If you dance with the devil, the devil doesn't change; you do. For years, the private sector has performed the tango with Uncle Sam, receiving generous taxpayer-funded subsidies, whether in the form of lavish tax credits or enormous government grants. Corporatists believed that the dance party of socializing losses and privatizing gains without politicians seeking stakes in companies would persist indefinitely. A new sheriff is in town, and he is ready to deliver benefits to the public through some incarnation of state capitalism.
The State Capitalism Gambit
Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent recently confirmed media reports that the US government is pursuing a stake in struggling chipmaker Intel.
The objective, they say, is to obtain a return for taxpayers. Because Intel is receiving $10.9 billion in taxpayer dollars as part of the Biden-era CHIPS and Science Act, the current administration is attempting to give Washington a seat at the table. The White House noted that the details are still being ironed out, but it is clear that President Trump wants a return on investment rather than handing out grants like candy to multi-billion-dollar, multi-national corporations.
"We were giving away the money," Lutnick said in an August 19 interview with CNBC’s Squawk on the Street. "Imagine this, look, the Biden administration was giving Intel money for free, and giving TSMC money for free, and all these companies just giving the money for free. And Donald Trump is saying, 'Hey, if we are going to give you the money, we want a piece of the action for the American taxpayers.’”
In recent months, the administration has engaged in a quid pro quo (something for something) with some of the world's largest companies.
Earlier this month, Trump approved export licenses to Nvidia and Advanced Micro Devices (AMD), allowing these companies to resume sales of specific AI chips to China. In exchange, the federal government will receive a 15% share of the revenue generated from these sales, potentially injecting approximately $2.2 billion annually into government coffers. Officials have already suggested that options are on the table for similar deals with other industries.
In July, the Pentagon became a wolf on Wall Street, purchasing $400 million in preferred stock in a US-based rare earths mining company, MP Materials. The Defense Department is now the firm's largest shareholder. Shares soared on the news, 15% in the past month, adding to its year-to-date rally of more than 300%.
After initially opposing the merger on the 2024 election campaign trail, the president granted the purchase of US Steel by Japan’s Nippon Steel. The acquisition granted the administration a so-called golden share. This special provision gives the government the authority to veto decisions regarding capital investments and workforce levels, as well as appoint a board member.
Does this establish a new precedent for incoming administrations? Is it a different form of state capitalism? What happens if these businesses slump? So many questions, so few details!
Mr. Washington Goes to Beijing
Under a model of state capitalism, markets and private property exist, but the government guides economic activity and corporate governance to achieve specific political or strategic objectives.
The Wall Street Journal published an Aug. 11 op-ed titled "The U.S. Marches Toward State Capitalism With American Characteristics." The article asserts that the Trump White House "is imitating [the] Chinese Communist Party by extending political control ever deeper into [the] economy" and that "capitalism in America is starting to look like China."
Liberty Nation News has documented Beijing’s quasi-capitalist model, in which the central government routinely intervenes in the private sector, bails out companies, and masks the economy’s weaknesses. If one business fails, a larger one will absorb its assets. If a deeply indebted organization struggles to pay its bills, politicians will run the printing presses.
In recent days, senior administration officials have rejected these comparisons, stating that they are merely attempting to get something in return for the billions of dollars taxpayers have been forced to invest in large corporations. They also argue that President Trump’s actions are meant to reverse the years of negligence, such as allowing Taiwan to manufacture virtually all of America’s chip and semiconductor needs.
Meanwhile, it is not without precedent. During the Great Recession, the US government purchased stakes in major American corporations, such as insurance titan American International Group (AIG), Bank of America, Citigroup, and General Motors. Under former President Barack Obama, the government co-signed more than $500 million in loans for solar panel startup Solyndra, which quickly collapsed.
However, at a time when Bessent has repeatedly touted Trumponomics 2.0 as a means to reprivatize the US economy, a branch of state capitalism might not support his case.
Just You Wait
Now that President Trump has opened the door for Washington to acquire direct stakes in companies without a crisis lingering in the background, his successor – say, California Gov. Gavin Newsom (D) – can directly invest in the left’s favorite companies, demand the resignation of an executive, or pick the next batch of winners and losers. US politics is based on the idea that if one side takes two steps, the other one can then take four.
In the end, the devil's sonata plays in the background, gradually altering America’s genetic makeup as progressives and conservatives step on one another's toes.
