All of this reaction was triggered by a surprising sequence of events. The first Trump administration was famously reluctant to use the full powers of the federal government to address Covid-19, at one point telling reporters that the federal government should not be “a shipping clerk” for PPE. This reluctance to use state power has now changed.
Then, in July, the Defense Department became the leading shareholder in MP Materials, America’s premier rare earths mineral company. Among the conditions of that deal: a ban on engaging in stock buybacks and a commitment to shift offtake agreements from China to the United States. And in the weeks since, the Commerce Department announced a deal to convert Intel’s Biden-era grants to equity stakes, and a still-vague plan to share in Nvidia’s revenue on China export sales that had previously been blocked over national security concerns.
Importantly, this is not just a story about China. State enterprises account for over 20 percent of the largest companies in the world, and include iconic companies like Renault, Mercedes-Benz, and Sweden’s green steelmakers. Sovereign wealth funds of Norway, Alaska, and other jurisdictions now control more assets than hedge funds and private equity firms combined, and include the planet’s top holders of private stock. Even the George W. Bush and Obama administrations temporarily became majority owners in financial and auto firms during the Great Recession—though they refused to steer those industries toward less destabilizing, lower carbon futures. And this gets at a further structural change.
None of these policy changes means that the profit motive or class relations have faded as organizing principles of our economy. Rather, they are pragmatic responses to changes in technology and regulation since the 1970s that accelerated corporate concentration and weakened workers’ power to keep capital domestically rooted.
State involvement in industry, if poorly regulated, can lead to corruption and capture. In the United States, for example, defense contracts and bailouts have been manipulated for private gain. But corruption is not inevitable; it depends on design and norms. Norway’s sovereign wealth fund, with its transparency rules, and Germany’s federalist consultative economic transition strategy, with its structured oversight, show that public investment can be managed accountably and in the public interest, which brings us back to the choices being made today.
Rather, it is a call to pause before reducing these shifts to just another Trumpian spectacle. The Biden administration’s heavy reliance on an arms-length relationship with the private sector had already run into headwinds before Trump. A second Biden or first Kamala Harris administration would have likely needed to become more interventionist anyway, especially with a tighter fiscal and interest rate picture that would have made a second round of tax credits less likely.
The United States has entered a new era of state capitalism. The real question is no longer whether the state will act, but whose interests it will serve. Will it merely prop up incumbents and invite capture? Or can public ownership and golden shares be harnessed for resilience and equity? If progressives don’t seize this moment to define a democratic, public-minded industrial policy, they will find themselves living in one designed by the Trump administration.
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