By H. Sami Karaca
Is the Trump administration trying to reshape American capitalism? Recent moves by Washington, such as taking a 10% share of semiconductor maker Intel, point to a shift in that direction. For decades, Washington has supported free-market capitalism. Today, the government appears to be supporting a new direction – state-directed capitalism.
As a professor at the Questrom School of Business who studies different economic systems, I find this reversal striking. My research is supported by the Ravi K. Mehrotra Institute, which is trying to understand how business, markets and society interact. My previous research – finding, for example, that U.S. news coverage of capitalism was far more negative in the 1940s than it is now – suggests capitalism isn’t in retreat but is rather evolving.
In what direction is the Trump administration pushing it?
Types of capitalism
While many people bandy around the term “capitalism,” it actually comes in many different forms. The most basic definition of capitalism is when the means of production – such as factories, farms and offices – are owned by private individuals.
Capitalism is driven by profit. Some of the earliest descriptions of the profit motive that drives the whole system come from Adam Smith. As he wrote in 1776, “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest.”
Who gets the profits and who controls the means of production determine the specific forms of capitalism. While there are many types, I want to focus on three of the most important.
Free-market capitalism, also called laissez-faire capitalism, is when the government takes a hands-off approach to the economy. The U.S. after the Civil War is a good example of free-market capitalism. During the late 1800s, the federal government imposed few regulations on businesses.
State-guided capitalism is when the government chooses industries or companies to support. Favored sectors are given money and face looser regulations than nonfavored sectors. China today is an example of state-guided capitalism, where the state provides support for industries such as shipbuilding, steel and AI.
Oligarchic capitalism is when a very small part of the population owns key industries and controls the economy. Russia today is an example of this type of capitalism.
Each form of capitalism has its strengths and weaknesses. For example, free-market capitalism provides the most incentives to grow the economy, but the lack of rules often leads businesses to run roughshod over consumers. U.S. historians describe the late 1800s as the era of robber barons.
State-guided capitalism can dramatically boost the output of favored industries. However, if the government invests in the wrong industries, huge amounts of money can be wasted propping up dying firms.
Oligarchic capitalism can rapidly invest in new areas and shift resources, but the profits enrich only a tiny elite.
Recent changes
The U.S. currently appears to be operating under a hybrid model of capitalism, blending free-market principles with elements of state capitalism.
One of the most recent changes is the Trump administration’s decision to take a 10% stake in Intel. Congress passed the multibillion-dollar CHIPS and Science Act in 2022 to bolster U.S. computer chipmakers. Intel is slated to receive US$11.1 billion in grants from the program and other government funding. The current administration has converted that public support into a 10% ownership of the semiconductor maker.
Intel isn’t alone. The government has recently become a shareholder in other companies it views as strategically important – a trend that seems likely to continue and possibly result in the creation of a “sovereign wealth fund.” In July 2025, the Department of Defense agreed to buy $400 million of convertible preferred stock in MP Materials. MP Materials is the only U.S. rare-earth minerals mine with integrated production capacity. The company said the Department of Defense would be positioned to become its largest shareholder.
The government is also requiring a share of revenue from large computer chip manufacturers. Nvidia and AMD will have to remit 15% of revenue from certain chip sales to China as a condition for export licenses.
Why the US change is important
The CHIPS and Science Act has already funneled billions into U.S. semiconductor manufacturing via grants, tax credits and R&D support. MP Materials and Intel could serve as pilot models for further strategic intervention. However, the U.S. government spends trillions each year, and the amounts invested in American industries and companies represent only a small percentage of total spending.
While the CHIPS and Science Act was passed in 2022 under the Biden administration, the implementation relied on traditional tools of industrial policy such as grants, tax credits and milestone-based funding. In contrast, the Trump administration has converted these grants into equity arrangements, with officials stating the government should get a return on its investment.
This shift from an incentive-based approach to a direct ownership model represents one of the most fascinating experiments in modern American capitalism. The real question is what happens if – or when – this strategy expands. The government could become more involved in energy, biotech and AI, or any place where markets show signs of lagging or supply chains are geopolitically fragile.
The U.S. isn’t rejecting capitalism but recalibrating its boundaries. The next few years will show exactly how Washington’s interventions will reshape U.S. capitalism.
H. Sami Karaca is Professor of Business Analytics at Questrom School of Business at Boston University.
Ed P says
The referenced recalibration of capitalism can be explained with one simple explanation.
National Security.
Chips, AI, and military equipment (cost and speed) are all critical components to the future security of the United States. Along with infrastructure components like electric production and grid.
“Things are a changing”
Appears a Tik Tok solution is emerging
The dude says
That’s the same reason we were given for building a nuclear arsenal.
When everything’s an “emergency”… nothing is.
The only that “changes” is the excuses.
What is an “emergency” however, is the willful decimation of the middle class via trickle up economics.
You can put your trust in the oligarchy, techbros, and a kleptocracy with state sponsored “capitalism”.
That doesn’t mean the rest of us have to.
BillC says
Today, 1/23, as of 2:15, Intel stock has plunged almost 18%.
Ray W. says
Some 200 million Americans face a potentially destructive storm stretching from Oklahoma and Texas to the East Coast. This storm brings the potential of ice buildups that can bring down power lines and disrupt distribution of goods.
Should significant weather damage or disruption occur, the weather event may expose how the current administration is attempting to redefine how recovery capitalism is supposed to work.
Will we see from any recovery examples of free-market or state-guided or oligarchic capitalism at work? Will we see an emergence of some form of European social-capitalism? Will we see some form of American political capitalism, where many promises will be made but few kept?
We have already seen how the current administration is handling through FEMA the recovery in North Carolina from flood damage across the western mountain country due to two hurricane impacts and it doesn’t look very good. Some of the affected have been made whole. Many have not.
As an aside, had this storm swept across the country during the week that covered the 12th of the month, the number of full-time workers would have dropped and the number of part-time workers would have jumped up in the monthly statistical survey of full-time workers. Whenever full-time workers lose a workday to weather during an assessment week they temporarily become part-time workers, but just for that month. The next month, they revert back to full-time status.
I comment about this because of a lie spread by one of Florida’s Senators a few years back. His office released a report, in which he claimed that nearly all of the jobs created that month had been part-time jobs. A link to a government report was included in the release. I used the link and found the report. A definition was set out in the report that explained that part-time work numbers can artificially rise when a major storm occurs during the week of the 12th of any month. A major storm had blanketed much of the country with snow and ice during the week of the 12th that month. A large number of full-time workers suddenly became part-time workers.
What our Senator did was intentionally conflate the temporarily higher part-time work numbers for the month with an entirely different “jobs created” monthly report. The more gullibly stupid who wander among us posted comments claiming that the Biden administration was creating only part-time jobs. This, tactically, is a very old political lie, but the gullibly stupid among us fall for it over and over again.
I repeat. Every FlaglerLive reader ought to know by now that the modus operandi of the professional lying class that sits atop one of our two political parties is to lie in hopes that the gullibly stupid among us will launder the lie.
R.S. says
State-run capitalism is what brought down the East-European regimes. Top-down decisions by the State ran their systems into the ground. Adam Smith had in mind the village economy; neither he nor Karl Marx believed that corporate control or state control would lead to healthy economics.
Ray W. says
Multiple utility companies are warning customers of potential multi-day power outages due to ice deposits downing tree branches and power lines. Apparently, natural gas futures have shot up, with some spot prices over $5.00 per million BTUs. The energy industry is bracing for frozen natural gas wells and pipelines and the fuel shortages that come with it. The concern is based in part because natural gas already in storage may not be enough to power turbines until the wells and pipes unfreeze and start flowing again.
Make of this what you will.
Me?
The issue is one of regulation. Many FlaglerLive commenters have bought into the lie that “all” regulation is bad. A lot of regulation really is bad, but nowhere near all of it.
Natural gas power plants in Wisconsin or Minnesota or Massachusetts don’t freeze in winter because regulations require weatherproofing of the plants during construction. Texas regulators did not require weatherproofing during construction of their grid’s natural gas power plants. Five ago, the entire country learned just how stupid Texas regulators were for their failing to properly regulate the industry. Hundreds of people died, either by freezing to death or from multiple other reasons. All because of regulatory stupidity.
Almost immediately, the professional liars went into overdrive, claiming that renewables were at fault. A small number of the more gullibly stupid FlaglerLive commenters among us tried to launder the lies about renewables. The government studies of the event established that some of the natural gas plants froze and others began to operate at maximum power to make up the losses to the grid. The pipelines feeding natural gas to the remaining operable plants froze, too, and the plants shut down for lack of fuel. The entire grid collapsed. All because of regulatory stupidity.
As an aside, some 30 years ago, wind turbine blades were first fitted with de-icing electric warmers; the blades don’t freeze over in winter conditions.
Ray W. says
The Telegraph just published an editorial with a different perspective.
The author starts with the idea that three-quarters of the world’s population live in countries that lack sufficient fossil fuel reserves to power their energy needs. That means, writes the author, that one-quarter of the world’s people live in countries that extract financial resources from many of the nations that cannot afford to pay for the fuel they rely on.
China is one of the many energy-starved countries. Decades ago, China set out to completely electrify their economy. Europe, energy deficient as a bloc, took a punch to the face when Russia invaded the Ukraine. Europe pivoted away from Russia to other energy suppliers, including the US. Europe just took another punch to the face by the US. NATO is at risk. Leaders can see that President Trump is willing to take over Venezuela, to weaponize commerce through tariffs, and to bully Denmark. They are beginning to talk of cooperating with China in an effort to completely electrify their own energy needs in order to reduce reliance on the US. Better to pay China for the solar and wind technology than to risk having to rely on the US.
Make of this what.you will.
Me?
I can’t say this often enough. Treat a populace like they are shit to you and they don’t soon forget what you are. Canada’s Prime Minister received an ovation when he told a Davos audience that Canada’s relations with America were in the midst of a rupture and that the old world order was not coming back. It is a rupture, PM Carney said, not a transition to a new world order.
Yes, I know that I treat the vengeful among us and the liars and lie launderers among us with extreme disrespect. There exists a moral imperative for all FlaglerLive readers to do the same. These vengeful lying people are what James Madison called “pestilential”.
Madison deemed such people the greatest danger to his proposed liberal democratic Constitutional republic. Checks and balances were liberally spread throughout the document so as to protect us all from such people. Madison knew that such people would always wander among us.
Ray W. says
Preliminary data supports the claim that, globally, 91.7 million cars and light trucks were sold in 2025.
According to a news source, Car Sales Statistics, 2025 American new car and light truck sales of all brands rose 2.3% from 2024 to 16.3 million vehicles.
According to a different news outlet, CNEVPOST, Chinese 2025 New Electric Vehicle (battery electric vehicles, plug-in hybrid vehicles, extended range electric vehicles and hydrogen-powered vehicles, etc..) sales rose 28.2%, year-over-year, to 16.49 million vehicles.
Chinese NEV exports rose 100% to 2.62 million vehicles.
Total Chinese 2025 car and light truck sales, including diesel and gas-powered vehicles, rose 9.4%, compared to 2024, to 34.4 million units.
Make of this what you will.
Ray W. says
According to a recent Bloomberg article, BYD, China’s largest EV carmaker, delivered 1.05 million vehicles to foreign markets in calendar year 2025, many exported and many others assembled in foreign factories. BYD’s announced plan is to deliver 1.3 million electric vehicles to foreign markets in calendar year 2026.
Make of this what you will.
Ray W. says
Reuters reports that crude oil production in North Dakota has dropped between five and ten percent as the massive ice storm impacts the region. Natural gas and crude oil production in the Permian Basin, spanning New Mexico and Texas is expected to drop , perhaps by as much as 200,000 barrels per day.
Overall national estimates may be production losses of as high as 300,000 barrels of oil and 86 million cubic feet of natural gas per day.
Make of this what you will.
Me?
Frozen fluids don’t easily move through pipelines. Alaskan crude is heated to keep it flowing in winter. Pipes are insulated. Pipes are buried underground.
Texas pipelines are not heated.
If the freeze lasts long enough, refineries and power plants can run out of crude and natural gas reserves. Distribution points on the major gasoline pipeline from refineries to the east coast are expected to ice over, meaning that in certain regions truck deliveries of diesel fuel and gasoline to gas stations may be interrupted.
Make of this what you will.