U.S. government ownership of private companies is now a reality in an unprecedented way, according to several economists and policy analysts I spoke with for a story today on Marketplace.
The Trump administration got Intel to give it a 10% ownership stake in the form of stock in return for billions of dollars in government grants that Intel had already been promised.
The president said he wants more deals like this.
The experts I spoke with all said this is reminiscent of actions you might see at emerging economies, like India, and to some extent China, as well.
It’s a practice called state capitalism.
During the Great Recession, the U.S. government did buy into GM, AIG and others, but that was to rescue them and prop up the economy. The government quickly sold off shares in the bailed out companies.
Now, the Trump administration is actively seeking partial ownership of private companies, a share of their profits or sales – like with NVidia – and it wants to influence business decisions companies make.
Experts told me that when governments own companies, it never ends up working out in the long-run. We’ve seen this in countries in Asia, South America and Europe. Government-sponsored companies often make bad decisions, because of politics.
Intel, in a regulatory filing, said the government intends to be hands off. But there are questions about HOW the arrangement will actually work.
Intel also said that it’s not sure it will be able to raise MORE money down the road because of this deal.
Bottom line: It’s a tricky time to be Intel, and in essence any major company that deals with the government.
InterArts Fresno 