The Trump administration is attempting to reconcile two irreconcilable forces: a dynamic private market and an aggressive, interventionist state. The Trump administration has had no qualms about creating a “venture capitalist state,” taking ownership stakes in over 30 companies during President Donald Trump’s second term. Over time, this creeping state capitalism will produce the exact opposite of economic dynamism: distorted capital markets, entrenched cronyism, and long-term stagnation.

The promise that state-directed capital allocation can accelerate private-sector growth is a mirage. Government intervention in markets unleashes perverse incentives that will reduce competition and produce stagnation in the long run. Two recent high-profile initiatives illustrate the hazards of this model: the state-brokered Venezuelan oil venture and the launch of the Trump Accounts program.