On the Road to Serfdom*

 Although few people realize it, the Trump/Biden years will be remembered when the United States took a giant step on the road to serfdom by socializing the economy. The Republicans of yore held up the virtues of the free market; under Trump that is no longer the case. For generations the Democrats have never been comfortable with the workings of the market, but they conceded its ability to generate wealth and to create a mass prosperity. However, today there are growing voices in the Democratic Party to socialize much of the economy.

Under Biden the country embarked on an industrial policy whose goals were to penalize the production of fossil fuels and subsidize clean energy (solar and wind), subsidize computer chip making, and further increase the government's involvement in healthcare, just to name a few. Biden also left the initial Trump tariffs in place. You can't look to the Democrats to support free trade. Further, Biden attempted to micromanage the economy by putting DEI into every nook and cranny of employment law.

Compared to Trump's second term, Biden's industrial policies were chump change. Trump is in the process of jacking up tariffs from 3% to close to 20%, extorted $550 billion from Japan to fund a sovereign wealth fund, made an investment in rare earth producer MP Materials (See: https://shulmaven.blogspot.com/2025/07/the-pentagon-makes-play-for-rare-earths.html), and with a "golden share" gave the president control of U.S. Steel. To me the sovereign wealth fund brings up memories of the corrupt Reconstruction Finance Corporation of 1932-1953, a path to corruption if there ever was one. Although American universities are need of significant reform, Trump's attempt to micromanage them goes far beyond what is necessary.

My sense is that under Trump we are on the road to something that will look a lot like Mussolini fascism where the private sector carries out the will of the state. For those comfortable with Trump, I would warn them what goes around comes around. When the Democrats return to power the economy could soon be turned into a 21st century version of British Labor Party socialism of the late 1940's with the added kicker of having DEI on steroids. Either way, it is not a pretty picture. 

*-With apologies to Friedrich von Hayek

The Pentagon Makes a Play for Rare Earths

In taking a page out of Winston Churchill's playbook, where Britain acquired a 51% controlling interest in the Anglo-Persian Oil Company (now BP) on the eve of World War I, the Pentagon today made a $400 million dollar investment in rare earth miner/refiner MP Materials. The Pentagon on full exercise of its convertible preferred and warrants will own 14% of the company and become its largest shareholder. Paired with the investment is a long-term supply contract at fixed minimum prices thereby ensuring profitability. 

Rare earths are used to make highly sophisticated magnets that are used in advanced aircraft (think F-35) and guided missiles. At the present time the bulk of the rare earths used by the Pentagon and U.S. industry are imported from China, not the best of circumstances.

The Pentagon's logic behind the deal is identical to Churchill's over 100 years ago. As First Lord of the Admiralty Churchill was seeking a secure supply of oil for the Royal Navy. In addition to its investment, Britain secured a 20-year supply contract for Anglo-Persian's oil. 

As an aside, the preferred stock is convertible at $30.03 a share. MP Materials stock shot up to $44, so thus far the Pentagon is well ahead of the game.