The U.S. government has taken a 10 percent interest in Intel which used to be the primary manufacturer of computer chips in the U.S. The government is now reportedly the largest shareholder in Intel.
The Trump administration is now looking at whether other defense contractors should be partly — or wholly — owned by the government. This is a tremendously bad idea.
The Trump administration should be concentrating on rebuilding our military, which it isn’t doing.
Commerce Secretary Howard Lutnick said that the Trump administration is having a “monstrous discussion” about taking a stake in defense companies. He said that Lockheed Martin is “basically an arm of the U.S. government,” and asked, “What’s the economics of that? I’m going to leave it to my secretary of defense and the deputy secretary of defense.”
Wow. Lutnick is defaulting in his job because it’s his responsibility — along with the secretaries of the Treasury and Defense — who should be shouting that the ownership of defense contractors should never be the government’s business.
That’s true because the free market isn’t designed that way. Government bureaucrats aren’t responsible to shareholders or, in literal terms, anyone else. They are non-independent actors who look out for the bureaucracies that they are a part of. Among bureaucrats there is no thought of the free market though they happily take control of whatever they can.
Shareholders can be relied on to look after their own interests in a growing or shrinking market. The market for computer chips — semiconductors to the trade — is rapidly evolving because nations and commercial interests are driving computers to artificial intelligence (AI). They haven’t reached that point yet. No computer functions as a human brain can.
And maybe AI should never be reached, as we learned from the “Terminator” movies where the AI took over the world and declared humanity superfluous. China and several other nations are driving their research to achieve real AI as soon as it can.
I’ve looked at both Adam Smith’s Wealth of Nations and George Gilder’s Wealth and Poverty. Neither says that the government should take control of defense contractors or any other types of businesses. Conservative economics, going back 250 years, prohibits government control of industry. Seizing — even buying — the means of production is not consistent with freedom. For Trump to take a 10 percent interest in Intel — be it a bailout or something more likely to take control of Intel’s business — is precisely the wrong thing to do.
We should have learned that from the British nationalization of their steel industry. That happened in 1949 and 1967, both times reversed by conservative governments. The Keir Starmer regime — again, a hyper-liberal government — re-imposed nationalization in 2025 because China had taken control of it. That, too, will be reversed by a conservative government if one is even possible in the UK at this point.
Intel’s fall from market dominance was caused by several factors, not the least of which is cheaper labor in Taiwan whose TSMC now dominates the chip market. Its chips are greatly faster than anything made in the U.S. Our defense capabilities are now mostly dependent on Taiwanese chips. Intel now outsources its most advanced chips to TSMC.
China has promised to take Taiwan by force if necessary by 2027. What can we do to save the U.S. chip industry?
In 2022, under the Biden administration, the “CHIPS Act” was meant to provide needed assistance to U.S. chip companies and gave power to government agencies to “help.” Trump has traded that support for Intel for the 10 percent ownership of Intel.
What could possibly go wrong? This is where Murphy’s Law takes effect, especially if it spreads to other companies and industries. Government is unable to make market decisions especially where the survival of an industry is at stake.
Can government make better decisions as to what products to manufacture or how best to predict the evolution of those products? No. We might fancy a takeover of the chip industry by DARPA — the Defense Advanced Research Projects Agency — but that too would be a mistake. Independent research and development accomplished by industry is a more reliable factor. Two war stories illustrate this.
Years ago, when I worked for Lockheed, I was told the history of stealth by its inventor, the late great Ben Rich who was the boss of the Lockheed Skunk Works which built classified aircraft. He told me that the CIA used to send him translations of Russian mathematical journals. Ben said that one Sunday morning, when he was reading one such translation, he stumbled across an article by a Russian mathematician who claimed to have a formula that would determine the radar cross-section of any object. As Ben said, he spilled his coffee, dropped his cigarette on the carpet,and called his team into action. The result was the first stealth aircraft, the F-117.
When I served in the Pentagon during the First Gulf War, DARPA was under the nominal control of our office. The director, Vic Reis, stopped by my office on his way to then-secretary of defense’s Dick Cheney’s office. He told me that General Schwarzkopf had sent an urgent message to Cheney complaining that, on the first day of the war, several of our armored vehicles had been hit by friendly fire because of the dense sand storms. In Vic Reis’s hands was the solution. It was a coffee can shaped object that produced a powerful infra-red signal flashing “good guy” to any aircraft above. The prototype had been produced in just one day. It attached to the friendly vehicle and saved a lot of lives.
That’s what U.S. industry was capable of then. It should be relied on to do more of the same now.
Lockheed-Martin is, as Lutnick said, basically an arm of the U.S. government. Is it next on the list for a government takeover?
The Trump administration should be concentrating on rebuilding our military, which it isn’t doing. As I’ve written before, the Navy needs more and better ships and the Air Force is older and less ready to fight than it has ever been.
It’s time to rebuild our military. The initiative to rebuild shipbuilding by relying on South Korean shipyards is only a part of it.
Our warfighters need the best and most advanced weaponry possible. That will take tens of billions — maybe hundreds of billions — of dollars to accomplish. Changing ownership of industries to government control is not going to do that.
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