“There is a great deal of ruin in a nation,” wrote Adam Smith. A market economy with $30 trillion in GDP, backed by 347 million people, is inherently resilient. No president’s policies, however erratic, can bring the dynamic US economy to a grinding halt.

But they can inflict lasting damage. President Trump’s recent corporate cronyism won’t produce an acute catastrophe that America could quickly self-correct from. Its effects are arguably worse: a slow, corrosive unravelling of the free-market capitalism that made America rich.

This summer Trump has politicised America’s corporate sector through arm-twisting and backroom deals. He extracted a “golden share” in US Steel as the price for approving its merger, leaned on Apple to ramp up domestic investment, took a 15 per cent stake in MP Materials, forced Nvidia and AMD to hand over 15 per cent of some China chip revenues, and, most dramatically, demanded a 10 per cent government stake in Intel. Stakes in other firms are promised.

Free markets are thus giving way to court politics. Yes, governments have long kept an eye on strategically important sectors, but this is qualitatively different. The president isn’t setting industrial frameworks, he’s cutting deals, firm by firm, dictating terms and demanding favours. And this corrupts businesses’ purpose. Instead of value creation in pursuing profit, they must also consider what appeases the Oval Office.

Protectionism and industrial policy from both Trump and Joe Biden facilitated this cronyism. Rewrite tariff schedules and lobbyists swarm Washington seeking exemptions or similar protection. Trump’s team even invited downstream steel and aluminium users to plead their case, resulting in tariffs on everything from baby strollers to spray deodorant.

Likewise, subsidise chip fabs to encourage domestic semiconductor firms and you’ve created an incentive for meddling in their ownership and investment decisions. That’s what happened with Intel. Trump’s government didn’t inject new capital, it’s converting $5.7 billion in promised Chips Act subsidies and $3.2 billion from a defence programme into equity. If taxpayers are bankrolling the business, shouldn’t they get a stake?

But this partial nationalisation is more than traditional industrial policy. Trump relishes leveraging power over business and cutting deals. Asked if the Intel stake was a new model, the president said: “Yes … I want to try and get as much as I can.” His adviser Kevin Hassett even called it “a downpayment on a sovereign wealth fund”. Trump sees himself not just as president, but as managing the country’s investment portfolio.

Anyone imagining Washington will be a passive, disinterested owner isn’t paying attention. The government will be Intel’s biggest shareholder. This deal allows it to take another 5 per cent if Intel divests its manufacturing business — a direct constraint on business strategy. Reports suggest the administration wants to help Intel find customers too. Might Apple soon be leaned on to buy chips from Trump’s new pet company?

This is the unfortunate logic of state ownership. Once taxpayers’ money is on the line, political meddling follows. Politicians double down to protect the “investment”, or to encourage political goals such as jobs and factories in swing states. And it’s the upstarts who lose out. New firms without a direct line to the president don’t even get in the room.

Once, only the left fantasised about government ownership. Socialists like Bernie Sanders and Jeremy Corbyn championed state central planning. “Entrepreneurial statists” like Mariana Mazzucato, the economist, argued for equity for government’s risky subsidies. Conservatives would retort that true prosperity comes from market-tested innovation, something politics invariably corrupts.

Yes, Trump’s cronyism won’t alone produce a recession. But, over time, self-interested businesses will hire, invest and expand with an eye to pleasing presidents, marginally slowing growth and innovation. Indeed, other grant recipients will already be tweaking plans to flatter Trump, while diverting resources to socially wasteful lobbying.

That’s how capitalism corrodes. Not with a bang, but a quiet surrender to politics.