National Security and the New Command Economy
In the name of national security, the Trump administration has taken a stake in Intel, acquired a “golden share” in U.S. Steel, obtained equity stakes in critical minerals companies, and required semiconductor companies to pay the government a percentage of their profits from sales to China in exchange for export licenses. These actions mark a dramatic departure from the traditional US capitalist system, which relies on the market, not the government, to pick winners and losers. Indeed, they carry overtones of a command economy. But as unusual and occasionally illegal as these developments are, they also build on a broader shift that has pushed US companies into a central role in US national security policy in the last decade.
Recent administrations of both parties have invoked the mantra that “economic security is national security.” To implement that philosophy, they have relied heavily on economic tools, including sanctions, export controls, investment screening, and tariffs. While these tools provide important levers for the US government to manage national security threats, their proliferation is also fostering deeper, more diverse, and riskier roles for companies in this new era. We identify five such roles. Companies are: 1) keys to security supply chains, prompting government involvement in the companies; 2) front-line enforcers or self-enforcers of economic security; 3) national security proxies for the US government; 4) sources of products that the government uses as negotiating leverage; and 5) sources of funds that the government can extract in exchange for national-security related approvals.
These enhanced, often novel, and sometimes illegal roles for companies in the national security ecosystem pose disturbing costs to public law values, such as legality, rationality, accountability, and fairness. The government’s burgeoning reliance on companies to implement national security policy undercuts public law values by fostering incentives for companies and the government to act unlawfully, creating principal/agent problems, and undercutting transparency. The Trump administration’s latest moves go even further: by introducing profit motives into security-related decisions, they produce conflicts of interest, potential corruption, and decision-making distortions for both the government and companies. This approach is especially pernicious in national security policy-making because the stakes are so high. The end result will be a United States that is both less safe and economically weaker.
Because at least some of these corporate roles likely will continue in future administrations (whether Democratic or Republican), finding ways to minimize the risks to public law values is crucial. For each of the risks that we identify, we propose concrete measures that Congress, the Executive, companies, and even allied governments could undertake to mitigate the corrosive effects of corporate entanglement in US national security policy going forward.
About the International Law Workshop
Michigan’s International Law Workshop engages with cutting-edge scholarship in the field, focusing in particular on current challenges to the international legal order. The workshop is open to the academic community, and no rsvp is required. Professors Julian Arato and Kristina Daugirdas organize the workshop. If you would like to receive workshop announcements, please contact Alex Wroble ([email protected]) and ask to have your name added to the workshop’s email list.