U.S. Government Expands Equity Stakes in Multiple Companies, Raising Concerns Over Market Impact
When the Magistrate Becomes a Merchant, Liberty Is the Collateral
A government that buys into dozens of companies ceases to be a neutral guardian of law and turns itself into a player with skin in the game—and power to load the dice.
I read that your national government now holds a share in a particular company worth over two billion dollars, and that this is only one of roughly three dozen such stakes accumulated by the present administration. I am further told that sober analysts warn of conflicts between the government as investor and the same government as regulator across an industry, with the risk of preferential treatment that may distort competition, stifle innovation, and lead to monopolies or tight concentrations in strategic trades. I do not pretend to judge the exact sums or valuations, which some reports themselves treat as needing firmer proof; I ask only what sort of power this is, and upon what trust it rests.
When I sought, in the Second Treatise of Government, to understand political power aright, I began with men in a state of nature: free, equal, and independent, under the law of nature, with a property in their lives, liberties, and estates, subject to no will but God’s and their own reason. Out of that condition, they could be supposed to consent to a common authority only so far as it better secured those properties by known standing laws and impartial judges. This is the measure. If any new fashion of rule leaves men less free, less secure, and more at the mercy of discretion than they were by nature, it cannot pretend to their rational assent.
Now a people may very reasonably consent that their governors levy taxes, build roads, equip navies, and in general dispose of common stock for common ends. They may also consent that the magistrate regulate trade by general rules, so that fraud and force be restrained and no man’s property invaded by another’s craft. These are public trusts plainly directed to the safety of all. But to hear that the same power, which makes and executes the rules of a market, has also taken a direct ownership stake in dozens of the companies that live and die by those rules, is to hear of something different in kind. Here the umpire steps out from behind the line and buys a team.
Those observers who warn that such ownership creates conflicts between the magistrate as investor and as regulator, and may distort competition, say in modern phrase what I long ago argued against arbitrary power. Wherever the same hand that enforces the law has a particular gain in the success of one subject over another, it ceases to be an impartial judge and becomes a party. Preferential treatment for state-linked firms does not only offend your modern taste for fair play; it offends the law of nature, which forbids any man, or body of men, to harm another in his possessions by force of a power held on trust. To stack the rules is to invade property.
Some will reply that government, like any other person, may invest where it sees prospect of gain; and that if private men, by their labour and risk, may acquire estates, why not the public? Here it is needful to distinguish. When a private man mixes his labour with what is common, as I there described, he does not thereby gain a power over his neighbour’s liberty; his property stands bounded by the like right of others, among whom there remains enough, and as good. But when the magistrate mixes the public treasure with a trading company, he gains not only dividends but influence: a temptation to bend regulations, subsidies, and penalties so that one favoured undertaking thrives where others are choked.
This is a concentration of discretion more dangerous than many open monopolies, for it hides under the venerable name of the public good. If the same authority that sets export rules, polices competition, and commands the coercive force of the state, also stands to profit if one firm succeeds and its rivals fail, then those rivals live not under a known standing law, but under men who are judges in their own case. It matters little whether such power calls itself socialism, industrial policy, or some new contrivance of letters; what matters is that it rests not on equal rules but on particular favour, and so tends from government toward usurpation.
I do not say that a single such investment, clearly justified, narrowly confined, and plainly revocable, would by itself dissolve the government’s title or warrant resistance. I wrote that people ought not to stir upon every little mismanagement, but only upon a long train of abuses all tending the same way, to make the design visible to sober minds. Yet when I see not one stake but many, not one exception but a pattern of the magistrate becoming merchant, and when the burden of proving its necessity is not openly shouldered but left to hopeful conjecture, I judge that your legislators and people have cause to call this power sharply to account. To keep government a guardian and not a gambling partner is work that must never be left on trust alone.
From the works cited
- Second Treatise of Government — Political power defined narrowly as the right to make laws, with penalties, only for the public good — anything beyond that definition must justify itself or stand condemned.
- Second Treatise of Government — The state of nature as analytic baseline: perfect freedom and equality under the law of nature, so that government must be shown to improve on that baseline for everyone who leaves it.
- Second Treatise of Government — Absolute arbitrary power is worse than the state of nature it claims to cure. Judge any concentration of discretion — executive, corporate, algorithmic — by whether it leaves those subject to it a known standing law and an impartial judge, or makes the powerful judge in their own case.