Back in July when I first assessed the Trump administration’s plan to turn Kodak into a pharmaceutical company via a $765 million taxpayer loan, I was skeptical. Since that time, the government’s plan to revive the historically‐mismanaged company has collapsed due to a toxic combination of poor planning and execution (and some questionable stock trades) — all delightfully documented in a new episode of the Slate’s “Tales of Modern Capitalism.” The whole podcast is worth your time, but it’s the finale which shows why we should be skeptical — of not only the Kodak transaction itself but also the trendy rush among American policymakers to embrace industrial policy more broadly:
There is a reasonable explanation for most of Kodak’s behavior, but the optics of executives and board members loading up on shares ahead of a clearly market moving announcement, even if they thought there was a lot of doubt about whether that announcement would happen until the last minute, the optics of a beaten up company trying to present itself as the answer to one of America’s great strategic problems. All of that adds up to the picture of a pretty shabby industrial policy. And I don’t think that it is yet proven that it was dirtier than that. But I think it is a reminder that when governments and businesses try to come together, it’s often rushed, it’s often poorly thought through, and there’s often a whiff of crony capitalism.
In the end, what happened here might have been less about some deeply nefarious plot and more about typical low level government corruption, maybe mixed with Donald Trump’s characteristic knee jerk affinity for a once glamorous American brand, one that, by the way, also happened to be a big sponsor of The Apprentice.
I think the fact is every American is familiar with the Kodak brand. Even now, decades after we’ll put away our film cameras, it still has a power that’s far larger than its commercial clout. And so it’s an interesting idea that you can take this great American brand, which isn’t a great American business anymore, and turn it into a great American business again.
Back in its 20th century heyday, at the height of its success, Kodak wasn’t really selling cameras in film. It was selling nostalgia. All its ads were about how important it is to capture a good feeling and make a hard copy of it before it inevitably disappears, which makes it fitting that the company itself is now banking on nostalgia to save it. Eastman Kodak has very little going for it as an industrial enterprise at this point. What it has is the nostalgia its name evokes. Any recovery for the company will almost certainly be dependent on Americans fond memories of the brand at its peak. No wonder Kodak wants to invite us to dust off that old photo album and relive the great times we spent together.
Politicians and pundits embrace a similar nostalgia when they dream of using subsidies and protectionism to recreate the industrial economy that existed in America during Kodak’s prime. But while nostalgia may make for great advertising and good politics, today’s Kodak shows why it makes for bad policy — especially when it’s financed by tomorrow’s taxpayers.