The List: Pork Goes Global
From Tokyo to Riyadh, governments are pouring billions into their economies. Find out who stands to gain the most and who's out of luck.
Sean Gallup/Getty Images
Sean Gallup/Getty Images
Stimulus package: $36 billion, passed in February
Winners: Automakers. Like many other countries around the world, the German auto industry has been hard hit by the global economic turmoil and slumping demand. Its little surprise, then, that Chancellor Angela Merkels government has been careful to look after carmakers interests. Specifically, $1.9 billion was earmarked for consumers who buy new cars if their old one is more than nine years old. While the car earmark might seem a boon to consumers, critics say it represents an indirect and massive subsidy to the auto industry, as these funds may only be used for the specific purpose of purchasing a vehicle.
Losers: Children. In comparison to the $3,200 available to each household that buys a new car, government funds to support families are fairly meager at just a $130 subsidy per child. Some analysts even debate whether the car-scrapping measure will help the German auto industry, because many consumers are likely to buy cars manufactured abroad.
YOSHIKAZU TSUNO/AFP/Getty Images
Stimulus package: $235 billion, proposed in December
Winners: Local governments and the ruling Liberal Democratic Party’s (LDP) junior coalition partner, New Komeito. At about $10 billion, the packages generous subsidies for local governments are aimed at keeping opposition from outside Tokyo to a minimum. And as the LDPs popularity has plummeted in recent months, New Komeito has sought to increase its influence. With a Japanese election imminent, the junior party looked to use the stimulus to bolster its credentials as a champion of the people. By demanding outlays for households along with small- and medium-size enterprises, New Komeito distanced itself from the LDP, a party seen as consistently protecting the interests of Japans major businesses.
Losers: Exporters. Because the government chose to divide the latest stimulus between localities, families, and financial institutions, Japans heavily export-oriented business sector went largely overlooked. The countrys exports fell 45.7 percent in January on a yearly basis — the largest drop in more than 50 years. The drop has caused Japans big-name companies such as Toyota and Sony to make deep cuts in production and jobs, with little hope of receiving funds from the government unless another stimulus bill is passed.
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Stimulus package: $127 billion, announced in December
Winners: Oil, real estate, and poor regions. In theory, a government that never has to deal with lobbyists or voting constituents can pretty well spend its petrodollars as it pleases. But that doesn’t mean certain interests won’t be benefiting from Saudi Arabias $127 billion fiscal expansion. The state-run oil industry, for example, will see a massive increase in investment at a time when the price of oil is at rock bottom and the Saudis are reducing their output. The kingdom’s once booming real estate sector will also get a cut, with $7 billion going to something called the Real Estate Development Fund, which provides housing construction loans to Saudi citizens. Other entities that stand to gain are the less-developed regions of the country, including the provinces of Hail, Northern Border, Jizan, Najran, Al Baha, and Al Jouf, which will receive tax concessions to boost investment. Experts see these measures as a bid to head off any political and social anxiety in those regions that could turn to unrest.
Losers: Saudi banks. Although a handful of state-run banks will see some money from the Saudi government, private lenders and even several official banks face a major crunch. The $13.3 billion that the government plans to extend to its official lenders pales in comparison to bank bailouts around the world. Banks in the kingdom are squeezed by a stagnating economy, a high loan-deposit ratio, and now a lack of government money. Many bankers are urging the government to extend more of a lifeline.
TORSTEN BLACKWOOD/AFP/Getty Images
Stimulus package: $28 billion, passed in February
Winners: The ruling Labor Party, swing MPs, the south. To pass the bill, the ruling Labor Party had to win over several key parliamentarians by offering to fund pet projects. The biggest political winner is Nick Xenophon, an independent MP who only agreed to support the package after the Labor government agreed to revive the countrys ailing river system. In the end, Xenonphon successfully extracted a concession of $583 million to support rivers in the Murray-Darling basin. The deal is a significant victory for residents of southern Australia, which Xenophon represents.
Losers: The opposition. The opposition Liberal-National coalition favored a smaller bill that included more tax cuts, but Labor played hardball. Although no earmarks specifically went toward the relief effort, government officials noted that a portion of the increased spending would go to rebuilding schools in the area affected by the Victoria brush fire that killed at least 200 people in February — putting stimulus opponents into the uncomfortable position of appearing to be against fire victims. The opposition swiftly crumbled.
INDRANIL MUKHERJEE/AFP/Getty Images
Stimulus package: $4 billion, enacted in January
Winners: Exporters and domestic automakers. The Indian Parliament lowered the interest rate on export credit by 2 percent and made up to $220 million available for rebates of excise duties. For the carmakers, an arrangement is in the works that would allow lenders to provide financing for commercial vehicles by first obtaining a line of credit from public-sector banks. And another item in India’s stimulus package, meant to be a further gesture to the auto industry, allows government departments to begin replacing their current vehicles by purchasing new ones within a given budget.
Losers: Governors. In a place as politically gridlocked and decentralized as India, one might expect more spending discretion to be put in the hands of provincial governments. However, due to the fiscal constraints on the central government, it seems that leaders have bypassed their local counterparts for more centrally directed spending.
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