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Re: demise of Aerospace Industry?



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[Topics under debate]: GOOD GOVERNANCE
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vamsi@siliconcorp.com wrote:

>     I have a naive question for you - I am very good at this: Why
> doesn't the GoI find a couple of talented Aerospace guys from IIT and
> give them startup capital (no interest loan) to launch a company?

About a year ago, in the course of a debate on capitalism and
alternative to
it, Prof Sabhlok assigned me the 'homework' of finding an alternative to
the
capitalist corporation as a way to manufacture airliners. I pointed out
that
he had chosen an interesting example: at this time, there are only two
manufacturers of large passenger aircraft in the world: boeing-mcdonnell
and
airbus. Both are taxpayer supported enterprises, airbus openly so as a
multi-nation government consortium and boeing-mcdonnell via subsidies in
the
form of military contracts- it is well documented that these subsidies
are not
accidental but deliberate and specifically directed- it was argued in
the US
legislature in the early post WW2 years that boeing should be subsidised
in
this way [see my original post for references] and that without these
subsidies boeing would remain a maufacturer of small single engine
aircraft.

In both cases the rationale is fairly transparent: leaders in europe &
the US
realized that 'air travel was going to be a big thing' and future
prosperity,
jobs, and control of worldwide air transportation depended on
proficiency in
aviation technologies. Private capital was unavailable for such
projects: the
amount of capital needed was huge, the risk high, and the potential
payoff
period was very long. So the governments  pumped large amounts of tax
money
into these organizations. In the case of boeing-mcdonnell this
guaranteed
profits, thus achieving a conversion of public money into private
profit, and
[significantly] a development of world dominance in these technologies,
consolidating international power of the governments of these countries.

These models are hardly a model of free market capitalism but I digress.

Now to get to your question: why not provide the seed capital to a bunch
of
talented and ambitious engineers and entrpreneurs to create an aircraft
manufacturing company in India? I can only speculate here, but as I see
it, it
amounts to a creation of a new and power center that will compete and
possibly
challenge its creators: a huge amount of money will have to be invested
to get
independent aircraft manufacture started. No european country could put
up
that much capital alone- they had to form a consortium, India may not be
able
to divert that much public money without significant opposition and
sabotage
from those who would see it as diversion and pilferage from their
objects of
theft and sources of political power- for example it may require, among
other
things, stopping subsidies to the job mills maintained by the govt owned
steel
industry, cutting the power of the politicians who depend on the support
of
their constituents who 'work' in the mills- you can imagine the
opposition
this would generate- think of the opposition to bank computerisation in
nationalized banks that is ongoing for the past 15 years. So, you're
asking
that politicians and their supporting bureacrats take this massive
amount of
capital, which translates to a huge amount of political power and give
it to
'couple of talented Aerospace guys from IIT'. One of two things could
happen-
they could fail, in which case a sum of money amounting to a significant

fraction of the national GDP has been wasted and distributed making at
least
some people incredibly rich with no return to the public, and the blame
falling on the leaders that gave away the money- leading to a reduction
in
their power for making such a stupid mistake. Alternatively, the
enterprise
could succeed, making many more people extremely wealthy and therefore
powerful, rivalling the power of the politicians who gave away the money
and
power to start the enterprise in the first place.

At this time I'm not making a value judgement on what is right or wrong
but I
think I've answered your question of why this wouldn't normally happen
in
India- regardless of the success or failure of such a project, its
execution
takes away power from those who now have power.

>
>
>     After a few years, the GoI can award fighter development projects
to
> the private sector to get state-of-the-art equipment for IAF.  In
fact,
> GoI can encourage many such companies in the beginning by giving them
> interest-free loans.

Or [as in the case of boeing] by buying products from these companies at

prices that guarantee these companies a profit.

> You see, space travel is going to be a big thing
> next century and any country without a strong aerospace industry will
be
> left in the dust!!
>
>     I think the real problems to the aerospace industry in India are
the
> laws made by AAI and such agencies - they are rediculous and do not
> encourage growth in this sector.

I think they are quite deliberate in their objective of preserving the
power
structure status quo. I do find it concievable that if those in power
percieve
the outcome to preserve or enhance their power then public resources
will flow
towards such projects with alacrity as in the case of this minister's
son/relative who has managed corner most of the licences for cellular
services
[or was it laying fiber optic line] in a large number of states.

> You see, many jobs are lost this way
> to Boeing, Northrop, Lockheed, etc.  Thanks to GoI, no foreign company

> has anything worry about - especially competition.

I believe that those in control are more worried about competition to
their
political power.

This is not, imo, a desireable system, but if we profess to want to
change it,
it behooves us to understand it- the better to more efficiently change
and
replace it.


-Charu





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