New Capitalism?
Or just more blurring of the lines between capitalism and socialism?
In a recent piece for the Wall Street Journal, Greg Ip writes that President Trump’s administration continues to blur the lines between capitalism and socialism, sometimes threatening companies, such as the drug company Pfizer, to get them to line up with policy, and sometimes taking a stake in them, as the administration has now done with Intel and the mining company Lithium Americas.
As I discussed in my last post on State Capitalism, President Trump isn’t the first American president to promote blurry economic policy. In this post, I’d like to examine some common variations of capitalism as a way to reflect on America’s version of free enterprise.
Let’s begin with the idea that America’s version of capitalism has a general ethos and an institutional structure. Its ethos is rooted in the complicated and often competing ideas of freedom and equality. Its structure is generally considered a liberal-market structure, meaning that
Capital allocations should be driven by markets, not state banks or corporatist agreements.
Firms compete through price signals, flexible labor, and shareholder-oriented governance.
The state’s role is focused on setting rules, enforcing contracts, and maintaining macroeconomic stability, not directly coordinating production.
America’s liberal-market model of capitalism, which has evolved over 250 years, is so deeply ingrained that many Americans see it as a natural state and the direction in which other countries are inevitably headed. This is not true, nor is it likely that the specific policy agendas implied by “neoliberal” capitalism, which thrived from around 1980 until the pandemic, will be embraced by leading world economies.
Capitalisms
Capitalism is the only functioning economic system in the world. It is adaptable. Different capitalist systems have distinct institutional structures. Business leaders operating abroad understand they must identify who controls capital, how decisions are made, and what justifies the system itself. These answers influence how companies compete globally, arrange supply chains, and manage risks and opportunities.
Some variations of capitalism are more and some are less friendly to liberal-market ideals. It is increasingly important for business leaders to explain to their communities the types of capitalistic economies they operate within, compete against, and help build through their actions. Their actions validate narratives—such as growth, security, ideology, and democracy—that political actors use to justify economic intervention. Political regimes, of course, always claim that the version of capitalism that fits best with their ideology is also best suited to advance the broader public purpose.
Party-State Capitalism
(also authoritarian capitalism and socialist market economy)
In party-state capitalism, ideology and power are the central organizing principles. China’s “Capitalism with Chinese characteristics” is the most successful current example of party-state capitalism. Markets operate under a political system where the ruling party holds supreme authority over economic affairs. Firms can be private, but they must align with state priorities; property rights exist, but they are contingent upon political loyalty. It is clear to everyone that the economy is not just a tool for growth but also a means for the party to maintain political power and regime stability.
Party-state capitalism can mobilize vast resources quickly, coordinate large-scale industrial projects, and pursue long-term strategic goals without the electoral or market pressures that limit democracies. It is characterized by opaque decision-making, unpredictable political intervention, and the merging of economic and geopolitical competition. In these environments, supply chains, technology standards, and market access are influenced by both political and economic factors.
The Developmental State Strategy
(also state-led developmentalism, and developmental capitalism)
Developmental capitalism is less authoritarian but still challenges American assumptions. Here, the state actively guides industrialization, coordinates credit, and promotes strategic sectors. Leadership’s stated purpose is not to consolidate political power but to accelerate national development. East Asian economies, including Japan, South Korea, and Singapore, pioneered this model in the twentieth century, blending market dynamism with targeted state intervention. For some, developmental capitalism shows that markets do not always know best. By disciplining domestic firms, fostering export competitiveness, and investing heavily in education and infrastructure, developmental states achieved rapid growth and technological progress.
For Americans, the downside of this kind of tightly wound economy is that it limits democratic freedoms. Singapore is usually said to be open for business and closed for dissent. We can admire Singapore’s carefully designed government systems and pro-market environment, characterized by low corruption, efficient bureaucracy, world-class infrastructure, and investor-friendly policies. These certainly help it score well on doing business indicators (see the Heritage Foundation and World Bank). Still, it is unlikely that highly individualistic Americans, most of whom want to express themselves freely in the press and on social media, would wish to emulate Singapore’s poor rankings in civil liberties (see the World Press Freedom Index and Freedom House).
Hybrid Democratic State Capitalism
(also coordinated market economy, mixed economy, democratic corporatism, SOE/sovereign investor model)
In some countries, regimes extend their influence into the economy in ways that specifically increase state involvement while attempting to maintain democratic accountability and the rule of law. In Germany, Japan, and Sweden, for example, markets are more regulated, and firms may coordinate more closely with trade unions, banks, and the state. In some cases, the government may own key companies, manage sovereign wealth funds, or act as a direct market participant. Generally, the goal is not to control political outcomes but to achieve social missions, ensure stability, or promote national champions.
One example is the Agence des Participations de l’État (APE), the French State Shareholding Agency, an influential branch of the French government. It is a specialized agency within the Ministry of the Economy and Finance that manages the French state’s equity stakes in strategic companies, both in fully state-owned enterprises and in private firms where the government holds a minority share. APE was established in 2004 to modernize France’s management of public shareholdings. Here, the state is an active shareholder and strategic investor in key sectors of the economy. The combination of deep market integration with a much more robust state presence is something Americans are less used to.
Strategic-Nationalist Capitalism
(also strategic capitalism, economic nationalism, geoeconomic statecraft and strategic capitalism)
Strategic-national capitalism is currently in vogue in the United States. It isn’t a radical institutional adjustment, but it is certainly a shift away from the neoliberal policies of the late 20th century. Policy makers increasingly use state-provided tools, including subsidies, trade controls, and industrial policies, to protect or develop critical industries in the name of national security and resilience. The CHIPS and Science Act, the Inflation Reduction Act, and the European Union’s Green Deal exemplify this shift.
In America, this trend recognizes that global competition is not always fair and that geopolitical realities heavily influence market outcomes. It also reflects domestic pressures: voters increasingly want the government to provide extensive social safety nets to shield against market shocks, inflation, and technological changes affecting education and jobs. American business leaders already recognize the advantages of aligning with strategic state goals. Securing subsidies, managing new regulations, and understanding national industrial priorities are now as important as traditional market strategies, blurring the line between “public” and “private” strategy.
Corporate-Oligarchic Capitalism
(also corporatocracy, oligarchic capitalism, and crony capitalism)
The most provocative model for capitalism is one where political and economic elites merge. For thinkers who reject capitalism, this is where all capitalism eventually goes to die. Instead of acting as a neutral referee, the state becomes a tool for entrenched private interests. Regulation is shaped to benefit insiders, taxation is designed to protect wealth, and public policies aim to maintain the dominance of a small economic elite. Many Americans are concerned that our system is heading toward this model. For some, increasing economic inequality and the growing gap between a small group of very wealthy people and everyone else suggest America is shifting toward a corporate oligarchy.
On the surface, corporate oligarchies may appear “market-based,” but their reality falls short of the ideals of liberal-market capitalism. Rules are applied unevenly, property rights may be jeopardized, monopolies become commonplace, and the government intervenes for capricious reasons, making it difficult for companies to compete, innovate, and succeed or fail based on their own merits. Corporate oligarchies benefit established businesses and businesses set up by favored insiders, but they hurt public trust, weaken long-term competitiveness, and fuel political backlash.
What’s the End Game?
These general approaches to how capitalist systems incorporate state power are often presented in convoluted ways by people who both like and dislike capitalism. People who opine about capitalism generally fall into three camps:
Camp 1: Those who believe capitalism is exploitative and that all forms of capitalism, including Party-State Capitalism and Corporate-Oligarchic Capitalism, are paths to an alternative system: a generally utopian Marxist communism that favors growth, or, alternatively, a de-industrial degrowth non-capitalist form of human organization that may resemble a return to the Stone Age.
Camp 2: Those who criticize capitalism’s inequality and power dynamics and see Party-State Capitalism, or something very close to it, such as Democratic Socialism, as an acceptable system for America. The platform of the Democratic Socialists of America, for example, advocates for the nationalization of most industries.
Camp 3: Those who generally support capitalism and focus mainly on constantly adapting and reforming it. In this camp, Party-State Capitalism will not work in America because it harms democracy. Corporate-Oligarchic Capitalism will not work because it undermines equality and opportunity. Essentially, neither aligns with American ideas of liberty. What you think about Strategic Nationalist and Hybrid Democratic systems will largely depend on your politics.
The academic literature is full of studies on how targeting specific social outcomes using subsidies, trade controls, and industrial policy, as well as sovereign wealth funds, direct market participation, and government ownership of key companies, impacts market efficiency and transparency. Business leaders, who I assume are members of Camp #3, should ask themselves how such tools impact their firms and contribute to growth, security, ideology, and democracy.
None of these tools will prevent economic shocks. One of America’s greatest strengths is its robust and resilient economy, which is necessarily chaotic, adaptable, and decentralized. The economy should reflect tension between states, the federal government, and various cultural and ideological perspectives on balancing liberty and equality. It’s a continuous dance that’s tough to perform in a nation of 340 million people with diverse cultural ideals. For Americans, liberal-market capitalism is a powerful model that has driven significant innovation and prosperity.