President Donald Trump‘s Intel deal has faced bipartisan backlash, with critics raising concerns that it is a break from traditional American capitalism. Economists told Newsweek whether they view the deal as a step toward socialism.
Why It Matters
Trump announced last week that Intel, a computer-chip producing company, would give the federal government a 10 percent stake in the company. It marks a rare, but not unprecedented, instance of government intervention into a private business, but a shift from typical conservative free-market economic orthodoxy.
The deal is intended to boost Intel and U.S. computer chip production, as China’s market for chip production grows. The White House has pushed back on the criticism that it is a break from free market capitalism, with a spokesperson previously telling Newsweek the administration is “ensuring that taxpayers are able to reap the upside of the federal government’s investments into safeguarding our national and economic security.”
What to Know
The deal has sparked pushback from across the political spectrum—with Kentucky Senator Rand Paul, known for his libertarian fiscal views, calling it a “step toward socialism,” and California Governor Gavin Newsom, viewed as a likely Democratic presidential candidate, calling Trump the “leading nationalist and socialist of our time” over the deal.
Laissez-faire, free-market style capitalism has been a cornerstone of the Republican Party‘s economic platform, and Trump has always touted himself as a capitalist businessman. But critics have not viewed this Intel deal as being in line with those policies.
Several economists told Newsweek they do view the deal as a break from traditional American capitalism.
Mark Williams, master finance lecturer at Boston University’s Questrom School of Business, told Newsweek he believes American free market capitalism is under “government attack.”
“The intel deal pushed by the government is the latest example of a march towards state capitalism,” he said. “Recent White House deals involving Intel, Nvidia and AMD are troubling and allow the government to interfere with the free market, picking what industries and companies are the winners or losers.”
He warned that these deals may also promote “crony capitalism,” creating an “unfair playing field where businesses gain success not through market competition but by managing close ties and currying favor with government officials.”
“In such a world, political connections and favoritism are more important than free-market forces, fostering increased conflicts of interest and corruption. The economy suffers too. If such White House policies expand past AI chips and steel and into other strategic industries, it would move the US towards a brand of government-managed capitalism like Russia and China,” he said.
The move may also be a risk for Intel, he said, as other countries may view the company as an “extension of the U.S. government” and decline to do business with it.
Norbert Michel, vice president and director of the Cato Institute’s Center for Monetary and Financial Alternatives, told Newsweek he believes it is a “break” from traditional capitalism.
“In as much as a socialist economy is one where the government has ownership and control over the means of production, this is a step toward that,” he said.
Michel raised concerns that the administration could now have say over specific policies or personnel decisions “with golden handcuffs,” which would be a “dangerous step.”
Intel, when announcing the deal, emphasized that the arrangement does not give the government access to company information or any representation on the Board.
Not all economists necessarily view the deal as a shift toward socialism, however.
Socialism Critique Not ‘Super Credible,’ One Expert Says
M. Todd Henderson, a University of Chicago professor of law focusing on corporations and economics, told Newsweek he is not supportive of the deal—and believes it is better to have government and business separate. But he does not view it as creeping toward socialism.
“The idea that this is somehow like what F. A. Hayek would have called the road to serfdom—the first step down toward some sort of fascist or socialist state—I don’t think is super credible,” he said.
However, he noted the government has a long history of engaging in similar sorts of deals.
Whether U.S. equity in the company will make Intel “more responsive” to Trump’s views is yet to be seen, Henderson said, noting that Trump has already used the “bully pulpit” over American businesses on a “new level,” he said.
“He has expressed views about how companies should be run, from Apple to Cracker Barrel, to everything in between. Lots of companies are adjusting themselves to get in his favor, and that’s without any kind of direct equity ownership,” he said.
White House Rejects ‘Socialist’ Critique
White House deputy press secretary Kush Desai previously told Newsweek the deal is not a shift away from capitalism.
“The previous administration pushed legislation to dole out billions in grants that prioritized DEI over taxpayer return to some of the largest semiconductor companies in the world. Now the Trump administration is ensuring that taxpayers are able to reap the upside of the federal government’s investments into safeguarding our national and economic security – all while simultaneously pushing supply-side reforms like deregulation and The One Big Beautiful Bill’s tax cuts to let the free market restore America as the world’s most dynamic economy,” Desai said.
Trump-Intel Deal: Is There Historical Precedence?
Henderson said there have been “constant” sorts of similar government deals since the nation’s founding, though they have taken different forms over the years.
“Alexander Hamilton famously was a very strong proponent of an early industrial policy for the United States,” he said.
Thus, the Society for Useful Manufacturers, a public-private partnership, was founded in New Jersey, he said. The U.S. government was an equity holder in the company and funded it, in part.
“Pretty much continually since then, the U.S. has been involved, in one way or another, in funding canals, railroads, the first and second banks of the United States, telegraph expansion,” he said. “During the Progressive Era, there was all kinds of stuff with mobilization in World War I. During the New Year, there were the Tennessee Valley Authority and rural electrification projects, for example.”
He also pointed to bailouts and government investments in saving businesses like Lockheed or Chrysler in the 1970s. The companies received government loan guarantees, but not equity. The Troubled Asset Relief Program (TARP) and automaker bailouts during the 2008 financial crisis are other examples of similar deals.
“Even though, had those companies gone bankrupt, there still would have been a demand for cars, and there’s still factories in the United States that would have used, they just would have been owned by somebody else,” he said. “So there was a sense of picking winners and losers there.”
He pointed to the case of Solyndra, a green energy company that received more than $500 million from the Department of Energy, as an example that “highlighted the danger of mixing business and politics.” The company faced backlash over a scandal in which it was asked to avoid laying off employees until after the 2010 midterm elections.
Economic Historian Says Lack of ‘Emergency’ Differentiates Deal From Past
Joel Mokyr, an economic historian at Northwestern University, also told Newsweek he does not view this sort of deal as necessarily creeping toward socialism, though he does view the specific deal as problematic because it is not intended to solve a national emergency like a war or economic downturn.
“The U.S. government buying up assets and equity in firms is not novel,” he said. “And I don’t think it is a step toward socialism necessarily.”
However, he said this deal is different from others in the past because those happened “under some sort of national emergency.”
“Either war or depression, or something like that,” he said. “What we are looking at currently—I don’t see any national emergency.”
The act of the government purchasing equity in a company is not necessarily a shift toward socialism, but an argument could be made that “there is no justification for this, except for the government trying to establish control over certain industries in which it seems to have an interest,” he said.
He said that regardless of whether the government is a voting member of the board or not, they will “clearly” still have a “very serious voice” in the decisions the company makes.
“It’s not clear to what extent the taxpayer will be served by that, and much less so the free enterprise system,” he said.
Dael Norwood, an associate professor of history at the University of Delaware, told Newsweek a key difference between the Intel deal and those bailouts made during the Great Recession is that those programs were “quickly unwound.”
“In no case did the executive branch seek to exercise either strategic or tactical control over the business, much less extort them for personal gain,” he said.
Another key difference from these historical deals is that those of Trump seem to be “arbitrary exercises of personal power, very directly tied to Trump himself,” Norwood said.
“A ruler seizing direct, personal control of large corporations (though various means) and using public policy to directly benefit his family’s enterprises is a massive break with the history of US capitalism, at least as since the American Revolution,” he said.
What People Are Saying
Dael Norwood, an associate professor of history at the University of Delaware, told Newsweek: “I think these ‘deals’ suggest we’re witnessing a profound break with the historical patterns of American capitalism. American capitalism has always been deeply and inescapably intertwined with government – markets and private property exist only insofar as the law creates, legitimates, and regulates them; corporations are all literally creations of state and federal governments; government funding through grants or purchases has always been critical to the development and marketing of new technologies; and so on.”
Senator Rand Paul, a Kentucky Republican, on X: “If socialism is government owning the means of production, wouldn’t the government owning part of Intel be a step toward socialism? Terrible idea.”
Governor Gavin Newsom, a California Democrat, on the Pivot podcast: “This guy has completely perverted capitalism, Donald Trump. It’s crony capitalism. It’s whatever, you pay him off, give him a phone call.”
Intel’s CEO Lip-Bu Tan, in a statement: “President Trump’s focus on U.S. chip manufacturing is driving historic investments in a vital industry that is integral to the country’s economic and national security. We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance U.S. technology and manufacturing leadership.”
Commerce Secretary Howard Lutnick said during a Cabinet meeting on Tuesday: “It’s not socialism. This is capitalism. If you give someone $11 billion—who is just building in America. They’re not doing anything special, they’re just building in America. Their CEO told the president he didn’t need the grant, and you said, ‘Well then why don’t we get something for it.’”
What Happens Next
Trump told reporters at the White House on Monday that he hopes to have “many more cases like” Intel.
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