Jack Mintz: This year saw the rise of state capitalism in North America. It won’t work

Governments taking ownership positions in private companies or lending in exchange for direction will screw up as badly as in the pastYou can save this article by registering for free here. Or sign-in if you have an account.A key development in 2025 was the sharp rise of state capitalism in both Canada and the United States. Increased state involvement in the economy is a departure from both nations’ traditional approaches.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.In Canada, Mark Carney’s “nation-building” gives the government a key role in trying to influence economic outcomes. In the United States, the Trump White House’s detailed participation in corporate governance marks a transition toward state-directed economic policy. The governments of both countries are conferring advantages on selected companies, frequently benefiting their owners through direct state intervention in corporate decision-making.State capitalism represents a distinct framework, separate from both Marxism and pure capitalism. It involves neither the complete government takeover of the means of production, nor full market autonomy. Instead, it attempts a partnership between the government and private-sector entities in managing economic affairs.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.There are various forms of state capitalism but all share the core feature of governments leveraging economic influence to try to direct corporate behaviour, whether by acquiring equity positions or “golden shares” in companies, granting tariff relief in exchange for compliance with governmental directives, or making other interventions. In many cases, the interests of policy-makers and corporate owners are served, potentially at the expense of consumers, workers, and taxpayers.Historically, the U.S. approach to economic matters has prioritized competition, deregulation and neutral tax policies rather than state intervention. It has served the U.S. well, making it the largest economy in the world and helping it outperform Europe over the past century.When American governments have acquired firms, the takeovers have typically been temporary, occurring only during wartime or economic emergencies, such as financial crises. But in 2025 Donald Trump’s “Make America Great Again” (MAGA) policies have placed state capitalism at the centre of economic strategy. In June, Japan’s Nippon Steel was allowed to acquire U.S. Steel only on condition that the U.S. government received a board seat and a golden share granting it a veto over major decisions. In August, Washington acquired a 10 per cent stake in semiconductor manufacturer Intel to help secure a domestic supply of chips in furtherance of national security purposes. This followed extensive public investment, including $8.5 billion in grants and $11 billion in loans. At the same time, an agreement brokered with Nvidia permitted the sale of advanced chips to China, contingent on the U.S. government receiving a growing share of related revenues and Nvidia investing US$5 billion in Intel.In exchange for tariff relief, drug company Pfizer agreed to reduce selected prices for U.S. consumers and invest in domestic manufacturing. Leveraging its relationship with the administration, Pfizer subsequently acquired Metsera, a company previously targeted by Denmark’s Novo Nordisk.In Canada, the federal government is shifting from grants to equity or loan stakes as part of its nation-building agenda. Select corporate projects have been exempted from various regulatory requirements, giving specific companies preferential treatment.Other policy actions include adoption of a “Buy Canadian” approach for federal contracts, potentially extending to defence procurement — such as prioritizing Sweden’s Saab Gripen jets, possibly in partnership with Bombardier, over U.S.-made F35s. To develop critical minerals, the government is also considering joint ventures with mining companies, likely involving guaranteed price floors and shared upsides that substantially subsidize risk.Further examples of interventionism include federal commitments of up to $23 million each to four high-potential quantum technology firms, as well as the proposed allocation of $1 billion for the “Venture and Growth Capital Catalyst Initiative,” which, managed by the Business Development Bank of Canada, aims to stimulate growth in sectors like life sciences.The projects that state capitalism ends up selecting do not always align with profitability, and even favoured companies may end up seeking opportunities elsewhere. There has always been heated debate regarding the effectiveness of targeted interventions. Economists typically argue that approaches focused on deregulation, tax reform and reduced governmental involvement do better over the long haul.Over time, I expect state capitalism to fail again, as it did so often in the 1960s and 1970s, when interventionist Canadian governments created mixed enterprises with partial government ownership. Companies the Canada Development Corporation invested in, such as Telesat, Panarctic Oils and the Nanisivik Mine, did poorly. Governments usually have other objectives than profit maximization so it’s hardly surprising that with them as partners many companies end up with inferior profitability.Besides, as the saying goes, though governments seldom do a good job picking winners, losers sure know how to pick governments.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. 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