Governments considering equity ownership in key industries hope to ease budget pressures and boost investment in social programs. However, this approach raises concerns about market independence.
Many countries are grappling with how to fund essential public services such as healthcare, aged care and infrastructure without increasing debt or placing greater pressure on taxpayers. A number of governments, including the United States, are experimenting with a new approach. By acquiring direct ownership stakes in profitable private firms, they aim to share in the financial success of leading sectors. This concept, sometimes called hybrid capitalism, offers potential long-term benefits but also brings notable risks.
Sovereign debt has grown significantly over the past ten years, exceeding $US318 trillion globally. These borrowing efforts helped stabilise economies and supported private sector growth, resulting in strong corporate profits. Meanwhile, public finances continue to deteriorate. Some economists now argue that governments should take a more active role in capitalism by holding equity in high-performing or strategically important businesses in areas like technology, resources or manufacturing.
The United States has already taken steps in this direction. Under the CHIPS Act, the government invested about $13 billion in non-voting stock in Intel by converting construction grants into equity. Similar models apply to large tech firms such as Nvidia and Apple, with public funding tied to wider economic goals. These types of agreements are designed to support vital industries while ensuring that taxpayer-funded assistance delivers public benefits and not just corporate gain.
This approach could also benefit countries like Australia, especially in sectors such as mining, where profits largely flow to private operators. Government-held shares in major firms could provide reliable income through dividends, which could be used to help fund public services like healthcare or education. Even modest equity positions might generate meaningful returns for reinvestment without requiring further tax increases or depending entirely on royalty systems managed by state governments.
Nevertheless, this increased involvement in markets is not without critics. Some warn that public ownership in private companies may lead to bureaucracy, politicised decision-making or weakened competition. There are also fears that excessive government involvement could result in cronyism or introduce shifting political agendas whenever new leadership emerges. Key to success is the way it is implemented, with clear governance rules, limited direct interference and a commitment to maintaining investor trust while delivering outcomes for the wider population.
Other countries already operate under models that mix public wealth with private enterprise. China and Norway provide examples where national funds participate in markets while serving broader public interests. Western democracies, facing stretched budgets, may find lessons in these cases. If managed effectively, hybrid capitalism can redirect economic output to fund shared priorities. If mishandled, it could damage investment confidence and concentrate power within government. Either way, this developing shift is starting to reshape how democracies connect profit and public value.
