Republican Socialism: The Trump Administration Buys a Stake in Yet Another Company

Not even shutting down the government can stop Republicans from forcing their way into corporate boardrooms these days.

The federal government is, at the moment, incapable of completing its most basic and routine task—passing a budget—and yet it is simultaneously expanding its portfolio to include a 10 percent ownership stake in an Alaskan mining company.

That company, Trilogy Metals, will receive a $35.6 million “investment,” the Trump administration announced on Monday. In return, the federal government will own 10 percent of the company (and will have the option to buy another 7.5 percent at some later date). The deal seems to follow the same blueprint that the Trump administration has used to seize stakes in U.S. Steel, Intel, and others: Trilogy does something that the White House has decided is essential for national security—in this case, mining for cobalt, copper, and other critical metals—and therefore the government must have a stake in the company’s future.

On its face, that idea might seem compelling. Cobalt and copper are indeed really important to modern technology, and America consumes more of both than it produces. (A different administration might see that as a good reason to embrace global trade, but alas.)

What Trilogy does is important, and the Trump administration is capitalizing on the fact that many people believe “is important” and “should be done by the government” are synonymous.

Are they? Again, look at the current state of the federal government. It is deep in debt, lacks a budget, and (probably most importantly) has no experience running a mining company. If this was not the government and was instead a large, powerful institution or corporation, wouldn’t an acquisition like this seem poorly thought out? Would you trust that entity to make a smart investment on your behalf at a time when its board of directors can’t even agree on a budget?

I’d be skeptical even if I assumed the officials involved were interested in doing only what’s best for the country—which, in this case, might not be entirely true. As Forbes reported Tuesday, one of the biggest beneficiaries of this deal is John Paulson, a Trump donor who was once on the short list to lead the Treasury Department. Paulson owns 8.7 percent of Trilogy, and his shares are now worth more than $100 million, up from $30 million yesterday.

Did the administration decide to dump nearly $36 million into Trilogy because its work is important and serves the national interest or because Paulson has friends in the White House? Will those considerations be a factor in the business’s future decisions? Once the government has a stake in this company—or any company—it becomes impossible to answer those questions. It also becomes difficult for the company to plan ahead since 10 percent of its shares could be controlled by a radically different owner every four years.

The importance of Trilogy’s work is actually an argument against giving the government even a minor stake in what it does. It should be experts in resource extraction and logistics who run mining companies, not bureaucrats or (worse) officials doing favors for friends.

There is, in fairness, a role for the government here. As part of Monday’s announcement, the Trump administration said it was approving permits for a 211-mile road that will provide access to the remote part of Alaska where Trilogy is hoping to mine all that cobalt, copper, and more. That is exactly the right thing to do, and it does not require any federal ownership of the businesses that might someday use that road.

You don’t need a firm belief in small-government principles or an aversion to socialism to recognize the difference between those two things. All it really takes is a sense of prudence. The government is good at issuing permits and not particularly good at running quasi-private industrial firms. Therefore, it should stick to what it does best.

That would be true of any government at any time, even one that was running efficiently, managed by competent leaders, and flush with a revenue surplus. It should be especially true of the current federal government, which is none of those things.

Thomas Jefferson probably didn’t actually say that a government big enough to give you everything is also powerful enough to take it all away, but that doesn’t make the sentiment any less true. Allow me to propose a corollary that’s become apparent in recent years: A government big enough to promise everything will also be so unwieldy that it cannot fulfill its most basic functions—yet will keep promising to do even more things anyway.

The Trump administration’s sense of urgency regarding America’s supply of copper, cobalt, and other key metals may be well-founded. But just because something is important doesn’t mean the federal government must have a hand in doing it.