President Trump’s decision to have the federal government acquire a 10% stake in Intel Corp, a publicly traded company known for its computer chips, raises eyebrows, especially for those of us who champion free-market principles. Historically, Intel has ruled the chip market, yet in recent years, its reign has faltered.
The question is: can government ownership, even of a fraction, have a positive impact on Intel and on the entire economy?
To understand the potential ramifications, it’s essential to consider Intel’s trajectory. Once a titan that consistently released groundbreaking products — remember the microprocessors 286, 386, 486, and Pentium? Intel now finds itself eclipsed by dynamic competitors like Nvidia, Apple, AMD, and Snapdragon.
These companies have seized opportunities in a growing chip market, while Intel has largely clung to its legacy microprocessors. While they’ve made strides in specialty chips for AI, the company’s traditional dominance is undeniably waning.
In a scenario where a very successful company struggles, two paths typically present themselves:
Currently, the federal government is staggering under a $37 trillion debt load, while total consumer debt exceeds $18 trillion. Including state and municipal debt, we are looking at a staggering $56 trillion drain from capital markets through bond financing.
This situation creates a scarcity of equity capital, simply because if fewer government bonds were sold, many investors would turn to equity markets. Already, equity capital is expensive for publicly traded corporations.
While my instinct as a free-market economist recoils at the notion of government ownership of private corporations, there’s a peculiar logic to this investment. If government involvement could provide Intel with needed capital during a time of fiscal constraint, perhaps it’s a necessary evil.
That said, history teaches us to be wary. Government ownership inevitably introduces layers of influence that hinder market dynamics. In addition, the Government would select winners and losers, instead of the market making those decisions.
This is a recipe for inefficiency and waste. Even if the Trump Administration insists on no board representation or voting rights, influence can manifest in other, perhaps more insidious ways.
Consider a future scenario: a Democrat arrives in the Oval Office and mandates that Intel allocate funds to politically favored, yet unprofitable, initiatives. This could stifle innovation and reallocate resources where they aren’t truly needed.
Notably, I consider the European experience with Airbus, a venture where the government held a 25% stake, born out of a collaboration among firms in France, Germany, and Spain to rival Boeing. Initially, I believed such government involvement would lead to subpar decision-making and inevitable losses. Yet, Airbus has become a formidable competitor, sometimes outshining Boeing not just in product quality but profitability.
Trump’s stake in Intel mirrors a calculated Eurocentric approach. By using government stake holdings to mitigate capital shortages in vital industries like semiconductors and defense, Trump aims to bolster domestic production. And have the taxpayers share the profit.
Computer chip manufacturing is vital to national security and a prosperous future. So is defense equipment. Those are the areas where Trump wants to invest. While government ownership of the means of production is generally a bad idea, in selected areas vital to national security, the Europeans have done it successfully.
Is some government ownership of the means of production a disastrous path for the U.S. economy?
Historically, I would say yes. However, if executed with the right intentions and an understanding of market dynamics, perhaps this isn’t the clear-cut failure we assume it is. Time will tell whether Trump’s gamble will reap rewards — or create new troubling precedents in American corporate governance.
Agree/Disagree with the author(s)? Let them know in the comments below and be heard by 10’s of thousands of CDN readers each day!
Brit Hume has long been known for cutting through the noise with sharp observations that…
Latin America’s most cartel-plagued nations are freaking out over President Donald Trump’s crackdown against cartels. Trump…
With Fox’s Greg Gutfeld dominating late-night ratings for the network, the host has consistently used…
Maryland's Governor Moore and Illinois' Governor Pritzker can't tell an emergency when they see one.…
The House Judiciary Committee launched an investigation Friday into an environmental activist group for allegedly…
Department of Homeland Security (DHS) Secretary Kristi Noem shared the full portion from her interview…