State Capitalism in the US
Trump’s interventionism in business and markets is more reminiscent of the Chinese model than American liberalism
Although the calmness of the stock markets may be misleading, the U.S. has experienced one of the most significant weeks for the financial markets since the financial crisis 15 years ago. President Donald Trump’s decision to lay off Fed Gov. Lisa Cook (who sued the president on Thursday) could put an end to the organization’s 74 years of independence and subject monetary policy to the wishes of the White House. A complete paradigm shift that has regulated the first-world economy for decades, with more echoes in emerging markets and authoritarian leaders than in developed economies and liberal democracies.
Before his fight against Cook, Trump had already tried to fire Fed Chair Jerome Powell for opposing the lowering of interest rates to suit his wishes. At the beginning of the month, he fired the head of the U.S. Bureau of Labor Statistics for publishing employment data he didn’t like. Trump wants to make it clear who’s in charge, and he thinks the slightest uncomfortable voice is dissidence.
The seven months since he took power have served to lay to rest the long Republican tradition in favor of the free market and a reduced role for the state in the economy. The economic liberalism that the world took for granted has given way to the White House’s attempt to gain sectarian control over institutions, as well as government intervention into private companies, something unprecedented in U.S. politics. Granted, for exceptional reasons (such as World War II and the COVID-19 pandemic) and only temporarily, the U.S. has always intervened to aid its strategic interests through public loans, tax cuts, and investments.
Last week, the Trump administration announced its decision to convert a government loan to the processor manufacturer Intel into a 10% stake in the company. There will be more moves like this, Trump warned. In July, the Department of Defense closed a deal with MP Materials to buy a 15% stake in the company that takes advantage of the only important rare earth minerals extraction facility in the U.S. More recently, Trump demanded 15% of tech companies Nvidia and Advance Micro Devices’ sales to China in exchange for authorizing them to carry out these transactions. Washington forced the transfer of a golden share [to the U.S. government] from the Japanese company Nippon Steel to allow it to buy the U.S. Steel company. In tariff negotiations, the president demanded investments from the U.S.’ primary trade partners (the EU, Japan, South Korea) totaling $1.5 trillion that he is preparing to manage personally. Meanwhile, he has made adjustments to drive up the cryptocurrency market in which his family has billion-dollar interests, a clear conflict of interest.
If China’s entrance into the World Trade Organization at the beginning of this century was based on the conviction that the liberalization of the [Chinese] economy would lead to Beijing moving toward the American model, it now appears more like Washington is adopting the Chinese model, with some American characteristics. Those who know Trump stress that this shift is more a reflection of his way of doing business carried over into politics than an ideological purpose. The problem is not his personality but that he can do this. Trump isn’t just trying to make institutions work for him, but large companies and markets too. The consequences of this blowing up of economic certainties will be far-reaching.
Although the calmness of the stock markets may be misleading, the U.S. has experienced one of the most significant weeks for the financial markets since the financial crisis 15 years ago. President Donald Trump’s decision to lay off Fed Gov. Lisa Cook (who sued the president on Thursday) could put an end to the organization’s 74 years of independence and subject monetary policy to the wishes of the White House. A complete paradigm shift that has regulated the first-world economy for decades, with more echoes in emerging markets and authoritarian leaders than in developed economies and liberal democracies.
Before his fight against Cook, Trump had already tried to fire Fed Chair Jerome Powell for opposing the lowering of interest rates to suit his wishes. At the beginning of the month, he fired the head of the U.S. Bureau of Labor Statistics for publishing employment data he didn’t like. Trump wants to make it clear who’s in charge, and he thinks the slightest uncomfortable voice is dissidence.
The seven months since he took power have served to lay to rest the long Republican tradition in favor of the free market and a reduced role for the state in the economy. The economic liberalism that the world took for granted has given way to the White House’s attempt to gain sectarian control over institutions, as well as government intervention into private companies, something unprecedented in U.S. politics. Granted, for exceptional reasons (such as World War II and the COVID-19 pandemic) and only temporarily, the U.S. has always intervened to aid its strategic interests through public loans, tax cuts, and investments.
Last week, the Trump administration announced its decision to convert a government loan to the processor manufacturer Intel into a 10% stake in the company. There will be more moves like this, Trump warned. In July, the Department of Defense closed a deal with MP Materials to buy a 15% stake in the company that takes advantage of the only important rare earth minerals extraction facility in the U.S. More recently, Trump demanded 15% of tech companies Nvidia and Advance Micro Devices’ sales to China in exchange for authorizing them to carry out these transactions. Washington forced the transfer of a golden share [to the U.S. government] from the Japanese company Nippon Steel to allow it to buy the U.S. Steel company. In tariff negotiations, the president demanded investments from the U.S.’ primary trade partners (the EU, Japan, South Korea) totaling $1.5 trillion that he is preparing to manage personally. Meanwhile, he has made adjustments to drive up the cryptocurrency market in which his family has billion-dollar interests, a clear conflict of interest.
If China’s entrance into the World Trade Organization at the beginning of this century was based on the conviction that the liberalization of the [Chinese] economy would lead to Beijing moving toward the American model, it now appears more like Washington is adopting the Chinese model, with some American characteristics. Those who know Trump stress that this shift is more a reflection of his way of doing business carried over into politics than an ideological purpose. The problem is not his personality but that he can do this. Trump isn’t just trying to make institutions work for him, but large companies and markets too. The consequences of this blowing up of economic certainties will be far-reaching.
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