What Business of Ours is This?

Whether or not you were alive in 1980, you live with memories of that era when entrepreneurialism, corporate ingenuity, and low interest rates became baseline assumptions for good business. More than that, it was in that memorable age that free-market capitalism prevailed over alternative theories. Good business had a parallel in good government, and these core principles became established as the standards for prosperity and propriety: transparency in accounting and investment, impartial oversight and regulation of business, and separate domains for the business and the government.

We need not rely only on our memories to assert these truths. A century ago Calvin Coolidge, the great advocate of commerce and small government said,"The chief business of the American people is business,” pointedly distinguishing between individual citizens and appointed bureaucrats.

Considering how indisputable these ideas remain, it’s remarkable how often they are disregarded.

Recently, Intel Corp. assigned a 10% equity stake to the U.S. government. The silicon chip manufacturer exchanged the common shares for redemption of $8.9 billion from various unpaid government grants. Is it out-of-date, out-of-bounds, and out-of-touch to call it unseemly? Is this just the world we live in now?

“The United States paid nothing for these shares, and the shares are now valued at approximately $11 billion dollars,” President Trump posted to social media. “This is a great deal for America and, also, a great deal for Intel.”

Who can say if it is or will be a great deal? When the prospect emerged in late summer it seemed inappropriate, and that sense has not changed in the subsequent weeks. But to consider their part of the story, Intel and the Trump Administration had mutual interest in making the deal.

Intel faces stiff global competition, but it is the only U.S.-based business capable of manufacturing advanced chips domestically – a detail known even to the past administration that worked to help Intel to expand its American operations.

Over at the White House, the vision of revitalized American industry would be severely impeded if the reshored and reenergized manufacturers have to rely on imported chips.

Other arguments for the U.S. holding a stake in a vital private business point to foreign governments with significant holdings in major businesses. France and Germany hold similarly sized stakes in Airbus, Great Britain owns Sheffield Forgemasters outright, and the examples of broadcasters, railroads, electric and gas utilities, and home mortgage lenders are too numerous to list.

Of course, the examples that prove the argument against state ownership are businesses like Huawei and Comac, and many more, which claim a right to free-market access but eschew free-trade economics, enjoying regulatory protection and easy access to government funding.

Such a protected status is what free-market advocates find most unsettling about deals like the one between Intel and the U.S.

But is it not also true that the U.S stake will be a magnet for other Intel investors, a chance to ride for free as Intel scares away competitors thanks to its access to regulators and lawmakers? We’re not talking about Amtrak – a business held by the federal government because no one else will take it, and functioning by the performance standards of that ownership. Intel is a high-tech enterprise. It’s expected to perform like Nvidia, not the Post Office.

And note that Intel investment is not a fling. The Administration has followed up with a stake in mining company Lithium Americas, which also has investment by General Motors; and credible reporting points to future U.S. investments in rare-earth mining business MP Materials and defense powerhouse Lockheed Martin.

There is no doubt that by this investment is fuzzing the distinction between public and private enterprise. Just because some critics once tolerated or cheered the Obama Administration’s interest in GM and Chrysler does not mean they are wrong now. And anyone withholding objections over Intel because they do not want to oppose the White House will not be wrong when they raise criticism of future deals. The separation of government and private interests is a principle that respects both sides. It has been reliable and effective for all the decades of people now in charge of business and government. If it no longer is so, the people making the change must tell us why.

Perhaps the imperative of rebuilding the U.S. industrial sector is a persuasive argument… so make it. Tell us that global competition does not abide by the rules we maintain, the principles we hold. And tell us how the new rules will be observed. Tell us why we should adopt principles that respect power over skill, and authority over innovation.