A new economic paradigm becomes truly established when even its would-be opponents begin to see the world through its lens. At its peak, the Keynesian welfare state received as much support from conservative politicians as from those on the left. In the United States, Republican Presidents Dwight Eisenhower and Richard Nixon fully embraced the core tenets of the paradigm – regulated markets, redistribution, social insurance, and countercyclical macroeconomic policies – and worked to expand social protection programs and strengthen regulation on the workplace and the environment.
It was the same with neoliberalism. The impetus for this came from economists and politicians – such as Milton Friedman, Ronald Reagan and Margaret Thatcher – who were passionate about the market. But the paradigm’s eventual dominance was largely due to center-left leaders like Bill Clinton and Tony Blair, who had internalized much of its pro-market agenda. These leaders have pushed for deregulation, financialization, and hyper-globalization, while lip service to mitigating the resulting increase in inequality and economic insecurity.
Today we are in the midst of a transition away from neoliberalism, but what will replace it is highly uncertain. The absence of a new solidified paradigm is not necessarily bad. We don’t need another orthodoxy offering cookie-cutter solutions and ready-made plans for countries and regions with different circumstances and needs.
But economic policy must be guided by a driving vision. History suggests that the void left by the decline of neoliberalism will soon be filled by a new paradigm that will eventually need support across the political spectrum. Such an outcome may seem impossible given the current political polarization. In fact, there are already signs of convergence.
In particular, a new bipartisan consensus could emerge around “productivism,” which emphasizes the spread of productive economic opportunity across all regions and segments of the labor force. Unlike neoliberalism, productivism gives governments and civil society an important role in achieving this goal. It has less faith in markets, distrusts big business and favors production and investment over finance, and the revitalization of local communities over globalization.
Productivism also departs from the Keynesian welfare state by focusing less on redistribution, social transfers, and macroeconomic management and more on supply-side measures to create good jobs for everyone. And productivism departs from its two antecedents by reflecting greater skepticism toward technocrats and expressing less instinctive hostility to economic populism.
The rhetoric of US President Joe Biden’s administration – and some of its policies – has many of these elements. Examples include adopting industrial policies to facilitate the green transition, rebuild national supply chains and boost good jobs; blaming big business profits as the culprit for inflation and refusing (so far) to revoke former President Donald Trump’s tariffs on China. When the administration’s most experienced economist, Treasury Secretary Janet Yellen, touts “friend-shoring” — sourcing from U.S. allies — over the World Trade Organization (WTO) ), we know that times are changing.
But many currents of this thought also exist on the political right. Alarmed by the rise of China, Republicans have made common cause with Democrats in pushing for investment and innovation policies to bolster American industry. US Senator Marco Rubio, a former and likely future Republican presidential candidate, has made impassioned pleas for industrial policy – promoting financial, marketing and technology aid to small businesses and the manufacturing and high-tech sectors. “In cases where the most efficient market outcome is one that is bad for our people,” Rubio said, “what we need is targeted industrial policy to promote the common good.”
Many on the left agree. The architect of Trump’s China trade policy, Robert Lighthizer, has won over many progressive supporters for his tough tactics on the WTO. Robert Kuttner, an influential voice on the left, argued that Lighthizer’s views on trade, industrial policy, and economic nationalism “were more those of a progressive Democrat.”
The Niskanen Center, named after libertarian economist William Niskanen (one of Reagan’s top advisers), has made “state capacity” one of its main pillars, pointing out that the ability of governments to provide public goods is important for a healthy economy. Oren Cass, an adviser to Republican Mitt Romney during his 2008 and 2012 presidential campaigns and a former senior fellow at the pro-market Manhattan Institute, is a critic of financialized capitalism and supports the relocation of supply chains and community investment. local.
Similarly, Patrick Deneen, one of the leading intellectuals of the American “populist right”, advocates “worker-friendly policies” and “the encouragement, through government policy, of domestic production”. During a recent interview in which Deneen discussed these and other economic policies, New York Times writer Ezra Klein remarked, “What’s funny about this to me is that they seem to me to resemble what the Democratic Party is today.”
As James and Deborah Fallows discovered when they traveled across America in their single-engine plane to study local economic development, pragmatism can trump political partisanship when it comes to fostering business. , job creation and public-private partnerships. Local politicians facing the challenges of economic decline and unemployment engaged with community groups, entrepreneurs and other stakeholders in extensive political experimentation. And in many cases, their political affiliation had little bearing on what they did.
Whether this kind of cross-party collaboration and fertilization of ideas will amount to a new paradigm remains to be seen. There are deep divisions between Republicans and Democrats on social and cultural issues such as abortion rights, race and gender. Many Republicans, including prominent figures such as Rubio, have yet to renounce their allegiance to Trump, who remains a threat to American democracy. And there is always the danger that the “new” industrial policies favored by both conservatives and progressives will collapse or turn into old measures of the past.
Nevertheless, there are signs of a major shift towards an economic policy framework that is rooted in production, labor and localism instead of finance, consumerism and globalism. Productivism may well turn into a new political model that captures the imagination of even the most polarized political opponents.
Dani Rodrik is Professor of International Political Economy at Harvard University’s John F. Kennedy School of Government and President of the International Economic Association.
Copyright: Project union