The most unlikely bipartisan issue in the United States right now is state ownership of the means of production. Donald Trump is turning Uncle Sam into a stock picker. His administration has now taken or agreed to take equity positions in 34 companies, including roughly 10 percent of Intel and stakes or warrants of up to 15 percent of MP Materials and nearly 20 percent of Elmet Group.
Meanwhile, the Democratic Socialists of America advocate public ownership of the largest corporations and essential industries. In New York, DSA member Mayor Zohran Mamdani plans to open city-owned grocery stores.
Despite ideological differences, both MAGA and DSA claim that government can support jobs, communities, resilience and innovation better than market forces, and both describe it as a necessary break with a long-standing American free-market consensus.
...
Yet there is nothing new about such policies. They have been tried many times before and the track record is long and disappointing. The experience of my home country of Sweden in the 1970s and 1980s is informative, since state ownership was justified by many of the same, often conflicting, objectives that are now being invoked by Washington.
Sweden established the Swedish Investment Bank in 1967 to channel long-term finance to industry and in 1970 it founded the state holding company Statsföretag (Swedish State Company), which brought 22 companies under a single umbrella to coordinate and expand government ownership.
Soon, what first seemed like a strength—that state ownership could achieve many goals simultaneously—became a corporate governance nightmare. Boards and management fought over whether profitability or industrial policy should take precedence, making both strategic decisions and accountability difficult.
State ownership also turned government into both umpire and player: the same politicians who regulated industries and distributed subsidies now had a financial interest in the success of particular companies.
Some companies used government resources and guarantees for activities that seem distant from core state responsibilities. A state-owned restaurant group sent two employees to work for McDonald’s in the United States on a fact-finding mission. Armed with this know-how, they later started Clock, a rare example of a government-run hamburger chain, including the distinctly Swedish "Hawaii burger," topped with pineapple.
At one point, the Swedish Investment Bank led a consortium trying to salvage the Spanish galleon San José, which had sunk off the Colombian coast in 1708 with a treasure of gold believed to be worth billions. The consortium fell apart, and the San José remains on the ocean floor.
Industrial policy gradually became an ad hoc system for rescuing failing companies. Instead of creating new industries, the government increasingly bailed out shipyards, steel companies and textile firms under pressure from trade unions and local politicians. The rescue operation became known as the "Industrial Emergency Room."
Between 1976 and 1982, the Statsföretag group accumulated total losses of around $2 billion in today’s money, a huge sum for a small economy. Shipyard bailouts had cost the equivalent of $17 billion.
Kjell-Olof Feldt, minister of finance in the Social Democratic government that took over in 1982, described state-owned companies as "a black hole" in the public finances. A spokesman for the biggest center-right party observed: "State ownership of business has, with few exceptions, been a gigantic failure."
Assar Lindbeck, the Social Democratic economist who first proposed creating the investment bank, came to regret his advice, noting, "I have never heard any informed observer argue that the Investment Bank served any useful purpose during its existence."
Remarkably, less than 15 years after the new policy had been launched, a consensus had emerged that it had been a costly failure. In the 1980s and 1990s, loss-making companies were closed down and many state-owned companies were sold. One study showed that productivity in companies increased after privatization by between 12 and 36 percent.
Yet this retreat took longer than those involved wished. Feldt, the minister of finance, spoke of "the resistance generated by the system itself, i.e. the state administration and the interest groups dependent on the flow of public funds."
One important lesson for America today, as it begins to repeat some of Sweden’s failed experiments from the late 1960s and the 1970s, is that when public ownership replaces private ownership, the feedback of a decentralized market is replaced by organized lobbying and institutional self-preservation. The result is not only worse policies but also a political system that becomes less capable of correcting its own mistakes.
For years, Sweden’s National Debt Office kept a six-foot model of the T.T. Sea Scape in its headquarters, a tanker built with government support during the shipyard crisis, as a reminder of the costly industrial policies of the 1970s. Perhaps it is time for the Sea Scape to make one final voyage—across the Atlantic, to be displayed in the halls of Congress.
Johan Norberg is a senior fellow at the Cato Institute and author of Peak Human: What We Can Learn from the Rise and Fall of Golden Ages.
The views expressed in this article are the writer's own.