Blurred Lines Between Public and Private Sectors
In May 2023, during a panel discussion at an American Catholic university, Senator J.D. Vance (R-Ohio) expressed the view that the boundaries between the public and private sectors in the United States are becoming increasingly indistinct. He stated, “It’s all blended together, and, in my view, everything is very consistent with people.”
Vance pointed to President Trump’s recent proposal to stake a claim in the federal government by pushing for ownership of a portion of Intel, a major computer chip manufacturer, as an example of this trend.
Howard Lutnick, the Commerce Secretary, suggested collaboration with universities to share patent royalties resulting from federally funded research as another angle of this blending.
This kind of government involvement has historical precedence, harking back to President Harry Truman’s 1952 threat to nationalize the US steel industry during a labor dispute related to the Korean War. However, the Supreme Court’s ruling later that year prevented Truman from doing so, highlighting the constitutional limitations on the executive branch’s power to seize private property.
The contrast between the two sectors couldn’t be more stark: in the private sector, resource allocation is driven by strong incentives and market demands. Here, companies are essentially motivated to succeed—or risk failure. In contrast, the public sector often lacks similar incentives, leading to bureaucratic inefficiencies and resource misallocation.
Government officials, while dedicated to public service, vary greatly in their effectiveness. Not every player in the public sector is, let’s say, uniformly informed. Recently, taxpayers reportedly spent around $35 billion annually funding the public workforce without always seeing the best outcomes.
Discussing the intertwining of private and public spheres, George Mason University economist Richard E. Wagner noted that their connections run deep. Looking back to the early days of the republic, Alexander Hamilton, Washington’s Treasury Secretary, advocated for what we now call industrial policy, promoting protective tariffs to boost domestic production.
Hamilton’s policy interventions didn’t stop with tariffs; his taxation on whiskey caused considerable unrest, leading to the Whiskey Rebellion in 1794 when farmers protested against unfavorable practices. This historical context illustrates various forms of government intervention, such as economic nationalism and crony capitalism, that have been seen throughout U.S. history.
This governance model has the potential to edge toward what is legally defined as fascism—where the means of production may remain privately owned, yet the government heavily influences decision-making on their use.
In contrast to a purely communist system, fascism allows for private ownership but limits how that property can be used. Private entities often find themselves in a position of seeking government favors rather than competing freely, which skews what we traditionally understand as market dynamics.
Vance is correct in noting that the line between the public and private sectors is becoming increasingly blurred, and that poses its own challenges. However, merely erasing these lines further would not solve the issue.
Adhering to principles such as protecting private property rights, limited governmental power, and maintaining the rule of law has historically fostered freedom and economic success. It’s a lesson worth remembering. Ronald Reagan famously remarked that “the nine most frightening words in the English language are: ‘I’m from the government and I’m here to help.'”
The public sector, constitutionally and institutionally, operates differently from the private sector. It’s crucial that both maintain their distinct roles, especially considering that private sector operations are generally broader in scope.
— William F. Sugart II, Research Advisor; J. Fish Smith, Professor, Public Choice, John M. Huntsman School of Business, Utah State University.
