HLS professor talks to NY Times about implications of more government involvement in corporate America
Whether by taking a “golden share” in U.S. Steel, demanding a cut of U.S. firms’ revenue in exchange for export licenses, or publicly supporting or opposing the appointment of publicly trade firms’ CEOs, the Trump administration has taken an unprecedented, hands-on role in private enterprise. Some experts compare these moves to forms of state-managed capitalism seen in other countries like China. These new government actions are sparking concern among business leaders and academic observers alike.
Unlike previous government interventions, such as the 2008 global financial crisis bailouts of banks and General Motors, the companies now being targeted are not on the verge of collapse. For example, the administration is acquiring a 10 percent stake in Intel, a leading semiconductor manufacturer that received a grant from the bipartisan CHIPS Act. It is also pushing for a cut of revenue from other semiconductor companies like Nvidia and AMD in exchange for receiving licenses to export their chips to China. The White House defends these moves as essential for national security, but critics have described them as "extortion for success."
According to a recent article in the New York Times, this shift away from the traditional free-market system raises significant questions for the future of U.S. economic policy. Hamilton Lugar School's own Sarah Bauerle Danzman, associate professor of international studies and director for the Tobias Center for Innovation in International Development, provides key insight on the situation.
Bauerle Danzman explains that while these deals might seem beneficial in the short term for companies already feeling pressure, there's a serious long-term risk. “Once the government gets involved in strategic decision making, those strategic choices are no longer driven by market considerations,” she told the New York Times.
This type of intervention can erode the level playing field for all businesses and create an environment where success is tied to political backing rather than market innovation. The situation raises broader questions about who will invest in companies the administration doesn't favor.
HLS students can learn more about these crucial questions in a range of courses offered by Bauerle Danzman and her colleagues including Wendy Leutert, Hong Zhang, and Michael De Groot.
Read the full New York Times article "Corporate America’s Newest Activist Investor: Donald Trump" to learn more or explore Bauerle Danzman’s research on economic security and global investment at the Hamilton Lugar School.