Trump’s Golden-Share Mistake
He would effectively nationalize U.S. Steel and make America a little less great.
By Andy Kessler
Scale flies off of a steel coil as it is unrolled on the line at a steel mill in Farrell, Pa., March 9, 2018. Photo: aaron josefczyk/ReutersLast week brought us the Golden Share.
No, that isn’t a James Bond movie, or a detail from the Steele dossier, although the plot is as sinister.
It’s the Trump administration’s first step to nationalize the steel industry.
In exchange for approval of Nippon Steel’s merger with U.S. Steel, the government receives a single preferred share, which includes voting rights and all sorts of control over U.S. Steel’s ability to close factories, invest capital and relocate jobs outside the U.S.
This “Golden Share” is a bad idea.
Nationalization is a fool’s errand, a slippery slope to fascism’s “government controlling the means of production.”
Don’t do it.
President Harry S. Truman tried to nationalize the steel industry in 1952.
The Supreme Court ruled against it.
President John F. Kennedy wrote a strong letter to a dozen steel companies in 1961 telling them not to raise prices because “the clear call of national interest must be heeded.”
Some raised prices anyway and later reduced them under pressure from Kennedy.
Thus began the long, steady decline of steel in the U.S. that we’re still trying to arrest.
Now that we’re in the steel-cage driver’s seat, will regulators institute price controls to protect the golden share?
Tariffs are already an attempt at price manipulation.
Where does it end?
Other examples have been less than stellar.
After Penn Central’s collapse in 1970, Congress created the National Railroad Passenger Corp., better known as Amtrak, to run intercity passenger trains—nationalizing much of Penn’s key infrastructure.
It has been a sinkhole for capital and an embarrassment.
We’ve nationalized banks (Continental Illinois), coal mines and quasi-government agencies (Fannie and Freddie are still government-owned 17 years later).
But the concept is mostly foreign—think Venezuela and its nationalized oil company, Petróleos de Venezuela S.A., a total disaster.
This expression sums it up: “Governments don’t pick winners and losers, they consistently pick losers.”
Nationalization is against the American capitalist spirit which thrives on competition. Why?
Because profit motives go away and inevitable price controls lead to stagnation.
We have too many industries on the nationalization spectrum, owned effectively by regulators rather than formally by the government.
But they are still controlled in various ways: airlines, autos, banks, healthcare and energy.
Is the Federal Reserve’s owning Treasury securities and monetizing the federal debt to control interest rates a form of nationalization?
Smells like it.
Under the Biden administration, the Chips Act provided money to build domestic semiconductor fabrication plants.
It was larded with all sorts of stipulations, including daycare requirements.
This is the kind of meddling that kills industries.
When companies fail, my worry is that the golden-share concept will be used as precedent to do all sorts of zany things.
If Intel loses money for a few more quarters, will the Trump administration nationalize the company in the name of national defense?
It could.
Will OpenAI, which loses money hand over fist, be on the government’s takeover radar?
Implausible, but it fits the description in the America First Investment Policy laid out in a February presidential memorandum, as “critical to our national and economic security.”
Power-hungry types pretend this is all in the country’s best interest.
Remember when President Barack Obama said, “What I have no interest in doing is running GM.”
Maybe not, but he did want to hand 17.5% of it to the United Auto Workers.
And Mr. Obama practically gave Chrysler away to Fiat in exchange for pushing what one Fiat specialist called “the Obama car,” the ugly, eco-obnoxious, underpowered Fiat 500.
One of Commerce Secretary Howard Lutnick’s demands was for the golden share to last in perpetuity.
Oh great.
A future President Alexandria Ocasio-Cortez (please no) could force U.S. Steel to identify as corporate-fluid and be exclusively powered by cow exhaust.
Some of the sharpest minds on Wall Street, including David Shapiro and Michael Grimes, helped structure the deal and the Class G share.
There must be better things for them to do.
For the record, I don’t even like dual-class share structures at companies such as Comcast, Google or Meta.
The idea of a golden share will chase away future foreign investment scared off by bureaucratic input.
Golden shares are also a bad example to set overseas as every two-bit dictator around the world will rationalize corporate seizures with, “well, the U.S. did it.”
Our stock market is the most valuable in the world, and entrepreneurs flock here from all over to start companies specifically because we don’t have government ownership or interference at the board level.
That’s why the future is invented here.
If we damage that with golden shares and other anticorporate policies, we’ll damage access to capital for the next wave of great businesses.
Not to torture the metaphor, but the Bond-like “The World Is Not Enough” for government meddlers will kill our golden goose and turn our economy into “Skyfall.”
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