Long-Term Capitalism Without State Ownership
For more than a decade, I have argued that we need to reorient capitalism toward the long term. The short-term pressures of quarterly reporting, bonus cycles, and political election calendars undermine our ability to build the capabilities and resilience our economies require.
Today, the debate is taking on new urgency. The United States, like many countries, faces strategic challenges in artificial intelligence, defense, semiconductors, and critical infrastructure. Policymakers are rightly asking: how do we mobilize vast amounts of capital quickly, and direct it toward industries that underpin national security and prosperity?
One path gaining traction is for government to take equity stakes in strategic companies. The logic is straightforward: when the stakes are existential, the state cannot leave matters to chance. Yet there are real risks in this approach. State ownership—even partial—blurs the line between public and private, politicizes corporate decisions, and risks crowding out innovation and discipline. History shows us that once government sits on the shareholder register, decisions become less about competitiveness and more about political cycles.
There is another way—one that stays true to the principles of capitalism while mobilizing capital for long-term national goals.
A Tax Incentive for Strategic Investment
The United States already has a model: Section 1202, which exempts Qualified Small Business Stock from capital gains tax if held for five years. This provision has channeled capital into entrepreneurial firms that drive growth and innovation.
Why not extend this principle to large, strategically important companies? Imagine a rule where:
If an investor places capital into a designated strategic sector—AI, defense, semiconductors, infrastructure—and
Holds that investment for at least five years,
then the gains would be exempt from capital gains tax.
The outcome is clear: patient capital flows into the industries that matter most. Investors remain owners, accountable to markets and boards, not governments. Companies retain the discipline of private ownership, while enjoying a deeper, more stable shareholder base.
Aligning Incentives with National Goals
This approach strikes at the heart of long-term capitalism: aligning incentives so that what is good for investors is also good for society. It avoids the pitfalls of command capitalism, in which the state directs and owns the means of production, yet it still ensures that capital flows where the country needs it most.
It also tackles another chronic problem: the dominance of short-term trading. By requiring a five-year holding period, we build in patience. Investors will think twice before chasing a quarterly beat; they will care about whether the company is building the capabilities to succeed in 2030.
A Wartime Mindset Without Wartime Socialism
In times of war or crisis, governments often resort to nationalization or heavy-handed intervention. We should learn from history—but innovate beyond it. Tax incentives for strategic investment offer a middle path: mobilizing private capital at scale without sacrificing the innovation, competition, and efficiency that private ownership brings.
In other words, we can adopt a wartime mindset without adopting wartime socialism.
From Short-Term to Long-Term Capitalism
This is not a silver bullet. Boards will still need to reorient their agendas toward long-term value creation. Executives will still need to invest in people, technology, and brand equity rather than simply manage the next quarter. Investors will still need to reward sustainability and resilience, not just immediate cash flows.
But a policy like this can be a catalyst—tilting the system toward patience, commitment, and alignment with national priorities.
We live in a time when the stakes are high. AI, semiconductors, defense, and infrastructure are not just markets; they are the scaffolding of national security and prosperity. Let’s ensure our capitalism is equal to the challenge—not by turning to state ownership, but by harnessing the power of private capital for the long term.