but U.S. diplomats “tested many times” this “core market orientation” (p. 3). Tested indeed! The authors spend so much time on the fascinating, ever-changing role Ex-Im played in foreign policy that the reader gets the impression that the bankers at Ex-Im were helpless pawns in the hands of diplomats and governments friendly to the United States. This is undoubtedly a false impression gained by the weight of presentation, yet one that could have been countered by more frequent mention of “businesslike” statistics such as loan loss rates, profitability, and so on.

As it stands, the foreign policy story is one that should interest diplomatic historians: During the late 1930s, Ex-Im made risky loans to Latin American countries to forestall German Nazi intervention; after World War II, the Bank was the first U.S. agency to help reconstruct Western Europe before the Marshall Plan went into effect; during the 1950s and 1960s, it financed development projects in the Third World to counter communist movements. Later, in the 1970s, Ex-Im negotiated with the Organization for Economic Cooperation and Development (OECD) to “level the playing field” among export credit agencies in Europe and North America after that era’s brutal trade wars.

The past two decades have proven particularly challenging for the Export-Import Bank. The Reagan Revolution of the 1980s brought to power laissez-faire conservatives who were skeptical of subsidies for bankers. Meanwhile, a Third World debt crisis and a strong dollar led to plummeting U.S. exports, a weak Ex-Im portfolio, and a severe institutional crisis. During the early 1990s, however, the Bank “reinvented” itself by abandoning the direct credit market and relying almost exclusively on loan guarantees through private banks. The authors note that this strong market orientation is unique among Western export credit agencies, which are much more state-oriented. In the epilogue, the authors reflect on recent international financial crises that have reintroduced the potential of Ex-Im as a “lender of last resort” when private capital flees foreign markets.

There is no evidence of institutional bias in this organizational history. Becker and McClenahan give plenty of airtime to critics who have accused Ex-Im of serving as “corporate welfare” and as an agent of the U.S. military-diplomatic-industrial complex. If anything, their judgments on these controversies are too even-handed: After presenting both sides, the authors frequently hedge their judgments, leaving the readers to judge for themselves the merits of the case. A bit more controversy might have spiced up an otherwise dry and neutral presentation of the facts. For readers short on time, the authors provide a splendid summary in their introduction. Specialists will gain much more, however, from the detailed narrative that follows. Overall, this book earns “two thumbs up.”

Jonathan J. Bean is Professor of History at Southern Illinois University – Carbondale. He is the author of Big Government and Affirmative Action: The Scandalous History of the Small Business Administration (University Press of Kentucky, 2001).