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Excerpts below from Barron's link (sorry, subscription free archived article not available yet)
The Trump administration has crossed a line that ought to alarm Americans of every persuasion.
In the past two months, it has started taking equity stakes in private enterprise, including billions worth of Intel shares. That so-called partnership was pitched as a strategic investment. It has demanded a “golden share” in U.S. Steel and pressured AMD and Nvidia to funnel a portion of their China revenue into government coffers. Officials promise more such “deals” to come, including with TikTok. That forthcoming deal will reportedly give the government a seat on TikTok’s board.
This isn’t regulating, subsidizing, or industrial policy. It is state capitalism—and, in practice, little more than crony capitalism under a new label.
The dangers are familiar: When the government underwrites private risk, markets get distorted, lobbying supplants innovation, and taxpayers hold the bag. History is full of examples—none should comfort those who hope Washington can outsmart markets.
Three recurring themes appear when Washington plays investor. Moral hazards crop up, in which the companies that have won Washington’s favor take on more risk, confident that the government will rescue them. There is cronyism, in which political influence, not performance, determines who gets funded. And, finally, permanent subsidy machines emerge. Once created, these government-funded programs are impossible to unwind, no matter how costly or ineffective.
Today’s experiments of state capitalism repeat the mistakes from the past. They swap neutral, rules-based policy—permits, tax expensing, broad research and development credits—for bespoke bargains that entrench political clients. They echo practices familiar in Beijing and, before that, the Soviet Union.
U.S. exceptionalism didn’t spring from government allocation of capital. It came from the freedom of entrepreneurs and investors to fail or succeed under the rule of law. It came from equal and open competition and protections against arbitrary state power.
The real promise of American capitalism has always been opportunity, not ownership by the state. We forget that at our peril.
Just one of many ways in which the Trump Administration is changing our economy for the worse. When will the powerful business leaders finally stand against this insanity?
The Trump administration has crossed a line that ought to alarm Americans of every persuasion.
In the past two months, it has started taking equity stakes in private enterprise, including billions worth of Intel shares. That so-called partnership was pitched as a strategic investment. It has demanded a “golden share” in U.S. Steel and pressured AMD and Nvidia to funnel a portion of their China revenue into government coffers. Officials promise more such “deals” to come, including with TikTok. That forthcoming deal will reportedly give the government a seat on TikTok’s board.
This isn’t regulating, subsidizing, or industrial policy. It is state capitalism—and, in practice, little more than crony capitalism under a new label.
The dangers are familiar: When the government underwrites private risk, markets get distorted, lobbying supplants innovation, and taxpayers hold the bag. History is full of examples—none should comfort those who hope Washington can outsmart markets.
Three recurring themes appear when Washington plays investor. Moral hazards crop up, in which the companies that have won Washington’s favor take on more risk, confident that the government will rescue them. There is cronyism, in which political influence, not performance, determines who gets funded. And, finally, permanent subsidy machines emerge. Once created, these government-funded programs are impossible to unwind, no matter how costly or ineffective.
Today’s experiments of state capitalism repeat the mistakes from the past. They swap neutral, rules-based policy—permits, tax expensing, broad research and development credits—for bespoke bargains that entrench political clients. They echo practices familiar in Beijing and, before that, the Soviet Union.
U.S. exceptionalism didn’t spring from government allocation of capital. It came from the freedom of entrepreneurs and investors to fail or succeed under the rule of law. It came from equal and open competition and protections against arbitrary state power.
The real promise of American capitalism has always been opportunity, not ownership by the state. We forget that at our peril.
Just one of many ways in which the Trump Administration is changing our economy for the worse. When will the powerful business leaders finally stand against this insanity?
