Eliot Spitzer's First Slate Column

01/04/2009 05:12 am ET | Updated May 25, 2011

Last month, as the financial crisis and the government rescue plan dominated headlines, almost everyone overlooked a news item that could have enormous long-term impact: GE Capital announced the acquisition of five mid-size airplanes--with an option to buy 20 more--produced by CACC, a new, Chinese-government-sponsored airline manufacturer.

Why is that so significant? Two reasons: First, just as small steps signaled the Asian entry into our now essentially bankrupt auto sector 50 years ago, so the GE acquisition signals Asia's entry into one of our few remaining dominant manufacturing sectors. Boeing is still the world's leading commercial aviation company. CACC's emergence--and its particular advantage selling to Asian markets--means that Boeing now faces the rigors of an entirely new competitive playing field and that our commercial airplane sector is likely to suffer enormously over the coming decades.

Daniel Gross explained why Freddie and Fannie were too big to fail. Tim Harford urged people to get over the "moral hazard" problem and enjoy the bailout. In 2005, Gross revealed the secrets behind Boeing's rise in aircraft manufacturing. In 1998, James Surowiecki argued that Boeing's problems weren't all in Asia.

But the second implication is even bigger. The CACC story highlights the risk that current bailouts--a remarkable $7.8 trillion in equity, loans, and guarantees so far--may merely perpetuate a fundamentally flawed status quo. So far, at least, we are simply rebuilding the same edifice that just collapsed. None of the investments has even begun to address the underlying structural problems that are causing economic power to shift away from the United States, sector by sector:

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