State Now a Part of US Capitalism

Is the Trump administration trying to reshape American capitalism?

- H Sami Karaca

Recent moves by Washington, such as taking a 10 percent 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?

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.