Boeing finally fired its CEO, Dennis Muilenburg. Many where baffled by the fact that he still had the job months after the world grounded 700 of the company's new planes because of serious safety issues. And the more the world looked into these issues, the more it saw a company that was more concerned with meeting the demands of shareholders rather than producing quality planes. Under Muilenburg, the value of Boeing stock rose from around $150 a share (which was already too high) to $440 (it reached this peak 10 days before the crash in Ethiopia). Those billions went to shareholders in the form of buybacks.
The buybacks even continued after the first 737 MAX crash. They stopped after the second. But the company did not discontinue manufacturing the 737 MAX after they were grounded. 400 came out of the plant. Where are they going to go? No one wants them. The value of all 737 MAX planes is around $100 billion. The crisis has so far cost Boeing $9.2 billion. To make matters worse, the company's Starliner spacecraft test mission failed because it went into the wrong orbit. That project was behind schedule, and now its future is unknown.
If we properly appreciated the economic scale of this crisis, then the news of the new CEO would be as valuable as pennies placed on dead eyes. The power of the market is not, as so many Americans are told believe from day one, unlimited. There is a point when the temporal distance between costs and returns is too great for private investment. Since the crisis began in early March, not one day has seen a contraction. Its expansion has only accelerated. What will happen in 2020? What is the fate of the plant workers in the Seattle-area? If we continue to turn to the market for answers, these and other pressing questions will receive no realistic answers. The time for the nationalization of Boeing is now.
Of course, everything will be done to avoid this obvious solution—the state ownership of an enterprise that can no longer afford the crisis it created by cutting costs for shareholders. The indirect solution might be an increase of government contracts, but that will only be a short-term fix. (Please think about and attempt to picture this possibility: Boeing might have made $100 billion worth of worthless of planes.)
Boeing's situation is existential in nature and depth. Meaning, the ontology of the corporation, its mode of being in the market, which is the kind of culture that shapes what the Cambridge economist Ha-Joon Chang calls institutional memory (the actual value of an enterprise of Boeing's size and complexity), must be replaced if it hopes to live for as long as it has been around.
This radical transformation will not be easy. The resistance to changing the culture that Boeing adopted after it merged with McDonnell Douglas in 1997, a merger which led to its physical separation between management (Chicago) and workers (mostly Seattle-area) in 2001, will be fierce. Why? Because the profits from the production of planes are no match, when it comes to the central but unreal program of the very rich (which is continuous high yields), to those achieved by speculation on the stock market.
And here we really hit the heart of the crisis. Boeing was not the kind of corporation that could turn a quick profit. But everything about shareholder value maximization is about fast returns on placements, which we erroneously call "investments." The SVM time horizon is rarely longer than a year (and sometimes less than a second), and development and distribution of a plane series takes decades. Shareholders leading Boeing is like an elephant tied to, and led by, the impulses of a squirrel. If you can grasp the extent of this asymmetry, if you can face it for what it is, then you will begin to have some idea of the time it will take to undo this mess. Now is not the time of markets; we have entered the time of the state or the public.
And this brings us to the scholarship of the British-based economist Mariana Mazzucato. Her research has shown that government investment (or, put another way, socialism) is really what drives product innovation in the private sector. The more a government directs resources to scientific and technological projects whose marketability is not well understood or known, the richer becomes the nation-level institutional memory (in Chang's sense) that corporations like Boeing, Microsoft, and Amazon heavily draw from for their products and systems of distribution.
Mazzucato calls this the "entrepreneurial state." But what do we find happening in the US today? Right now the Fed is propping up the stock market by injecting billions upon billions in cash (so far a total of $300 billion) into the broken repo market. The value of the institutional memory of this purely financial market is actually next to zero. That IM, gathered by Boeing's largely state-educated engineers over the many years, is inestimable.
