President Donald Trump considers China the country’s biggest rival. But he also seems to view it as a model where the state calls the shots on who gets ahead in business.
Since returning to office, Trump has taken a more direct stake in American businesses than his predecessors — especially the Republican ones — turning the federal goverrnment into a major shareholder. While it’s still nowhere near China’s state-directed market economy, it’s still closer to it than the U.S. has typically been.
America’s investment portfolio currently spans 16 companies with $21 billion invested so far, according to the Council on Foreign Relations. The roster includes smaller stakes in Intel Corp. — the single-largest federal commitment— and rare-earth mineral companies such as MP Materials among others.
Now he’s poised to use the Iran war to exert more power in the economy.
The Trump administration is galloping ahead with a pair of bailouts for Spirit Airlines and the United Arab Emirates, a Persian Gulf nation and a close U.S. ally. Both are grappling with the fallout of the war, which has rippled through the global economy and spiked fuel prices.
Spirit was already in bad shape before war broke out in the Middle East. The budget carrier cycled through two bankruptcies in two years and has long had a dismal reputation among travelers. A University of Chicago professor once infamously compared traveling on the airline to a case of chickenpox since “everyone has endured Spirit once.”
Nevertheless, it is in line to receive a $500 million loan from the U.S. government to avoid liquidation or even an outright sale — turning Spirit into America’s first state-owned airline.
“We’re thinking about helping them out, meaning bailing them out, or buying it,” Trump told reporters Thursday evening. “I think we just buy it.”
Next up is the UAE. Iranian missiles bombarded the oil-rich nation, crippling its ability to sell and export oil through the critical Strait of Hormuz. Though the UAE has ample financial reserves, it is still bleeding dollars. Now the administration is engineering a currency swap line that functions similarly to credit. It is the exact same lifeline that was extended to Argentina late last year, and may well be granted to Asian nations in the future.
In both cases, Trump is using reprecussions from the war to justify more government involvement in the economy.
There is precedent for this. During World War I, the federal government took control of the nation’s railroads, though they were returned to private ownership after the war’s end. In World War II, the feds ordered auto companies to stop building private cars and focus on planes and tanks, strictly rationing the remaining civilian automobiles. And during the Korean War, President Harry Truman attempted to seize control of U.S. steel mills, only to be blocked by the Supreme Court.
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Republicans have long argued that this kind of state meddling — which former House Speaker Paul Ryan referred to as “picking winners and losers” — risks being corrupted by personal influence. They had a field day when the solar power company Solyndra went bankrupt after receiving a federal loan guarantee from the Obama administration, calling it “crony capitalism” because some people invovled with the company had been campaign contributors.
Crony capitalism is typically defined as a system in which private firms leverage influence in government to secure privileged favors and gain advantage, instead of competing in open markets for success. The term was first used in the 1980s to illustrate the two-decade dictatorship of Ferdinand Marcos over the Philippines. Marcos minted oligarchs who dominated the Philippine economy with insider deals and relied on him to preserve their splendor. His rule ended with the economy in free fall.
Closer to home, the U.S. sugar industry has long been held up as a blatant example of crony capitalism. Domestic sugarmakers have been federally backed through a blend of import tariffs, purchasing quotas and price guarantees for more than four decades. The Trump administration has only reinforced the status quo: It tossed them three lifelines over the past year by restricting sugar imports, boosting price guarantees and issuing temporary one-time payments for sugar producers.
Big Sugar is the dominant political donor among crop producers and an influential constituency. Republicans in particular learned never to cross them. “Don’t f— with sugar,” former Republican House Speaker John Boehner wrote in his 2021 memoir.
With Trump knocking down wall after wall separating business and government, that critique appears prescient.
Now with Trump knocking down wall after wall separating business and government, that critique appears prescient.
Take the UAE, first among equals in the Persian Gulf. Early last year, Dubai pledged $1.4 trillion in direct U.S. investments over 10 years. The UAE is heavily intertwined with the Trump family, who cultivated extensive business ties in the country. An Emirati-backed investment firm also has a sizable stake in World Liberty Financial, the crypto venture directed by Trump’s sons. Now the war’s fallout has stirred fears in the Trump administration that the UAE’s enormous investment pledges are in jeopardy.
Over the past 15 months, Trump has laid the groundwork for a command economy, giving him plenty of opportunities to direct government money to friends and family if he chooses. Now, a war of choice against Iran sets the stage for him to take it even farther.
Joseph Zeballos-Roig
Joseph Zeballos-Roig is a reporter who has covered economic policy and politics for Semafor, Business Insider and Quartz, among other publications.