Politics

Let's Call the Kodak (KODK) Deal What it Is

If you ever doubted the power of the government, or rather government cash, take a look at what has happened this week with Kodak.

Yesterday, it was announced that Eastman Kodak (KODK) will, with the help of a $765 million federal loan authorized under the Defense Protection Act, begin making ingredients used in generic drugs. The stock opened on Monday at $2.15 and is trading in this morning’s pre-market at close to $13.

That is great news for anyone who was holding KODK or who bought in early in the move, but how should the rest of us feel? Is it a brilliant use of existing legislation to bring jobs back to America while enhancing national security by reducing our reliance on foreign manufacturers, or is it another example of government picking winners and throwing money at them regardless of their record or chances of success?

I suspect that, as with everything these days, your answer will be dictated by your political affiliation. It is, however a sign of the twisted nature of politics right now that a lot of Republicans will be cheering this particular example of socialism in action while those on the left will be decrying it, despite having called for the Defense Protection Act to be used for just such a thing many times over the last few months.

That word, "socialism," has become a generalized insult these days, used to discredit those who advocate for positions on the left of American politics, regardless of whether or not they are actually socialist in nature. For me, as someone who grew up in the U.K. when there was a real socialist party in power, one that nationalized key industries and tried to run them for the common good, that is more amusing than anything.

However, to see those who use the word as an epithet now enthusiastically supporting actual socialist policies is quite shocking.

Make no mistake, that is what this is. It is taking a private company and funding it with public money, but as a requirement for that money, dictating what business they should be in.

The fact that it was done in the name of national security at a time of trouble for the nation just makes it sound even more like a five-year plan, instituted for the glory of the party and the good of the people.

I understand that there are enough similarities between the manufacturing processes for film and generic drug ingredients to make this a good fit, but somehow, the fact that it is Kodak that is the beneficiary here is particularly fitting. I have nothing against them. I am sure all their officers and staff are good people, but the company is the poster child for failure in the modern world. They continued to make photographic equipment long after cameras became just apps on our phones and, once they realized that wasn’t going to work, began to focus on the equally doomed copier business instead. Therefore, it wasn't a shock when they were forced into bankruptcy in 2012. The current Executive Chairman of the company was brought in after the bankruptcy, but many of their other officers predate that time.

Again, I’m sure they are good people, but do you really want to spot them a loan with your money?

And let’s not forget, that is what is happening here. It is my money, and yours.

All this may sound like I am violently opposed to the government subsidizing Kodak and getting involved in how they run their business, but I’m not sure that I am. It makes perfect sense for the federal government to be involved in a business with such massive strategic implications, especially at a time like this. I’m just frustrated that, as with the unstated acceptance of the principles of UBI that I talked about on Monday, not calling this what it is means that we are not having an honest conversation about it.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

KODK

Martin Tillier

Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.

Read Martin's Bio