This is another confirmation that the Trump regime is marching the USA toward a Chinese-style form of state capitalism. Trump’s economic advisor, Kevin Hassett, confirmed the possibility that the federal government was beginning to act like a sovereign wealth fund that interjects political leaders into corporate financing and decision-making. Hassett deflected the slippery slope fear of the federal government taking control of corporations by saying that the Trump administration was merely buying non-voting shares of corporations.
However, there are many problems with selective investments in corporations. Here are but a few:
- How would the federal government decide which corporations should receive investment money and which shouldn’t?
- Can a corporation that needs investment money badly sue the federal government if the government invests in a less needy competitor?
- In the past, the federal government loaned money to corporations, and the corporations typically repaid the loans. Why is this approach inferior to the new equity approach?
- When the federal government takes a 10 or 20 percent equity position in a corporation, wouldn’t this give future investors pause? The investment might shore up the corporation’s valuation in the short term, but what about the longer term? Will federal equity positions drive away potential investors?
- Suppose the federal government now wants to acquire equity stakes in corporations that receive government funds and contracts. Does that mean that the Trump administration will begin to extract equity from corporations in American agriculture, defense contractors, and the automobile industry?
- How will regulatory decisions (e.g., public safety) be made in industries in which the federal government has equity stakes in some corporations but not in others? Will federal regulators be biased in favor of the corporations for which the government has invested?
- Is modern capitalism NOW based on the federal government being a player in the effective functioning of the investment marketplace? If the federal government is a player, who regulates the marketplace?
The intentions of the Trump administration are exposed in the following recent interview with the always deliriously happy Kevin Hassett.