President Donald Trump’s increasing control over businesses and the economy is being described by some commentators as “state capitalism”—a mix between socialism and capitalism.
But the term “state capitalism” is wildly inaccurate and blames capitalism for the evils of its opposing political system, statism. If we are to defend true capitalism, we need to understand what that term means and push back against packaging it together with statism.
Some of what is being labeled as “state capitalism” is the federal government’s newly acquired equity stake in Intel, which made the government one of the largest shareholders in the company. Additionally, the new tariffs pressure American businesses to reorganize their entire production to bring manufacturing back to America, even if it means losing money. The president has also repeatedly threatened businesses who raise their prices, and has even told them who they should fire.
Government acquiring shares of private companies, forcing them to relocate their manufacturing, and telling them how to run their businesses is the opposite of capitalism.
Capitalism isn’t the mere existence of private businesses, even if controlled or influenced by the government. It isn’t ‘some private property despite pervasive state control.’ It isn’t giving businesses some leeway to innovate and create value, while bring controlled bureaucrats. That’s partly the Chinese system, and China is a statist, oppressive regime, not a capitalist one.
Capitalism, as philosopher Ayn Rand described it, is “the only social system based on the recognition of individual rights and, therefore, the only system that bans force from social relationships.” This means that all property is private under capitalism (there’s no government equity stakes in companies, for example), and no one is forced, by the government or individuals, to operate their business in any which way.
People’s judgment is respected in a capitalist system, and government has no say at all in what companies and individuals do. The only limit to their actions is the rights of other people, i.e.: the initiation of force. As long as an individual doesn’t initiate force against others, they are free to operate however they see fit. They will be rewarded or punished by a freely operated market, as appropriate.
A capitalist system lets each individual pursue their own self-interest. On the contrary, a statist system (of any variety—socialist, communist, fascist, authoritarian) overrides self-interest and pushes for the interest of “the nation,” or “the public good,” or “the state,” or “society,” or any other collective instead.
As I’ve written in these pages before, a statist system sacrifices individuals for the collective. One of the tools to do so is the control of the economy and businesses. The president’s increasing influence over businesses are not a set of suggestions, they are a set of threats to make businesses fulfill his agenda.
The government deals in force, not in voluntary exchange—it cannot produce, only reallocate by force. Unfree governments can exploit businesses’ production by controlling them (such as in China), they can redistribute what was produced by others, but they can’t produce anything by themselves. The tool of government is force, not trade. The moral legitimacy of a government comes from protecting the conditions under which the mind can function freely, not from trying to replace the mind as a creator of values.
This rejection of capitalism is not new to the Trump administration. It has been happening for decades under Democratic and Republican administrations. More recently, the Biden administration pressured social media companies to take down content the administration deemed objectionable, overriding the companies’ judgment and forcing them to comply. Via the Inflation Reduction Act, Biden “negotiated” with drug companies, extorting them to lower their prices, among many other interventions.
Building on precedent, the Trump administration is making it even more transparent that the federal government has massive power over businesses, and this is antithetical to capitalism. In the mixed economy we’re in (a mix of control and freedom), the Trump administration is rapidly taking us closer to more controls (statism), not freedom (capitalism).
Those of us who defend capitalism should reject terms like “state capitalism” and not fall for this conceptual trap. When the statist approach inevitably fails (including by further restricting the freedom of Americans) capitalism should not be blamed for it, including because we’ll get even more controls if that happens.
Bad conceptualizations also prevent us from understanding what’s truly going on, so our terms must remain clear. To make America freer, we need to rein in government power and embrace true capitalism, not statism.
Agustina Vergara Cid is a columnist for the Southern California News Group and a Young Voices contributor. You can follow her on X at @agustinavcid