Back in August, the Trump administration announced it would purchase a 10% stake in chip-maker Intel, garnering criticism from members of the president’s own party. It’s only one example of the presidency intervening directly in private corporations; the administration is also taking 15% of Nvidia and Advanced Micro Device’s chip sales to China and has taken stakes in lithium and earth metal companies.

It might seem like a huge step toward state capitalism, but for economist Mariana Mazzucato, these moves are unaligned with strategy, and a step back from the industrial policy of the recent past.

Mazzucato is the founding director of the Institute for Innovation and Public Purpose at the University College London and the author of many books on industrial policy, including her latest, “Mission Economy.” She spoke with “Marketplace” host Kai Ryssdal about the state of U.S. industrial policy under Trump 2.0. The following is a transcript of their conversation.

Kai Ryssdal: So what do you think? Are we, in the United States, sliding towards state capitalism? Are we in it, do you think?

Mariana Mazzucato: Well, you know, when I wrote my book "The Entrepreneurial State" back in 2013 I argued that the United States has always had an active industrial strategy, but has pretended not to have one. So they kind of talk the Jefferson talk, but act Hamilton. And at the time when I said that, no one knew what I was talking about. But thank God for the “Hamilton” musical.

Ryssdal: [Hamilton creator] Lin Manuel Miranda took care of you on that one.

Mazzucato: Exactly. And so I think what's super interesting now is that Trump is actually dismantling any form of industrial strategy that the U.S. has had. So, for example, the CHIPS Act had conditionality linked to it that those semiconductor companies that were benefiting would have to be good companies. They'd have to improve working conditions. They would limit share buybacks, so reinvesting profits in and that's the kind of stuff Trump is taking away. He's really eliminating all the safeguards that would actually help people and [the] planet.

Ryssdal: It does seem there is an element also of capriciousness in the President's policies. He has said, you know, “I walked into this meeting with Intel, and I said, I think we should have 10% of your company.” And they said, “Okay. That does not seem to me to be a reasoned industrial policy.”

Mazzucato: Well, so I argued that governments should take equity stakes. Because what happened in Silicon Valley, for example, is that the government, you know, made huge investments. Everything in our iPhone that's smart and not stupid was actually state funded. So, the internet, GPS, touch screen, Siri. But we ended up socializing risks and privatizing rewards. So, one way to socialize both risks and rewards is indeed through equity stake. So, you know, just think of Tesla. Tesla got the same amount of money as Solyndra. Everyone knows about Solyndra because it went bust.

Ryssdal: Let's remind people, it was the solar cell company that got raided, which, full disclosure, my brother worked at, and he said, that was quite a day. But anyway, that, yeah, that's what was going on there.

Mazzucato: That's interesting. So, Tesla received close to what Solyndra got as a guaranteed loan from the Department of Energy. They got $465 million. They succeeded. They actually paid back the loan in 2013 after receiving it in 2009 but in this case, with Trump, he hasn't actually created anything, right? He's coming on the back foot. He's, in fact, with one hand increasing tariffs, with the other hand, I'd say decimating the only industrial strategy that was left, but then hand picking in a capricious way, as you rightly said, things like, “oh, we're going to take stakes in a company.” But that's completely unaligned with any strategy.

Ryssdal: Setting aside for a second the inner workings of Donald Trump's mind on the state of this economy, it is true, is it not, and would you agree that that the free market can figure out how to allocate capital and get things done far more efficiently than a government can?

Mazzucato: No. There's no history of that.

Ryssdal: All right.

Mazzucato: So I mean, whether you look at the history of pharmaceuticals, the history of nanotech, you know, biotech, clean tech, energy, the state has always played the leading role. I might be wrong—

Ryssdal: Yeah, but the question wasn't who played the leading role. The question is, who did it better, who did it more efficiently, right? Because you want return on your investment.

Mazzucato: Well, it depends what you mean by efficiency. So first of all, all these sectors have different phases in their life cycle, right? So if we're talking about, you know, the automobile industry today, that's very different from talking about artificial intelligence today. So, in the later phase, the more mature phase of an industry, you could argue that there's really no reason for government to be too involved. The real question is, in terms of efficiency, does the government ultimately have the capacity, the skills, the people that can, independent of that kind of life cycle, make the right decisions? My biggest worry is that we've actually reduced that capacity, and the DOGE kind of rhetoric is reducing it even more.

Ryssdal: You know, it's very interesting actually, this conversation, because you are clearly in favor of some measure of government involvement in the economy, directly, when necessary. And yet you are concerned about what is happening in the United States.

Mazzucato: Yeah, well, I'm a U.S. citizen, so I'm very concerned with what's happening in the United States.

Ryssdal: Well, I appreciate that point, but also academically, professionally, right?

Mazzucato: Oh, absolutely. I mean, well, first of all, there's a history of the United States, which, again, has always had the rhetoric about the free market, right, but actually has had a much more visible hand, than Europe. You know, $40 billion a year is what the National Institutes of Health have been spending, every year recently, on health innovation, not regulation. Literally, the investments that get us blockbuster drugs. Under Reagan, for example, the NIH, the National Institutes of Health increased their funding. So, this is the first president that actually is going after particular organizations like ARPA-E and NIH and so on. And of course, China is very happy, by the way. You know any competitor to the U.S. must be extremely happy, because this is really going to hurt our competitiveness.

Ryssdal: I hate to end on a hypothetical, but I'm going to end on a hypothetical, and it goes like this. Let's assume that the path the American economy is on right now under Donald Trump and has been the case for a while now, continues. Where do you see the short-term future of the United States economy?

Mazzucato: Well, unfortunately, potentially irrelevance. In other words, if you look at what's happening in China right now, the leadership they're playing at the G20, the COP conferences, the alliances that they're making, the real risk is that the U.S. is just becoming extremely siloed. It's talking about making America great again, but we know that's not the case if we're going to look at the future of inflation with the tariffs, but also jobs, which will not happen if we don't have a proper industrial strategy. So at home, I see problems, but also internationally, the international stage, that's the risk: global irrelevance.