Government as Shareholder: Proactive Competitive Strategy or Last Resort?

Donald Trump Jr. backed an investment fund which bought shares at Vulcan. Three months later, Vulcan got huge funding from the Department of Defense. Was that on the economic merits or was

that because of a political [music] connection? >> If you're at the last resort, you've already screwed up and you have to break glass and take emergency measures to

deal with it was very expensive. Government ownership leads to more failures than successes. And this is a sovereign reality that we need to pay attention to in order not to repeat the

[music] mistakes. >> This is not about giving the government a blank check. The real question here is when a strategic industry is too important [music] to lose, will we act

early or only after the damage [music] is done? [applause] This is open to debate. I'm John Donvan. Delighted to be on stage in New York at

the headquarters of the Council on Foreign Relations, our continuing partner in a series of debates that examine the implications of decisions being made at the highest levels of

government and power. One such set of decisions making a lot of news right now is the burgeoning pattern of the US government taking stock of private American companies, buying stock into

those companies. It's all over the headlines. We're seeing it covered by the Wall Street Journal, Bloomberg, The Economist, foreign affairs, and many more. Companies that are being bought

include the Chipmaker, Intel, an array of mining enterprises. Now, this is not the first time, of course, that the government has bought pieces of private business. It has happened in wartime. It

happened during the financial crisis where Uncle Sam ended up with stock in banks and General Motors and Chrysler and the insurance giant AIG. But those were always in response to an emergency.

And by design, they were temporary. Now it's more about national security and competition with China and technological supremacy. A contest that is built around microchips and rare earth

minerals. So that's different this time. Also different is the sense that this is not temporary. that the US government may be in the chip business and in the mining business indefinitely. So what

about this? What do we need to be aware of about these moves that perhaps is not so obvious until we hear the pros and the cons argued out? That's what we intend to discover with the debaters on

this stage who will hash it out around this precise question. Government as shareholder, proactive competitive strategy or last resort. Let's begin by meeting our debaters. First, I want to

welcome Bob Posen. Uh Bob, you are the former president at Fideli Investments. You are currently at MIT Sloan School of Management and the Brookings Institution. You also worked with uh

George W. Bush, Mitt Romney. You are at the SEC. Uh you wrote a book called Extreme Productivity. Bob, I want to welcome you to Open to Debate. >> Thank you. [applause]

>> And my my question for you with your book Extreme Productivity, why does Productivity Need to be extreme? Well, it's a word play on extreme sports and my editor thought the title would

appeal to readers who are modestly productive and wanted to become much more productive. >> And did it all work out? >> Uh, we sold a lot of copies and it's now

translated into 12 languages. So, something good happened. >> Congratulations to you for that. Your your partner I want to welcome is Yang Hang who also is at MIT Sloan. Um, Yang,

you taught at Harvard. You are a consultant at the World Bank. You have written 12 books. That's a lot of books. And you've also debated with us before about the tech cold war with China. I

remember that debate well. But I'm curious, will you be using anything you learned from that debate in your arguments today? >> Yeah. One thing I think is the size of

the action is no guarantee for the results of the action. >> Okay. Preview of the argument you're going to make. Thanks very much for for that thought. And um on the other side

of the debate, I want to welcome Laura Taylor Khalle. Laura, you are the first assistant secretary of defense of industrial base policy. You've also worked at the Department of Commerce.

You've worked at the World Bank. You have your own advisory firm. You're a senior fellow here at CFR. Welcome to the program. Uh you began your State Department career uh as a diplomat in

India and the Ivory Coast and Afghanistan. Which was the most challenging? >> Oo. Um I think I will say that Kotvar was probably the most challenging. Um in

part because you were going through a very tough democratic um transition and seeing a country dealing with the fragility of its institutions really up close really

um uh you know brought to mind how how how challenging it can be to maintain a democracy. >> Interesting powerful lessons. Last, I want to welcome Richard Falconrath. I

want to welcome back Richard Falconrath because you are this is your fourth debate with us. You're a four-timer there. >> That's that's a lot of debates. Um you

have worked in counterterrorism and the world's largest hedge fund. Uh you advised George W. Bush on homeland security. Uh you're now a senior fellow at CFR. You're teaching a new course at

Johns Hopkins about the American presidency. Just curious, which president do you feel is the most underrated? >> I think James Pulk. Uh Pulk is an

interesting president. He he came into office. He said, "I have four things I'm going to do." And he did them. Said, "I'm going to serve one term." And he did. And then he left.

>> That all worked out for him. >> Yeah. Well, he died very quickly after. He's the shortest post presidency of any president, but other than that, he was a pretty good one.

>> This would be a great trivia contest. [laughter] Well, thank you everybody for being here. I want to point out to people who are listening and watching that our live

audience here at the Council on Foreign Relations is playing a critical role tonight. We have asked for their opinion on this topic. We've asked them to vote to tell us where they stand on the

question. And we're going to ask them again after the debate. And we will get those results in real time and see which side has changed the most minds tonight. So that makes this a competition, a

friendly one. Uh but it also means we have some rules. No personal attacks. Stay on topic. Listen to what the other side is actually saying. The debaters here are here to show that we can

disagree with each other in good faith. So let's do that and let's get started. We're going to go to our opening statements. And first up making an opening statement on the question that's

up before us. Uh government shareholder proactive competitive strategy or last resort. Laura Taylor is arguing proactive competitive strategy. Laura, the floor is yours.

>> Thank you. >> Thank you and welcome tonight. Uh this debate is about more than just economics. It is about whether the United States will act with urgency to

protect its security, its supply chains, and its future. Yes, the government has tools. We have loans. We have grants. We have purchase commitments. But sometimes these tools are just a bit too timid for

the challenges that are ahead of us. When a critical industry needs hundreds of millions of dollars to survive and scale, taxpayers should not be expected to write the check and then surrender

all influence over the outcome. In national security, waiting for government becomes the last resort, becoming the being the last resort is really not

prudent. uh in fact it is failure delayed. By the time uh strategic weakness becomes a crisis, the cost is higher, the the options are fewer and our adversaries have moved far ahead. So

I understand the instinctive objection that we have to the government being the shareholder and company. America believes in markets. We believe private capital is usually smarter, faster, and

more efficient than government. And most of the time that's true. But national security is not most of the time. Markets do not automatically invest in resilience. Markets do not automatically

protect strategic capacity. And markets do not automatically move at the speed of geopolitical competition. When the return is uncertain, the timeline is long and the stakes are

national. the market can hesitate precisely when the country cannot. So let's take a look at rare earth processing. China did not build dominance in that sector by accident and

it's not a niche issue. Rare earths are inside all of our advanced weapon systems in medical technologies and the devices that power our everyday life including all these iPhones that we had

to turn off to be here at the council. So when we allow a strategic dependency like that to deepen, we're not choosing efficiency. We're choosing exposure. That is that is why I believe minority

government stakes and private companies should be on the table. Not as a default, not as ideology, not as a last resort, but as a strategic tool for strategic problems. If the if public is

in investing massive sums to secure a critical industry, then the public deserves accountability, visibility, and a real seat at the table. Loans help, grants help, advanced purchase

commitments help, but sometimes they're not enough to build the market, to anchor production, and keep a vital capability alive. But equity can do that. It allows government to move

earlier, act more decisively, and stay engaged long enough to make sure that the investment actually pays off. So, let me be clear. This is not about giving the government a blank check.

It's not an argument about favoritism or opacity or permanent government control. The real question here is when a strategic industry is too important to lose, will we act early or only after

the damage is done? In defense of national security, uh government can always cannot always afford to be the lender of last resort. Sometimes it just has to be early and it needs to be

organized. Thank you. [applause] >> Thank you. Up our next speaker is going to be Bob Posen. Bob is taking the opposite side saying that government a

shareholder should be a last resort. Bob, the floor is yours. [clears throat] >> Thank you. So my position is that the government should be a shareholder only

as a last resort. In 2008, for example, the government had to take some shares in big banks in order to avoid an economic collapse. But not that's not the situation now. The

government is buying company shares in an attempt to pick winners. The Trump administration has made at least 10 equity investments without an economic plan, without an

exit strategy, without transparent procedures. In my view, this is discretionary state capitalism. Discretionary state capitalism, which is bad for the economy and worse for our

democracy. Government bureaucrats cannot do not have the skills necessary to pick economic winners. For example, the government made a big investment in a company that claimed to have a new

approach to energy storage. Within three years, that company went bankrupt. And it's especially difficult for the company to pick economic winners in

industries with fastchanging technologies. Who in this room can predict with confidence the winners in the race for self-driving cars or AI bots?

Moreover, the process of government investing is highly problematic. The [clears throat] president of Intel met with Donald Trump and Donald Trump demanded that the government get 10% of

Intel shares. A few days later, he personally bought millions of dollars of Intel bonds. Now CEOs are reportedly afraid to meet with the president. What will be the next target of equity

investment? Will it be software, hardware biotech? And will the government insist on having a veto over company decisions as it did in the US steel uh transaction.

My opponent invokes the term national security to justify equity ownership by the government. But national security has become a meaningless term.

National security is the premise for the new tariffs on baby strollers and golf carts. Why? Because they contain aluminum and a little steel. Under that crazy logic, the president could deem

any industry to be a national security threat. Bob, I'm sorry. Your time is up. >> Okay. >> Thank you very much. [applause] [applause]

>> Our our next speaker is swinging back to the side arguing for proactive competitive strategy in terms of government shareholders, Richard Falconroth. Richard, the floor is yours.

>> Thank you, John. Thank you. Um, look, this the this is a complicated topic. This is not a topic that's easy to distill to a simple conceptual presence and is easily distracted by what the

Trump administration is doing. So if this were a referendum on the sensibility of the Trump administration's economic policies, we'll just throw in a towel right now.

Like that's not what this is about, right? What this is about, I mean this is a this is a higher level proposition about the use of equity which is an instrument of economic policy

proactively rather than reactively at the very end in a crisis. Um it's been it was started it's happened under many administrations and yes the president the current president is using it.

there's 15 or 16 deals underway without a clear legislative framework and there's undoubtedly lots of problems and that that's not what we're here to defend. We're here to ask a sort of

different question which is given what the United States is up against these days and the challenges we face with AI and space and chips and all these other things [snorts] do we really want to

leave this instrument off the table as an instrument I mean think equity first of all share you hold shares for different reasons right there's an economic reason most of you have a 401k

it has stocks you hold that because you're getting an economic return for it that's not what we're talking about here there's another reason you hold stair it's for governance rights if you're In

private equity or venture capital, you hold shares as a means to get access to the inside information going on in a company and to influence its decisions before they are made. So then I ask you

how many of you are completely comfortable that the public right now has enough fornowledge of what the most important companies in the world are doing with their products and the

decisions and that the public through its elected officials has an ability to influence those decisions in a way that makes sense for the national interest. And now if you're comfortable with that,

if you say, "Yeah, we're good. We know enough and we'll just take whatever decision they make in their boardroom without telling anyone who's been elected." uh if you're good with that

then you're not you're you're not really in this debate. You've already made up your mind. It's unnecessary. You're not in favor of economic intervention on these things. But if you are thinking

well maybe yeah no I'm not entirely comfortable with what Palanteer is doing or SpaceX is going to do when it's the largest IPO of all time or what anthropic is going to do that I'm not

entirely comfortable that then ask okay what instruments are at our disposal to do that and I'll tell you they're not very good they're not fit to purpose regulation in these cases will not work

it comes after the decisions already been made and the products we're deploying is litigated forever will not work to break these companies up for that um tax incentives and loans are

just moving it at the margins. These these are companies with multi-t trillion dollar capitalizations. And so you have to say by process of elimination, what instruments work? And

by getting an equity stake in a company, you actually have the ability to get an inside track on what's really happening there and in principle influence it. And the best example that we have is the

steel company where there's a golden chair uh that permits US steel to continue operating, but it's not the only example. So that's what I think is the essential conceptual premise of this

is do you think we have enough influence over these vast companies and if so are you open to using this as one of your one piece of your economic toolkit [applause]

and rounding out the opening round I want to welcome to the stage Yang Hang who is arguing on the side of last resort. The floor is yours. [applause] Responding to China doesn't mean that we

have to copy China. During the cold war, we didn't copy central planning from USSR. During the height of competition with Japan, we didn't copy the caressu

organization of firms in Japan. And a accurate knowledge of China is very ne is necessary for us to do it right to answer this question right. You may be surprised to learn that the most

competitive firms in China such as Deepseek, BYD, Alibaba are not stateowned and in fact there are massive state-owned failures in that country. One example is that the Chinese

government created a search engine and embarrassingly for that search engine today, it has a lower market share than Google which is banned in China. State ownership is just unbelievably

inefficient. We shouldn't confuse the size of the Chinese economy, the infrastructure, the highways with efficiency. If you want to triple the cost of capital to produce one unit of

GDP, you copy China. If you want to create technologies that don't translate into productivity, you also want to copy China. But I would argue these are not the results we desire. Worldwide, the

evidence is super clear. Government ownership leads to more failures than successes. And this is a sobering reality that we need to pay attention to in order to not to repeat the mistakes.

If a government in a democratic society makes wrong investment and ownership decisions, it damages the credibility and the legitimacy of the government. I believe that kind of damage has far more

severe consequences on our political system, on our government system because it undermines the credibility and the legitimacy of our government to do other things that are absolutely necessary for

the government to do. Unlike China, we have very high standards for accountability and the standards and cred and if the credibility is damaged and this entire

economy builds on credibility rather than on command and control by the government. Government has and is needed to provide many valuable and important functions

such as mitigating against risks, regulation, social protection and supporting basic research and providing basic public goods. But owning and running enterprises

is not the best capability on the part of the government and we should leave that to the private sector. >> Sorry, I've hit time. >> Yeah, let me end by saying I'm not a

libertarian and I'm not opposed to government doing anything in the economy, but we should do it as a last resort. Thank you. >> Thank you very much. [applause]

All right, that concludes our opening round. And now we move into a round of more free- flowing conversation discussion where the debaters can question one

another, challenge one another, in fact, politely interrupt one another. Um, but we kick off with questions from me. In the beginning, as I've listened to the opening statements, I just want to say

what I I have heard the arguments shape up as. Uh, we've heard this this side that's arguing for uh government ownership as a strategic move. Um, that this is really about national security.

This is not like uh past situations in which the government has become involved in ownership. That um uh markets are uh everybody appreciates markets but markets are just not good or

incentivized good at or incentivized to deliver security. That tools like grants and loans simply have not been enough. Uh that not to do this now would be failure delayed because the pace at

which technology is moving. They also make the case that shares share ownership gives the taxpayer gives the government an insight into what these companies are doing. So there's a little

bit of a sense of distrust of the companies the tech companies themselves in a sense that they need to have some kind of guidance from the inside and that traditional regulation uh is not a

solution for that. The team on on on the other side are arguing we just heard the case made uh that China is an example of um examples were cited of companies that uh have been state controlled in China

and have been done very very poorly. um that there have been severe consequences for those companies um and that uh in general that the government doesn't have a very good track record uh with

bureaucrats trying to pick winners that they just don't have the skills for that that it's um all in all it would be dis discrediting uh to the uh United States to the government uh to its economic

system to start to go down this road. So that's what I heard from all of you talking about this, but I want to um I want to go to uh first to Laura. Um your opponent making the case that going down

this way would lose credibil the United States would lose credibility. Can you respond to to that argument that Hashang just made? >> Sure. Thank you. Uh, I think it's

important to to realize that it's not that the United States is completely isolated in this area and that it's the only country that's that's facing these questions. It's actually the entire

world. Um, a recent World Bank report even showed us that uh the use of government minority stakes in companies is actually far more prevalent um around the world than we pre previously

thought. government has been taking an a strong role in business particularly in the defense sector since the beginning. This actually goes back to Alexander Hamilton and the report of

manufacturers. So the idea that we just don't do this and that uh you know even for national security is just false and that we >> let me take that very point very sharply

argued points to the other side. Well, the government has been involved with [clears throat] companies for in different sorts of ways. It's regulated them. It's subsidized them. It's given

them tax credits. Uh it's brought enforcement actions against them. Uh there actually hasn't been a huge amount of government share investments in companies historically in the United

States. This is a new phase. And let me say this. I think the our opponents misunderstand what are the rights of a shareholder. Think about this. The index funds hold

over 30% of most publicly traded companies. Do they have access to inside information? Do they have as access to companies secrets? The answer is no. And there's a regulation, an SEC regulation

FD that says if a company gives an analyst a piece of material information, it must post it on its website in order to make sure that everybody has it. On the other

hand, the government has lots of ways of getting information early other than share ownership. It can demand reports. It can meet with executives. It can serve subpoenas. So, it doesn't need

share ownership. Share ownership doesn't add anything to its ability to extract information early if that's the critical point. When you define the purpose of this the way I did, you would never say

the government should get common stock. Like that's what we're talking that's what our opponent was just talking about. Yeah. Yeah. Common stock. You get no information. You just have some

economic benefits. Maybe what we're talking about here are particular kinds of rights that come from different classes of shares. And there's plenty of those. There's lots of them. There would

be no VC industry if it weren't possible for founders and equity investors to get access to the inner workings of those companies. A golden chair is exactly this and there's lots of practical. A

golden chair, it's just a it's a term of phrase. It's it's a governance share that essentially can trump others on particular issues. And so the only reason now that US Steel is still, you

know, capitalized the way it is is because the US government now has a golden chair in US Steel which is otherwise owned by Nippon Steel. And so there are many different ways to do

this. I I will readily acknowledge it would be far better if we had a legislative framework that governed this. So it was clear rules of the road and we could see the categories of

things for which the government should be involved. Completely agree. I think that'd be a great thing for Congress to work on and we don't really have that. But there's plenty of different share

classes that can accomplish this that aren't just common stock. Can I respond to the golden chair argument? So the golden need my permission. >> Yeah. The golden chair uh gives the

government an incredibly intrusive role in the company. Uh it can make any decision and overturn any decision of the company. And just think the government used its golden share already

to stop a plant closing. That's a pretty micro decision. So the golden share is exactly what people worry about when they talk about government ownership. >> There's some people worry about that.

There's a lot more people I worry about Elon Musk having sole control over some of the most strategically important companies in the world. Sole control being unfirable in the terms of his new

IPO. But I'd say SpaceX might be one of the most strategically important companies that have ever existed on time and nobody has a golden chair or any influence on that except him on that.

And so what do you like? Yes, there are problems with the government being intrusively involved in corporate decision-making. It might not do layoffs. It might not do lots of other

things. There's some problems. The but the test is not what is the perfect solution. It is what is a better solution than the status quo. Laura, your your opponents are also making the

case that um uh it's putting aside the national security question. It's a bad it's a bad economic and financial situation that that as they put it, the government can't pick winners. Um, and

Yang has gone through some examples of China, despite its reputation for being successful at state capitalism, of companies that have been disasters when when the government got involved that

you you're you're saying the market can't deliver security. They're not incentivized, but they're saying the market can't figure out the government is not as good as the market at picking

winners. >> I don't think that this is a question about the government picking a winner. I think that this is a question of the government helping to shape the market

in a way that uh benefits uh the national defense and national security in particular sectors. So you know the question the the example that I think Bob you mentioned of a company that went

bust after receiving a loan from the government was Celindra and uh that's sort of the case that's always used to talk about you know the worst thing that can happen but there have been plenty of

other examples of the government intervening and putting in smaller amounts of capital grants loans things like that and if the the companies have not gone bust I think in the case of

that we're talking about now where the government is take is is proposing to take take shares is really also about the fact that we're looking at larger sums of money. You know, we're not

talking about a million dollars or $2 million in a grant that could be uh used to catalyze other other capital. We're we're talking about companies getting 400 500 million a billion dollars in uh

in concessional loans or grants from the government and there really needs to be a sense of accountability for it. I think the issues that the other side raised about how the government um acts

the bureaucrats these can all be dealt with in terms of creating a real uh set of guard rails and having institutions in place to govern this. Right now we're acting like it's the wild wild west.

>> I I think it's very important to be precise about what we're talking about. The debate in front of us is about the shareholding role of the government. It is not about a general role of the

government. Government has been involved with the companies in terms of regulation in terms of information disclosure in in in terms of supporting them early grants and subsidies but

taking ownership share of companies. That is a substantially different step from all the ones that we are familiar with and that has many many complex implications down the road that we

should be very careful about. So take us through two one for one implication that that down the road we would need to be careful about. >> Well so government for better or worse

is a much more complex entity as compared with a company. So Richard mentioned venture capital and venture capital has a very straightforward objective function. We may criticize

their objective function but they are going in for profits and profits alone. Government by its very nature cannot focus just on one objective function. They have to take care of many many

other things. When you have such a complex objective goals for the government, it is very hard for them to judge the performance of the management on the basis of a

single metric. Right? Once you have multiple metrics, you kind of dilute the corporate nature and the managerial managerial nature of the company. >> I'll readily agree this will be unusual

and we certainly don't want it on all companies. We don't want stateowned companies. We don't want the Chinese economy. Uh but I'd say that thing that the government has a broader set of

interest in a VC firm is a feature, not a bug. It's actually a good thing. like we need someone in these in these rooms uh affecting these companies because they are so impactful on American

society and the American national security and we need some mechanism that it and that to influence and shape that that isn't just jawboning them or calling them up or regulating them after

the fact or trying to break them up in an antitrust case that never works or taxing them or whatever. The thing is our claim is not this is a perfect instrument that should be used on all

companies all the time. It is for select strategic industries as Laura explained to be used as part of the toolkit for government to deal with the second order effects of the power and impact and

importance of these companies which is extreme. And what we're mostly saying is there should not be an ideological refusal to consider it proactively. >> So right right now Richard would you

like to see the US take a share in Starlink Elon Musk? >> Well Starink is just a business line in this massive IPO and So let me let me phrase it a little bit differently is I

I do think there are extensive public interest in Starlink, SpaceX, the AI companies extensive and I do think that we have to ask ourselves seriously what is our what are our tools for

influencing them long term and within that and I I'm not proposing this sort of this just flippantly is I do think we have to look at the full range of possibilities and some sort of

governance rights the likes of which the early stage investors actually do have for the government I think is a reasonable thing to do. >> Can I respond to that? SpaceX is a

government contractor. Almost all of its revenue comes from the government as a contractor. As a government contractor, the government can impose any conditions it wants, including all information

rights, much more extensive than a shareholder. And they can impose those conditions before SpaceX gets the contract. so they can get the information as early as they want. So

buying 10% of SpaceX doesn't give you any more rights for information than you would have as a government contractor because you have total control over the contract.

>> You don't have total control. You look at what RTX I mean like RTX is only exists because of government contracts. Former Rathon and they're doing share buybacks. Like the government doesn't

want them to do share buybacks. So SpaceX, it is true, it is mostly from the government. They would have a hard time operating their business without government. But there are other

companies that do not. Anthropic doesn't get any revenue from the US government. >> If the if I'd also like to redirect this because I think it's easy to get focused on these

some of these big companies and big names. And really the issue that we're that I'm arguing and that we're trying to really resolve is there are certain industries and areas that are so

important for national defense and national security. they cross different lines. So again, I brought up the rare earth example. If we had uh been able to say 15 years ago to uh use equity

authority to be able to help, you know, spur the market and be able to to to move things along much quickly and using larger infusions of cash, we probably wouldn't be in the same place that we're

in right now in terms of our vulnerabilities with respect to rare earth. The United States used to be uh a number one exporter of rare earth rare earth magnets and now we're we're really

trying to we're playing more than just you know catch up. We're trying to deal with the strategic vulnerability. So it's not just companies and space

15 years ago we could have subsidized rare earth companies. We could have given them tax credits. We could have given them loans. We could have reduced environmental regulation so they would

have an incentive to do that. We didn't do any of that. So it's not that we didn't have share ownership 15 years ago. We didn't use any of the tools. And since we didn't use any of the tools, we

have a problem now. And that's not because the government didn't do something didn't have share ownership 15 years ago. It's because we didn't do a whole range of things. And those are the

things that we need to do. >> These tools are what you're mentioning. You're you're listing out the range of tools that we have. That's what we're saying is that equity should be part of

the set of tools and in that toolkit that the government has to be able to intervene. >> I think Bob is absolutely right on this issue just historically and empirically.

15 years ago, 20 years ago, there was no intention for this country to keep the rare earth industry in America. It was considered incredibly dirty, right? >> It was considered as incredibly

environmentally damaging. >> We were overjoyed 15 years ago that industry migrated to other countries and so I think that's a totally different debate.

>> It's really it's really I think the the essence of the rare earth point is not a historical one like why this happened. that's going forward. How do we have patient capital to recreate an industry

which we need strategically that wouldn't the market will not produce on its own? Full stop. And that in that when that's a hard strategic problem that is our lots of people's fault for

having but is a hard real problem. It would be foolish to leave equity off the table as you try to solve that problem. >> So but you have to be prepared to argue that reversing history requires this

particular step. Right? So I think you have rather than using other instruments and tools that we have and one unintended consequence of government taking ownership in this industry is

that it may impede innovations in new materials that there are companies working on new materials. In Japan, Japanese government is encouraging by supporting basic research on new

materials. By having government take ownership in this industry may imp may have this adverse implications for new players coming into this indust to completely revolutionize this industry.

>> Yeah, we're actually seeing the absolute opposite happen. If you look at a report that my colleague here at the council on foreign relations put out Heidi Krebber where she talks about uh innovation and

leapfrogging on the critical minerals and rare earth issue. There is actually a lot of innovation happening in the technology sector with with respect to this and some of the actions that the

government is taking with equity are in these some of these innovative areas. It's not just about looking at old old ways of mining and old ways of doing things, but it's actually innovating in

the is actually funding and looking at ways of of uh innovating and building up new types of technologies and new ways of processing. >> Laura, one one argument that your

opponents did not put in front of you, but I know it's part of this conversation would be the moral hazard conflict of interest. The government is is both owns and regulates an industry.

That sounds like the beginning of a problem. I think that there's uh conflict of interest is even beyond that. So you have, you know, a a particular problem where questions about

transparency, about political influence, about whether or not um family members are benefiting from it. Look, these are all institutional problems and issues that really Congress should be willing

to step forward and uh create the set of guard rules that are necessary and that the American public should be demanding it as well. In order for this to work and and its ideal, Congress needs to do

its job. We should have transparency and anti-corruption monitoring. There should be absolute statutes that really outline and and push back on any conflicts of interest in these companies. But

moreover uh I referred to earlier World World Bank reporting on you know the extent of government minority stakes around the world. One of the best practices that they note is having an

independent agency that's at arms length from political influence. That's the absolute opposite of what we have right now. So if we look at the Federal Reserve and its resilience even if it's

uh been under siege for a year or more but it is withstanding the pre the political pressure that is being put on it. That's actually the kind of steps that Congress needs to take in order to

make this uh create the guards that are necessary for this to be >> successful. Bob, you said in your opening that while your opponents are citing national security that national

security has become meaningless. >> Correct. But as you hear them making their argument, do you think they're talking about a range of issues that are meaningless?

>> Well, I think there are things that are national security. The problem is we have allowed the government and many governments to do it, not just Republicans, to redefine national

security. So, it's so elastic and so vague that we're letting the government do anything. >> So, your argument is that if I didn't mean to suppress your uh Um, so

your argument is that a trend towards uh government ownership in Jerry's could could go way beyond the the the realm that they're talking about.

>> Right. And I do want to Yes. Correct. I do want to mention one other big negative about the government taking share ownership. >> Yeah.

>> And that is there is something that's called in the industry the government moat. And by that means once the government anoints some company through share ownership as the national champion

or the leader, other companies don't want to get into that line of business. They're afraid. They they can't raise capital. They complain of that. And so uh it's not just what happens

[clears throat] to that company. It's the impact on the competitive by the competiti by the government mode on competition. >> We're certainly not arguing there are no

drawbacks to government and we're from both of us are familiar with the literature. We like this is classic kind of from Hayek. I mean like it's well known that government intervention in

the economy is problematic, often creates dead weight loss, not the best way to get total factor productivity, like all that stuff, right? We're just saying it's not the only consideration

and that it we should not for ideological reasons essentially refuse to consider this instrument when we're trying to solve hard strategic problems. And the rare thing is a hard strategic

problem and we need to shorten that as quickly as we we can and it would just I we're just arguing that we understand there are drawbacks to this. >> Both sides are both sides are saying

there are trade-offs in in this choice that's being made here today and you're you where you differ is where the bal where it balances out. >> I think Richard is right that we