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Last week, Ed raised the big question of whether Biden is pursuing too much complex economic policy at the moment. My quick response was no – there is real synergy in what he does – and I would like to expand on that topic here.
Let me start by defining the context of what it does. I think of markets, economics, and capitalism in general, not as something handed down on stone tablets, but as systems that evolve and change with the needs of the times. Mercantilism of the 18th century gave way to the 19th century non-intervention philosophies as nation-building has passed into the wave of globalization. Keynesianism gave way to the Chicago school, when we needed a little less government and more cheerfulness. Systems reach critical mass because they are built specifically to meet the challenges of the day. Then, eventually, the pendulum swings too far in one direction, and we need a new set of policies that will eventually become its own system.
We are now at such a turning point. I have written many times that the last half century was based on the idea that capital, goods and people will cross borders in search of the most profitable profits and, most importantly, will end up where it will be most productive for our economy and society. . generally. This philosophy, neoliberalism, has given us faster growth. Global level than ever before. But the system has created a significant amount of inequality within nation
It also created the global imbalances between capital and labor that gave us everything from the financial crisis (imbalances breed speculation) to the cost of living crisis (imbalances create asset inflation that wage inflation cannot match) to the geopolitical crisis (production/consumption). the imbalance between the US and Asia is at the heart of it).
This reality determines everything Biden must do. You cannot look at his chessboard gradually. It’s not politics, as usual, where you might consider getting into, say, health care or real financial reform, as was the case in the Obama paradigm. (In my opinion, at the time, Obama should have done the latter, not the former; because he failed financially, he lost the confidence of many parties and the people, and the rest of his program was doomed—but that’s another note! ).
On the contrary, Biden needs to immediately begin to use a lot of leverage to have any hope of shifting the scale enough to put the US in a fundamentally different position in the next decade. America must change the mix of production and consumption to change its fiscal picture and raise wages.See my column here why this should include production subsidies). It must innovate by iteration, which means do things again to grow He needs to make sure that the fastest growing industries, in the care sector, create good jobs.
Gina Raimondo’s plan to tie the two together by pushing the business to provide on-site childcare is actually brilliant because many of the companies I’ve talked to so far want do just that (otherwise, how can they recruit more women to critical to improving GDP growth and narrowing the labor gap). They just need some incentive to do so and use CHIPs money to give them easy hanging fruit.
I could go on listing all the reasons why White House multilateralism makes sense. Everything that made the old world possible—cheap labor, cheap capital, and cheap energy—is gone, and fast. We must understand and map a new and more regional world with multiple political economies. We must restructure supply chains, build resilience, and even prepare for a post-dollar world. We must move from financial to real growth. None of this is incremental. Biden is right to throw everything at the problem, including the kitchen sink.
Ed, I’m blown away by your Jimmy Carter column last weekand all the ways we misunderstand this president. One that I might add is how the Carter administration actually began the partial financial deregulation (such as interest rates and the repeal of Regulation Q that started the financialization process) for which Reagan is credited. What struck me is that in many periods of seismic change, the administration that ends up being credited for something is often not the one that initiated the change.
So my question to you is both futuristic and historical. Looking back at several decades of history that you’ve covered in your upcoming book, and looking into the crystal ball of the future, do you think the Biden era will be remembered as the beginning of a post-neoliberal era, a la the Reagan -Thatcher transition? Or will this title pass to some younger, different president in the future?
I was struck by a recent column by Chris Giles on why Britain’s London problem is not how much economic and political air the capital sucks and what local cities can do to get their piece of the pie, but how the UK can help London get more business from international competitor cities.
I recently saw a documentary about David Bowie. moon dreamwhich is one of the best depictions of the artistic spirit I’ve ever seen (although I’m a big Bowie fan, so I’m certainly biased).
I enjoy the latest book by Mariana Mazzucato, big scam, written with Rosie Collington, looking at how the consulting industry has exposed governments. It amazes me that both companies and public sector officials are so worried about making the wrong decision that they are willing to pay tons of money to people who know less to do it for them.
Edward Luce Responds
Ran, just to clarify, I wasn’t criticizing Biden for “pursuing too many complicated economic policies”: it was a specific criticism of his overly burdensome industrial policies with too many conditions. I keep thinking what I’ll deduce from his effort. I don’t dispute Biden’s core goals of reducing inequality in the US, improving worker rights (mandatory parental leave, etc.), and kickstarting the transition to a greener economy. Who do I think it’s hard. But governance is about execution, especially when it comes to detailed government intervention. The media should pay more attention to this.
Will history remember the Biden era as the end of neoliberalism? As you know, I prefer a more precise definition of anti-globalism happening in the US. But the backlash against free trade began under Trump, not under Biden. Biden’s approach to globalization is Trumpism with a human face. You rightly point out that a lot of the deregulation we associate with Ronald Reagan actually started under Carter. His economic policy was and remains difficult to classify. Unlike, say, Lyndon Johnson’s Great Society, Roosevelt Roosevelt’s New Deal, or even Bill Clinton’s Third Way, we have no name for Carter’s economic approach. It’s because it was confusing. He vetoed spending bills, deregulated large sectors of the economy, made major and revolutionary investments in new energy technologies, and tried to force special interests out of Washington. His legacy has been mixed and difficult to generalize. Compared to this, Reagan was simple.
For now, I would give Biden relatively high marks for his work. Starting with the interim dates, we have moved from the period of adoption of legislation to the stage of its implementation. This is the most difficult part, and he must be single-minded in his performance. The tension between Washington’s talk of “committing friends” and the protectionism of the Inflation Reduction Act, and the desire to buy American, makes this goal much more difficult to achieve. We are also fast approaching a point where the US will not be able to talk with a straight face about maintaining a “rules-based international order” as it continues to break those rules and disable the World Trade Organization. Like I said, it started under Trump. The biggest blow to Biden is that he continues what Trump started.
And now a word from our swamps. . .
In response to “America is not the way to conduct industrial policy”:
“Biden is chasing rabbits, they are elusive and can overtake him.” — Reader shetland37
We would like to hear from you. You can write to the team at [email protected]Contact Ed [email protected] and Rana on [email protected]and follow them on Twitter at @RanaForoohar And @EdwardGluce. We may publish an excerpt from your response in a future newsletter.