Tokyo-based Nippon Steel Corporation’s new CEO says he’s pressing on with its $14.1 billion acquisition of United States Steel Corporation.
But President Biden thinks U.S. Steel should be “domestically owned and operated.” Why? Presumably because it’s important to national security that America has its own supply of steel on American soil.
The specific outcome depends on negotiations between the Biden administration and Nippon Steel. Nippon now says it will bring new technology to U.S. Steel to make it more innovative and competitive.
Meanwhile, the Biden administration has agreed to give giant chipmaker Intel $8.5 billion in grants and $11 billion in low-cost loans to help it push ahead in computer chip design and manufacturing. Why? Because, as the Commerce Department said in its March 20 announcement of the deal, “leading-edge logic chips are essential to the world’s most advanced technologies like artificial intelligence, and this proposed funding would help ensure more of those chips are developed and made domestically.”
But on its website, Intel proudly proclaims it has spent $152 billion on stock buybacks since 1990. What’s to stop it from using some of its federal subsidy for more buybacks? Although the legislation authorizing the subsidy prohibits its use for stock buybacks, it doesn’t bar Intel from using the subsidy to free up Intel’s own funds, which Intel could then use for buybacks. Which is why Senators Chris Van Hollen and Elizabeth Warren are pushing for regulations to be tightened.
Also essential to America’s security and technological lead are giant tech platform monopolies like Amazon, Apple, Facebook, Google, and Microsoft. But how “American” are they, really? Apple boasts that its products are “designed” in the U.S., but they are mostly made in China.
More troubling is that these companies are exploiting their monopoly power at the expense of both consumer privacy and potential innovators who are their competitors. So rather than subsidize them or protect them from foreign competition, the Biden administration is suing several of them for violating antitrust laws.
How to make sense of this seeming mishmash?
Back in 1990, I wrote a piece in the Harvard Business Review titled “Who Is Us?,” asking whether “us” was American-based corporations — which were already producing and selling stuff all over the world — or American workers.
My answer was American workers. I argued that if foreign-based companies create good jobs in America — jobs that enable American workers to understand critical technologies and continue to improve on them — the national identity of the corporation doesn’t matter.
By the same token, if U.S.-based companies — seeking to maximize their shareholders’ returns — outsource critical jobs abroad, they undermine the capacity of Americans to innovate.
I also argued that picking “national champions” that are supposed to serve both America and their shareholders was not the way to build the technological prowess of the American workforce. Better for America to invest in the skills of American workers directly — giving them access to the best possible technical education — and negotiate with foreign companies to do their critical work in the United States, with Americans.
As it happens, this looks a lot like the Biden administration’s emerging industrial policy.
Today — far more than was the case in 1990 — just about all big corporations are global, regardless of the nation in which they’re headquartered. They’re doing everything everywhere, and they’re actively and aggressively playing off countries against each other.
As my former American Prospect colleague Bob Kuttner has written, Biden’s industrial policy would be an easier sell if American-based corporations were better domestic citizens — if they didn’t bust unions and export jobs; if they didn’t collude at the expense of consumers; in short, if they gave more of a damn about America.
Yes, and if pigs could fly.
It’s not going to happen. American-based corporations exist to maximize shareholder returns, and CEO pay is linked to those returns.
So, the Biden administration — indeed, every American administration — has no choice but to negotiate with big global corporations, wherever their headquarters happen to be, on behalf of America.
That means negotiating with Nippon Steel to condition its purchase of U.S. Steel on taking whatever steps necessary to protect American national security and improve the technological prowess of U.S. Steel.
It means negotiating with Intel to condition federal subsidies for Intel on Intel’s doing the critical stages of chip manufacturing in the United States, and not frittering away those subsidies on stock buybacks.
It means negotiating with America’s big tech monopolies to share their operating systems and other key technologies with smaller American businesses so they don’t stifle innovation.
In other words: It means actively negotiating with global companies to protect and advance the interests of America — as the condition for merging, gaining federal subsidies, avoiding antitrust litigation, even keeping access to the American market.
Yes, this means a highly activist government. But what choice do we have? Big global corporations, even if headquartered in the United States, have no inherent patriotism. They’ll do whatever they can do — and wherever they need to do it — for their shareholders. Hence, the U.S. government must negotiate with them on behalf of America.
This article was published at Robert Reich’s Substack
