In 2009, the U.S. Department of Energy (DoE) issued nearly identical loan guarantees to Tesla ($465 million) and Solyndra ($500 million), a solar panel manufacturer. While Tesla succeeded, Solyndra declared bankruptcy just two years later, attracting intense public scrutiny. The US government suffered the public backlash and cost from Solyndra’s failure but received nothing from Tesla’s success. Under the original agreement, the government would only receive three million shares if Tesla failed — a counterintuitive arrangement, since public stakes in struggling companies rarely benefit taxpayers.
A more effective approach would have granted the government shares only if Tesla succeeded, allowing taxpayers to benefit from the company’s growth. Tesla’s share price, which was around $9 in 2009, then ranged between $258 and $479 in 2013, meaning that a public stake could have generated substantial funds to cover Solyndra’s losses and support future investments. The cases of Tesla and Solyndra highlight how, by not recognizing its role as a public venture capitalist, the state often ends up socializing risks while privatizing rewards.
Beyond taking equity stakes, the government can incorporate conditionalities into its contracts as a pre-distribution tool to ensure that societal benefits are built in from the start. A clear example is the US 2022 CHIPS and Science Act, which aimed to bolster domestic semiconductor manufacturing by providing approximately US$53 billion in incentives for research, development, manufacturing and workforce development (CHIPS stands for ‘Creating Helpful Incentives to Produce Semiconductors’). The Act was designed to expand production and shape how the benefits of public investment are distributed — diversifying manufacturing locations, strengthening supply chain security, creating jobs, driving innovation, and promoting resilience and inclusivity.
