Gongol.com Archives: January 2025
January 4, 2025
The perfect domestic buyer isn't coming
In issuing an order prohibiting Nippon Steel from buying United States Steel, President Biden claims to be acting on an "unflinching commitment [...] to defend U.S. national security". In theory, domestic ownership of major manufacturing operations may be favorable to national security, at least in the sense that their decisions may, in some sense, reflect a set of values which may include a greater sense of the national interest. ■ But the order has many of the markings of a choice to let the perfect be the enemy of the good. Nippon Steel had made promises to invest in facilities in Indiana and Pennsylvania that would have measured in the billions and might well have done a considerable amount to secure the long-term health of US operations. There is no such guarantee that any alternative buyers (should they even be found) will do the same. ■ There is no shortage of investment money lying around: Private-equity companies are estimated to have done more than three-quarters of a trillion dollars in deals in 2024. The $15 billion offer from Nippon Steel would barely move the needle on the $320 billion of cash and Treasury bills burning a hole in Warren Buffett's pockets at Berkshire Hathaway. If a better offer were coming from stateside, we'd know it already. A perfect domestic buyer just isn't forthcoming. ■ What is the concern, after all? That, in a time of international crisis, Japan will abruptly abandon us as an ally? Of all the unlikely scenarios in an uncertain future, Japan making a hard turn against us is about the unlikeliest. The US is a huge trading partner for Japan, a defense treaty partner for well over half a century, and the source of Japan's nuclear umbrella. ■ The only plausible scenario that could threaten the mutual partnership in the short- to intermediate-range future is the unlikely prospect that China might conduct an invasion of Japan. Nothing is really impossible, of course, but were it to come to something as drastic as that, not only would the US be involved in repelling the invasion, but occupied-Japanese ownership of US Steel would become a mere formality, which Washington could waive through an emergency nationalization. ■ It's old and tired thinking to treat Japanese ownership of distressed smokestack industries as a hazard to American national security. If Nippon Steel can run US Steel better than domestic ownership while reinvesting heavily in facilities and promising at least ten years of stability, then blocking the deal is, on balance, the bigger threat and an entirely unforced error by the White House.
A community really thrives when it has a steady source of profitable "exports" that mean its people aren't just exchanging goods and services among themselves. And it further prospers when it can grow its own local enterprises from scratch, usually on the backs of skills developed or demanded by the flagship employers.
