We are in unprecedented times.  I’m not talking about wars, or about social strife on some cultural issue, or about poverty.  Even the Bible says: “The poor you will always have with you” and I suppose at a certain level it will always be true.  What I am at least seeking to objectively talk today about is the increasing mixture of federal government with capitalism in the United States.  That’s an untested cocktail that has never been stirred quite the same way before and for the sake of the nation’s poor as well as the rich, I think we need to be very (very) careful here.

Much of the free world (democratic institutions) supports a free-market economic system.  We generally call those free-market systems ‘capitalist’ because the economic system that undergirds them is run by private citizens operating for profit and we call that capitalism.  “Free enterprise” over the means of production can be roughly understood to mean economic exchanges free of coercive government influence. These United States of American represent the undisputed global leader of free enterprise as measured by Gross National Product (number one in the world)[i].  Further, The United States constitutes just 4% of the world population yet its companies represent 50% of global stock market capitalization[ii].

While the above statistics tout U.S.A. competitiveness and ingenuity, that achievement would not be possible without a strong system of government that assures:

1. Property rights
2. The enforcement of contacts in independent courts
3. Promoting competitiveness (precluding collusion and anti-trust activity)
4. And…keeping the country’s infrastructure plumbed and its populace safe (businesses can’t operate without infrastructure (roads, bridges), taking care of the social order (protecting workers, healthcare for the indigent) and fighting wars(buying missiles and tanks) is only the domain of federal governments)

Without engaging in any shallow didactic exercise, private enterprises can operate but the government must regulate. We can all quibble whether businesses can operate morally or governments operate efficiently, but the basic die is cast.  That essential formula has taken the United States from insignificant diplomatically and economically on the global scale to dominant and rich.  Businesses, unimpeded by government involvement, must and do allocate resources more productively and set prices nimbly.  If they do not do that — they go broke. Plain and simple. That’s not only how it works — it is how it MUST work — or capitalism fails.  The Risk = Reward trade-off I listed in the newsletter last month works and has employed people and made some entrepreneurs rich while others lost everything.

Contrast the above with what happens if the government doesn’t just regulate, it operates.  Government officials and / or the institutions they run cannot simply watch out for shareholders, but by definition have a broader social contract and must work for the good of the public.  If direct government involvement were to happen, you have ‘the fox watching the hen house’.  Dangerous things can not only happen that threaten the forementioned economic system that contributed to the United States being great, but in my opinion they WILL naturally happen.  Corruption will happen (think of the regulated becoming the regulators). Misallocation of resources will happen (think my district versus your district).  Market price distortions will happen (think subsidies and price controls).  Picking winners or losers (in economic terms, ‘excess rent-seeking’) will happen.  Why do I raise these possibilities?  It is because we are experiencing a spate of government interventions into the private sector on a scale that has never happened before.  Below I provide a short list of what are not capitalist moves (per se), and are not socialist moves (per se) but some odd concoction of statism / capitalism which surely will end poorly:

1.  In the $280 Billion 2022 CHIPS Act, over $52 Billion was approved as private sector subsidies for the expansion or building of semiconductors in the USA[iii].
2. In a separate Inflation Reduction Act authorizing spending of $891 Billion, over $105 Billon was set aside for at least 6,100 separate programs (keep in mind, anyone managing 100 projects simultaneously is hard if not impossible, and I would argue the latter) and a further $244 Billion was set aside for questionable tax credits[iv].
3. Though the U.S. Steel acquisition by Nippon Steel was blocked by the former White House administration, for its approval the current administration wants a ‘golden share’ to control certain critical business decisions[v].
4. The Federal government has recently begun taking 15% of Nvidia and Advanced Micro chip sales to secure licenses for exports to China[vi], a direct skimming of corporate revenue which has never happened before.
5. The US Government has recently become involved in private industry leadership by demanding the firing Intel’s CEO Lip-Bu Tan[vii] and then last Friday announced it was extracting a 10% ownership stake in the company in exchange for the CHIPS Act grant[viii] (Intel Corporation had made some bad business decisions, and then got itself in hock to the U.S. government by taking $8 Billion in CHIPS Act subsidies – which I already said in item #1 was a government subsidy deal rife with problems and like prophecy, here we are right out of the economic gate).
6. Rare earth magnet mining start-up MP Materials has just granted convertible preferred shares to the Department of Defense (up to 15%), which potentially makes the U.S. government its largest company shareholder[ix].

It was the famous playwright Oscar Wilde who famously said: “Every saint has a past, and every sinner has a future.”  The above-described public / private trysts have me very concerned we won’t be able to tell saints from sinners and both sides will claim the former.  I personally don’t know one private sector CEO who wants to invite more government into their Boardroom.  Capitalism – and taking care of its shareholders / stakeholders – is plenty hard enough without inviting public officials with their own constituencies and politics to sit at the table.  The USA is the glimmering global light of jobs and innovation and has never been down this road before.  Thus, we need to be extremely careful given we’re at the top of the economic mountain and it is long way down.

It remains my deep and distinct pleasure to serve you well.

Patrick Zumbusch
Founder and CEO

---

[i] “Gross National Product (GNP) by Country 2025” (World Population Review.com, August 17, 2025)

[ii] “The $124 Trillion Global Stock Market, Sorted by Region” (Dorothy Neufeld, Visual Capitalist, February 26, 2025)

[iii] “Chipmakers are rushing to get Chips Act money before Biden’s out. Here’s who’s finalized so far” (Britney Nyugen, YahooFinance.com, January 3, 2025)

[iv] “What climate funding remains from the IRA?” (Tom Taylor, Climate Program Portal, October 25, 2025)

[v] “The Nippon-U. S. Steel Deal, a Golden Share, and Magic Beans” (Stephen Heifetz, Council of Foreign Relations, July 16, 2025)

[vi] “Nvidia and AMD to pay 15% of China chip sales to US” (Adam Hancock and  Peter Hoskins, B.B.C. Live, August 11, 2025)

[vii] “Trump flip-flops on Intel CEO, calls him ‘success’ days after demanding resignation” (Jordan Novet, CNBC.com, August 11, 2025)

[viii] “Uncle Sam Shouldn’t Own Intel Stock” (Mike Schmidt and Todd Fisher, Wall Street Journal, August 25, 2025)

[ix] “MP Materials Deal Marks a Significant Shift in US Rare Earths Policy” (Tom Moerenhout, Columbia University, July 11, 2025)