Annals of Autocratic Capitalism
The Broadcom v. Qualcomm story may put you to sleep. But pay attention: A struggle for the future of free markets is afoot.
You’ve likely already heard about one of the biggest stories in tech and politics, Trump’s killing of what would have been the largest merger in technology history. From the Washington Post: “President Trump on Monday ordered Singapore-based Broadcom to abandon its $117 billion hostile bid for Qualcomm, blocking what would have been one of the biggest technology deals in history.”
Perhaps like many of you, I go MEGO (My Eyes Glaze Over) when I see headlines about massive chip companies like Qualcomm or Broadcom. But if you view the story in the same frame as my recent piece on the end of democratic capitalism, it suddenly gets much, much more interesting.
This stuff is complicated, and I’m still sorting through it, but first and foremost, let’s call a spade a spade: The President of the United States, by fiat and without any publicly reviewed supporting documentation, just killed the largest global merger ever considered in the technology sector. If that doesn’t feel a bit…autocratic, well, read the actual order.
As I argued in my earlier piece, China is the dominant player in a philosophy of market economics I’ve come to call “autocratic capitalism.” Autocratic capitalism is a market-based economy (that’s the capitalism) run by autocratic, centralized governments. I am not a fan of this philosophy. But I’m not certain our current administration shares my concerns. Again, like many of you, I’ve increased my study of politics, economics, and state craft since Trump took power, and it strikes me that given a choice, Trump would far prefer to preside over an autocratic system of capitalism, where he gets to pick winners and losers, than a democratic one, where winners emerge from a more level playing field governed by the rule of law and regular elective process.
But I am getting a bit ahead of myself.
As it relates to the Broadcom/Qualcomm deal, it’s clear that the fear of losing control of arguably the most important market in the world — mobility, with all its attendant data about and control over the public — has driven the United States to take what initially appears to be a defensive counter attack for the good of democratic capitalism. If San Diego-based Qualcomm falls under the control of Singapore-based Broadcom, the standard narrative goes, then Qualcomm as an independent entity will decline, and will lose its leadership position in mobile markets. Chinese companies, already ascendant in mobility, will conversely win. (There’s also the latent “otherness” racism in equating Singapore with China, but for now let’s leave that one alone. )
As tech analyst Ben Thompson puts it: “The structure of the deal itself said far more clearly than anything else that Broadcom wanted to feast off of Qualcomm’s past innovations and contribute far less to future ones than Qualcomm would on its own. And, given ever-increasing Chinese dominance of wireless, that is indeed a national security problem.”
National security, yes, but is this a democratic capitalism problem? To me, that’s the salient question. And for Trump, I think the answer is a definitive shrug. Trump simply wants to win, he doesn’t care much how that win gets on the board.
What comes next will be particularly interesting. It’s clear that Trumpian economics favor protectionist and nationalist policies. But China accounts for nearly two thirds of the newly protected Qualcomm’s revenue. As the Wall Street Journal puts it: “Qualcomm has now effectively been designated a national champion in the battle with Beijing. However, the company’s loyalties are divided — it needs China as much as it competes with it.”
So while Trump’s move may seem like a blow to autocratic capitalism (China) from a champion of democratic capitalism (the US), it clearly binds the fate of Qualcomm’s future to the United States government and its protectionist policies, effectively shifting our vaunted system of democratic capitalism one step further toward exactly the kind of system we should all fear. Good news? I think not.