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, which found, for example, that US 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.

Free market capitalism, also called laissez-faire capitalism, is when the government takes a hands-off approach to the economy. The US 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 non-favored 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. US 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.

The US 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 percent stake in Intel. Congress passed the multibillion-dollar CHIPS and Science Act in 2022 to bolster US 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 percent 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, the only US rare earth minerals miner 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 percent of revenue from certain chip sales to China as a condition for export licenses.

The CHIPS and Science Act has already funneled billions into US 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 US 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 administration of Joe Biden, 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 US isn’t rejecting capitalism but recalibrating its boundaries. The next few years will show exactly how Washington’s interventions will reshape US capitalism.

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The writer is a professor of business analytics at the Boston University Questrom School of Business. This article is republished under a Creative Commons license.