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After 18 months of bargaining, multiple White House interventions, a presidential election, a snarling lawsuit, a xenophobic rant, two national security reviews and a government golden share, Nippon Steel has finally secured approval to buy US Steel.
The $15bn takeover makes history for many reasons, but perhaps most potently as a marker of era-change: it is the first large-scale cross-border deal in the age of “stick-holder capitalism” — which is like stakeholder capitalism but with at least one particularly heavy-handed stakeholder.
It is no coincidence that this tormented transaction, and the stunningly intrusive powers Nippon Steel has been forced to grant current and future US administrations in order to win the presidential nod, should be the landmark. The epoch has arrived through a process of juddering evolution, with Japan as one of the principal non-US passengers involved.
In stick-holder capitalism, companies remain fundamentally propelled by the usual forces, but at the permanent, tempering risk of punishment, inconsistency, coercion and sudden, top-down rewriting of concepts or rules that previously seemed inviolate. Donald Trump did not provide all the ingredients for this dish, but he has cooked them together with astonishing speed and dedication.
The parameters have been set so that even close allies, such as Japan, can get hurt. Trump’s “liberation day” tariffs are designed to cajole consumers and companies into behaviours, such as investment in US manufacturing, that previous iterations of capitalism had not enforced — and for which shareholder and other stakeholder permission has yet to be granted.
When there is dissent — as there was last month when Walmart suggested that higher costs induced by the tariffs would be passed to customers — Trump’s stick-holder activism has struck at capitalism itself.
The US president posted on social media that Walmart should “EAT THE TARIFFS” rather than charging customers higher prices, adding that it made huge profits the previous year.
Are there really new rules of US capitalism that limit what profits a company should make or how it sets prices? The point is that nobody knows, thus ensuring the carrot will always be subordinate to the stick.
How did we get here? Consensus has been shaky for a decade now over which stakeholders merit the most focus from companies, and whose interests most optimally serve national economies and guide the invisible hand of markets.
The most purist interpretation of shareholder capitalism, in the US and beyond, was already ceding ground to alternative takes in the aftermath of the 2008 financial crisis. The capitulation was crystallised in 2019 when the powerful US Business Roundtable lobbying group updated its statement on the Purpose of a Corporation to reflect commitment to “all stakeholders”.
Under the Biden administration a new point of realisation was reached. Neither shareholder nor stakeholder capitalism could be fully relied upon to deliver industrial national security: they had not made the US a global leader in chip manufacturing; they did not guarantee long-term pre-eminence over a rising, coercive China.
The US response was to establish an industrial policy — after years of Washington criticising both the existence and strength of industrial policy in places like Japan. But the problem with industrial policy, as Japan well knows, is that it requires companies to propel a version of capitalism where decision-making no longer fully serves the interests of shareholders or stakeholders. In the wrong hands, as the US and the rest of the world is now discovering, industrial policy can become highly coercive.
The timing of Nippon Steel’s attempt to buy US Steel, in the run-up to the US presidential election, meant that the problem was always political, and so would be the solution. The deal was blocked first by President Joe Biden, then by Trump, before the Japanese company gave a string of eye-popping concessions — including the US government’s golden share, and huge investment commitments.
Throughout this process, Nippon Steel has confronted (and been mauled by) four versions of US capitalism. It won over shareholders with price and premium, but that did not matter. It talked a good game by accentuating what it would do for US blue-collar jobs. It lobbied hard, but in vain, to have the deal interpreted as a perfect outcome of industrial policy from a trusted ally.
Its victory was only granted in the era of stick-holder capitalism: a version of the genre many may now have to navigate that involves being clobbered quite hard and pretending to like it.
