Breaking News Stories

DANIEL MCCARTHY: Trump’s Approach to Industry Is Practical Rather Than Socialistic

Are you now a comrade president?

Some conservatives are pointing to Trump’s choice to have the government buy shares in Intel.

This seems a lot like state ownership of production, doesn’t it? It’s textbook socialism.

Jonah Goldberg commented that if there were mainstream conservatives from ten years ago, they wouldn’t be screaming “socialism” or “fascism” over Trump’s Intel investments.

Actually, even within conservative circles, there’s been a long-standing embrace of industrial policy, though perhaps not as aggressively as Trump.

Pat Buchanan has been a notable figure in this discussion, being ahead of the curve on issues like industrial policy, similar to his stance on immigration.

It’s important to clarify, President Donald Trump isn’t a socialist, and the U.S. has a history of government-owned enterprises, with Amtrak being a familiar example.

This passenger rail service, which operates for profit but is government-owned, was established during the Nixon administration.

However, what Trump is doing with Intel marks a departure from past examples.

He views these transactions as the initial move towards establishing an American “sovereign wealth fund,” with further investments planned.

This isn’t about looking back; it’s about ensuring America can compete globally in the 21st century, particularly against nations like Communist China, which holds significant sovereign funds.

A sovereign wealth fund functions similarly to a private investment fund—holding stocks, bonds, and various assets.

Typically, resource-rich countries, especially those reliant on oil, create such funds to diversify and bolster their economies.

This system enables countries like Norway and Saudi Arabia to manage vast revenues, akin to the substantial contributions made by billion-dollar universities in the U.S.

Is it a bad thing to allow the government to earn profits instead of raising taxes on citizens or accruing debt that incurs interest?

While the government pays out interest on national debt, a sovereign wealth fund can generate income.

More than ten years ago, many conservatives supported a plan to “privatize” Social Security, which shares both merits and drawbacks with sovereign wealth funds.

The idea was for Americans to choose their own investment options rather than mandatory government-led Social Security contributions.

Many on the right considered this a positive move toward free-market ideals.

So, are sovereign wealth funds fundamentally different?

They both carry similar risks, especially concerning what economists term “moral hazard.”

We saw this during the Great Recession when some financial entities deemed “too big to fail” required bailouts from Washington and the Federal Reserve.

The government cannot afford to let Social Security collapse. If retirement funds are funneled into private investments, how many failures in D.C. are acceptable, especially when investments go south?

Trump might be taking on double the risk. Most sovereign wealth funds focus on maximizing returns for government revenue.

In contrast, the president seems inclined to use sovereign wealth funds not just to invest but also to drive industrial policy by backing crucial firms like Intel that may be facing economic hurdles.

The real dilemma isn’t merely whether the U.S. can properly manage a sovereign wealth fund. It’s also about the ramifications of inaction as competitors refine their strategies.

Beijing has its massive Chinese Investment Corporation, with $1.3 trillion, as well as Hong Kong’s $1 trillion safety investment fund, not to mention smaller funds with billions in assets.

During the Cold War, when the U.S. confronted the threat of Soviet-backed communism, conservatives understood that a rigid adherence to free-market principles could be counterproductive.

William F. Buckley Jr., emerging as a conservative leader in 1952, staunchly supported capitalism and limited government.

Yet he noted:

“Conservatives, along with many Republicans, need to thoughtfully address this issue. If they consider Soviet power a threat to our freedoms (which I do), they have to prioritize centralizing Washington’s significant military and intelligence capabilities, among others…”

Trump appears to be pondering similar issues of our time and how sovereign wealth funds can play a role.