On August 22, 2025, both the Trump Administration and Intel announced that the federal government is investing $8.9 billion to purchase ten percent of the stock in the firm, “reflecting the confidence the Administration has in Intel to advance key national priorities and the critically important role the company plays in expanding the domestic semiconductor industry.”
Conservative economists criticized this decision as an act of socialism. Worse, they called the investment an act of ‘crony socialism,’ because it was a bailout of a poorly-performing company intended to gain policy leverage over the firm. A fellow of the conservative Manhattan Institute warned that “companies will underperform because they know they will be bailed out,” if the government is willing to support them in an effort to promote domestically-owed firms.
Despite this concern, on August 25, the Director for the National Economic Council told CNBC that the administration intended to invest in other American companies as well. He explained that “It’s like a down payment on a sovereign wealth fund, which many countries have.” This is true, especially of petroleum-rich countries such as Norway, Russia, Venezuela, Nigeria, Angola, and the Gulf Arab states. Each of these countries nationalized their oil sectors, so that oil-export revenue has been collected directly by their governments. The results have been mixed. But the mechanism is straightforward: partial or total national government ownership of the production firms.
But what does this mean, that the Trump administration is employing a socialist policy?
A little clarification of the term ‘socialist’
In 1922 the Russian Bolsheviks declared the formation of the Union of Soviet Socialist Republics. Although they also stated that the ultimate goal was to achieve Communism, they led with ‘socialist’ to appeal to Europeans who were in fact implementing socialist policies, from the Swedish and German Social Democratic parties to the Labour Party in Britain. American industrialists were opposed to both movements: the labor-unionism and regulations of the socialists, and the abolition of private property advocated by the communists. The Soviets handed them a propaganda tool: since the Soviets were communists, but declared themselves socialists, American conservatives conflated the two terms to undermine the credibility of union organizers, social democratic leaders such as Eugene Debs and Franklin D. Roosevelt, as well as American communists. Conservative succeeded to such a degree that Americans (beginning with Roosevelt) have avoided the term ‘socialist’ even when they were implementing socialist policies such as public schools, regulation of firms, and the creation of a social safety net.
Now that the USSR is long gone, we need to clarify political economy terms again.
Capitalism is sometimes used to refer to ‘any market economy.’ In fact it is more specifically a modern, future-oriented market economy. Mercantilist economies of the past were also ‘market economies,’ but without the data and institutions that make future-oriented investments possible. Mercantilist currency was precious metals. We deal in future-oriented investments in stocks, bonds, and research. Even our currency is future-oriented promissory bank-notes.
Communism means a planned industrial economy in which the workers own the means of production, and most forms of property are abolished. Although this was the stated ideal of the Soviets, this form of political economy has never been implemented.
Socialism means a market economy in which the government actively intervenes. Proponents argue that the intervention is for public benefit. If that benefit is intended for the majority of the population who vote, it is called ‘democratic socialism.’ The clearest example is Sweden, were the Swedish Social Democratic Party dominated policy and economic reforms during the 20th century. They transformed a country with indifferent aristocrats and starving peasants (including some of my ancestors) into a modern country with broad-based wealth.
Most modern political economies are a hybrid of capitalism and socialism. Governments intervene in numerous markets, in diverse ways. The motivations for intervention are also diverse: sometimes to gain votes, sometimes to protect strategic industries, sometimes at the request of wealthy owners, sometimes to promote competitiveness. This is not utopia; it is more like a sausage-factory of policy production. But it is productive.
Ideologues often argue for one pure form of political economy. Furthermore, American ideologues still assume that capitalism and socialism are mutually exclusive. This is misleading because every modern government intervenes in markets. The only governments that don’t intervene are those which are too weak to exert police power because of active civil war or state collapse, such as Somalia.
Asking better questions, now that we know
I am careful not to idealize socialism because in actual practice, government involvement in the economy can be problematic. Workers might vote for leaders who promote more domestic employment and better wages, but employment policies do not necessarily mean more competitiveness, nor innovation, nor sustainability. Each outcome follows a discrete logic, and it is exceedingly difficult to achieve positive outcomes in all dimensions simultaneously. This is why Rittel and Webber (1973) call policy problems “wicked:” they are unbounded, complex, and impredictable. In a constantly-changing world, it is more useful to keep asking questions that help us adjust policies, so that we can at least try to achieve the many outcomes we desire.
Asking good policy questions requires setting aside ideological distractions. Rather than fall for century-old fallacies such as the supposed mutual-exclusivity of capitalism and socialism, we need to ask: What are the beneficial ways that government can intervene in the economy? What indicators should we use for changing policy? When and how can the capitalist aspect of an economy go awry? When and how can the socialist aspect of an economy go awry?
While I was teaching in Suzhou, the Chinese Communist Party was preparing the 15th national five-year plan. CCTV(English) reported that the focus was on reviewing state-owned enterprises in order to decide which to privatize, which to strengthen for national-interest reasons, and which to allow to fail.
“State-owned enterprise” is a term which reveals the hybrid nature of modern political economies. Public ownership of ‘stock’ in companies is a distinctly modern, capitalist practice. However, governments can directly intervene by buying some or all of that stock. In federalized countries (especially US and India), local and regional governments have fiscal autonomy, so even sub-national parts of a federal government could own some or all of a company. At one extreme, the USSR owned 100% of the stock in firms such as Mikoyan-Gurevich (MiG) and Sukhoi. And yet these remained discrete enterprises, which competed with each other in the development of fighter aircraft. During the 1950s and 1960s, this competition promoted innovation. However by the 1970s, monopoly control of the Soviet economy by the government itself stifled innovation. So, again, I do not mean to idealize here; I agreed with the CCP’s efforts in 2015 to continue the shift to a hybrid economy that balanced private investment with public control of strategic sectors and firms.
However, a government can intervene by buying only a fraction of a company. Any degree of government ownership in a firm is a socialist policy because it is a direct government intervention. Whatever their motivations may be, it is now accurate now to state that the Trump administration has begun to use explicitly socialist policies. This is neither praise nor condemnation; it is observation. I actually take them at their word that this is a policy of “investing in America,” which seems like an appropriate framing for a conservative-populist form of socialism. I know that 20th century Americans could not imagine those words together, but we are a quarter of the way through a very different century, and we need to describe 21st century conditions accurately.
Conflicts of Interest in a Hybrid Economy
The Trump administration is also investing in strategic minerals enterprises, and may buy 10% of the company Lithium Americas. On the one hand, lithium is unquestionably a strategic metal. On the other hand, this same government has regulatory authority over Lithium America’s development of the Thacker Pass mine.
Even without socialist government investment, strategic and electoral incentives often clash with incentives for environmental protection. When the Obama administration sought to make the US an oil exporter, they kept extraordinarily silent as the Deepwater Horizon oil rig explosion led to an environmental disaster. In an era of hostile partisanship, it is worth noting that very different American administrations pursue strikingly similar policies and suffer conflicts of interest in the same ways. The purpose of this essay is to clarify how we understand policy, in order to wield it better.
How do we balance the conflict of interest between government promotion of businesses, and regulation of those same businesses? There is no fixed or stable answer to this question, so it needs to keep being asked. Partial ownership in the businesses does not eliminate this conflict of interest, but it changes the mechanisms of enforcement. As an investor, the government has direct voice in company policy and direct access to internal information and decision-making. Ideally, the government reflects the public preferences for a balance of: more employment, higher wages, sustainability, equal treatment, and incentives through profits. Those are many interests, and the balancing act is complex.
A further complication is that policy interests are entangled with geographic scale. How do we balance local environmental impact with promotion of national strategic interests? Wealthy residents of the San Francisco Peninsula are blocking the development of a California high-speed rail, costing the state billions in legal fees and preventing economic growth in all the less-wealthy cities that would benefit. The problem with oligarchs is that they can exert excessive control over both government policies and private sectors of the economy, damaging both. Russia is a clear example of this. But elite domination for self-enrichment, at the expense of entire national economies, is a common pattern across the world today.
A re-balance we need at this moment in America
I began this essay with the observation that the Trump administration is now pursuing explicitly socialist policies. This strange fact pries open a whole barnacle-encrusted set of assumptions about political economy, to reveal the pearl of wisdom: we live in a hybrid capitalist-socialist economy. With that revelation comes the responsibility to ask policy questions in a very different way. Since we are trying to achieve multiple desirable outcomes in every policy debate, policy-ethics becomes a question of balancing different interests. Now it is time to focus on the greatest imbalance of our present moment.
Oligarchs hide behind distracting accusations, claiming “free enterprise” as they suppress competition either through market domination or through buying government favoritism. Beyond distraction, we need to weigh the potential strengths and weaknesses of a capitalist-socialist system. We need to prevent domination by any one interest group, so that we keep getting input from all directions to help maintain a healthy balance of outcomes. In this moment, we need to reinstate wealth-taxes, inheritance taxes, and an income-tax profile similar to Dwight D. Eisenhower’s in order to grow the whole economy while reducing severe inequality.
Historically, most taxation policies were implemented by Republicans, including the Revenue Act of 1862, War Revenue Act of 1898, and the promotion of a permanent income tax by Teddy Roosevelt (enacted in 1913). The problem of American oligarchs is not new. We used to call them ‘robber barons’ in the 1890s, and we enacted policies to curb their influence. To maintain the balance of a 21st century hybrid political economy we will have to keep looking for new solutions. But in the ethics of taxation, we already a solution with an established a track record: taxation of elites was heavy enough to reduce economic inequality in the 1950s and 1960s, which was also an era of sustained, robust economic growth.
The linkage between the reduction of inequality and sustained economic growth is complex (see Goldin & Margo 1992, “The Great Compression”), but no free-marketeer can claim that high taxes on the rich is bad for the economy, based on the evidence. Low taxes on the elites are common in sub-Saharan Africa, and I observed it directly while working for the Afghan government. I testify as a direct witness: low taxes on the elite is bad for a national economy.
In closing: Enjoy the weirdness!
I often advise my students to avoid conspiracy theories for three reasons. First, it is exceedingly difficult for a massive modern government to keep anything secret. Second, because you can become entirely distracted by imagining any number of hidden agendas and secret programs when, as Occam argued, the simplest explanation is probably the most valid one. Third, because the weirdest stuff is hidden in plain sight: the Trump administration’s public embrace of explicitly socialist policies is so weird that you cannot make this stuff up. However, we can learn from the weirdness that is our actual present reality. Capitalism and socialism go together like chocolate and peanut butter. Go figure.