TheMarketForIdeas

It’s not easy being a politician in America, especially a Republican one. The world’s largest economy is going through an ideological upheaval accompanied by a reorganization of the electoral coalitions that have dominated American politics for the past 50 years. The effects of demographic transformation, globalization, and social media are rewriting the rules of American politics in a very short time.

Take the Republicans. Fifteen years ago, Barack Obama’s Healthy, Hunger-Free Kids Act of 2010, part of First Lady Michelle Obama’s Let’s Move! initiative to combat obesity, was described by many Republicans as “communism coming to America.”

Today, Republican President Donald Trump announced that he would take over 10% of American giant Intel by using the remaining $5.7 billion in aid from the Biden Administration’s 2022 CHIPS Act to exchange for shares in the company.

The rules of American partisanship dictate that it doesn’t matter if your new positions disagree with the principles you supported yesterday — you must support the party line today. Traditional Republican free trade and non-interventionism in the economy seem to have fallen victim to the populist insurgency. Trump’s actions, especially in a deeply divided society, have sparked heated debates about the role of the state in the economy, and about how the interventionist economic policies of an administration rhetorically dedicated to capitalism and the free market could promote corruption and reduce the market discipline that, according to critics, has been the basis of America’s success over time.

Waking up to reality

However, the American political class has struggled for decades to translate national strategic priorities into effective industrial policies. Americans acutely feel the relative decline compared to China and are wondering whether their national industry would be able to withstand a war with China — especially after the lessons learned in Ukraine about the attrition of real war with a peer.

This kind of war consumes munitions, weapons systems, vehicles, and people at an alarming rate, engages the whole of society, and is completely different from the telescopic war of surgical bombings and asymmetric conflicts that Americans were used to in the Middle East.

The Asian giant’s ability to mobilize resources and coordinate national actors — including private ones — to burn through stages in the rapid adoption of new technologies, to create a complex and highly integrated industrial base, and to develop an innovative and advanced economy and a formidable armed force has aroused anxiety in Washington D.C.

In the U.S., this muscle has atrophied during the era of industrial offshoring and outsourcing. As an example, the shipbuilding sector is perhaps the most severely affected, with the U.S. having 200 times less annual construction capacity in tonnage than China, which now concentrates 60% of the global market. Americans have even considered buying warships from Japan and South Korea, because their current capacity serves only to slowly build a small number of advanced ships and submarines, while the civilian industry has almost completely disappeared.

The total atrophy of civilian shipyards has left Americans without an industrial base or a workforce ready to convert to a war economy in the event of conflict — meaning that losses cannot be regenerated, surviving ships cannot be easily repaired, and the U.S. merchant fleet (Merchant Marine) is in secular decline.

The motivation for the trade conflict with China, started by Donald Trump in 2016, was to limit the rate of China’s technological advance by reducing access to Western technology, advanced chips, and semiconductors for its own electronics industry. At the same time, these U.S.-pioneered industries were in an advanced state of decline at home, and Americans were grappling with critical dependence on Taiwan — and even on China — for finished and intermediate goods for essential industries such as defense.

However we cut it, American assumptions about the advantages of post-industrial economies, the sources of national power, and the political and values convergence of globalizing economies such as China with the West were not borne out. They have created a simultaneous social, economic, technological, and supply crisis that contemporary models and orthodoxies were ill-equipped to address.

Into this void, there have emerged early and highly contested experiments, as well as a kind of industrial and commercial demagogy that has reached its peak under the new Trump Administration — which is now experimenting in real time on the U.S. economy to do in a few years what global champions like China have achieved over decades of friendly (some would say naïve) collaboration from the West.

Contemporary precedents

Trump supporters point to Franklin Delano Roosevelt’s New Deal and the rearmament during World War II as evidence that the United States can successfully implement actively state-led industrial policies — although they also lament the erosion of American freedom after the New Deal and the role of the bureaucracies that grew there in America’s decline.

They also argue that the U.S. has gone through several phases of military contraction and expansion with industry attached, in response to the geopolitics of the moment — pointing not only to the post–Cold War peace dividend but also to the reduction of its fleets after World War I, later reversed during World War II.

Their optimistic attitude has a partisan element, but also a factual basis. Americans have a history of successful public–private cooperation on major, geopolitically motivated industrial projects — from the Liberty Ships and the Manhattan Project of World War II to the Space Program, plus the entire research ecosystem that produced the digital revolution and the Internet.

Moreover, the voices that present the actions of the Trump Administration in a hyperbolic register wilfully ignore the reality of increasing interventionism in the U.S. and the hasty exploration of new mechanisms of state involvement by Democratic administrations as well.

More recently, there have been attempts at industrial policies in the green sector, with resounding failures such as the bankruptcy of Solyndra in 2011 after substantial injections of government capital ($535 million). Support for companies like Solyndra came through the Obama-era American Recovery and Reinvestment Act of 2009.

The U.S. government also used the Troubled Asset Relief Program (TARP) of November 2008, which injected liquidity into the banking sector, as a reason to take over substantial stakes in major banks such as Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, Goldman Sachs, and Morgan Stanley. The government directly intervened in the management of these banks — not only as a regulator but also as a shareholder. Almost all TARP loans were repaid by 2010, and the U.S. government even earned a profit from the banks’ share buybacks.

This is the positive model cited by those who see the takeover of a minority stake in Intel as a limited and temporary government response to the crisis facing that company.

Other entities exposed to the subprime crisis, such as Fannie Mae and Freddie Mac, were placed directly under government control. The two entities — the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) — are government-sponsored enterprises (GSEs) dating back to the Great Depression, created to provide liquidity in the financial market as counterparties to traditional banking players.

These entities are publicly traded and privately owned, and are among the largest companies in the world, with Fannie Mae holding assets worth $4.3 trillion. Such public-interest corporations were pioneered in the Anglo-Saxon world and were the basis for many infrastructure projects in the 19th century, including in the United States, but are less well known today.

The GOCO solution?

Another model of interest to the Trump Administration as a potential expansion is the GOCO system used by the U.S. military (Government Owned, Contractor Operated). Under this system, the government owns the factory, equipment, and land, but private companies bid for the exploitation rights, bringing in workers, specific equipment, and management.

In theory, the system offers a good compromise for the government between the need to maintain capabilities for a possible conflict and the need to make them financially sustainable and more efficient. For private companies, it means that the government absorbs the capital costs for extensive or advanced facilities they could not have created on their own — or would not want to create without guaranteed contracts.

The U.S. Army currently has six such plants, most dedicated to munitions production — including the Radford and Holston plants (both operated by BAE Systems), which also produce for the civilian industry (explosives and other chemicals).

Space in these industrial zones can often be subcontracted to other companies, maintaining complex financial and industrial ecosystems. The system is not limited to relatively simple products but also applies to advanced weapons systems. The Air Force, for instance, has several GOCO facilities: Plant 42 in California, used by Northrop Grumman and Lockheed Martin to produce systems such as the RQ-4 Global Hawk drone and spare parts for the B-2 Spirit bomber; and Plant 4 in Texas, operated by Lockheed Martin for the F-35 fighter jet.

This model can also be found in Europe, where such facilities are often operated as joint ventures between governments and private operators.

The model is not limited to the military. The Department of Energy has 17 research centres, 16 of which are operated under the GOCO model — including the famous Sandia National Laboratories, the main U.S. institute for nuclear physics (including for nuclear weapons), currently operated by a Honeywell subsidiary.

Even the Los Alamos Laboratory during the Manhattan Project was operated by the University of California but owned by the government.

Following the discovery of vulnerabilities in supply chains for critical defense materials, a first agreement was concluded in July 2025 between the Department of Defense (now “War”) and the company MP Materials to mine and process rare minerals for the energy and electronics industries — guaranteeing a minimum purchase price double the market rate.

The deal is complex: the Department of Defense will pay MP Materials the difference between $110 per kilogram and the market price for two of the most popular rare earths (currently set by China). If the price rises above $110, however, the Department will receive 30% of the additional profits. At the same time, it has taken a 15% stake in the company, becoming its largest individual shareholder.

Other companies, such as Aclara Resources, with operations in Chile and Brazil, have announced plans to open industrial magnet factories in the U.S. to take advantage of this new approach.

Conclusion

It is too early to tell whether the new Administration’s efforts will bear fruit. They may not maximize American economic success, but behind the populist rhetoric, Trump’s priority is a strategic one — related to the role of industry, technology, and innovation in global competition and in deterring (or winning) a conflict with China or any other revisionist challenger.

The outline of the new American industrial policy can be traced back at least to the Obama era, when major lawsuits against China at the WTO began. But each new administration has slaughtered a sacred cow of the Reagan legacy and the neoliberal consensus. In this sense, Trump is not a disruptive factor, but the latest culmination of a new order — just as Reagan replaced the previous paradigm, and Franklin Delano Roosevelt’s New Deal replaced the one before him.

We will see increasingly strong interventionism in critical industries and hybrid models of corporate governance — the height of irony for those who insist that Trump is a fascist, since a defining feature of fascism was state corporatism.

Intel will not be the only American (and perhaps even foreign) company to find itself under American state ownership, and it is unclear whether the state will know when to make a profitable exit, or whether future administrations will find increasingly narrow reasons (such as social justice) to intervene in the economy this way.

It remains to be seen whether a new industrial philosophy and policy appropriate to the new global situation can emerge from the competition of interests within the Trump Administration. Even if it could close the strategic gap with China, it will be contested if it does not deliver prosperity and optimism — especially in the areas most affected by globalization.

Along the way, certain books of “best economic practices” for states will also be rewritten, with uncertain results. We cannot all have trade surpluses, strategic industrial autonomy, and economies of scale for national champions — and unsuccessful attempts will impose major costs.

Many countries practice premature mimicry for political and ideological reasons and may end up in the economic pit because of it. Whether we are talking about the 20th-century rush for heavy industry, the deregulation of financial markets, or the trend of offshoring and outsourcing, we have numerous examples of innovations insufficiently evaluated yet copied by many out of irrational exuberance.

Trump’s current approach is logical and consistent with the thinking of elites critical of the previous order, but the details and execution of these policies may pose problems. It is certain that he has ample precedents for many of his actions, and the success of Operation Warp Speed to accelerate the development of anti-COVID vaccines shows that the administration is not statist enough to forget about harmonizing its interests with those of the private sector. Perhaps this will help avoid the major drawbacks of state-led industrial development.

The most important lesson is that the global populist wave is one based on aesthetics, value judgments, and moral-ethical systems — not on coherent ideologies. Otherwise, Javier Milei, who is trying to eliminate Peronism in Argentina, would not have allied himself with Donald Trump, who risks introducing it in the U.S.

Photo source: PxHere.com.