State capitalism refers to
state ownership of companies and businesses. That distinguishes it from free
market capitalism. It does not complement free market capitalism but rather
distorts it. According to Wikipedia:
“State capitalism is an economic system in which the
state undertakes business and commercial economic activity and where the means
of production are nationalized as state-owned enterprises (including the
processes of capital accumulation, centralized management and wage labor). The
definition can also include the state dominance of corporatized government
agencies (agencies organized using business-management practices) or of public
companies (such as publicly listed corporations) in which the state has controlling
shares.”
In my 2017 review of Ian
Bremmer’s 2010 book The End of the Free Market: Who Wins
the War Between States and Corporations? I wrote
that state capitalism is:
“…capitalism assisted and otherwise propped up by states
through nationalized industries, sovereign wealth funds, and other mechanisms.
The strong influence of these state capitalisms on the global free market show
that the concept of a global free market is illusory or at best only partial.”
State capitalism is also
often partial and might be better termed as state-enhanced or state-assisted
capitalism. China offers a very good example where the state props up
businesses, basically nationalizing them, subsidizing them, and keeping them
immune from vulnerability to undesirable market forces.
Subsidization to Improve International Competitiveness as
State Capitalism
State subsidization of
domestic industries is a very important means of state capitalism that gives
domestic companies significant market advantages. If the subsidization is too
high, it can trigger pushback from the market. It should be pointed out that
subsidization of renewable energy and energy storage is not state capitalism in
that its goal is not to support those industries so that they compete better
against the industries of other nations, but that they compete better against
other forms of energy generation. China is a country that subsidizes for state
advantages rather than for energy source advantages. Thus, its subsidization is
deemed state capitalism. For this reason, some pushbacks, perhaps in the form
of tariffs, are warranted.
Protectionism: Tariffs and Value-Added Taxes as State
Capitalism
Tariffs, if they are more
than reciprocal and too high, can be seen as a form of state capitalism in the
form of protectionism. It is an instance of a state conferring advantage on its
businesses and disadvantage on the businesses of others. However, the
triggering of reciprocal tariffs immediately cancels those advantages, and
domestic businesses can be disadvantaged as well as foreign industries. Thus,
tariffs are often described as a lose-lose scenario, or as Paul Blart noted:
“nobody wins with a headbutt.”
According to the Wall Street
Journal, 71% of CEOs say tariffs are killing their businesses. They are also
worried about the independence of the Federal Reserve.
Sovereign Wealth Funds and Public Investment as State
Capitalism
Of course, every country
wants to secure advantages as it can, preferably within the limits of trade
rules. Countries with excess cash from exports, often crude oil, develop
sovereign wealth funds that are state investments in markets. These
state-controlled funds “produce” profits. Thus, they can be seen as a state
controlling the means of producing those profits, not technically socialism,
but a form of state capitalism. Ian Bremmer notes in his book that the three
main tools of state capitalism are national oil (and gas) companies (NOCs),
other state-owned enterprises (SOEs), and sovereign wealth funds (SWFs). NOCs
may be fully or partially owned by states. He also points out that state
capitalism is not socialism, but a form of nationalism. Sovereign wealth funds
are simply “state-managed pools of excess cash that can be invested
strategically.” State capitalism distorts free markets. Bremmer notes that
as of 2010, there were 50 SWFs, with half begun since 2000. Now, in 2025, even
the U.S. has a small one started. Some are open and transparent, like Norway’s.
Others, especially in authoritarian countries, are more secretive.
Norway’s Version
Due to the great success of
drilling for oil & gas in the North Sea, Norway was able to generate excess
cash and start a sovereign wealth fund that has become quite large. It is
essentially a “petro-state,” though not often acknowledged as one. The state
oil & gas company, formerly Statoil, now Equinor, is, or was, 60% owned by
the state. The country of modest population is well endowed with oil & gas
and now with wealth. This wealth has allowed them to pursue decarbonization and
expand social programs. It is a success story, but still one that depends on
distorting free markets for state advantage.
China’s Version
China manipulates markets,
currency, and controls resources in order to gain leverage. It has long
distorted markets to its advantage and will continue to do so. Some pushback is
good.
In China, Premier Wen Jiabao
gave a statement in a 2008 CNN interview that Bremmer says amounts to a
definition of Chinese state capitalism: “The complete formulation of our
economic policy is to give full play to the basic role of market forces in
allocating resources under the macroeconomic guidance and regulation of the
government.” He also talked about giving full play in markets to both the
‘invisible hand’ and the ‘visible hand.’ The Chinese opening to capitalism
began with Deng Xiaoping and Zhao Ziyang. The opening happened deliberately,
gradually, and slowly. China picks its favorites and provides massive long-term
subsidies for those favorites. That makes its system thoroughly a state
capitalism.
Other State Capitalisms
The Gulf States, like Saudi
Arabia and the UAE, have large SWFs. They fluctuate between open markets and
state control. State capitalism is complementary to authoritarianism simply
because it increases state control. Thus, authoritarian countries often have
some degree of state capitalism. Authoritarian states also often exhibit
protectionism, censorship, and human rights abuses. Russia is a state
capitalist, but in reality, it is a form of crony capitalism with rampant
corruption, rampant propaganda, state control, and human rights issues =
totalitarian.
Trump’s New Version
Some recent moves by Trump
have been called state capitalism. The massive tariffs in the early part of his
tariff wars certainly fit the definition. Indeed, any tariffs beyond reciprocal
ones meant to even the playing field, rather than give advantages, could be
seen as state capitalist. The country taking a 10% stake in semiconductor
companies is another example, although that is too small a percentage to argue
that it is state control.
Timothy Noah of The New
Republic wrote that CEOs are not happy with Trump’s actions so far:
"They claim Trump’s “state-driven capitalism”—which
I think is more accurately termed fascist corporatism—offends their sense of
patriotism, what they really seem to resent is having routinely to pay Trump
tribute, either by enriching him personally or by helping him try to plug the
$3 trillion revenue hole he created with his idiot Big Beautiful Bill."
In response to Trump’s forays
into part ownership of companies such as Intel and Nvidia, CEO’s expressed
dismay.
"The Trump administration’s drift toward a
quasi-socialist statism, seizing ownership from private shareholders, dictating
staffing, and selectively blocking moves into strategic markets based upon
politics and kickbacks," they said.
Treasury Secretary Scott
Bessent argues that our state control is devised to counter China’s
“When you are facing a nonmarket economy like China,
then you have to exercise industrial policy,” said Bessent, who spoke at an
“Invest in America” forum sponsored by CNBC.
He also noted that the
pharmaceutical, shipbuilding, semiconductors and steel industries are
legitimate targets for government aid and protection. However, he previously
denigrated Biden for basically the same behavior, describing:
“… {Biden’s} subsidies for domestic semiconductor
production as “a horrible, horrible thing.” Bessent last year accused Biden of
pursuing “the discredited economic philosophy of central planning” in a speech
to the right-of-center Manhattan Institute.
Bessent did caution that the
small stakes in strategic companies were limited and mainly a response to
China, and that we need to be careful not to overreach that
reciprocity.
A Wall Street Journal article
noted
“…that Trump is “imitating the Chinese Communist Party
by extending political control ever deeper into the economy.” Economist Daniel
J. Smith warns that this trajectory “risk[s] leading us down the road to
serfdom that Friedrich Hayek warned against in 1944.”
Biden’s Inflation Reduction
Act is seen by some as a form of state capitalism, meant to prop up industries,
although the goal of decarbonization and its benefits also fits in there as
well. However, the level of interventionism has been upped considerably under
Trump, who also has a penchant for pushing CEOs around as he sees fit, calling
for their removals.
An article by Michael Chapman
for the libertarian Cato Institute sees the Trump trends as worrying. If the
government can take stakes in chips, steel, critical minerals producers, and
military technology, what is to stop it from expanding to other companies and
industries? Expressing disapproval, he writes:
“Such policies represent a betrayal of America’s
founding principles. The nation was built not on state control but on liberty,
private property, and the right to pursue happiness without government
coercion. If those ideals are abandoned, state capitalism will not make America
great again—it will make it unrecognizable.”
Bremmer noted in a recent
video that he agrees with some of the reciprocal efforts to balance the playing
field with market manipulators like China, but that some are overkill, such as
using state capitalism to reshore U.S. manufacturing. He sees it as problematic
that U.S. companies are lobbying the government for market advantages over
other companies, which he refers to as oligarchy and kleptocracy. He notes that
in capitalism, one is responsible for both profits and losses. Bremmer notes
that state capitalism in the U.S. is not likely to endure and do well
long-term. This is partially due to the ever-changing political climate, where
leaders in the executive branch and Congress often change and bring about
changes in policies. He also notes that much more of the benefits of state
capitalism go to the wealthy. Paying for access is a problem in the U.S. and is
getting worse, he says. He thinks the answer is more capitalism, not less, but
it must be in a competitive environment where no one gets to capture the
political process, and losses are seen as responsibilities. He says there has
been a rise in far-right populism that is anti-capitalist and that there is
also rising far-left anti-capitalism. I will say that I think far-left
anti-capitalism has been around for a long time and is a defining feature of
Progressivism.
Globalism vs. Globalization
Bremmer also notes that when
globalism is seen as the same as globalization, then the pitchforks come out.
The website ChooseLoveNotFear gives definitions of globalization and globalism
and distinguishes the two. First is globalization, which they define below.
“Globalization is a process that has evolved organically
over time, primarily driven by technological advancements and improvements in
transportation. These developments have facilitated increased interaction and
integration among people and businesses worldwide.”
The site describes globalism
as an ideology, more specifically as a collectivist ideology:
“Globalism: A Collective Ideology”
“In contrast, globalism is an ideological movement that
seeks to transcend national boundaries and promote a global governance model.
This concept is often associated with collectivist policies and the influence
of international organizations.”
The site identifies important
globalists as George Soros and the World Economic Forum’s Klaus Schwab, and
especially his Great Reset idea, as basically a radical socialist movement
seeking radical wealth redistribution.
“The debate between globalism and globalization continues to shape our world. While globalization emphasizes interconnectedness and economic growth within the framework of nation-states, globalism pushes for a centralized global governance model that often conflicts with national sovereignty. Understanding these distinctions is essential for navigating the complexities of modern geopolitics and economics.”
References:
Globalism
vs. Globalization: Understanding the Differences. Choose Love Not Fear.
2024. globalism
State
capitalism. Wikipedia. State capitalism - Wikipedia
The
End of the Free Market: Who Wins the War Between States and Corporations? Ian Bremmer. (Portfolio/Penguin 2010).
Argentina's
Milei to partially privatize nuclear power plants operator. Eliana Raszewski.
Reuters. September 16, 2025. Argentina's Milei to partially
privatize nuclear power plants operator
'Shakedowns':
Here's why CEOs are finally turning on Trump. Lesley Abravanel. Alternet.
September 23, 2025. 'Shakedowns': Here's why CEOs are
finally turning on Trump
Exclusive-Trump
administration seeks equity stake in Lithium Americas amid loan talks. Ernest
Scheyder and Jarrett Renshaw. Reuters. September 23, 2025. Exclusive-Trump administration seeks
equity stake in Lithium Americas amid loan talks
Trump
to expand government stake in strategic sectors to combat China. David J. Lynch.
Washington Post. October 15, 2025. Trump to expand government stake in
strategic sectors to combat China
Trilogy
Metals shares surge as US acquires 10% stake. Reuters. October 7, 2025. Trilogy Metals shares surge as US
acquires 10% stake | CNN Business
Trump’s
“State Capitalism … a Hybrid Between Socialism and Capitalism” Won’t Make
America Great Again. Michael Chapman. Cato Institute. August 28, 2025. Trump’s “State Capitalism … a Hybrid
Between Socialism and Capitalism” Won't Make America Great Again | Cato at
Liberty Blog
Is
American capitalism still capitalism? | Ian Bremmer's Quick Take. YouTube. GZERO
Media. August 2025. Bing
Videos
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