In 1982, the gifted libertarian Roy A. Childs Jr. warned that the American New Right was working to build a “populist, authoritarian movement” hostile to free markets and committed to some form of managed economy. Forty-three years later, Donald Trump is president, and the Wall Street Journal’s chief economics commentator describes his policies as “state capitalism,” a “hybrid between socialism and capitalism in which the state guides the decisions of nominally private enterprises.”
The Journal further argues that Trump is “imitating the Chinese Communist Party by extending political control ever deeper into the economy.” Economist Daniel J. Smith warns that this trajectory “risk[s] leading us down the road to serfdom that Friedrich Hayek warned against in 1944.”
Is that a realistic analysis—authoritarian, semi-socialist, serfdom-bound—and was Childs right? It sure looks that way.
To be clear, Trump is not pursuing traditional socialism, where the means of production are owned by the state. Nor is he trying to copy exactly China’s state capitalism—but he is applying its methods with what the Journal calls “American characteristics.”
What makes the situation especially troubling is that Trump does not operate from a coherent economic philosophy. His actions suggest not principle but instinct—nationalism, transactional bargaining, and bullying of critics, from Federal Reserve Chair Jerome Powell to Representative Thomas Massie.
In the commentary, the Journal’s Greg Ip notes that some past presidents—FDR, Bush, and Obama—implemented state capitalism temporarily in special circumstances. However, President Biden went further to “shape the actual structure of industry” through the Inflation Reduction Act, the Chips and Science Act, and consideration of a sovereign wealth fund to finance important but risky projects.
Trump’s economic intervention is bolder and, like Biden, cloaked in “national security” language. Examples abound. To approve Nippon Steel’s $14.9 billion acquisition of US Steel, Trump secured a “golden share,” granting him (or a designee) veto power over major decisions—functionally, a controlling stake.
The Defense Department is spending $400 million in taxpayer funds to buy a 15 percent stake in MP Materials, a California company that harvests rare earth minerals. The arrangement makes the government the firm’s largest shareholder.
Trump crafted an export control deal allowing Nvidia and AMD to sell artificial intelligence chips to China—on the condition that they pay the federal government 15 percent of the revenue. The conservative National Review called this “extortion” and a “lurch toward state-directed capitalism.”
Commenting on the chip deal, Cato’s Clark Packard said, “There is no statutory basis for these companies having to pay a share of their Chinese sales revenue in exchange for their export licenses. … Beyond the troubling legal questions, the deal with Nvidia and AMD reeks of more crony capitalism.”
In a related step, the Trump administration announced it is acquiring 10 percent of Intel stock in exchange for $9 billion in federal grants the tech company was slated to receive under the CHIPS Act. This makes the government the largest Intel shareholder. Walter Isaacson observed, “You’re seeing what is really state capitalism here, where the government is interfering in all sorts of ways in corporate decisions, whether it be pricing, whether it be Coca-Cola, whether it be Intel, and maybe taking a stake in it.”
The Journal’s editorial board labeled the move “a de facto nationalization.” Senator Rand Paul cautioned, “Today it’s Intel, tomorrow it could be any industry. Socialism is literally government control of the means of production.” Cato’s Scott Lincicome described it as “a dangerous turn in American industrial policy. Decades of market-oriented principles have been abandoned in favor of unprecedented government ownership of private enterprise.” Cato’s Ryan Bourne said that Commerce Secretary Howard Lutnick “can deny that this is a step” toward socialism, but “the effect is the president allocating capital through partial nationalization.”
Trump rejected the criticism and pledged to “make deals like that for our country all day long.”
Trump’s willingness to personally attack CEOs reinforces the authoritarianism Childs anticipated. He demanded the resignation of Intel CEO Lip-Bu-Tan, suggested Goldman Sachs leadership find other work, and, according to Fortune, has “publicly called out and humiliated” executives at JPMorgan, Bank of America, Walmart, Apple, and Harley-Davidson. Trump has also fired Fed Governor Lisa Cook, pressured Chairman Powell to resign, and dismissed the Bureau of Labor Statistics commissioner after claiming jobs data were “RIGGED” to make him and Republicans “look bad.”
All those actions reek of state capitalism and soft tyranny. They also mirror what Ludwig von Mises, in 1947, termed interventionism, a “middle of the road” policy that “stands midway between” capitalism and socialism—similar to what the Journal’s Greg Ip termed a “hybrid,” whereby the state guides private companies’ decisions.
“The system of the hampered market economy, or interventionism, differs from socialism by the very fact that it is still a market economy,” wrote Mises. “The authority seeks to influence the market by the intervention of its coercive power, but it does not want to eliminate the market altogether.”
“However, all the methods of interventionism are doomed to failure,” said Mises, because the more the government intervenes—e.g., tariffs, subsidies, regulations, price controls, bailouts—the more it distorts the economy and everyday living. “Government control of only a part of prices must result in a state of affairs which—without any exception—everybody considers as absurd and contrary to purpose. Its inevitable result is chaos and social unrest.”
To remedy the problem, the government intervenes again and again, which only compounds the chaos and unrest—all the while blaming capitalism and market failures. Mises called this the path to “socialism by installments.” Hayek described it as the road to serfdom.
“Now that Mr. Trump has crossed the Rubicon, Republicans will have no objection to the federal government expanding state ownership of companies,” Smith warns in the Journal. “Lawmakers will soon argue that if chips and steel are too important to leave to free markets, food and medicine are as well.”
Such policies represent a betrayal of America’s founding principles. The nation was built not on state control but on liberty, private property, and the right to pursue happiness without government coercion. If those ideals are abandoned, state capitalism will not make America great again—it will make it unrecognizable.
