Boeing vs Airbus if Boeing did not get subsidies

[Cone0]

My roommates and I have political discussions every so often, and my roommate stumped me last time. So, I have come seeking help.

My roommate said that if Boeing stopped being subsidized by the government they would not be able to compete with Airbus which I acknowledged to be true. Furthermore, he said that since boeing goes out of business, money would be siphoned out of the American economy since we no longer have a jet manufacturer and America loses one of its largest exporters.

So my fundamental question is if America becomes purely free market, and the rest of the world continues to subsidize its industries would that hurt America in any significant way?

[Austrian Econ Disciple]

No. Would he not call subsidies a 'siphoning' (Theft) of the productive value of a worker to a business that is unproductive (unprofitable)? How does that help our standard of living, productivity, and economy? It in fact, is a huge negative. Not only are we stealing from our citizens to give to a few corporate slack-offs, we are paying even more since we are subsidizing and it is still more expensive than Airbus!

We should be welcoming the fact that not only do we get to keep our money from being stolen (Re: subsidy), we get to purchase cheaper products. If we stopped the subsidy (Theft), Boeing would have to liquidate through bankruptcy and sell its assets off to another entreprenuer who could take a turn at trying to make it a productive (profitable) company.

All he is doing is trying to justify theft and welfare. We would all be better off in a world without theft and welfare.

If he retorts that Airbus could raise their prices merely bring up Austrian theory of monopoly prices. Here is a good video:

YouTube - The Theory of Monopoly Price: From Menger to Rothbard | by Joseph T. Salerno (Lecture 4 of 10)

PS: Besides, subsidies don't even really lower the cost of the product. It merely allows a bigger profit margin for the company because they get to sell at the same prices (Set by consumers), but get to pocket the subsidy for essentially nothing (E.g. a gift). It is a fallacy to assume a subsidy actually lowers a price.

[Danke]

I'm pretty sure Airbus is heavily backed by governments in Europe. I know they gave sweetheart deals to US airlines to break into our market.

[Austrian Econ Disciple]

I'm pretty sure Airbus is heavily backed by governments in Europe. I know they gave sweetheart deals to US airlines to break into our market.

This could very well be true, I however, am just arguing the principle which can be argued for any two companies.

[madengr]

It is definitely true. Airbus is heavily subsidized, to the point of losing money for many years. Boeing does not get direct subsidies, rather military contracts, which is still a subsidy.

[Cone0]

Thanks Austrian Econ disciple very insightful post

I always assumed that subsidies meant lower prices

[Zippyjuan]

Both companies do a lot of subcontracting around the world too- just like the auto industry. I believe it was in discussions for replacing either Air Force One (the presidential plane) or Marine One (his helicoptor) and there was going to be bidding between Airbus and Boeing. It was argued that they should use Boeing since it was an American company but analysis showed that the Airbus conract would have in the long run (including labor for the subcontractors) used more American labor in the production of the aircraft.