The US government’s decision to take a 10% equity stake in Intel, converting a substantial portion of previously awarded grants into ownership, is a grave misstep that blurs the lines between a free market economy and state-led capitalism. This action, while cloaked in the rhetoric of national security and economic competitiveness, is a dangerous move down the path of Chinese-style industrial policy. It signals a shift from the principles of genuine private-sector innovation to a system where political motives can supersede market forces, ultimately harming both the company and the American economy.
China’s economic model, often described as “party-state capitalism,” is characterized by the Communist Party’s deep entanglement in both state-owned and private enterprises. The Chinese government uses subsidies, preferential lending, and direct control to steer strategic sectors. While the US government’s stake in Intel is currently described as “passive,” this arrangement is a slippery slope. By becoming one of Intel’s largest shareholders, the government gains leverage and a seat at the table that can, and will, influence corporate decisions.
This model has been proven to be inefficient and susceptible to political interference. State-owned enterprises in China, despite their scale, are often less productive than their private counterparts. The profit motive, the engine of American innovation, is replaced by political expediency. Michael Strain of the American Enterprise Institute has voiced a legitimate concern: Intel may now make decisions “based on what’s going to make the White House and the President happy or unhappy.” This could mean avoiding necessary layoffs to improve profitability or making strategic choices that are politically popular but economically unsound.
The government has hailed this deal as a win for taxpayers, arguing it provides a return on investment for the billions in CHIPS Act grants. However, this is a flawed premise. The CHIPS Act was intended to be a strategic investment in revitalizing the US semiconductor industry, not a vehicle for government profit. By converting grants into equity, the government is essentially punishing Intel for its need for capital, while simultaneously assuming the risks of a volatile private enterprise. It’s a deal that sets a dangerous precedent, inviting other industries to seek similar state bailouts and partnerships, and potentially stifling the very competition the CHIPS Act was meant to foster.
The short-lived government stakes in companies like General Motors and AIG during the 2008 financial crisis were a last resort to prevent systemic collapse. They were temporary, and the government’s role was strictly to stabilize, not to permanently entrench itself in the private sector. The Intel deal is fundamentally different. It’s a proactive measure that, by Intel’s own admission in a regulatory filing, could limit the company’s ability to pursue future strategic transactions and attract other private capital. This is not a bailout; it’s a co-opting of a private company into the state apparatus.
The US government should not be a shareholder in its private companies. American competitiveness is built on free-market principles, innovation, and robust competition, not on government-led industrial policy. The path to securing our technological future is not through an imitation of China’s state-capitalist model, but by doubling down on what has made us an economic superpower: an environment where companies rise and fall on their merits, not on political favor. This move against Intel, while seemingly strategic, is a step away from our core economic identity and a concerning step toward a less free, less dynamic future.
