Nationalize the US defense industry?

The Trump 2.0 regime has taken a 10% equity stake in the private corporation Intel. The government will hold not be voting in stakeholder meeting and formally will have no direct say in the corporation’s management policies.

It’s hard to guess what angles the Trump team is trying to play with this. If it has nothing to do with promoting corruption and personally further enriching Donald Trump, I will be astonished. If the government is simply buying shares with no voting power, that sounds on its face like just injecting a lot of public dollars into a private corporation and getting nothing for it. Except illegal kickbacks, maybe?

It's not at all unprecedented for the federal government to bail out private corporations. The Cheney-Bush Administration did a bailout for General Motors which was continued by the Obama Administration. (1)

The Carter Administration – to the outrage of “free market” zealots - had previously provided public loans to bail out Chrysler Corporation, for which the company was required to meet certain conditions. It paid back the loans after recovering. At the time, it was the most dramatic bailout in American business history,” (2) The Trump 2.0 aid to Intel seems to be just a gift.

But Trump’s Commerce Secretary Howard Luttnick has also actually floated the idea that nationalizing the defense industry might be a good and legitimate thing to do!

Breaking Points, which provides left and right perspective but sticks to solid reporting and (mostly) avoids crude MAGA arguments, titled a report on the surprising suggestion by Trump’s current Secretary of Commerce Howar Lutnick “Trump Goes FULL XI? Floats NATIONALIZING War Machine.” Thus at the same time calling it a Communist idea (“FULL XI”) and simultaneously giving it a dovish rhetorical twist (“War Machine”). (3)

I don’t really care about the cheesy headline, because Ryan Grim and Emily Jashinsky give a decent report on the idea.

I’m certainly hesitant to say anything that might sound like justifying another sleazy scheme from Trump. And I know I’ve been quoting the late John Kenneth Galbraith quit a bit lately. That’s because he was one of the most prominent Keynesian economists for decades (with a Veblen twist), he served as the head of the American Office of Price Administration (OPA) during the Second World War, was Ambassador to India under JFK and later became a leading critic of the Vietnam War and other reckless US interventions, and wrote insightful left-liberal political and economic analyses until the end of his life, usually framed in an accessible form for newspaper readers.

He also seriously advocated the nationalization of the US defense industry. In a 1969 editorial, he wrote:

Last June, in testimony before a subcommittee headed by Senator William Proxmire that had been looking into the economics of the defense industry, I suggested that we recognize the reality of things, which is that the large, specialized defense contractors are really public firms. This is most obviously true of such companies as General Dynamics, Lockheed or Thiokol, which do all but a small fraction of their business with the Government. And it is equally true of the defense subsidiaries of the conglomerates - the Aerospace Corporation of Ling-Temco-Vought or the Bell Aerospace Corporation of Textron. Such firms do the bulk of the business. Even the defense divisions of such predominantly civilian firms as General Electric and Western Electric have a markedly public aspect ... (5)

He didn’t explicitly call for “expropriating the expropriators,” which as Jacob Blumenthal points out can be done through legal means or by a government simply seizing the property extralegally. (6)

But Galbraith advocated something like the former for the US defense industry:

If a company or subsidiary exceeded a certain size and degree of specialization in the weapons business, its common stock would be valued at market rates well antedating the takeover and the stock and the debt would be assumed by the Treasury in exchange for Government bonds. Stockholders would thus be protected from any loss resulting from the conversion of these firms to de jure public ownership. Directors would henceforth be designated by the Government and the firms, subject to any needed reorganization and consolidation, would function thereafter as publicly owned, nonprofit corporations. There would be no real increase in public debt or liability. The present value of the stock and the present security of the indebtedness of these firms lies entirely in the expectation (supported by a considerable moral commitment) that the Government will keep them busy, solvent and profitable. [my emphasis]

This would be a huge change in US economic policy. It would have obvious advantages. The federal funds that that are currently paid to private for-profit defense companies would now be funds appropriated by Congress to public agencies. Such firms would still exercise enormous influence in government along with the rest of Pentagon and other public agencies that are part of the sprawling US defense infrastructure.

Galbraith’s 1969 proposal is still well worth reading. Among other things, he points out the private profits heaped up by private defense contractors are also made possible by facilities that are publicly owned. As he described it then:

Private ownership of capital is what, anciently, has made private capitalism private capitalism. A very large part of the fixed capital of these firm sis owned by the Government of the United States. In 1968 the large defense contractors were using an estimated $13.3 billion worth of already nationalized plant and equipment. The often - pictured plant in Marietta, Ga., where Lockheed is turning out the C-5 Galaxy is owned by the people of the United States. So it is elsewhere. There is a marked uneasiness when you ask these firms about this Government plant.

As we see already in the Trump 2.0 regime, a badly-run public function can be expensive, wasteful, inefficient, and dangerous. But so can a defense industry that is effectively guaranteed huge profits by the federal government. At least public institutions aren’t allowed to directly fund political campaigns!

The idea didn’t die out after 1969.

Charlie Cray and Lee Drutman wrote in 2005:

Converting the [dfense] companies to publicly-controlled, nonprofit status would introduce a key change: it would reduce the entities' impetus for aggressive lobbying and campaign contributions. Chartering the defense contractors at the federal level would in effect allow Congress to ban such activities outright, thereby controlling an industry that is now a driving force rather than a servant of foreign policy objectives. As public firms, they would certainly continue to participate in the policy fora designed to determine the nation's national security and defense technology needs, but the profit-driven impetus to control the process in order to best serve corporate shareholders would be eliminated. (7)

John Stanton promoted the idea in 2006, referring back to Galbraith’s 1969 proposal, endorsing Cray’s and Druman’s notion of “putting the defense industrial base (DIB) into the direct service of the American public through a form of nationalization: federal chartering.” He also states – maybe understates, “There's a lot of evidence to show that the DIB is not functioning in the nation's best interest.” (8) (No kidding!)

In a piece for The Nation in 2019, Peter-Christian Aigner and Michael Brenes note the obvious fact, “the defense industry has gone unchecked, even as the evidence is clear that it has corrupted the democratic process.” They refer also to Galbraith’s 1969 idea, arguing that “the only real way to shrink the military-industrial complex” – which they see as a worthwhile goal – and “to eliminate the private incentives for increased military spending, lay in severing the connections of for-profit business to national security.” (9)

And here in 2025, Julia Gledhill also makes the point:

While perhaps unexpected from the current administration, full or partial nationalization of the largest military contractors is a reasonable policy proposal worthy of serious debate. One benefit of some degree of public ownership is that it could significantly reduce the arms industry’s influence-peddling activities, particularly congressional lobbying. With a direct stake in a military firm, the government would have greater leverage to guide how a firm does business — like, for example, how much it spends on internal investment versus congressional lobbying. (10)

The fact that Howard Luttnick raises this notion as Commerce Secretary in the Trump Administration seems to be a case of then-Presidential candidate Rick Perry blooper in 2015, “A broken clock is right once a day.”

Notes:

(1) Glass, Andrew (2018): Bush bails out U.S. automakers, Dec. 19, 2008. Politico 12/19/2019. <https://www.politico.com/story/2018/12/19/bush-bails-out-us-automakers-dec-19-2008-1066932> (Accessed: 2025-28-08).

(2) Matthews, Patricia (2023): U.S. Government Bails Out Chrysler Corporation. EBSCO 2023. <https://www.ebsco.com/research-starters/history/us-government-bails-out-chrysler-corporation> (Accessed: 2025-28-08).

(3) Trump Goes FULL XI? Floats NATIONALIZING War Machine. Breaking Points YouTube channel 08/25/2025. <https://youtu.be/dL3pR0vyc8A?si=VVc2MdmOSy74Drzv> (Accessed: 2025-27-08).

(4) Galbraith, John Kenneth (1969): The Big Defense Firms Are Really Public Firms and should be nationalized; Defense firms are public firms. New York Times 11/16/1969. <https://www.nytimes.com/1969/11/16/archives/the-big-defense-firms-are-really-public-firms-and-should-be.html> (Accessed: 2025-27-08).

(5) Blumenthal, Jacob (2022): Expropriation of the expropriators. Philosophy & Social Criticism 49:4 03/01/2022. <https://doi.org/10.1177/01914537211059513> (Accessed: 2025-28-08).

(6) Cray, Charlie & Drutman, Lee (2005): Corporations and the Public Purpose: Restoring the Balance Seattle Journal for Social Justice Winter 2005, 305-361. <https://digitalcommons.law.seattleu.edu/sjsj/vol4/iss1/41> (Accessed: 2025-27-08).

(7) Stanton, John (2006): Why It's Time to Nationalize the US Defense Industry. History News Network 07/23/2006. <https://www.hnn.us/article/why-its-time-to-nationalize-the-us-defense-industr> (Accessed: 2025-27-08).

(8) Aigner, Peter-Christian & Brenes, Michael (2019): Shrinking the Military-Industrial Complex by Putting It to Work at Home; It’s not a pipe dream. The Nation 02/26/2019. <https://www.thenation.com/article/archive/military-industrial-complex-green-new-deal/> (Accessed: 2025-27-08).