Government Equity Stakes in Companies Undermine Free Markets and Enable Crony Capitalism
Source: James Surowiecki. "When the President Takes a Cut - The Atlantic." May 29, 2026. www.theatlantic.com
The Gist
The author argues that when the government takes ownership stakes in companies, it corrupts the free market system. Instead of companies competing fairly, they start making decisions based on what will please the government rather than what makes economic sense, leading to crony capitalism.
Conclusion
Federal stakes in public companies may enrich the government, but they are bad for America because they distort markets and enable crony capitalism
Premises
- Government ownership creates market distortions by tilting the marketplace in favor of companies the government owns
- The administration lacks legal authorization and transparent processes for taking equity stakes, making decisions subject to presidential whims
- Government stakes create incentives for companies to seek favorable treatment through share trading rather than economic merit
- When government becomes a shareholder, the partnership becomes intimate and long-term, compromising regulatory independence
- Government policy should be shaped by what's best for the economy, not by what benefits companies the government happens to own
- Unlike crisis-era bailouts that were temporary, Trump is making government ownership commonplace across multiple industries
- Companies now view trading shares as a cost of doing business to gain favorable treatment or avoid punishment
Assumptions
- Free markets produce better economic outcomes than government-influenced markets
- Regulatory independence from ownership interests is essential for sound policy
- Government should maintain arm's length relationships with private companies
- Presidential discretion in equity investments will lead to favoritism and corruption
- Market-based allocation of resources is superior to politically-influenced allocation