In May 2023, then-Sen. JD Vance (R-Ohio) asserted during a panel discussion at Catholic University of America that “there is no meaningful distinction between the public and the private sector” in America.
“It is all fused together and it is all, in my view, very much aligned against the people” he then represented, he said.
For evidence of this one need look no further than President Trump’s recent proposal — perhaps the first of many — that the federal government acquire a 10 percent ownership stake in beleaguered computer chip-maker Intel.
Commerce Secretary Howard Lutnick also wants deals with universities to share in the patent royalties generated by federally financed research projects.
Such talk has been heard only rarely since 1952, when President Harry Truman threatened to nationalize the U.S. steel industry on the eve of a planned labor strike that would have disrupted production during the Korean War.
Truman’s threat was never carried out after the U.S. Supreme Court ruled later that year, in Youngstown Sheet and Tube Co. v. Sawyer, that the president has no constitutional authority to seize and operate private property.
Defendant Charles Sawyer was Truman’s second secretary of Commerce, whose department had been directed to implement the proposed government takeover of the industry.
The distinction between the public and the private sector could not be starker. In the private sector, the motivation to deploy resources to their highest-valued uses is strong; success and survival depend on it.
In the public sector, politicians’ political motives and the rigidity of bureaucracy displace the high-powered incentives of market-price and profit signals, leading to misallocation of resources, the proliferation of duplicative programs, lax oversight, fraud and other taxpayer abuses.
Though many, if not most, government employees are dedicated to public service, the public sector’s actors — a mix of both political and supposedly apolitical players — are not, uniformly, the well-informed, benevolent “experts” that taxpayers have funded in recent years at a cost of some $350 billion a year.
Nevertheless, as George Mason University economist Richard E. Wagner insists, the private and public sectors are entangled.
Just four years after the U.S. Constitution was ratified, Alexander Hamilton, President George Washington’s Treasury secretary, issued a “Report on the Subject of Manufactures.”
The document supports what today might be called an industrial policy intended to jumpstart American economic growth by imposing protective tariffs and other measures favoring domestic textile production over British imports.
Hamiltonian interventionism didn’t stop there; his excise tax on whiskey, which farmers in Western Pennsylvania distilled because it was cheaper to ship east than bulky grain, triggered the Whiskey Rebellion in 1794.
Whether it goes by industrial policy, economic nationalism, a sovereign wealth fund, crony capitalism or America First, putting the public sector in charge of market-based private decision-making is a species of what legitimately can be termed fascism.
Under such a system, the means of production remain largely in private hands, but decisions about how to utilize those means are directed by the government.
Unlike a communist system in which state ownership is the norm, fascism allows property to be owned privately, but the owners are not free to use it as they see fit.
Despite paying lip service to the virtues of market competition, private businesses often support government control because when “rent-seeking” substitutes for profit-seeking, the public sector becomes a firehose of favors like subsidies, regulations and favorable tax treatment that is more reliable than fickle consumers.
Secured by lobbying, campaign contributions and other political connections, those favors, of course, come at the expense of others, including both taxpayers and competitors. But that is someone else’s worry.
Vance is correct that the distinction between the private and public sectors has increasingly become blurred. But that is a serious problem, not a justification for further erasing the line between the two.
Secure private property rights, limited government and adherence to the rule of law are the proven recipe for freedom and economic prosperity.
That vital lesson should not be lost. As President Ronald Reagan famously said in a 1986 news conference, “The nine most terrifying words in the English language are: I’m from the Government and I’m here to help.”
The public sector differs institutionally (and constitutionally) from the private sector. Both must stay in their own lanes, with the private lane much wider than the public’s.
William F. Shughart II, distinguished research advisor of the Independent Institute, is J. Fish Smith Professor in Public Choice at Utah State University’s Jon M. Huntsman School of Business.