“The free-market capitalism that saw this nation prosper like no other is no more.”
He goes on to list, one by one, the steps President Trump has taken to have the government own shares in once private companies. We discussed some of these in an earlier
blog post. Steltzer cites these transactions:
(1) AI chip-maker Nividia was allowed to set aside trade restrictions to China if it pays the U.S. government 15% of the proceeds.
(2) Apple was given exemption to the tariffs, as long as it invests billions of dollars in American factories.
(3) Nippon Steel was allowed to buy U.S. Steel, conditioned on its giving the government a “golden share” of stock that will give the Trump administration major say in the company’s operations.
(4) Chipmaker Intel was given big subsidies by the Biden administration, which Trump turned into an equity stake. The U.S. government now owns 10% of Intel.
(5) Another deal in the works is with MP Materials, makers of rare-earth magnets, that will make the Department of Defense–sorry, the War Department–the company’s largest shareholder.
(6) Another deal forthcoming is with defense contractor Lockheed Martin. Because 90% of its revenue comes from the government, President Trump is demanding an ownership share.
On top of all of this, President Trump has seized the macroeconomy in his own two hands by claiming personal authority to impose whatever tariffs he pleases, thus upending world trade and thus the economies of the whole world!
Economists have long linked free markets with individual freedom, state control of the economy with the power of government to decide which companies prosper and which industries provide jobs in which states. Trump has displaced those market forces with, well, himself.
The government now owns 10% of Intel–but what about Intel’s competitors? Doesn’t that disadvantage them? Intel was failing, so Biden gave them a billion-dollar subsidy, which became the pretext for Trump’s demand for equity in the company. Normally, when a company falters, the marketplace raises up competitors who offer better products or lower prices, forcing the original company to do the same or shut down. But either way, the result is better products and/or lower prices for consumers.
What incentive will Lockheed have to design better aircraft and other defense technology if the government, being one of its owners, will buy its products anyway? And how can private companies compete against that?
Steltzer, who cites how socialist Bernie Sanders is applauding these measures, concludes that American free market capitalism, which has created untold prosperity for this country, is over.
That is surely an exaggeration. President Trump’s “state capitalism” initiatives are small scale in the vast scheme of things. The private sector is alive and well. But that Republicans now support the government’s incursion into the private sector sets an ominous precedent. Leftist have been wanting to do that for a long time, so once the Democrats come back in power, they can be expected to go all-in on what the Republicans started.
But “capitalism” has become a dirty word, not only for the Left but also for the Right. A study this summer found that nearly two-thirds (62%) of young adults under 30 had a positive view of socialism. Over a third (34%) had a positive view of communism! The good news is that 59% also had a positive view of capitalism. The fans of both socialism and capitalism must overlap, which is probably what kind of economic system is emerging today.
But now we’ll be seeing what happens when we abandon the system that has brought Americans unprecedented freedom and prosperity.
Illustration: Capitalism Is Over If You Want It by Thomas Hawk via Flickr, CC BY-NC 2.0
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