Now ex-president Biden’s decision to block the sale of U.S. Steel to a Japanese company is unjustifiable.
Now ex-president Biden’s decision to block the sale of U.S. Steel to a Japanese company is unjustifiable.
G overnment intervention helped cause the decline of U.S. Steel and government intervention is now preventing a possible rescue. With former president Joe Biden officially killing the sale of U.S. Steel to a Japanese company, let this be a cautionary tale to every industry that sends its lobbyists to Washington seeking protection from competition. The government may protect your business out of existence.
U.S. Steel has been struggling for many years with outdated plants and technology. A Japanese company, Nippon Steel, offered to buy U.S. Steel for $14.9 billion. As a presidential candidate, Donald Trump stated he would block the deal, and the now-departed Biden administration recently agreed to killing it.
The value of U.S. Steel plummeted 34 percent over the past year and 20 percent since Biden and Trump made it clear they would block the deal.
So, the U.S. government has basically stolen 20 percent of the private property of an American company.
In fact, the government prohibition of this merger may lead to a situation where no other buyer steps forward.
The blocked acquisition might do more than steal 20 percent of the company and could destroy all remaining value in U.S. Steel. That’s what happened to Spirit Airlines when the proposed merger with JetBlue was blocked. The consequence of government overreach was bankruptcy and the loss of 13,000 jobs.
In fact, the United States government has to answer to U.S. Steel’s employees for undermining their company for over half a century. Founded in 1901, U.S. Steel was the world’s first company valued at over $1 billion, which was more than twice the entire U.S. budget that year. And as the United States became an economic superpower, our skyscrapers, cars, bridges, and home appliances were made with U.S. Steel. But as competitors emerged in the decades following World War II, U.S. Steel began to decline. Rather than innovate and otherwise improve operations, U.S. Steel sought protection from the U.S. government.
American steel companies’ lobbying efforts from the 1970s onward were so successful, they arguably received the most “protection” of any domestic industry. According to Scott Lincicome, a trade policy expert at the Cato Institute, the steel industry received “hundreds of import restrictions; tens of billions of dollars in state, local and federal subsidies and bailouts; exemptions from environmental regulations; special ‘Buy American’ rules just for integrated steelmakers like U.S. Steel; and federal pension benefit guarantees.”
The result of protectionism was a false sense that the company was exempt from competition and U.S. Steel’s subsequent decline. In 2023, U.S. Steel’s annual revenue was $18 billion. It took Apple about two and a half weeks to bring in the same amount of revenue in the same year. When U.S. Steel was formed, the company produced two-thirds of domestic steel and was one of the largest companies in the world. Today, it makes just 12 percent of American steel and employs fewer people than Krispy Kreme. According to one of President Trump’s Defense secretaries, James Mattis, the military’s need for steel is about 3 percent of total domestic production.
So much for the national security pretext for blocking the sale to Nippon Steel. For all the caterwauling about Chinese authoritarianism (much of it justified), doesn’t the U.S. lose its high moral ground when the government forbids the sale or merger of private businesses?
As for the so-called national security risks of foreign ownership of an American steel company: Perhaps someone with half a brain should assess the national security risk of U.S. Steel going bankrupt because no other buyer offering the same amount of money may exist. Cleveland-Cliffs CEO Lourenco Goncalves is reportedly offering to buy US Steel at a price of somewhere in the high $30s per share, significantly less than Nippon Steel’s $55 per share offer. The government took a struggling company and made it financially weaker by almost certainly reducing its selling price, which can only be detrimental to U.S. Steel’s employees. By weakening U.S. Steel, Biden inadvertently strengthened Chinese competitors. Without question, this authoritarian interference in the marketplace will only enhance China’s market position.
Like so many issues in the Swamp, the real answer is actually completely opposite the one promoted by officialdom. U.S. national security is actually harmed by blocking Nippon’s purchase of U.S. Steel.
Rationally, there should be no separation on this sale between U.S. Steel management and labor. Yet big union bosses oppose the sale. But the workers closest to the problems, such as the rank-and-file laborers in Clairton Coke Works, understand the need for an infusion of cash to modernize their plant. By forbidding the sale, Biden chose Big Labor over U.S. steel’s employees.
It’s not just union bosses Biden rewarded at the expense of workers. Luddites masquerading as environmentalists are celebrating the president’s order to block the sale precisely because the deal would have continued domestic steel production. This despite the fact that both U.S. Steel and Nippon Steel pledged to decarbonize by 2050 and are working to adopt technologically advanced processes to reach carbon neutrality. Killing the deal serves the green agenda to hasten the end of blast furnaces in the United States.
We cannot be sure who is celebrating Biden’s destruction of the sale more: union bosses, Green New Dealers, or the Chinese Communist Party.
But Biden did more than just demolish the deal to appease the progressive Left. He also diminishes the notion of property rights. In her influential book, The Discovery of Freedom, Rose Wilder Lane demonstrates that for thousands of years, human life was constant struggle, suffering, and poverty. Only when individuals are free from economic and social domination by the state can they channel their productive energies to innovate. Freedom is what makes innovation possible. And innovation is what keeps businesses alive.
As Lane points out, freedom is not possible without property rights. She writes, “No one can act freely, if by merely living he is a trespasser upon property that Government — the King, the Squire, or the Commune — owns.”
In rejecting the deal, Biden all but assumed control of U.S. Steel and relegated the company’s true owners to pawns who must continue to beg their overlords for permission to save their company and the jobs they provide.
For those of us who still believe in private property, the government has no business regulating or forbidding private sales or mergers. As for some national security override of property rights, if such an exemption exists, it should be reserved for declared enemies in declared wars.
Don’t believe the flimsy argument that Biden blocked the sale because of national security concerns. In the end, it was politics and the evisceration of property rights, not foreign threats, that doomed U.S. Steel.