At a time of increasingly dangerous competition with hostile, mercantilist China, it is easy to make a decent argument for Washington, but only in limited cases, to intervene in areas of the economy when markets by themselves are not going to be able to deal with the threat from Beijing. Instances where such intervention should involve the state taking ownership positions in private companies are even harder to find.
One example, given the recent clamp-down by China on exports of rare earths, where Washington’s involvement could be justified might be the government’s recent investment in MP Materials, the owner of the only operational rare earths mine in the U.S. However, that stake, like any other such stakes, should only be temporary, part of a bridging operation designed to ensure that America is no longer dependent on China for a vital resource.
That is an argument which is much more difficult to make when it comes to the government’s taking an equity position in Intel, and one that is almost impossible to sustain when it comes to what the Wall Street Journal is describing here:
Several quantum-computing companies are in talks to give the Commerce Department equity stakes in exchange for federal funding, a signal that the Trump administration is expanding its interventions in what it sees as critical segments of the economy.
Companies including IonQ, Rigetti Computing and D-Wave Quantum are discussing the government becoming a shareholder as part of agreements to get funding earmarked for promising technology companies, according to people familiar with the matter. Other companies such as Quantum Computing Inc. and Atom Computing are considering similar arrangements.
It is not as if this sector is lacking in private sector capital. As is noted in the WSJ report:
Shares of companies in the space have surged this year, though they have fallen recently.
Companies from International Business Machines to Microsoft are investing in quantum computing, as is China. Google said on Wednesday that it showed a quantum computer can run 13,000 times faster than classic supercomputers and potentially speed drug discovery and materials science. . . .
Quantum Computing Inc. Chief Executive Yuping Huang said the government’s potential equity stakes in companies in the industry are exciting. A Rigetti spokeswoman said the company is continuously engaging with the government on funding opportunities.
But of course. . . .
There is nothing wrong with the government entering into close technological and scientific cooperation with the private sector, but direct equity investment has more than a whiff of bureaucrats picking winners (not their strongest point) about it. It also risks discouraging the flow of capital to more deserving cases.
When it comes to innovation, the U.S. should play to its strengths, which are based on free markets, rather than trying to ape Chinese or, to be really unkind, Peronist state capitalism.
Apart from the technological cooperation referred to above, the best thing that Washington can do to aid the further development of U.S. quantum computing is to keep its regulators, not least the antitrust enforcers, out of this space and, in most cases, away from an American high-tech sector that is the envy of the world.
Leave regulation to Brussels and central planning to Beijing. Washington can and should, however, (although the fight over rare earths will complicate this) restrict the export of advanced technology to China. Permitting such exports in exchange for the payment of a 15 percent fee is not the way to go.