This dissertation project that I did at university aimed to examine how the grounding of the Boeing 737 MAX is determined by a failure of the liberal free market in the USA. It was graded a 2:1 at the UK Degree level. Without further ado, sit back, grab a coffee, and enjoy the read!
It is key to note this was written between October 2019 and March 2020, so any news beyond that point will not have been mentioned.
The literature review explored the neo-Liberal and Marxist perspectives on the idea of regulation and people before profit, stating how Neoliberalism relaxes practices for companies to thrive.
The case study uses social constructivism to investigate the two accidents as well as the scrutiny Boeing received in the aftermath.
The critical review highlights how this may not be a failure of the system due to the solutions being put in place and the consumer confidence in the aircraft remaining strong.
The overall findings of this paper state that the 737 MAX crisis has caused a failure in the neo-liberal free-market approaches as it is currently not being sold on the market and the level of scrutiny applied to Boeing in the aftermath.
As someone who is an aviation fanatic and part-time journalist, the project at hand is rather fitting.
However, rather than this being a positive element of something of interest, it is an element that has caused a lot of trouble in the industry over the past 24 months.
The Boeing 737 MAX crisis is something that isn’t just sad about the moral and emotional level, but on the political level and is a significant example of the wider failure of free-market neoliberal approaches.
This crisis began on October 29th, 2018 when Lion Air Flight 610 crashed shortly after take-off whilst on a routine flight between Jakarta to Pangkal Pinang when a failure with the Manoeuvring Characteristics Augmentation Systems (MCAS) caused the aircraft to dive and crash.
MCAS was designed specifically onto the Boeing 737MAX to counteract any sudden angle of attack changes to keep the aircraft more stable in the air, especially due to the engine’s position on the aircraft being moved further forward compared to the previous generation 737 aircraft.
Systems were also questionable, given that “the plane, which was practically new, crashed minutes after take-off, killing all 189 people onboard” (Specia, 2018).
Then, four months later, on March 10, 2019, Ethiopian Airlines Flight 302 suffered the same fate with the flight data showing “immediate comparisons” being drawn with the Lion Air flight (Topham, 2019). Once this crash occurred, confidence was immediately shaken.
Within days of the second crash, the European Aviation Safety Agency (EASA) was the first aviation regulator in the world to release an advisory grounding the aircraft.
This had been proven to be controversial because the U.S Federal Aviation Administration had not been the first authority to push a grounding of the aircraft and should have been the case given Boeing’s origin being Seattle.
This then pushed forward questions about whether Boeing had encouraged a delay in the grounding, which subsequently resulted in U.S Senate hearings regarding certification processes and whether the FAA had any level of control over Boeing at all.
This was evidently seen in the Seattle Times when it had emerged that “in 2014, Boeing convinced the FAA to relax the safety standards for the new 737MAX related to cockpit alerts that would warn pilots if something went wrong during flight” (Gates, 2019).
On top of this, another article was published stating that “managers twice rejected adding the new system”, referring to updates of MCAS, which could have prevented the two 737MAX crashes completely (Gates, 2019, b).
The crisis has had a significant backlash onto the airlines that either operates the variant currently or are due to operate it.
For example, American Airlines has extended cancellations on its 737MAX-operated flights until 2020 as it “anticipates that the impending software updates…will lead to re-certification of the aircraft later this year” (American Airlines, 2019).
On the moral standpoint, the 737MAX has taken away the lives of 330 people, in which the death toll should not have been that high for an aircraft that has only been in service for around two years.
To be able to establish the severity of this crisis, we need to look at how the neoliberal, capitalist free-market approach in the U.S and beyond is flawed when it comes to elements such as aircraft certification, entry into service as well as the testing processes taken out by aircraft manufacturers.
Marxist critiques from contemporary American thinkers will be used as they will be able to scrutinize how big corporations such as Boeing operate when it comes to approaching the FAA and other regulatory bodies.
This project will look at thinkers such as Karl Marx who diagnosed “capitalism as the systemic underdevelopment of development”, which is what we correctly see with the sheer mismanagement during this crisis with a deliberately underdeveloped aircraft (Kapur & Wagner 2011, p. 200).
Other contemporary thinkers that will be explored such as Alfredo Saad-Filho who believes that “the endless mantra of ‘reforms’ which systematically fail to deliver their promised ‘efficiency gains’ delegitimizes the neoliberal states, their discourse and their mouthpieces”, which has definitely been seen in the 737MAX crisis due to the lack of reform so far at the time of writing (Saad-Filho & Johnston 2005, p.5).
That common theme from those thinkers will be useful in my discussion in not just how Boeing conducts its business, but also other American-based corporations.
In terms of the analytical framework, the answer would have to implement a blend of theory into this.
We would be looking at “hard power” when it comes to the 737MAX Crisis because it looks at what the result of “hard power” and of decision-making and how the events that have unfolded in the last year were caused by the likes of certification processes being sped up through the political channels of the U.S Senate and the FAA alike (Marsden & Savigny, 2011).
The analytical framework, which will be summarised in this introduction before the further discussion, will be diagrammed and will highlight elements such as external & internal factors, the emotive side to the crashes due to loved ones perishing, the impact, and more.
The external factors will look at the influences outside of the control of Boeing when it came the certification process, in which “Boeing Co tumbled… on heightened scrutiny by regulators and prosecutors over whether the approval process for the company’s 737MAX jetliner was flawed” (Levin & Robison, 2019).
This factor for example was exemplified when The Seattle Times reported that “the FAA has made a habit of delegating parts of the regulation process to Boeing due to cuts in funding” (Stieb, 2019).
This important external factor could have also gone alongside with the initial grounding back in May 2017 due to an “issue with the aircraft’s LEAP-1B engine”, as more delays would mean a heavier backlog of aircraft to keep on the ground and also to build, which would mean the other external factor of customers and consumers would also face the delay as well (Karp, 2017).
Internal factors would look inside the company itself and at what level the responsibility lies with the company for these disasters.
As mentioned earlier in this introduction, the article by The Seattle Times stated that Boeing pushed the FAA to relax restrictions on certain elements of the aircraft due to the previous release of the 737-800 and other variants dating back the last 40 years.
This would have reduced the certification process time and would have encouraged a quicker entry-into-service time as well as bringing costs down also. The emotive side would be conveyed as something pretty obvious for something like this.
The loss of 330 people is reflected also onto the loved ones, who would have placed trust in the aircraft that their loved ones were flying on, and linked to that would be the impact of losing them but also their responses not just on that side but in the wider world.
In September 2019, Boeing launched “a $50m financial assistance fund” to the families of those involved in the two crashes (BBC, 2019).
On the other side, we had seen orders from airlines canceled for the aircraft because of this, with the likes of Flyadeal canceling its deal of “$6bn for 30 of the latest version of the 737” and switching the order to “Boeing’s rival, Airbus, with a new agreement for the same number of A320neo aircraft” (Calder, 2019).
With that as an example of what’s to come, the outline of the project will be as follows. It will begin with a Literature Review, where Contemporary Marxist considerations of Neoliberalism will be explored, especially how the big corporations such as Boeing operate in America, which in this case, will be looking at the lack of regulation over the certification of the 737MAX.
Specific examples will be aligned to what thinkers such as Marx and others had argued in previous years.
After that, there will be a shift towards the case study, being the crisis itself.
This will aim to go into as much detail as possible about the decisions taken by Boeing both before the two crashes occurred as well as what has emerged afterward consequences-wise.
Once that has been discussed, the case study will be used to answer the question and determine why this is a failure of the free-market neoliberal approaches in the U.S.
Once that has been established, devil’s advocate will be played by applying critical review to my case study and arguing why this is not a failure and whether it is something that has only occurred rarely in the eyes of Boeing.
Success points to the Boeing 737MAX will be added, whether that is through the manufacturer still securing orders in the post-crash environment and look at the likelihood of recertification as well.
After that, a final answer and determination will be made which will summarise why the results have been established in this way. We now move on to the Literature Review.
This section does not look much at the 737 MAX, but more the ideas of the neo-liberal system and Marxist considerations of it. Skip to the Case Study section if this does not interest you.
This literature review will look at the woes of the Neoliberal market approaches in the U.S. As there are many actors involved in something like this, several readers with different outlooks will need to be assessed.
The first three texts will look at the contemporary Marxist considerations of Neoliberalism, including how American firms such as Boeing operate their businesses.
Thinkers such as Karl Marx, John O’Connor, and Alfredo Saad-Filho will provide the base for such considerations.
In order to expand understanding, the review will use another three texts to look at the non-Marxist considerations of Neoliberalism, looking at the work from Joseph Stiglitz, Robert Blantan and Dursun Peksen as well as any other thinkers that agree with either the Marxist or non-Marxist perspectives towards the likes of regulation in the industry.
This will enable the Literature Review to look at the different insights that thinkers of different ideological elements have on the theme of Neoliberalism and the dangers that come with it.
The first text comes from Capital (2000), which was produced by Karl Marx. What struck me the most about his text was one of the passages, where it could subtly hint towards the internal politics that occurred when looking at the business practices of American neoliberal firms.
He mentions that “the capitalist consciously introduces machinery in order to repress strikes”, which could align with those who silence employees about safety concerns of the product the company is making (Elster 2012, p.81).
The machinery in this case is linked to the executives in a company that may silence those raising those concerns due to other agenda-based matters.
Saad-Filho agrees with Marx on this element because there is “a drive for ‘shareholder value’ through financial dealings and changes in corporate governance dominating the sources of profitability, often at the expense of investment to expand and enhance capacity and increase productivity” (Fine & Saad-Hilho 2010, p. 164).
Konings (2001) believes that if Marx was to fix this problem, regulation would be conducted “in a more constructive manner” so then it can “work against and challenge the operation of market forces”, in reference to those at the top (Konings 2001, p.108) and also make those using any consumer products safe and sustained.
However, at the moment, those in the neoliberal environment are being succumbed to these failures due to the “autocracy over his workpeople” in terms of the decision-making agenda (Marx 2000, p. 607).
Up to now, these texts suggest that a lack of regulatory scrutiny under the capitalist model is a failure of future-based neoliberal market approaches because it is highlighting that, like with the Marxist perspective, the focus is on the profit and not on the people or consumers.
This was evidently seen because the means of production and cost is cheap to develop, meaning that financial proliferation is more important than those consuming it in the eyes of capitalist business.
Therefore, it would be of the assumption that “relatively extensive political regulation is required” for this sort of thing, but Marx argues that the debates for regulation from other thinkers “do not go deeply enough into the nature of capitalism”, suggesting that there is more at play here than the question of regulation (Moseley & Smith 2014, p. 20).
In this case, Marx would, therefore, be applying the “principle of social regulation of expenditure” and whether it would be better to bring the cost down as opposed to spending more money on consumer preservation (Bidet et al 2006, p. 43).
Contextualising John O’Connor’s work to the neoliberal crisis would be through “the proliferation of financialization through…deregulation”, especially with the good-standing relationship that businesses typically have with state actors due to them being significant economic drivers of that country, like Facebook to the United States (O’Connor 2010, p. 710).
This would be an agreement to Marx’s work as although deregulation enables that element of profitability and fewer costs, it is not considering the aspect of the people, which would be those that could suffer from the negative elements that capitalist businesses always leave behind.
However, he argues against the pro-regulation side of Marxism in the same book because “economic and social regulations shape economic behaviour and outcomes, the state checks or limits activity that may lead to market failure” (ibid, p. 711).
This has been the same, not just for the U.S but the whole world as “across all OECD economies, there has been a sustained process of neoliberal deregulation aimed at opening up markets, reducing capital costs, and lowering consumer prices” (OECD, 1997).
It ultimately meant that countries’ domestic areas could be “penetrable by foreign capital”, bringing through the element of extra investment, which in the case of multi-national manufacturing firms would have been the same as not all parts are made in the U.S.A as well due to potential skill gaps for industrial innovation and so on (O’Connor 2010, p. 708).
O’Connor went on in his conclusion to say that other factors among the deregulation element sharpened “capitalism’s crisis tendencies”, and through to the “international pockets of resistance” that he predicted, it has indeed produced “a new milieu of political confrontation”, which has definitely been seen in the wake of U.S Senate and House committee meetings or UK Parliament proceedings for the downfall of Carillion, especially if an issue does require that element of political involvement (ibid, p. 710).
With something as complex as the deregulated and powerful businesses, O’Connor was relatively accurate when he mentions that through the Marxist political and the economic side of things, you can “specify neoliberalism’s logic and processes, as well as highlighting its complexity and multidimensionality”, especially with what will now definitely be highlighted as a downside to deregulation (ibid).
Alfredo Saad-Filho continues with the point of O’Connor, conveying the argument that the degraded environment that major U.S businesses has seen themselves in is due to the tampered levels of regulation in neoliberalism, “which tends to be obstructed or evaded by competitive pressures” (Fine & Saad-Filho 2010, p. 154).
This argument aligns well with the point of Business to State Actor relationships on the local, national, and international levels.
Through companies being able to cut corners in this respect, it limits the level of democratic scrutiny that should be subjected to big multi-national corporations, especially if there is no legislation to stop them.
He has also argued in other texts that because of this point, “it imposes a specific form of social and economic regulation based on the prominence of finance, international elite integration, the subordination of the poor in every country and universal compliance with US interests”, all of which could have been argued to contributing factors of the aircraft crashing (Saad-Filho & Johnston 2005, p. 4).
In works edited by Saad-Filho, he agrees with the idea that the system “calls out for a collective and democratic form of regulation, not only to protect the natural wealth that remains but also to restructure production in more healthy and sustainable directions” (Saad-Filho 2003, p. 113).
This would solidify the point presented by the likes of O’Connor regarding the regulation process but caveated in the fact that the scrutiny is now taking place, irrespective of the timing.
The writer also goes on to illustrate through his other work that the “mainstreams of global economic convergence are exaggerated since the underlying driving forces of neoliberal globalization, which lead towards persistent economic polarisation, are still operating” (Marois & Pradella 2015, p. 8).
This economic convergence has, as a result, led “to higher unemployment… and increased worker exploitation”, exploitation of which was seen when whistle-blowers may come out about the crisis as well as high unemployment being implemented across manufacturer supply chains due to reduced production rates and fewer revenues coming in (ibid, p. 3).
This is as a result of the “significant worldwide shift in power relations away from the majority”, which has ultimately caused the problems that we see today with the Neoliberal practices, with those working being subjected to austerity-based measures such as “muzzled or disabled” trade unions, “cuts in Keynesian wages, benefits and entitlement systems” as well as having “demoralized… the alternatives” due to such “concentration of power” (Albritton et al 2007, p. 104).
Moving away from the Marxist viewpoint, we first of all look at the work of Joseph Stiglitz who took an interesting view towards regulation where “any provider of insurance needs to be sure that the insured-against event does not occur – or that it occurs with less frequency and severity”, the insurer being of which is Boeing (Stiglitz 2013, p. 29).
He also mentions the slight irony between insurance and regulation, as is the common theme within this literature review is that “those… who are beneficiaries of this subsidized social insurance, not only call for more insurance, they also call for less regulation” (ibid).
These could be the flexible regulations that “allow or that encourage easy firing of workers” should an issue come up, which would back up the claims that whistle-blowers are told not to disclose any issues product through non-disclosure agreements (ibid).
Another way this would be the case would be through the “Shapiro-Stiglitz “no-shirking” incentive model of unemployment” (ibid).
Employees would have been encouraged to work as best and hard as they can due to the fear of being unemployed if anything is mentioned.
The autocratic elements of some multi-national firms that are described through Marx also appear ever-so-slightly under Stiglitz, and firms like Boeing were successful in that area until scrutiny was ready to be applied.
It would, therefore, suggest that the incentive model of unemployment would have to be reformed as threatening people with that element could lead to mistakes being made in the future.
As a closing remark, he said that the belief from free-market firms such as the banks and other areas of the lowly-regulated industry “should be given free rein because they can correct their own excesses”, offering the view that companies should be given a chance to right their wrongs (ibid, p. 84).
However, he then stated that this “is false, and it is responsible for three things: globalization, deregulation and financial innovation” (ibid).
Even then, Stiglitz comes across as someone who does not trust those to reform themselves, offering the perspective that “it is important to reform regulation” because “since markets are prone to produce bubbles, it becomes the objective of regulators to prevent bubbles from growing too big” (ibid, p.87).
Even though he was looking at the financial crash in his work, it is a point that has been expanded more to the post-crash era in which deregulation as well as the pressures that come with applying demand to globalization and bringing costs down through such innovation which can cause a demise for consumers.
Dursun Peksen and Robert Blanton conclude the literature review through their joint articles on Neoliberal policies and whether there is any further similarity or overlap over what has been argued already in this review.
Both authors cite to Gwartney et al where “labour and business regulations ‘infringe upon the economic freedom of employees and employers’”, especially if it means cost-cutting, as we have seen argued by Saad-Filho (Gwartney et al 2014, p. 6).
Peksen and Blanton’s arguments could be very related to the 737MAX crisis as the lack of regulation or scrutiny into the crisis could be down to the U.S lacking “either the resources or the political will to actively defend these rights”, with it being “up to corporations to enforce these regulations, whether through self-regulation or active involvement” (Blanton & Peksen 2016, p. 478).
They continue to say that enforcing these to the private firms “bears out these problems, finding that ‘private regulation has had uneven and stable effects in terms of improving labor conditions’” (ibid) (Kim 2013, p. 286).
This would ultimately suggest, that in the contemporary view, companies in the U.S would not be trusted to regulate this, even at all stages of production or their design processes.
The two authors also found that “the increased deregulation of business… reduces the rights of workers and that… (it) may send signals to the overall economy that worker rights concerns are secondary to business interests” (Blanton & Peksen 2016, p. 482).
This would be seen to be correct in many crises as well, as those up top ignored those, who eventually became whistle-blowers, and opted to continue in order to get their products through.
This was later backed up in their conclusions where “…business regulation – were found negatively and significantly related to workers’ rights”, as ignorance from big companies over something that can be catastrophic would mean that being silenced could have been a contributing factor to the downfall of such market approaches (ibid, p. 487).
This, therefore, means that for outlook, and going into the future, “efforts should be made towards achieving a more equitable balance between the interests of labor rights and economic competitiveness” (ibid, p. 488).
This literature review has significantly highlighted that through the lack of regulation, deliberate lack of communication between employees and employers, as well as through the financial proliferation of a manufacturer in the U.S Neoliberal market through cost-cutting and competitive measures, the 737MAX crisis is indeed a significant example of the neoliberal free-market approaches failing in a substantial manner.
The arguments have been considered strong, but there could be points where it hasn’t been a failure of the approaches at all.
This paper will apply this level of critique when this dissertation looks at the case study of the 737MAX crisis itself and whether there were any other external or internal factors that would have caused the crisis itself.
The next section outlines the Case Study.
The case study will determine exactly how the 737MAX Crisis is a failure of the wider neoliberal market approaches in the United States.
This will involve looking at how the events unfolded, looking at the two aircraft that crashed, as well as what ensued afterwards in terms of the U.S Senate hearings as well as what Boeing did to keep the issue quiet through whistle-blower exposes etc.
The main sources of information will come from air crash reports as well as industry journalists who have consistently reported on the crisis, including some of my own work, given my employment in that industry as well.
5.1 Lion Air Flight 610
The 737MAX crisis began on October 29, 2018 when Lion Air Flight 610 “crashed shortly after takeoff from Jakarta, Indonesia” bound for Pangkal Pinang (Airways, 2018).
It was understood that “a search and rescue team was deployed following the lost contact that Air Traffic Control reported with flight JT610 about 13 minutes after departure (ibid).
The crash resulted in the deaths of 189 people onboard. At first, it was speculated that technical failures caused the aircraft, especially given the safety record that Lion Air has had in the past with other aircraft in its fleet.
Around ten days after the crash, an Emergency Airworthiness Directive was released by the United States Federal Aviation Administration, in which Boeing would call attention “to an angle of attack (AoA) failure condition that can occur during manual flight only”, in which later on would have been referred to as the Manoeuvring Characteristics Augmentation System (MCAS), which is a feature only on the 737MAX itself (Perrella, 2018).
The bulletin gave “instructions to the operating flight crew – regarding the potential fault and how should the airlines address it” (ibid).
This ultimately meant that erroneous data was being sent to the flight computers that manage MCAS, meaning that it would override what is actually a correct movement by the pilots due to such troubleshooting of the system that is required.
This issue was later backed up when the Black Boxes onboard the aircraft, which record pilot audio communications as well as the operational data of each flight, when “pilots apparently struggled with a brand new automated system, known as MCAS, which prevents the aircraft from stalling” (Field, 2019).
This safety concern went straight to the top brass at Lion Air, especially towards the end of 2018 when The Straits Times reported that the carrier may cancel its order for 190 more units of the aircraft type, “worth $22 billion at current list prices” (Field, 2019b).
This was something heavily considered, especially with the airline already having 197 Boeing aircraft in its fleet already, so the switch to Airbus would have been a big blow for Boeing at the time.
Rusdi Kirana, the owner of Lion Air said in March 2019 that “the airline was drafting documents that would cancel its orders, accusing Boeing of acting immorally in this relationship” (Baker, 2019).
That same report stated that the manufacturer “reportedly sent representatives around the world to visit airlines and convince them of the safety” of the aircraft, as Boeing knew that this was going to be a serious ordeal (ibid).
The final accident investigation report stated that the MCAS system “was designed to rely on a single AOA sensor, making it vulnerable to erroneous input from that sensor” as well as that through the “repetitive MCAS activations, and distractions related to numerous ATC communications were not able to be effectively managed”.
This blamed the MCAS system for taking up too much of the pilot’s workload, when it should be doing the opposite (KNKT 2019, p. 215).
5.2 Ethiopian Airlines Flight 302
Disaster struck again around five months later when Ethiopian Airlines Flight 302 crashed near Addis Ababa on March 29th, 2018 , killing all “149 passengers and eight crew onboard” (Saunders 2019).
Once the preliminary report was released, “Media outlets speculated that this preliminary report could result in it being a similar outcome to that of Lion Air Flight 610” (Field, 2019c).
“ET302 was a scheduled service between Addis Ababa and Jomo Kenyatta International Airport in Nairobi” which had become the next victim to the 737MAX crisis (ibid).
This did not come at a good time for Boeing, especially as the “CEO Dennis Muilenberg [back in October] flew on a test flight onboard a 737MAX8 to see the system now supposedly work”, which would have suggested that the system is still faulty (ibid).
MCAS was also looking very likely to be the cause of this aircraft’s downing, especially with the frame being “four months old at the time”, meaning that newer aircraft entering the aviation industry do not crash unless there is something substantially and technically wrong with it (ibid).
Once this was the case, regulators around the world such as the UK Civil Aviation Administration confirming that “overflights of Boeing 737MAX aircraft will now be banned from the UK”, which would have affected those in Europe and the UK who operate the aircraft type (Airways, 2019b).
For example, TUI UK operates several units of the type in the likes of Manchester, Birmingham and London Gatwick.
This came after the Chinese Government opted to ban the aircraft from flying as well, and not before long, one of the world’s largest regulators, the European Aviation Safety Agency (EASA) placed the final sword into the chest of the 737MAX by grounding it as well.
This ultimately placed pressure on America’s regulator, the FAA, who did not initially choose to ground the aircraft stating that at the time both investigations had “just begun and to date… have not been provided data to draw any conclusions or take any actions”.
Ultimately, this did not last long as a day later, ironically stating that “together with refined satellite data available to the FAA this morning… the FAA has grounded Boeing’s 737MAX airplanes” (Marshall, 2019).
Cynically, the FAA would not have found the data one day after all the mainstream regulators globally chose to ground the type, they bowed out to pressure.
This ultimately led to regime change, with Stephen Dickson being appointed the “new head of the US Federal Aviation Administration (FAA)” in August 2019, who vowed that “this plane will not fly in commercial service again until I’m completely assured that it is safe to do so” (Airways, 2019c).
This would have been so then the FAA could reaffirm its strong presence in aircraft certification.
5.3 Blaming of MCAS
The Manoeuvring Characteristics Augmentation System (MCAS) was designed because Boeing moved “the engine slightly forward and higher up and extending the nose landing gear by eight inches”, so then the manufacturer could eke “another 14% improvement in fuel consumption” (Ostrower, 2018).
Because of those changes, MCAS was “quietly added,” “to compensate for some unique aircraft handling characteristics during its Part 25 certification and help pilots bring the nose down in the event the jet’s angle of attack drifted too high” (ibid).
With the cases of Lion Air Flight 610 and Ethiopian Airlines Flight 302, this system ultimately did the opposite of what it was supposed to do and caused the deaths of over 300 people.
Many regulators agreed with this stance, especially one manager at Transport Canada who “said that Boeing should remove an automated system, MCAS from the 737MAX before the plane is allowed to fly again” due to the fact that it “introduces catastrophic hazards and that it and the fix add too much complexity” (Slotnick, 2019).
On top of this, it was then revealed that lawmakers received “a transcript revealing that a top pilot working on the plane had raised concerns about the system in messages to a colleague in 2016”, with that pilot Mark Forkner stating that “it’s running rampant”, offering no element of stability in the cause (Gelles & Kitroeff, 2019).
Although Boeing’s defense stated “that it had done nothing wrong”, those in Airline Unions such as Jon Weaks stated that this argument gives “more evidence that Boeing misled pilots, government regulators and other aviation experts about the safety of the 737MAX” (ibid).
Even then, it wasn’t just Boeing that was misleading the public.
The Federal Aviation Administration came under fire in December 2019 following leaked information showing that “their own analysis found the plane could have averaged one fatal crash about every two or three years without intervention” (Rushe, 2019).
This would definitely suggest a failure of the neoliberal market as even those in the regulatory industry decided to mislead by hiding the information.
The FAA must have known this was going to emerge because a month previously the agency said it “will not approve the aircraft for return to service until it has completed numerous rounds of rigorous testing” as the FAA would have had to cover its bases in the wake of any analysis about the MAX being unsafe for flight operations (LeBeau, 2019).
On top of this, pressure from Boeing on getting the aircraft back in the skies for the new year did not go down well with the FAA, with Dickson writing that “The FAA fully controls the approval process”, in order to show who has the power (ibid).
Ultimately, what the MCAS debacle has shown is that the balance of power in the neoliberal industry seems to be non-defining and always changing.
5.4 Scrutiny Process
The scrutiny process has been one that has been very hurtful to Boeing, especially in the regulatory perspective.
The first bit of news came in March 2019, when “the European Aviation Safety Agency (EASA) and Transport Canada (TC), alongside with the Canadian Aviation Regulation Advisory Council (CARAC), will conduct its own review of the Boeing 737MAX” (Field, 2019d).
This point aligns well with that made by Moseley and Smith in which Marx assumes that “relatively extensive political regulation is required” as it does “not go deeply enough into the nature of capitalism” and the flaws that it holds (Moseley & Smith 2014, p. 20).
This ultimately meant that EASA, TC and CARAC chose to “split away from the FAA in order to establish whether the aircraft is indeed airworthy or not to its standards”, which would have undermined the FAA’s authority as one of the world-leading regulators (ibid).
Less than a week later, Boeing conveniently announced some technical fixes to MCAS itself, making it “less powerful and less prone to error”, with it activating “in non-normal conditions”, hopefully giving “pilots more confidence and control over the plane” (Field, 2019e).
Even then, the manufacturer refused any scrutiny after the fixes were announced, as “during a media event hosted by Boeing, the manufacturer refused any on the record questions” (ibid).
This would therefore highlight a disagreement in O’Connor’s work in my literature review.
He argues that “economic and social regulations shape economic behavior and outcomes, the state checks or limits activity that may lead to market failure” but in this case, it has actually had the reverse effect (O’Connor 2010, p. 711).
Boeing has suffered as a result of their own poorly regulated woes “a monumental $1.98bn (£1.52bn) loss… after the grounding of the 737MAX plane” (Daniel, 2019).
That point alone would be sufficient to suggest that O’Connor’s view is outdated as the social consequences to a company’s action does actually result in negative results and that regulation can indeed stop that so then nothing of the kind happens again.
Fast forward to seven months later, the biggest regulatory woe in the crisis was unfolded by the media, in which “Boeing convinced the Federal Aviation Administration to relax the safety standards for the new 737MAX related to cockpit alerts that would warn pilots if something went wrong during flight”, referring to MCAS itself (Gates, Miletich & Kamb, 2019).
On the same day, The Seattle Times released another damning report stating that “a Boeing engineer submitted a scathing internal ethics complaint alleging that management – determined to keep down costs for airline customers – had blocked significant safety improvements during the jet’s development” (Gates, Miletich & Kamb, 2019b).
This would be very aligned with Saad-Hilho’s thinking as per the literature review in this paper because there is “a drive for ‘shareholder value’ through financial dealings and changes in corporate governance dominating the sources of profitability” (Fine & Saad-Hilho 2010, p. 164).
This ultimately raised “new questions about the culture at Boeing” and that whether “the overarching priority” of safety in the company “was compromised on the MAX by business considerations and management’s focus on schedule and cost” (ibid).
This would have been exemplified with the release of the A320neo Family aircraft from competitors Airbus.
This is also an example of Marx being correct due to the Boeing culture of those at the top having “autocracy over his workpeople” and attempting to silence the problems on the top-down basis (Marx 2000, p. 607).
At the end of October, the real scrutiny began to take effect. CEO Dennis Muilenberg testified before the U.S Senate to “explain how the plane was built and certified to fly commercially despite flaws” (Slotnick, 2019b).
This scrutiny did not reflect well on Muilenberg, especially as the messages of MCAS seen in both crashes, “suggested that Boeing may have known that there were, at the very least, reservations related to the system” (ibid).
This level of scrutiny would have suggested that due to the closeness of the manufacturer and the regulator, it would not have mattered at the time what sort of problems there was with the aircraft, as it would have been brushed over by the likes of the FAA.
And knowing the global dominance of the FAA, it would have explained why the likes of TC or EASA approved this aircraft straight away.
This ultimately would have changed the behavior of the state from neo-liberal to Marxist (Alfredo Saad-Filho) as it would have definitely encouraged further scrutiny and accountability into the actions of Boeing in order, a big battalion of the capitalist model.
Even then, it could be considered that the Marxist perspective would not have solved this crisis.
Although Konings (2001) states that regulation can be done “in a more constructive manner”, it is always constructively done after a crisis has occurred, meaning that further regulatory patterns and behaviors need to be implemented in order to ensure this never happens (Konings, 2001, p. 108).
Once Ethiopian Airlines Flight 302 crashed and took the lives of more innocent people, the aftermath began.
This section can be split up into a few sections regarding the Aftermath, with it being the airline industry’s response to this, the regulator’s response as well as what the consumer thinks about this lowly-regulated aircraft and how Boeing was pressured into the decisions it had to take as a result.
For example, the first level of aftermath that we can examine is the regulator’s response to this crisis.
The UK’s Civil Aviation Administration confirmed in March 2019 “that overflights of Boeing 737MAX aircraft will now be banned from the UK”, which came “in response to the Chinese government” grounding them first (Airways, 2019b).
Not long after, EASA and Transport Canada also joined in with this grounding, and not long after, there was a global grounding in place.
It also exemplified the relationship that the FAA and Boeing had, with potential failure analyses “not revised”, and implementing a culture of “you turn in the answer” and “you don’t have to document all your work” due to the “culture of pressure inside the company to limit flight testing” due to it delaying “projects at a time when orders are stacking up, costing the company money” (Gates & Baker, 2019).
This most definitely lines with Albritton’s perspective in which the “significant worldwide shift in power relations away from the majority” and it shifting into a “concentration of power” that had been uncovered in the aftermath of this crisis (Albritton et al 2007, p. 104).
This level of pressure became more evident, especially when “a bust-up between Boeing and the Federal Aviation Administration” had occurred in December 2019 when the manufacturer had to “halt production of the plane in January after the FAA refused to authorize its return to service until 2020” (West, 2019).
The main consequence of this is that this “issue could prolong final vetting of the anticipated changes” needed to the aircraft from the regulators globally, which will play well in stating that this crisis was indeed a failure to neoliberal approaches (Pasztor & Tangel, 2019).
It also joins up with Stiglitz because the FAA eventually reformed its stance on the issue, with them realizing that “since markets are prone to produce bubbles, it becomes the objective of regulators to prevent bubbles from growing too big” (Stiglitz 2013, p. 87).
The second element of aftermath would be looking at the customer response, of which would be the airlines who ordered and also received units of this aircraft type.
The first level of news came in from Virgin Australia in May 2019, where it was revealed that it had “deferred its Boeing 737 MAX 8 orders until 2025 and believes it will take six years until the public will feel safe onboard the aircraft” (Sander, 2019).
FlyDubai in September 2019 said that its “passenger numbers have dropped to five million during the first six months, which is a 7.5% decrease due to a reduction in capacity” “attributed to the grounding of 11 Boeing 737MAX8s and three 737MAX9 aircraft” (Field, 2019f).
Irish low-cost carrier Ryanair also suffered from this crisis as for its Summer 2020 schedule, had to receive “about 58 units less than expected before problems arose with the MAX”, meaning that capacity growth will be significantly limited, even with the big plans it had at the time to boost its presence in Europe (Field, 2019g).
December 2019 then saw a major strike to the program, from one of America’s largest carriers, American Airlines who “extended its Boeing 737 MAX cancellations until April 7, 2020” adding that “before the 737 MAX is brought back to service, the airline plans to run trial flight as long as there are no further delays to the plane’s official return to service”, which would indicate that there is no consumer trust from American Airlines on this aircraft (Sander, 2019b).
And that is also based on the likes of Saad-Filho & Johnston because this is an example of the imposition of “a specific form of social and economic regulation based on the prominence of finance, international elite integration, the subordination of the poor in every country”, meaning that the consumers will be the one who suffers and that some did (Saad-Filho & Johnston 2005, p. 4).
Beyond the cancellations, it started to intensify a little bit more for Boeing on the financial front, especially with Norwegian back in March 2019 becoming “the first carrier to speak out over seeking compensation for this disruption”, with the airline saying that it “should not have any financial burden for a brand new aircraft that will not be used” (Field, 2019h).
This element is suitable with Stiglitz’s work, as “any provider of insurance needs to be sure that the insured-against event does not occur”, meaning that Norwegian would want the financial settlement in order to fix its woes with both the infrastructure in the company but also on to the consumers, whether that is supplying different aircraft for their operations (Stiglitz 2013, p. 29).
Southwest Airlines’ pilot’s union followed suit later in the year, with them suing for “$100 million in lost income connected with the grounding of the 737 MAX aircraft”, and has been negotiating since September over this suit (Goodwyn, 2019).
By January 2020, the financial disruption for Boeing seemed to have begun, with the beginning “to agree on compensation payouts”, with American Airlines, Turkish Airlines, Southwest Airlines, and others agreeing on such pay-out settlements (Field, 2020).
It is also causing financial aftermath for Boeing because according to a Wall Street Journal article, it “suggests that Boeing is looking at raising debt to strengthen its cash flow”, through “the deferring of capital expenditures, freezing acquisitions and cutting spending on research and development” (ibid).
Blanton & Peksen can be acknowledged in this point because through the lessons that Boeing will no doubt learn from this, “efforts should be made towards achieving a more equitable balance between the interests of labor rights and economic competitiveness (Blanton & Peksen 2016, p. 488), which has been something Airbus has done a lot more significantly and is in a better position than Boeing currently.
Further aftermath-based events included the resignation of the Boeing Chief Executive Officer Dennis A. Muilenberg who had to resign “effective immediately” due to the Board of Directors deciding “that a change in leadership was necessary to restore confidence in the company moving forward as it works to repair relationships with regulators, customers, and all other stakeholders” (Boeing, 2019).
And that restoration of confidence is something that those in the media and in the public believe still faces “a long, bumpy ride ahead in winning back trust” especially due to its “initial poor messaging” over the MCAS system which “served to breed more public distrust and fear” (Kamb, Miletich & Gates, 2019).
This is very aligned with Stiglitz because Boeing had indeed been “given free reign” so then “they can correct their own excesses”, but critics of Boeing said that this had been done at a point where the damage had been done (Stiglitz 2013, p. 84).
And this remains a true point, because the consumers and audience base that Boeing appeals to require the trust and safety aspect when flying, so this would be a key reason into why it was a failure of the characteristics of the neo-liberal approach because more regulation into its safety was needed in order to prevent the crashes of Ethiopian Airlines Flight 302 and Lion Air Flight 610.
It would, therefore, show that the case study has highlighted this huge failure, not just through the two crashes being caused by the same thing, but the handling of the issue in a post-crash environment, which was something Boeing could not stop in time due to its misbehavior.
Neoliberal approaches may be efficient but there are times where in this case, more time and effort are needed to ensure proper practices are maintained.
This critical review will examine how the Boeing 737MAX crisis was not a failure of neoliberal free market approaches in the USA. To determine this, I will look at the more positive consumer response to the MAX in the post-crash environment, the actions of Boeing after the two crashes as well as what stage the MAX is now in going forward.
6.1 Consumer Response In The Post-Crash Environment
Whilst this crisis would have uncovered some negative response from the consumers, being the airlines themselves, there have been some positive highlights of note on the airline industry front in regard to the MAX itself.
The biggest boost of confidence for the program came when “the International Airlines Group… placed a letter of intent for 200” units of the type “at a list price of $24 billion” (Field, 2019i).
In the aviation industry, that is a substantial order to make, especially with an aircraft that was still grounded at the time of the announcement.
This aligns well with Saad-Filho’s claims on neoliberalism, because of the “drive for ‘shareholder value’ through financial dealings and changes in corporate governance dominating the sources of profitability” (Fine & Saad-Filho 2010, p. 164).
Even when Boeing wasn’t in a positive position to secure orders, they were encouraged to keep selling the aircraft in order to minimize the level of damage from the crisis itself.
It also aligns with the work of O’Connor as that order achieved the “proliferation of financialization through… deregulation” stating that this order would not have been made if there were more restrictions in place during the certification process of the aircraft (O’Connor 2010, p. 710).
Another part of the consumer market placed focus on Indian low-cost carrier SpiceJet who although it “faced a substantial profit hit from the grounding of the MAX aircraft”, it “still performed remarkably well” by raising its profit margins from INR 55.1 crore to INR 73.2 crore in 2019 (Blue Swan Daily, 2020).
This would suggest that the business was both performing well anyway but was also well prepared for any disruption caused by the aircraft.
This would potentially place blame on airlines like Southwest, who’s “financial losses of more than $100 million” from the MAX, for not being financially prepared for any crisis that occurs in both the short and long-term (Telford, 2019).
That being said, the losses comparable from SpiceJet and Southwest are more significant in the U.S because Southwest has had to cancel “about 330 weekday flights from its schedule… through early June (2020)” (CBS Chicago, 2020), because of the airline owning around 34 units compared to SpiceJet’s 13 units (Planespotters.net, 2020).
The same rules apply to low-cost carrier Norwegian, who had claimed that the 737MAX had made them lose money. Whilst that may be the case, Norwegian’s slow route to potential bankruptcy came after a spout of bad “treatment of employees… the restructuring of its network as well as… aircraft order cancellation(s)” (Zuidberg 2019, p. 2).
It could be argued therefore that the 737MAX crisis may not have actually been a by-product of supposed financial damage, but more of corporate mismanagement in being financially prudent and implementing more “hard power” and socially constructed choices.
6.2 Actions of Boeing Post-Crash – Not the Sole Perpetrator?
The actions of Boeing in the aftermath of the two crashes suggests that its strong strategy of image repair efforts wouldn’t necessarily be a failure of the neoliberal market approach because it acknowledged its errors and bolstered its brand and product.
It bolstered this brand by issuing “an open letter to airlines, passengers, and the aviation community” stating that it will “continue providing the best products, training and support to our global airline customers and pilots”, offering “an ongoing commitment to make safe airplanes even safer” (Heine 2019, p.15).
This was elaborated on by the Chief Financial Officer of Boeing stating that there would be “further… collaboration efforts with the Federal Aviation Administration” about the investigations (ibid, p. 18).
This would align with the works of Konings as this would be an example of regulation being conducted “in a more constructive manner” in order to “work against and challenge the operations of market forces”, the market forces being the aircraft currently grounded (Konings, 2001, p. 108).
It could also be suggested that Boeing isn’t the sole perpetrator to this crisis. It follows the Federal Aviation Administration when it comes to regulation, which is run by the U.S Government.
As per O’Connor, “economic and social regulations shape economic behaviour and outcomes” in which “the state checks or limits activity that may lead to market failure” (O’Connor, 2010, p. 711).
In this case, because the FAA itself didn’t sufficiently check the 737MAX prior to certification, it could be suggested that the state has to take part of the blame for the ongoing crisis, especially when it applied more scrutiny onto the original 737 when it was undergoing approval.
This may have been because of the “liberalization” of the U.S creating “a healthy two-way street” to allow “universal cross border competition” (Mseitif 2014, p. 20), which we would have seen when Boeing was competing with Airbus over the A320neo in Europe and Airbus doing the same with the “construction of the company’s A220 Manufacturing Facility” in Alabama (Airbus, 2019).
Continuing on with the critique of the FAA, “it became clear in the investigation” that it lacked “adequate resources and staffing” and was “too deferential to the regulated industry” which ultimately “delegated authority” where Boeing could “certify the safety of airplanes” (Samet 2019, p. 976) without any sort of resistance.
If the FAA had not been that lenient towards Boeing, irrespective of their safety record, then those two air crashes could have been prevented through a delay in initial certification going forward.
This aligns with the likes of Saad-Filho in which going forward after the crisis, the state should call “out for a collective and democratic form of regulation, not only to protect the natural wealth that remains but also to restructure production in more healthy and sustainable directions” (Saad-Filho 2003, p. 113).
6.3 MAX Recertification Restabilising Neoliberal Model
Boeing stated after the crash that “an upgrade of MCAS has been developed which will guarantee that similar accidents cannot take place in the future anymore” (Bergstra & Burgess 2020, p. 3).
This aligns with Shapiro and Stiglitz because it has given the manufacturer “free reign” to “correct their own excesses” which in a neo-liberal world, arguably allows that level of leniency to occur (Stiglitz 2013, p. 84).
This was also strengthened on the FAA perspective where the “Administrator Steve Dickson told carriers that it could recertify the planes before the middle of the year if no new issues are discovered” (Josephs, 2020).
It shows that Dickson himself is not looking for any reason for the neoliberal approaches in the U.S to fail again because of the same crisis.
The U.S Government is also looking at restabilising the neoliberal model further by putting forward legislation to “create an independent aircraft certification commissions”, in which to “increase oversight of manufacturers that handle delegated certification tasks on behalf of the FAA” (Shepardson, 2020).
This oversight would look at giving “the FAA administrator power to deem airplanes not sellable in certain countries until airlines met training, operating and maintenance requirements” (ibid).
This was accepted with “huge relief for Transport Canada” as previously Boeing suggested that “pilots only needed computer-based training before flying the MAX” (Lampert, 2020).
With more scrutiny on the certification process, it would encourage Boeing to test any future aircraft with more integrity in order “to prevent bubbles from growing too big”, the bubble of which being the crisis (Stiglitz 2013, p. 87).
Shepardson also mentioned in his article that “the legislation would incentivize potential whistleblowers to report companies attempting to hide serious defects” (Shepardson, 2020), which means that the state would be listening to the likes of Blanton and Peksen as the current system of “increased deregulation of business… reduces the rights of workers and that… (it) may send signals to the overall economy that worker rights concerns are secondary to business interests” (Blanton & Peksen 2016, p. 482).
Even with this in place, the FAA mentioned in February 2020 that “the Boeing 737 Max’s certification flight – among the last major steps in the certification process – to happen in the next few weeks”, which was hinting for a March first flight (Slotnick, 2020).
This means that Boeing was able to comply with all practices and is working towards not being assigned as a company under the negativities of Blanton and Peksen.
It would, therefore, show that regardless of what has gone on over the crisis, Boeing has been able to strengthen its neoliberal psyche and aim ever so closer towards getting the aircraft back in the air, suggesting not a complete failure in the system.
The aim of this paper was to determine whether the Boeing 737MAX Crisis was a failure of the neoliberal market approaches in the United States of America.
The literature review established that Marxist and non-Marxist perspectives were required in order to consider the points about regulation and why the lack of regulation could have led to this crisis.
Getting to understand the two different perspectives enabled a gap to criticize both sides of the argument through the case study of the entire crisis from October 2018 to the present day.
The first chapter dissected the events behind the 737MAX crisis, looking at the incidents of Lion Air Flight 610 and Ethiopian Airlines Flight 302 as well as how they both had the same causes for the crash through the failure of MCAS.
This consistent failure of MCAS led to further scope for the scrutiny process, in which those at Boeing and the Federal Aviation Administration were placed under the microscope about the way products are certified.
Finally, the chapter went into more detail about how it was a failure of the neoliberal system with the aftermath section, in which the two crashes resulted in the global suspension of the aircraft’s operations, and even at the time of writing, has not gone back into the air commercially.
This aftermath had still continued on for the consumers, in which scheduling amendments had to be made as well as try and preserve financials due to the aircraft not making money if they aren’t in the air.
The second chapter looked at the other side of the argument, in how it wasn’t exactly a failure of the system.
There was still somewhat a level of confidence in the aircraft, especially through the huge International Airlines Group order for 200 units of the type back in 2019.
Airlines such as SpiceJet were still able to secure strong profits, even in the wake of rising costs due to the 737MAX being on the ground, meaning that the carriers in this case just had to be more financially savvy and be more ready for such crises to occur.
The critical review also looked at how it may not have been Boeing that is solely responsible for the crisis, due to the regulatory practices of the Federal Aviation Administration itself.
Because of its delegation of the certification process to Boeing, it could actually suggest state failure rather than a private firm-based failure.
Finally, the fact that recertification of the aircraft type is still ongoing would suggest the strengthening of the model as it wants to make sure that everything works positively this time.
Because it has learned from its past mistakes, it becomes far stronger.
The recommendations coming from this paper is that, with the 737MAX crisis still being labelled as an ongoing crisis, more critical review can be applied in the future if the aircraft is brought back into service and whether it can gain more sales momentum as soon as it is commercially viable.
More criticisms could look at whether Airbus has had any problems similar to this, meaning that the system itself could be potentially used to such crises already, both in Europe and the U.S.
It is to my opinion that the 737MAX crisis is a catastrophic disaster for the neo-liberal market and also for capitalism.
More regulations will no doubt be implemented in the wake of American aircraft certification, with the state involving itself more on a Marxist perspective to ensure that future aircraft will meet the criteria to fly and operate safely without anyone else losing lives.
History also tends to suggest that whenever a crisis occurs like this, then more regulation is put in place in order to ensure nothing that catastrophic happens in the future.
The same could be seen with the ongoing Coronavirus pandemic, in which the state is getting more involved economically through stimulus plans as well as social involvement as well by ensuring everyone can afford to survive.
For a firm to make the same mistake twice in the space of five months and also attempt to cover it up would suggest severe misconduct as well as a huge mishandling of the situation.
Even if Boeing is following what the Federal Aviation Administration in a post-crash environment, many people will be arguing that it should have been the case in the first place in order to have prevented the deaths of the nearly 350 people in that crash.
On top of that, the ongoing Coronavirus pandemic has placed the aviation industry into disrepute.
With no passengers being able to travel on a non-essential basis, this means that fewer passengers will use the services and disable a significant chunk of the industry’s revenues, up to amounts of over “$113 billion as a result of COVID-19”.
It has also resulted in the likes of airlines such as Avolon canceling “its order of 75 Boeing 737 MAX aircraft to preserve cash flow as it hopes for a swift recovery of the commercial aviation industry” (Airways, 2020).
Overall, this paper has demonstrated that the 737MAX crisis was indeed a significant failure in the United States and that going forward, more regulation will indeed be implemented in order to ensure both the aircraft are safe, but also to re-stabilize the neoliberal model in the US.
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