Trump’s New Era of Political Capitalism

The Trump administration has taken equity stakes in roughly 30 American companies, effectively turning the Commerce Department into a political venture capitalist rather than a neutral overseer of markets. Critics across the political spectrum warn that this arrangement distorts capital allocation by signaling government backing for favored firms, pulling investment away from businesses that succeed by serving consumers rather than currying favor with Washington.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

As America’s first reality-show president, Donald Trump wants people to think he is breaking new ground and transforming America for the better. Stepping where no president before has gone, Trump has directed the US Commerce Department to take equity positions in 30 American firms, which clearly is controversial.

Although the US is new to this policy, it isn’t the first country to do this, as France, Norway, Germany, China, and others have already seen governments purchase partial ownership in private firms. Supporters of this practice claim that any government infusion of cash into these businesses will expand the economy’s capital base, but there are plenty of reasons to oppose this practice, which economist Randall Holcomb has labeled “political capitalism.”