The Republican Embrace of Security-Based State Capitalism / Socialism

In the context of a House Committee on Rules discussion on Monday of a Republican-sponsored Resolution (H. Res. 1490 – Providing for the condemnation and denouncement of socialism in all its form, and for other purposes), there was the following exchange between Rep. Joe Neguse (D-CO) and Rep. Bryan Steil (R-WI) (starts at around 2:13:22 of the video, although the lead-up beginning around 2:10:23 may be of interest as well; also, there was a lot of cross-talk so I had to do some editing):

Neguse: So going back to you, Mr. Steil, socialism [is] owning the means of production, right?

Steil: That's a piece of it, yeah.

Neguse: Okay. What would you call the Trump administration acquiring a 10% equity stake in Intel, a 15% stake in rare earth producer MP Materials, and a 10% stake in Lithium Americas and Trilogy Metals?

Steil: It's an America first policy to make sure we can outcompete China.

Neguse: Do you believe that the government should own grocery stores?

Steil: No.

Neguse: That would be socialist to you?

Steil: I think that would be a type of overreach in the federal government, absolutely.

Neguse: Would that be socialist to you?

Steil: Yeah, that'd be a form of socialism.

Neguse: Okay. And if Donald Trump announces tomorrow that he's going to take a 20% equity stake in Kroger, would that be socialism to you?

Steil: I'd want to see the details.

Neguse: Oh, you want to see the details?

Steil: No, but understand the difference. ...

...

Neguse: ... You said if government owns grocery stores, that would be socialist. But if, of course, Donald Trump were to announce an equity stake in a grocery store, well, I'd have to really see the details ...

...

Steil: I think there's a meaningful and substantive role of the federal government as it relates to foreign policy and national defense. I think that's why we look at the National Defense Production Act. ...

... [Rare earth materials, oil] have national policy and national security interests at stake, which is why we have the Defense Production Act, which gives the federal government certain roles that are non-traditional in the capitalist system. ... And then the question is, where on that dial? And so the question then becomes: Some folks on your side of the aisle would like to have government-run grocery stores. I think that's nuts.

...

Neguse: ... I asked you a very simple question. You answered it. The government owning grocery stores would be socialist in your view. I then posed the question as to whether or not the President announcing that the United States government would take a 10% or 20% equity stake in one of the largest national retailers in our country, whether that would be socialist, you said, I'd have to know the details. ... So, you then answered and took us down the road of the justifications with respect to national security and foreign mining and all the rest, so we are back to square one. As you said, you said very clearly, there are people in my party who believe the government should own grocery stores, and I'm trying to get a better sense as to whether or not you agree. And I sense that if Donald Trump were to announce that he believes it's the right thing to do, that you would agree. You have an opportunity to tell me no, that if the President announced a 10 or 20% equity stake in a national grocer, that you would not support that, you believe that's socialist.

Steil: I think there would need to be a national security rationale for the action. I don't see any ... in your hypothetical, I don't see a national security purpose.

...

Neguse: Okay. So, a test for you as to whether or not the U.S. government acquiring a stake in any American company or any American industry, as to whether or not that is socialist, is whether or not there's any kind of national security implication. And essentially, the United States government can, so long as they can put together this cogent rationale, Donald Trump can take equity stakes in whatever companies he deems necessary – the U.S. government, I should say, taking equity stakes, he's initiating – as long as that national security prerogative is established ... .

Steil: No, I think you're wildly overstating.

In reaction, let me first note that I mentioned similar issues last year, when Commerce Secretary Howard Lutnick didn't seem to deny that what the Trump administration was doing could be characterized as state capitalism, suggesting that it was justified as a response to China. In the Neguse-Steil exchange, the characterization has shifted from state capitalism to socialism, which I think is a fair way to describe some of the things that have been happening recently.

It seems to me that Steil's position as set out above is that, contrary to the title of the House Resolution, socialism should not, in fact, be condemned or denounced in all its forms, but rather should be embraced in particular circumstances. I understand that he only wants government ownership of the means of production when "national security" is at stake, but the concept of national security is very broad in theory, and in practice recently has been much broader than I ever imagined, with few if any guardrails. As a result, a limitation on government ownership of industry to circumstances involving national security does not provide much of a restriction on what I always thought was one of the main concerns people had with socialism, and instead appears to be a somewhat open-ended endorsement of such ownership.

Bringing this topic closer to the main focus of this blog, what does the current Trump administration/Republican party position on these issues mean for U.S. international economic policy? If Republicans are going to support U.S. government ownership of the means of production for national security reasons, that could, in theory, lead to some significant changes in international economic governance and relations. Perhaps the rules need to be refined and clarified so that all actors in the trading system are aware of the specific circumstances when government ownership of the means of production is permitted, so governments can have more certainty in knowing when and how they can do it?

That, of course, was a rhetorical question, and I'm pretty sure I know the answer: The Republican politicians who support U.S. government ownership of the means of production for security reasons would not apply these principles to foreign governments, and do not think international rules need to be adjusted to provide more guidance or leeway. Rather, the Trump administration and these Republican politicians are still likely to object to foreign government policies and practices of this sort when they have an impact on U.S. companies. And if foreign governments invoked national security in the same way the Trump administration has been doing, I don't think that would make a difference for the Trump administration's response. To make that point more concrete, if you think about possible foreign government interventions of this sort in the tech sector, I can imagine the Trump administration's response would be highly aggressive.

Having said all that, I'd still like to see some questions from trading partners on these issues, to clarify the scope of what the Trump administration thinks governments – both the U.S. and others – may do here. What exactly are its views on government ownership of industry based on a national security rationale? Given how common the practice has become, this seems worth fleshing out. Ideally, these conversations would happen at the WTO, so there would be a published account of the discussion, but even bilateral conversations could be useful.

And while we are on the subject of questions for the Trump administration, Congress could ask some about the nature and purpose of the equity stakes the administration has been taking, as well as how these actions would be considered under our international obligations. That might be more useful than voting on non-binding resolutions such as the one that triggered this discussion.

Finally, a big issue here is whether, or to what extent, this view on the part of some Republican politicians will outlast Trump's presidency. In 2029, will they return to the more free market views they held for several decades before Trump? I have been skeptical that there is a coherent big government version of economic policy that works in terms of politics on the right, in the absence of someone with Trump's personality dominating the scene. We'll find out in a couple years whether I'm correct about this.