28 Jun The Realities of Statism

“Centralized government control – Statism – strangles capitalism and economic growth.” – The Lonely Realist

Democrats historically have supported centralized policymaking and government control whereas Republicans have placed their trust in private industry and free markets. That contrast has pitted Democratic Party socialist leanings against Republican Party capitalist ones. That sharp dichotomy, however, has blurred no longer exists.

Take the 2024-25 competitive bidding contest to acquire failing US Steel, an American icon that, after decades of decline, had found two suitors in an American competitor and a Japanese steel producer, Nippon Steel. Nippon’s superior offer was accepted by US Steel, but the merger was blocked by President Biden, the President basing his decision on pretextual national security grounds, even though US Steel is not a technology developer or part of a strategically sensitive industry (Candidate Trump agreed, saying “I would block it instantaneously”) [ED NOTE: 2024 was an election year and the United Steelworkers union had raised job concerns]. In fact, the Committee on Foreign Investment in the United States, which is responsible for scrutinizing foreign acquisitions of domestic companies – even ones like US Steel that are not part of a strategically sensitive industry – had been unable to find that Nippon Steel’s acquisition should be blocked (this despite Donald Trump’s subsequent assertion that the Committee’s review provided “credible evidence” that Nippon Steel “might take action that threatens to impair the national security of the United States”). The Committee’s role is to prevent strategic acquisitions by America’s adversaries (read “China”), not by allies like Japan. Both President Biden and Candidate Trump had opposed Nippon Steel’s bid, not for technological or strategically-sensitive reasons, but for politically-motivated ones.

Several months after assuming the Presidency, Donald Trump reversed the Biden decision…, but only on condition that the Federal government control the merged company through ownership of a “golden share,” stating that he, the President, will have “total control” of US Steel. It now is the President of the United States, and not US Steel’s CEO, who is responsible for determines the success of US Steel…, with President Trump further noting that he is “a little concerned” about what future Presidents might do. All Americans should be concerned about any President’s control of an American company…, and not only about what subsequent Presidents might do. After all, such control has the effect of undermining America’s free enterprise system. The reality is that it is not only socialists who believe that government control is superior to free market entrepreneurship. America has never subscribed to government intervention in its free market businesses…, even with respect to high-tech companies (that is, the U.S. government historically has taken a stake in companies only when they are in financial trouble and play a disproportionate role in the economy). US Steel therefore is a first. America’s government and, yes, even America’s businessman President, has no experience managing a Pennsylvanian steel manufacturer. Government is not in free market businesses for good reason. America’s government – and, yes, even its President – is not qualified to impose its decisions on American companies. That includes banks, businesses, law firms, educational institutions (like Harvard and Columbia) and State governments (like Maine) that employ policies that the government disagrees with. America’s government should not be making decisions that are fundamentally inconsistent with free markets. It should leave capitalism to capitalists. Republicans found President Biden’s Chips and Sciences Act (CSA) to be abhorrent because it was a form of Statist action that handed out government subsidies to high-tech businesses to create Federally-funded “national champions.” Republicans should find the President’s US Steel “golden share” Statism equally abhorrent. Moreover, even Joe Biden didn’t attempt to impose Presidential controls on the businesses targeted by the CSA, despite business arguments for doing so. The fact is that recidivist Statism is inherent in both President Biden’s and President Trump’s actions. Each ignored the proven success of America’s “invisible hand” and instead exalted centralized government decision-making and control.

Fiscal dogmatism once separated Republican Party common sense from Democratic Party free-spending. When Ronald Reagan declared that “Government is not the solution to our problem, government is the problem,” he was referring to the Federal government’s intrusion into the private sector. America’s brand of laissez-faire capitalism is now being undermined by the two Parties’ perverse applications of Statism – Democrats want the Federal government to subsidize targeted businesses while Republicans are happier with imposing the Presidential will on businesses (as well as the legal and higher education systems). Both believe that the current disorder in America – whether in trade or manufacturing or in balancing poverty and excessive wealth or in restrictions on labor or capital or in protecting gun rights or rights to organize and protest – requires government intervention using a strong hand, the hand of The State.

As The Economist recently editorialized in “Make America French Again,” these are policies that Americans have consistently derided as backsliding into “European socialism.” America is now mirroring those policies. That’s a frightening reality for those who cherish American exceptionalism and revel in America’s 200+ years of economic outperformance (and who are cognizant of France’s perennial underperformance). Evidence of the Europeanization of America’s economy can be found in America’s adoption of protectionist tariffs – you can’t get more European than protectionism –, backing national champions (the President, for example, hosting a Tesla sales event on the White House lawn), imposing price controls on pharmaceuticals, and witnessing the President unilaterally micro-managing managing budget reallocations and deciding which laws to enforce and not enforce (for example, by ignoring Congress’s direction with respect to TikTok). President Trump is exalting Federal power and, in the process, trampling on precisely the States’ Rights he supported with respect to abortion and gun rights, including by federalizing State national guard units and using U.S. troops to unilaterally address intrastate issues. By adopting such Statist policies, America’s government is inhibiting business activity and, in the process, sidelining capitalism. If this continues, the inevitable outcome will be reduced economic growth and declining lobal competitiveness.

Finally (from a good friend)